Controlling – Business Management Ethics and Entrepreneurship Notes

Introduction:
Koontz and O’Donnell gave the following definition, “The managerial control implies the measurement of accomplishment against the standards and the correction of deviation to assure attainment of objectives according to plans.”

Concept of Controlling:
“Control is the process of bringing about conformity of performance with planned action.” ~ Dale Henning

  • In common parlance, the word control means to check or verify, to regulate or to curb or to restrain.
  • Controlling is to ensure that the actions move in accordance with the plans.
  • Its main purpose is to check the deviations and take corrective action that is necessary.
  • Like the planning function, controlling is also an all-pervasive function and performed at all the levels in the organization.
  • Control is directly related to planning.
  • Control depends and contributes to all other functions of management.
  • Remedial action of controlling may result in alteration of plans, change in the organizational structure, modification in the staffing process, or change in the process and techniques of direction.

Characteristics of Control:
1. It is forward-looking:

  • A manager can take corrective action only on matters relating to future events.
  • Whatever has been done in the past cannot be controlled.
  • It is usually preventive as it tends to minimize losses and wastages.
  • A manager applies the advantages of previous experience to future conditions.

2. It is a continuous activity:
There should always be a cross-check or control between actual and planned performance. So that the deviations can be corrected in time.

3. Purpose of controlling is positive:

  • It plays a positive role for both the organization and the individual.
  • Control on the individual implies checking their activities so that the common goals are accomplished.
  • Control on the organization means to ensure that only planned activities take place.
  • At individual level the purpose of control is to make individuals give up a part of their independence so that common goals of objectives may be accomplished.

4. Controlling exist at every level of management activity :
It is the function of every manager – from chairman of BOD to first-line supervisor. Top management is involved in exercising strategic control, middle management concentrates on tactical control and operational control is the responsibility of supervisory management.

Importance of Control:
1. Helps in decentralizing authority: It helps the management to speed up the process of decision making without losing their control.

2. Increases managerial ability: It helps the managers to react prudently towards situations with risk and uncertainty; especially in areas of customer demand, government regulations by developing control system managers are better able to monitor specific activities and react quickly to significant changes in the environment. This facilitates organization viability in the face of environmental uncertainty of change.

3. Ensures optimum use of valuable resources: Controlling is necessary to ensure optimum utilization so that the results are achieved with least cost and few untoward consequences.

4. Facilitates coordination: Control and coordination are co-extensive. Where control is required to achieve the goals it is only through coordinated activities that one can make it possible control pulls together all the devise and multiple threads of organized activities & weave them into unified system to achieve predetermined goals.

5. It structures the human behaviour:

  • Control brings orders, discipline amongst the employees and improves their outlook towards the organization.
  • It reduces diversity and brings unity in their performance.

6. Fosters organizational efficiency and effectiveness:
Efficient control system helps in achieving organizational efficiency & effectiveness by focusing on crucial areas of performance & control is related to internal & external dimensions of the organization and include:

  • fixing responsibility for performance
  • motivating people for better performance
  • effective dealing with uncertainty
  • eliminating wasteful expenditure.

7. Controlling acts as a final link in the functional chain of management activities.

Control Process
1. Establishing Standards: Standards are the criteria based on which a performance can be measured. It can be a:

  • Tangible or Specific Standard, or (e.g. – production of 200 units per day)
  • Intangible or Abstract Standard (e.g. – to be the most preferred employer)

2. Measurement of Actual Performance against the Standards:

  • The next step is to check the actual performance. This is done not just to detect a mistake but also to predict future problems.
  • In practice, for some activities standards cannot be developed and also there are some performances which are difficult to measure.
  • Performance must be measured in units similar to those in which standards are expressed.
  • Thus, the manager should only concentrate on significant deviations whenever they occur.

3. Corrective Action:

  • In case of discrepancy between actual output and planned output, some corrective action is required.
  • It can be due to controllable or uncontrollable factors. The following are important phases of corrective action:

(A) Operation Phase: it involves the following steps:

  • Thorough investigation of the cause of deviation.
  • Taking actions for correcting the situation.
  • Prompt direction for correction in accordance with the decisions.
  • Close supervision of the corrective action to ensure that it is moving in accordance with the plan and is effective.

(B) The Administrative Phase:

  • Carrying out further investigation for determining the factors that are responsible for the deviation.
  • Ascertaining whether disciplinary actions are required as per the situation. Creative planning to prevent recurrence of the situation.
  • And lastly making a plan to prevent the recurrence of the situation.

4. Follow Through:

  • The corrective action must always be checked to ensure its compliance.
  • Specific procedures must be established and the responsibility should be clearly assigned to carry out the corrective action.
  • The superior must watch whether the subordinate is applying what he had learnt in the training program to the actual work situation.

