MGMT100 Lecture Notes - Lecture 30: Total Quality Management, Iso 9000, Debt Ratio
Financial statements and analysis
• Liquidity ratio:
o Indicates organisation's ability to meet its current debt obligations (assets/liabilities)
• Profitability ratio:
o Profit margin on sales
o Gross margin
o Return on total assets
• Leverage ratio:
o Debt ratio
• Total debt divided by total assets (above 1.0 is considered poor credit risk)
• Budgeting:
o Expense budget
• Anticipated and actual expenses
o Revenue budget
• Forecasted and actual revenues
o Cash budget
• Estimates and reports cash flows on daily or weekly basis
o Capital budget
• Plans and reports investments in major assets to be depreciated over several
years
The changing philosophy of control
Total quality management (TQM)
• Process of making quality principles part of the organisation's strategic objectives, applying
them to all aspects of operations, committing to continuous improvement and striving to
meet customer's needs by doing things correctly the first time
• Key principles:
o Continuous improvement of the quality of products, processes and services
o Reduced waste
o Less variation and defect prevention
o Supplier partnership
o Team process
o Reduced cycle time
o Commitment and participation by all
o Customer focus
o Exceeding the external customer's needs
Trends in quality and financial control
• International quality standards
o ISO 9000
• Uniform guidelines for processes to ensure products conform to high quality
requirements
• Open-book management
o Sharing financial information and results wit all employees
Corporate governance
• The system of governing an organisation so that the interests of corporate owners are
protected
• Corporate failures are often the result of poor control
• Over-control can also have problems
• Demotivation = low morale = lack of trust
• Balance is necessary
Qualities of effective control systems
Sustainable development and management control
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