Need help with a business question about the controlling function

Business & Finance
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Explain why the four steps involved in the controlling function are important. Why is a good understanding of the various ratios used by accountants and managers important to the controlling function?

Nov 23rd, 2015

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Importance of  four steps in the controlling function are:-

a)Establishing standards:-It is the criteria against which the result is measured.To achieve the desired goal for effective management it is of utmost important.

b)Measuring performance:-Measurement involves comparison between what is accomplished and what was intended to be accomplished. .It is important because it is the deciding factor in controlling the performance of the individual.

c)Comparing the actual performance with the expected performance:-Comparing the actual performance against the standard established is a great way to understand and manage and improve what a business organisation does.

d)Correcting deviations:-Measuring and comparing performance, detecting shortcomings, failures or deviations, from plans will be of no avail if it does point to the needed corrective action.It ultimately helps in sorting out the best possible steps to correct in.

Importance of ratio analysis in management:-

Ratio analysis is one of the most important management tools. It describes the relationship of one business variable to another.Following are the important advantage of the ratio analysis:-

a)It helps in understanding the financial position of the company.Different users such as investors,management. bankers and creditors use the ratio to analyze the financial situation of the company for their decision making purpose.

b)It is important for judging efficieny in terms of company operation and management.

c)It helps in formulating company's future plan.

d)It is essential for a company to know how well it is performing over the years and as compared to the other firms of the similar nature.Ratio analysis facilitates such comparison.


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Nov 23rd, 2015

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