Limitation of controlling :

  • Difficulty in setting Quantitative Standards: It becomes difficult to compare any plan with actual if it is not quantitative in terms of measurement.
  • No control on external factors: There is no control over external factors (i.e. technology updates government policies, customer preferences etc.)
  • Resistance from employees: Employees may resist to control since it curbs their freedom.
  • Costly affair: Control is expensive in terms of time, effort which are costly (maybe construct the efficiency of the organisation).

Essentials of a Good Control System
1. Feedback:

  • This is the essence of controlling. Any manager responsible for controlling needs information how much effective his control is. This is the process of adjusting the future actions based upon the information about the past performance.
  • This information is known as feedback which can be formal or informal.
  • Formal feedback can be in the form of financial statements, statistical analysis etc., whereas informal feedback can be through personal contact, informal discussions, etc.
  • Even the fastest data i.e., real-time information will not result in automatic correction of deviations from plans.

2. Control should be objective: It should be definite and objective. Impartial appraisal of work performance must be done in order to make employees respond favourably, it should not be a matter of Subjective Discrimination.

3. Prompt Reporting of Deviations: Managers should be able to provide the information as soon as possible so that failures can be avoided.

4. Forward-Looking: An ideal control system should be able to detect the errors much before they occur i.e. it should be self-correcting and forward-looking. A manager should therefore structure system in a way so that deviations are predicted well in time and corrective action can be initiated before substantial deviation occurs.

5. Flexibility:
Control system should be made under a flexible plan and must be able to adapt itself to the changing business conditions. Control should remain workable under dynamic business conditions includes the failure of control system itself.

6. Organizational Suitability: Flow of control information should be consistent with organization structure employed.

7. It should be economical and easy to understand:

  • It should be cost-effective, i.e. the cost of installation and maintenance should justify its benefits. :
  • The control system must be developed keeping in mind the qualification and expertise of the executives who have to use it.
  • Thus complex charts, statistical analysis may not serve as a good control device unless its meaning is properly understood by such executives.

8. Strategic point control: –

  • Management should not try to control all factors.
  • More importance must be given to more strategic areas and deviations so that management is not involved with less important problems.
  • Efficient control system discriminates between important & unimportant factors and through it makes the system more effective and less costly.

9. Control should suggest corrective actions: Effective control system must indicate deviations and suggest timely actions to be taken.

10. Control should be worker focused: Control is required on people Handing material resources for producing certain work results. This enables the management to make the people directly accountable. It results in higher productivity. Control system should be worker focused rather than the work or Job oriented one.

11. Simple to understand: While launching a control system, it must notify that it should be very efficient as well as simple so that its benefits and drawbacks are easily understandable.

Relationship between Planning and Controlling
1. Planning is looking ahead whereas controlling is looking back, since planning involves deciding in advance about the course of action to be taken in future and controlling is checking whether plans are properly implemented, hence backwards-looking.

2. Planning is done on the basis of past experience and then future course of action is decided.

3. Controlling attempts to improve work performance in future.

4. Koontz, O’Donnell and Weihrich remark, “Every objective, every goal of many planning programmes, every policy, every procedure and every budget become standards against which actual or expected performance might be measured.”

5. Controlling is a postmortem of events which have already taken place.

Traditional Control Techniques:
1. Budgetary Control:

Budget refers to a statement of anticipated inflows and expected outflows expressed numerically.

ICMA of England & Wales defines it as – “a financial and/or qualitative statement prepared prior to a defined period of time of the policy to be pushed during that period for the purpose of attaining a good objective.”

ICMA of England & Wales defines budgetary control as “the establishment of objectives relating to the responsibilities of executives to the requirements of a policy and the continuous comparison of actual with budgeted results, either to secure by individual action the objective of that policy or to provide a basis for its revision.”

(d) It involves the following steps:

  • Determination of objectives to be achieved like higher profits, better financial position, etc.
  • Noting the steps necessary to achieve the objectives.
  • Translating the course of action into monetary terms.
  • Constant comparison of the actual performance with the budgeted performance.

(e) Types of Budgets:

  • Sales budget
  • Production budget
  • Purchase budget
  • Capital expenditure
  • Administrative budget expenses
  • Research and Development Budget
  • Cash budget

Master budget

  • Master budget is a budget which combines all other budgets in a summary form.
  • The various functional budgets are the components of Master Budget.

Summary plan is divided into:

  • forecast income statement
  • forecast balance sheet

(f) Purposes of Budgeting:
According to Koontz and O’ Donnel, “Budget correlates planning and allows authority to be delegated without loss of control.”

Means of coordination: Budgeting is also used for coordinating the activities of various divisions of a business.

To control cost: Budgets help the management to know separately the cost of each element and exercise effective control over it.

To increase efficiency: When a production budget is separately prepared, progress and efficiency of production can be determined.

To encourage research and development: Thorough analysis of deviations particularly of key factors provide a sound basis for research and development.

To develop an organised procedure for planning: Budget requires planning and also acts as an instrument for planning. It involves forecasting or projecting a future course of action.

