MGMT100 Lecture Notes - Lecture 11: Debt Ratio, Profit Margin, Credit Risk
MGMT100 – Managing People, Systems and Culture
Week 11 Workshop
Control and Evaluation:
Control:
• Organisational Control:
- The systematic process in which managers regulate organisational activities
to make them consistent with expectations established in plans, targets and
performance standards
- E.g. acceptable levels of defective items
- Focusses on:
▪ Feedforward control
▪ Concurrent control
▪ Feedback control
Feedback Control Model:
• Focusses on the organisations outputs:
1. Establish standards of performance
2. Measure actual performance
3. Compare performance with standards
4. Take corrective action (if inadequate)
5. Or do nothing or provide reinforcement
Financial statements and analysis:
• Liquidity ratio:
- Indicates an organisations ability to meet its current debt obligations
- Assets
- Liabilities
• Profitability ratio:
- Profit margin on sales
- Gross Margin
- Return on total assets
• Leverage ratio:
- Debt ratio:
▪ Total debt divided by total assets (above 1.0 is considered poor credit
risk)
• Budgeting:
- Expense budget:
▪ Anticipated and actual spends
- Revenue budget:
▪ Forecasted and actual revenue
- Cash budget:
▪ Estimated and reported cash flows
▪ Either daily or weekly basis
- Capital budget:
▪ Plans and reported investments in major assets
▪ To be depreciated over several years
find more resources at oneclass.com
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Document Summary
The systematic process in which managers regulate organisational activities to make them consistent with expectations established in plans, targets and performance standards. Focusses on: feedforward control, concurrent control, feedback control. Feedback control model: focusses on the organisations outputs, establish standards of performance, measure actual performance, compare performance with standards, take corrective action (if inadequate, or do nothing or provide reinforcement. Indicates an organisations ability to meet its current debt obligations. Return on total assets: leverage ratio: Debt ratio: total debt divided by total assets (above 1. 0 is considered poor credit, budgeting: risk) Expense budget: anticipated and actual spends. Revenue budget: forecasted and actual revenue. Cash budget: estimated and reported cash flows, either daily or weekly basis. Capital budget: plans and reported investments in major assets, to be depreciated over several years, trends: International quality standards: uniform guidelines for processes to ensure conformity of products (iso 9000) Open-book management: sharing financial information and results with all employees.
