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MEASURE ACTUAL
PERFORMANCE
do nothing
DOES ACTUAL
PERFORMANCE
MATCH THE
STANDARDS Yes
No
TAKE
CORRECTIVE
ACTIONS
MEASURING ACTUAL PERFORMANCE
There is a need to measure actual performance so
that when shortcomings occur,
adjustments could be made. The adjustments will
depend on the actual findings
1. Strategic plan
2. The long-range financial plan
3. The operating budget
4. Performance appraisals
5. Statistical reports
6. Policies and procedures
STRATEGIC CONTROL SYSTEMS
* Financial analysis
The success of most organizations depends
heavily on its financial performance. It is just fitting that
certain measurements of financial performance be made so
that whatever deviations from standards are found out,
corrective actions may be introduced.
Indicators of Liquidity
* Current Ratios – this shows the extent to which
current assets of the company can cover
its current liabilities.
𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑟𝑎𝑡𝑖𝑜 =
𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
• Debt to total assets ratio – it shows how much of the firm’s assets
are financed by debt.
𝑡𝑜𝑡𝑎𝑙 𝑑𝑒𝑏𝑡
𝐷𝑒𝑏𝑡 𝑡𝑜 𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠 𝑟𝑎𝑡𝑖𝑜 =
𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠
• Profit Margin Ratio – this ratio compares the net profit to the level of sales
𝑛𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡
𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 𝑅𝑎𝑡𝑖𝑜 =
𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