Basis for control: Budget lays down objectives, goals and standards of the company in objective terms. It helps in analysing the deviations, and also suggest corrective actions.

To determine capital requirements: Budget helps in computing financial flows at different levels of all operations in a company.

To increase utility of cost records: Budget involves considerable use of cost records, thus increasing their utility. A master budget is frequently prepared to combine all other budget in a summary form.

(g) Benefits of Budgeting:

  • It helps the management to make comparisons between diverse things by converting them into common numerical terms.
  • Wastage and losses are avoided.
  • The excess expenditure can be scrutinized before it is incurred.
  • Management by exception is possible.
  • Targets for-profits are set up and then corrective action is taken for any deviation. Thus, it ensures profit planning.
  • Standard against which their performance is supposed to be judged is well known.
  • Lesser overlapping and nothing will be left undone.
  • If budgets are based on measured dynamism, firm would be able to grow at a faster rate.

2. Standard Costing:

  • Expenses related with every activity are recorded and then compared with budgeted costs.
  • Suitable action is taken where any deviations are found.

3. Ratio Analysis:

  • Ratio analysis is the relationship between various elements of financial statements expressed in mathematical terms.
  • It helps to understand the profitability,^liquidity and solvency of a firm.

4. Statistical Control: In order to find out the. .cause of deviations comparison of various ratios, averages and percentages of statistical data are undertaken. Statistical reports compiled after the analysis are presented in the forms of charts or graphs which helps in visualizing the trends and weaknesses in the respective areas of operation and necessary remedial steps are suggested.

5. Breakeven Analysis:

  • It is a point of no-profit no-loss
  • It acts as a basis for future performance
  • It determines the minimum level where the firm should operate

6. Internal Audit:

  • It refers to the regular and independent appraisal of the accounting, financial and other operations of a business.
  • It is done by the staff generally called as internal auditors.
  • But this method is limited to the integrity of accounts and assets only Modern Control Techniques / Non-Traditional Techniques.

1. Zero Base Budgeting: This technique was introduced by Peter Pyhrr of US in 1970. The following are the steps under this approach:

  • The managers at all the levels have to define the objectives of each programme of activity.
  • It requires additional time and effort during its initial year.
  • They then prepare the alternative spending plan known as decision.

packages which are:

  • One involving expenditure of (say) 20% below the present level of expenditure or the minimum expenditure which will permit the programme to continue meaningfully.
  • another package indicating resources in terms of men, materials and money which will be needed to continue at the present level of performance and objectives.
  • and a third package indicating what could be achieved, if additional funds were available to the extent (of say) 10% or more. The executives at the next higher level have to consolidate these decision packages and rank them in order of priorities. This is an effective technique for continuous evaluation of all the activities.

2. Network Analysis:
1. Critical Path Method (CPM):

  • Developed by Walker of Dupont.
  • Under this technique, a project is broken into different activities and their relationship is determined.
  • These relationships are shown with the help of a network diagram. This network can be used for the optimum use resources and time.
  • This approach is based on the assumption that the time taken by an activity is proportional to the magnitude of resources allocated to them.

(e) This approach has the following advantages:

  • It identifies critical areas and pays more attention to these areas:
  • Wastage of time, money and energy is avoided.
  • Achievement of clearly defined project objectives is made easy.
  • Provide an analytical approach to the ‘achievement o project objectives which are clearly defined.

2. Programme Evaluation and Review Technique (PERT):

  • It helps in planning, monitoring and controlling of projects.
  • It is directed towards dynamic management of projects.
  • It uses probability and linear programming for planning the activities.
  • Probability helps to estimate the timing of various activities, whereas linear programming is used to maximize the profit of various activities.
  • PERT technique is used in construction of ships, buildings etc.

It specifies techniques and procedures to assist project manager in:-

  • PlannIng schedules and costs.
  • Determining time and cost status,
  • Forecasting manpower skill requirements,
  • Predicting schedule slippages and cost overruns,
  • Developing alternate time-cost plans,
  • Allocating resources among tasks.
Management Audit financial Audit
1. It looks into the past, present and future. It is concerned with verification and confirmation of current financial data.
2. Covers areas of managing on asset potential, capacity utilization, executive evaluatlon etc. it is mainly concerned with financial records and results of company’s operation for the year.
3. Rights and çiuties are not clearly defined: Clearly defined rights and duties of the company auditors.
4. Maybe undertaken by the management itself. It is conducted by an independent qualified auditor.

Appraisal Areas Under Management Audit:
The American Institute of Management has identified 10 categories consists of ten categories of appraisal areas:
1. Economic Function: This Indudes appraising the public value of the company in relation to different groups like consumers, employees, etc.

2. Corporate Structure: The effectiveness of the corporate structure appraised.

3. Health of Earnings: It determines the extent to which the company earning profits.

4. Service to Shareholders: The company’s service to the shareholder in terms of minimum risk, maximum return etc. is determined.

