MGAD40H3 Chapter 10: Chapter 10 Notes

45 views3 pages

yellowwasp29

20 Apr 2011

School

Department

Course

Professor

For unlimited access to Textbook Notes, a Class+ subscription is required.

Document Summary

Chapter 10 using diagnostic and interactive control systems. To achieve financial and nonfinancial goals, managers must rely on the efforts and initiatives of employees. Employees must understand the business s strategy and their role in achieving strategically important goals. Using performance measurement and control systems effectively becomes critical to success strategy effectively, there are two different types of control systems: Success is determined by the ability to effectively communicate strategy to employees and control strategy implementations, to communicate and control o o. The difference between diagnostic and interactive control systems is not in their technical design features, but in the way the managers use these systems. Defined as the formal information systems that managers use to monitor organizational outcomes and correct deviations from preset standards of performance. Used as levers to communicate critical performance variables and monitor the implementation of intended strategies. Managers use control systems diagnostically to implement strategy effectively and conserve scarce management attention.

Related Questions

True-False

Indicate whether each statement istrue (T) or false (F).

___ 1. A companyâsmarket share is an example of external nonfinancialinformation.

___ 2. A good reasonfor using ROI as a performance measure rather than RI is that goalcongruence is more likely to be promoted by using ROI.

___ 3. The DuPontmethod of profitability analysis recognizes two basic ingredientsto profit making: increasing income per dollar of revenues andusing assets to generate more revenues.

___ 4. If companiescompensate managers on the basis of changes in the market price ofthe companyâs stock, this approach tends to shorten managersâ timehorizon because stock prices incorporate the expected future periodeffects of current decisions.

___ 5. Those who favorusing net book value as the investment base in ROI calculationsclaim this approach enables more accurate comparisons to be madeacross subunits.

___ 6. Comparingperformance of the divisions of a multinational company isdifficult because of economic, legal, political, cultural, andcurrency differences.

___ 7. The necessaryand sufficient condition for moral hazard to exist in a company isthat the employeeâs interest differs from the ownerâs interest.

___ 8. Performancemeasures that are sensitive to the managerâs performance motivatethe manager but limit his or her exposure to uncontrollablerisk.

___ 9. It can be costeffective to benchmark a managerâs performance against the bestlevels of performance available within the company or in othercompanies.

___ 10. Holding managers and otheremployees accountable for and rewarding them for achievingperformance goals in diagnostic control systems needs to becounter-balanced with boundary systems, belief systems, andinteractive control systems.

raspberryeel659

1) A properly designed internal control system is a key part of accounting information systems' design, analysis, and performance. True False

2) The use of internal controls provides guaranteed protection against losses due to operating activities. True False

3) Good internal control dictates that a person who controls an asset should also maintain the accounting records for that asset. True False

4) Once a good system of internal control is in place, it rarely needs review. True False

5) Two important limitations of internal control systems are (1) human error or human fraud and (2) cost-benefit. True False

6)The main principles of internal control include which of the following:

Establish responsibilities.

Maintain minimal records.

Use only computerized systems.

Bond all employees.

Require automated sales systems.

7) A good system of internal control:

Urges adherence to prescribed managerial policies.

Insures profitable operations.

Eliminates the need for an audit.

Requires the use of noncomputerized systems.

Is not necessary if the company uses a computerized system.

8) A company's internal control system:

Eliminates the risk of loss.

Monitors and controls business activities.

Eliminates human error.

Eliminates the need for audits.

Is not necessary in large companies.

9-56 Management Control System at Procter & Gamble
Setting up management control systems and determining measurementmethods and who should be
responsible for particular revenues, costs, and information can bea large task. The structure of the
organization plays a part in how well a particular measure islikely to work. Ensuring that the goals of
the organization are in concert with the management control systemis also an important factor. It is
not possible to evaluate a companyâs management control system froman Internet site. What we can
do, however, is to use a site as an example and apply some of theconcepts of the chapter to measures
and tools that would be possibilities for a fi rm.
1. A well-known and well-established company with worldwideacceptance is Procter & Gamble
(P&G) . Log on to the companyâs Web site at www.pg.com . Locatethe most recent annual report
by following the links under the âInvestor/Shareholder Relationsâtab to âFinancial Reporting.â
Examine the âLetter to Shareholdersâ section of the annual report.What does P&G consider to be
the most important factors that drive their growth strategy? Howdoes P&G ensure that managers
meet the company's objectives?
2. The company has numerous products, and the Web site divides theminto different categories and
brands to help customers find relevant product information. Clickon âBrands and Innovation.â
What are the major categories of brands listed on the Web site?Click on the âHousehold Careâ
category. What are some of the brands in this category that you arefamiliar with? How could a
system be set up to help measure the success of the firmâs goal tobuild brands in the âHousehold
Careâ category? What would be three possible financial measures?What about three nonfinancial
measures?

bluesheep375

MGAD40H3 Chapter 10: Chapter 10 Notes

Document Summary

Get access

Related Documents

MGAD40H3 Lecture : Chapter 11 Notes

MGAD40H3 Chapter 11: Chapter 11 Notes

MGAD40H3 Study Guide - Motivation, Workflow

Related Questions