5. Research and Development: This Is evaluated In terms of the participation by the company in developing research policies and developing new and economical ways of doing things.

6. DIrectorate Analysis: This involves the evaluation of

  • The quality of each director and his contribution to the company.
  • The extent to which directors work as a team, and
  • Whether they act as a trustee for the organization.

7. FIscal Policies: This means appraising the effective utilization of company’s funds.

8. Production Efficiency: It Includes the appraisal of material and machines.

9. Sales Vigour: It evaluates the extent to which sales have been realized, development of sales personnel and the extent to which present sales policies will help the mçagement to realize future sales potential.

10. Executive Evaluation: The quality of executives and their management philosophy should be evaluated separately. Three personal qualities essential for business leaders are ability, industry and integrity.

Relationship between planning and controlling:
these are balled the siamese twins of management. planning facilitates controlling and controlling facilitates planning

11. Planning Is looking ahead and controlling is looking back:
critical evaluation:
Planning is looking ahead and controlling is looking back the view of planning and controlling expressed in the statement though true, is incomplete. Planning is no doubt a forward-looking activity as it involves deciding In advance the organization’s objectives, strategies, major plans, policies & programmes and forecasting the future events as also likely their impact on the organization.

Controlling is backwards-looking activity as it involves checking whether the plans are properly implemented, their results achieved and the deviations corrected.
However, description of the processes and purposes of planning and controlling though correct, is certainly not complete, planning is not merely forward-looking as it is also based on past experiences, controlling is not merely a looking back exercise. By identifying deviations and initiating corrective steps, controlling attempts to improve performance in future. The whole exercise of looking back is meant to improve work performance in future.

Nature of Management and its Process MCQ Questions

1. A manager can control the past as well as take action for future.
(a) True
(b) False
(c) Partly true, partly false
(d) None of the above
Answer:
(b) False

2. Which function involves constant revision and analysis of standards resulting from deviations?
(a) Controlling
(b) Directing
(c) Organizing
(d) Planning
Answer:
(a) Controlling

3. Control presupposes the existence of and
(a) Policies and Procedures
(b) Objectives and Policies
(c) Goals and Plans
(d) Strategy and Goals.
Answer:
(c) Goals and Plans.

4. Control Is a function to ensure and maintain coordination throughout the organization.
(a) Wider
(b) Vital
(c) One-step
(d) Continuous
Answer:
(c) Goals and Plans

5. ……………….. and are two important phases under corrective action.
(a) Operation and administrative
(b) Establishing goals and standards
(c) Measurement of performance and their comparison
(d) Measurement of. performance and follow-through
Answer:
(a) Operation and administrative

6. Ideal control is self-correcting and forward-looking.
(a) True
(b) False
(c) Partly true partly false
(d) None of the above
Answer:
(a) True

7. The traditional control techniques are:
(a) Budgetary Control and CPM
(b) PERT and CPM
(c) Zero Base Budgeting and Management Audit
(d) Budgetary Control and Standard Costing
Answer:
(d) Budgetary Control and Standard Costing.

8. provides the yardstick for measurement of performance essential for effective control.
(a) Standard Costing
(b) Internal Audit
(c) Budgetary Control
(d) None of the above.
Answer:
(c) Budgetary Control.

9. Efficient control system discriminates between important and unimportant activities.
(a) True
(b) False
(c) Partly true partly false
(d) None of the above
Answer:
(a) True

10. Traditional control focuses on scientific methods whereas non-traditional control are based more on non-scientific methods.
(a) True
(b) False
(c) Partly true partly false
(d) None of the above
Answer:
(b) False.

11. Through analysis of provide a sound Isis for research and development.
(a) Budgeted goals
(b) Key factors
(c) Production costs
(d) Plans
Answer:
(b) Key factors.

12. …………………… provides basis for collective actions to be taken to improve future performance.
(a) Internal Audit
(b) Standard Costing
(c) Break-Even Analysis
(d) Statistical Control
Answer:
(c) Break-Even Analysis

13. Zero base budgeting can be used more meaningfully In those areas where a direct relationship exists between the expenditure on an activity and its benefits to the enterprise.
(a) True
(b) False
(c) Partly true partly false
(d) None of the above
Answer:
(a) True

14. Under method project is broken down into different activities.
(a) Critical Path Method
(b) Project evaluation and review technique
(c) Zero Base Budgeting
(d) Management Audit
Answer:
(a) Critical Path Method

15. provides framework for treating a wide range of project management problems.
(a) Critical Path Method
(b) Zero Base Budgeting.
(c) Project evaluation and review technique
(d) None of the above
Answer:
(c) Project evaluation and review technique

16. and are called the siamese twins of management.
(a) Planning and Organizing
(b) Co-ordination and Co-operation
(c) Directing and Controlling
(d) Planning and Controlling
Answer:
(d) Planning and Controlling.

17. Which one is the final link in the functional chain of management activities.
(a) Direction
(b) Planning
(c) Controlling
(d) Co-ordination
Answer:
(c) Controlling

18. Which one presupposes the existence of goal and plans
(a) Planning & Controlling
(b) Planning
(c) Organisation
(d) Controlling
Answer:
(d) Controlling

19. Amongst an of these which one is not a characteristic of controlling
(a) Controlling is forward-looking
(b) Controlling is positive
(c) Controlling is negative
(d) Contro
Answer:
(c) Controlling is negative.

20. Control is a one-step process.
(a) True
(b) False
(c) Partly true
(d) Partly false
Answer:
(a) True

21. Which of these characteristics involves actual and planned performance.
(a) Continuous activity
(b) Forward-looking
(c) Positives
(d) Management at every level.
Answer:
(a) Continuous activity

22. Controlling serves a positive purpose at this level:
(a) Organizational level
(b) Individual level
(c) Both (a) &( b)
(d) None of the above
Answer:
(c) Both (a) &( b)

23. Which management should go in for decentralization authority.
(a) Middle
(b) Low
(c) Top
(d) Both (a) & (b)
Answer:
(c) Top

24. Which is largely geared towards highlighting needed behaviour and discouraging unwanted behaviour.
(a) Organisation
(b) Planning
(c) Direction
(d) None of these
Answer:
(d) None of these.

25. …………………… are important process of management,
(a) Direction
(b) Controlling
(c) Coordination
(d) Planning.
Answer:
(c) Coordination

26. In the backwards-looking activity which is not involved,
(a) Forecasting the future
(b) Deviation
(c) Planning
(d) None of these
Answer:
(a) Forecasting the future

27. In the forward-looking activity which is not involved,
(a) Deviations are corrected
(b) Planning
(c) Direction
(d) None of these
Answer:
(a) Deviations are corrected.

28. Which function improves work performance in future?
(a) Planning
(b) Direction
(c) Both (a) & (b)
(d) Controlling
Answer:
(d) Controlling

29. Function which is named, as forward-looking or looking back,
(a) Planning
(b) Organization
(c) Direction
(d) Controlling
Answer:
(d) Controlling.

30. Planning and Controlling ……………………….. each other.
(a) Do not complete
(b) Substitute
(c) Reinforce
(d) None of these
Answer:
(c) Reinforce

31. Zero base budgeting was first introduced by:
(a) Peter Players
(b) Koontz
(c) O Donnell
(d) None of these
Answer:
(a) Peter Players

32. Zero base budgeting was introduced in which year.
(a) 1980
(b) 1970
(c) 1956
(d) 1979
Answer:
(b) 1970

33. Which network technique for management control was developed by Walker of Despot to reduce time-periodic maintenance.
(a) PERT
(b) Critical path method
(c) Both (a) and (b)
(d) None of these
Answer:
(b) Critical path method

34. Critical path method relation are shown with the help of diagram known as:
(a) Network diagram
(b) Line diagram
(c) Both (a) & (b)
(d) Flow chart
Answer:
(a) Network diagram

35. PERT involves basic network technique which includes:
(a) Planning
(b) Monitoring
(c) Controlling
(d) Both (a ) &(b)
Answer:
(d) Both (a ) &(b)

36. PERT uses ……………. and …………….. for planning and controlling the activities.
(a) Probability
(b) Linear programming
(c) Both (a) &(b)
(d) Planning.
Answer:
(c) Both (a) &(b).

37. Statutory audit is known as:
(a) Standard Audit
(b) Financial Audit
(c) InternalAudit
(d) Management Audit.
Answer:
(b) Financial Audit.

38. Which audit looks towards the past, present and future:
(a) Financial Audit
(b) Management Audit
(c) Internal Audit
(d) Standard Audit
Answer:
(b) Management Audit

39. Which audit is largely concerned with financial records and results of company:
(a) Standard Audit
(b) Management Audit
(c) Financial Audit
(d) Internal Audit
Answer:
(c) Financial Audit

40. The full form of AIM.
(a) American Institute of Management
(b) Accounting Institute of Management
(c) Audit Institute of Management
(d) None of these
Answer:
(a) American Institute of Management

41 .Which one is not an appraisal area of Management Audit.
(a) Economic Function
(b) Basis for Control
(c) Health of Earning
(d) Sales Figures Management
Answer:
(b) Basis for Control

42. Exercising control over day-to-day operation of the enterprises for the purpose of executing budget is known as:
(a) Standard Costing
(b) Budgetary Control
(c) Internal Audit
(d) Network Analysis.
Answer:
(b) Budgetary Control

43. This technique helps in finding out the activ ity of profitable:
(a) Standard Costing
(b) Budgetary Control
(c) Statistical Control
(d) Internal Audit
Answer:
(a) Standard Costing.

44. Which analysis is a point of no profit no loss.
(a) Network Analysis
(b) Break Even
(c) Financial Ratio
(d) Standard Costing
Answer:
(b) Break Even.

45. Which one is not an essential of good Control System.
(a) Forward looking
(b) Feedback
(c) Corrective action
(d) Flexible.
Answer:
(c) Corrective action.

46. Which one of these is not a traditional method of controlling,
(a) Budgetary Control
(b) Standard costing
(c) Merit-Rating
(d) Break-even analysis
Answer:
(c) Controlling is to ensure that the actions move in accordance with the plans. A variety of tools and techniques have been developed and used for the years for purposes of managerial control. Some of these techniques are termed as traditional and others as modern. The main traditional control devices are:

  • Budgetary Control
  • Standard Costing
  • Financial Ratio Analysis
  • Internal Audit
  • Break-even Analysis
  • Statistical Control.

Thus, Merit Rating is not a traditional method of controlling.

47. Which one of the following is not correct about control?
(a) Control is forward looking
(b) Control suggests corrective actions
(c) Control is one time activity
(d) Control is exercised as per organisational authority.
Answer:
(c) The main characteristics of controlling are:

  • Controlling is forward looking.
  • Controlling exists at every management level.
  • Controlling is a continuous activity.
  • Controlling suggests corrective action.
  • Control is exercised as per organisational authority.

Thus, control is not a one time activity.

48. Which one of the following is considered as non-traditional control technique?
(a) Internal audit
(b) Break-even analysis
(c) Zero-base budgeting
(d) Financial ratio analysis
Answer:
(c) Traditional devices focus on non-scientific methods, whereas non-traditional devices are based on more of scientific methods and are more accurate. Some of non-traditional (modem) control devices are:

  • Zero base budgeting
  • Network analysis
  • CPM- Critical Path Method
  • PERT- Programme Evaluation and Review Technique.
  • Management Audit.

49. Which one of the following is known as technique of controlling?
(a) Margin of safety
(b) Margin of Contribution
(c) Break-even analysis
(d) P/v Ratio.
Answer:
(c) Various techniques of controlling are:
Traditional

  • Budgetary Control
  • Standard Costing
  • Financial Ratio Analysis
  • Internal Audit
  • Break-Even Analysis
  • Statistical Control Non Traditional
  • Zero Base Budgeting
  • Network Analysis
  • CPM- Critical Path Method
  • PERT- Programme Evaluation and Review Technique
  • Management Audit.

50. In which country the zero base budgeting was first evolved?
(a) Japan
(b) USA
(c) India
(d) China
Answer:
(b) Zero base budgeting is a new approach to budgeting which was first introduced by Peter Pyhrr in 1970 in the United States. It is defined as an operative planning and budgeting process. Which requires each manager to justify his entire budget in detail from scratch and shifts the burden of proof to each manager to justify why he should spend any money at all.

51. The concept of ‘zero base budgeting’ was introduced in 1970 by:
(a) Joseph L. Massie
(b) Lester R. Bittel
(c) Peter Pyhrr
(d) Peter F. Drucker.
Answer:
(c) Zero base budgeting is a new approach to budgeting and it was first introduced by Peter Pyhrr in 1970 in the United States. It is defined as an operative planning and budgeting process which requires each manager to justify his entire budget in detail from scratch and shifts the burden of proof of each manager to justify why he should spend any money at all.

52. Which one of the following is called the Siamese twins of management?
(a) Planning and organizing
(b) Co-ordination and co-operation
(c) Directing and controlling
(d) Planning and controlling.
Answer:
(d) Planning and controlling are closely linked to each other, therefore they are called Siamese twins of management. Effective planning facilitates controlling and controlling facilitates planning.

53. Which one of the following control techniques provides basis for collective actions to be taken to improve future performance?
(a) Internal audit
(b) Standard costing
(c) Break-even analysis
(d) Statistical control.
Answer:
(c) Break even Analysis is point of ‘No Profit No loss’. It can be used as a control device as it proves a basis for collective actions to be taken to improve future performance.

54. The traditional control techniques’are ………………………… .
(a) Budgetary control and CPM
(b) PERT and CPM
(c) Zero base budgeting and management audit
(d) Budgetary control and standard costing.
Answer:
(d) Traditional control techniques are:

  • Budgetary control
  • Standard Costing
  • Financial Ratio Analysis
  • Internal Audit
  • Break Even Analysis
  • Statistical Control

Thus, Budgetary Control and Management Audit are the traditional controlling techniques.

55. …………………………. is the process of adjusting future actions based upon information about past performance.
(a) Control
(b) Organisational suitability
(c) Feedback
(d) Network Analysis.
Answer:
(c) Feedback is the process of adjusting future action based upon information about the past performance. Hence option (c) is correct.

56. …………………………….. is the relation between various elements of financial statements expressed in mathematical terms.
(a) Ratio Analysis
(b) Management Audit
(c) Internal Audit
(d) PERT.
Answer:
(a) Ratio Analysis is the relation between various elements of financial statements expressed ¡n mathematical terms. it helps to understand profitability, liquidity and solvency of a firm.

57. Which network technique includes planning, monitoring and controlling?
(a) CPM
(b) Zero-Base Budgeting
(c) PERT
(d) Both (a) and (c)
Answer:
(c) Programme Evaluation and Review Technique [PERT] is an important technique in the field of project management. It involves basic network technique which includes planning, monitoring and controlling of projects.

58. In which situation, control function is most required ?
(a) Decentralisation
(b) Centralisation
(c) Planning
(d) Organising
Answer:
(b) In Centralisation, the management exercises maximum control on all activities; hence, the level of control required is maximum.

59. ……………………………. and are called the Siamese twins of management.
(a) Planning and organising
(b) Co-ordination and co-operating
(c) Directing and controlling
(d) Planning and controlling.
Answer:
(d) Planning and controlling are closely linked to each other, therefore they are called Siamese twins of management. Effective planning facilitates controlling and controlling facilitates planning.

60. Orderly synchronization of group efforts, so as to provide unity of action in the pursuit of common purpose is?
(a) Planning
(b) Organising
(c) Controlling
(d) Co-ordination
Answer:
(d) Co-ordination is the orderly synchronization of group efforts so as to provide unity of action in the pursuit of a common purpose.

61. Managers always use these for performance standards during the Control process
(a) Employee opinions
(b) Standards given in books
(c) Generic performance on the basis of their intuition
(d) Goals created during the planning process.
Answer:
(d) Managers uses goals created during the planning processes for performance standards during the control process. It must be measured in units similar to those in which standards are expressed.

62. Management audit has a:
(a) Down orientation
(b) Future orientation
(c) Past orientation
(d) Top orientation.
Answer:
(c) Management Audit may be defined as the systematic and dispassionate examination, analysis and appraisal of management of overall performance. Management Audit signifies critical assessment of management of the enterprise from the broadest possible point of view. Such an audit looks to the past, to historical records of past performance. Option (c) past orientation is correct answer.

63. Zero based budgeting was first introduced in:
(a) India
(b) China
(c) Japan
(d) USA
Answer:
(d) Zero Based budgeting is a new approach to budgeting which was first introduced by Peter Pyhrr in 1970 in the United States.

63. Which of the following is the correct meaning of word “Appraisal” in the context of management?
(a) Frequent guidance
(b) Unified command
(c) The act of estimating performance
(d) To illustrate.
Answer:
(c). Appraisal’ in the context of management is the act of estimating the performance.

64. A major part of the controlling function of management is to ………………. .
(a) Correct performance problems
(b) Structure an Organisation
(c) Formulate strategies
(d) Set standards.
Answer:
(a) A major part of the controlling function of management is to correct performance problems.

65. Which of the following is a single-use plan containing expected results in numerical terms?
(a) Budget
(b) Policies
(c) Procedures
(d) Rules.
Answer:
(a) A Budget is a single use plan containing expected results in numeric terms.

66. A household that cuts back, on supermarket spending and going over budget on its food budget, is using the budget tool as a (n).
(a) Planning tool
(b) Controlling tool
(c) Leading tool
(d) Organising tool.
Answer:
(b) Budgeting is one of the most important of controlling devices. Control represents the most widely known use for budgeting. Budget is used as a controlling tool commonly.

67. Zero – Base Budgeting was first introduced in:
(a) Japan
(b) India
(c) China
(d) USA
Answer:
(d) Zero base budgeting was.first introduced by Peter Pyhrr in 1970 in the United States.

68. Co-ordination and Controlling exists are at:
(a) Same level
(b) Different level
(c) Intersect
(d) Siamese Twins
Answer:
(a) Controlling and co-ordination exist at same level. Control and Coordination are important processes of management. Control keeps all activities and efforts within their fixed boundaries and makes them to move toward common goal through co-ordinated activities.

69. A corn pany looks at its expenses and finds that its payment to treelancers increased significantly over the past few months, exceeding the budget by 25 percent This is an example of ……………………… .
(a) using a budget foc planning
(b) using data to confirm a budget
(C) justifying expenses with a budget
(d) usinq a budget for monitoring and controlling.
Answer:
(c) The company finds that its payment to freelancers increased exceeding the budget by 25%. This is an example of justifying expenses with the budget which altogether justice the inflow and the outflow of the company.

69. Which of the following best defines standard” in relation t0 estaiisning controls?
(a) Unbased Evaluation
(b) Parallel Association .
(c) Performance Target
(d) Rival Strategies.
Answer:
(c) Performance targets best define ‘standard’ in relation to establishing controls. Standards are the norms against which performance is measured to find out its results. This requires measuring the work in terms of control standards.

70. In general, the greater the distance between the home office of a global company and its branch, the ……………… .
(a) Less formalised the control
(b) Less automated the Control
(c) More formalised the control
(d) Control would be irrelevant.
Answer:
(a) In general, the greater the distance between the home office of a global company and its branch, the less formalised the controls as it may create problems in regulating the activities losing ultimate control over the goals and standards, of the organisation.

71. According to experts, the primary hindrance to a firms productivity is its inability to ……………….. .
(a) Utilize funds available
(b) Use government subsidy
(c) Use advanced controls
(d) Acquire and maintain human capital.
Answer:
(c) According to experts, the primary hindrance to a firm’s productivity is its inability to use advanced controls. It affects people who handle material resources for producing certain work results.

72. Pubic Investment in a company is generally in the form of:
(a) Savings Account
(b) Shares, Debentures and Deposits
(c) Purchase of goods
(d) Dividend.
Answer:
(b) Public investment in a company is generally in the form of shares, debentures and deposits which is a good source of generating funds.

73. Which Of the following defines a liquidity ratio?
(a) Revenue in relation to investment
(b) Total debt in relation to total assets
(c) Current assets in relation to current liabilities
(d) Amount of sales in relation to cost to produce.
Answer:
(c) Liquidity Ratio are the ratios that measure the ability of a company to meet its short term debt obligation. These ratios measure the ability of a company to pay off its short term liabilities when they fall due.

74. After a thorough company wide self-examination, company Y decides to set up work teams. This is an example of ………. .
(a) An external change causing an internal change
(b) An internal change causing an external change
(c) An internal change causing another internal change
(d) An external change causing another external change.
Answer:
(c) Company wide self examination is an internal change. Deciding to set up work teams is also an internal change. Therefore, such activities are internal change causing another internal change.

75. Controlling is the ………………… in the management process.
(a) Final step
(b) Low important step
(c) First step
(d) Most important step
Answer:
(a) Management process includes:

  • Planning
  • Organising
  • Staffing
  • Directing
  • Controlling

Thus, controlling follows other managerial functions. It is a continuous process and by forcing events to conform to plans, it becomes intimately connected with planning.

76. Zero Base Budgeting was first introduced in:
(a) USA
(b) Japan
(c) India
(d) China.
Answer:
(a) Zero based budgeting is a new approach to budgeting, which was first introduced by Peter Pyhrr in 1970 in the United States (US).

77. Controlling compares ……………………….. to see if goals are being achieved.
(a) Planned performance to standard performance
(b) Standard performance to ideal performance
(c) Actual performance to competitor performance
(d) Actual performance to planned performance.
Answer:
(a) Control is not a one-step process but a continuous one. It involves constant revision and analysis of standards resulting from the deviations between aètuai and planned performance. Hence, option a is correct.

78. Which institute has defined a budget as “ a financial and/or quantitative statement prepared prior to a defined period of time of the policy to be pushed during that period for the purpose of attaining a good objective”?
(a) The Institute of Cost and Management Accountants of England
(b) The Institute of Cost and Management Accountants of’England and Wales
(c) The Institute of Cost and Management Accountants of Scotland
(d) The Institute of Cost and Management Accountants of Wales.
Answer:
(b) The Institute of Cost and Management Accountants of England and Wales defines a budget as a financial and! or quantitative statement prepared prior to a defined period of time of the policy to be pushed during that period for the purpose of attaining a good objectiver.

79. Which of the following is a logical and sequential order of completing a non-routine work?
(a) Efficiency analysis
(b) Planning and control.analysis
(c) Satiation analysis
(d) Network analysis.
Answer:
(d) Network analysis is a technique for planning and controlling complex projects and for scheduling the resources required on such products. It achieves this aim by analyzing the component parts of a project and assessing the sequential relationships between each event. The results of this analysis are represented diagrammatically as a network of interrelated activities.

80. A technique that helps change agents to deal with change is:
(a) Manipulation
(b) Co-optation
(c) Education and communication
(d) Threats to employees.
Answer:
(c) Education & Communication: One of the best ways to overcome resistance to change is to educate people about the change effort beforehand. Up-front communication and education helps employees see the logic in the change effort. This reduces unfounded and incorrect rumors concerning the effects of change in the organization.

81. When a budget is used for controlling it provides ……………….. against which resource consumption can be compared.
(a) qualitative Standards
(b) quantitative Standards
(c) flexible Standards
(d) non numerical Standards.
Answer:
(b) Budget is a method of controlling and in this, quantitative standards are set for comparing with the resource consumption.

82. To identify a problem, a manager ……………….. .
(a) Uses institution to see that things don’t look right
(b) Compares one set of standards or goods to a second set of standards or goods
(c) Compares the current state of affairs with some standard or good
(d) Looks for top management.
Answer:
(c) A Manager compares current situation with the standards to identify a problem.

83. Which of the following is not an objective of management audit?
(a) Improve the profit earning capacity
(b) Controlling the operations
(c) Identifying the grey area in operations
(d) Presenting findings to shareholders of the company.
Answer:
(d) Presentation of finding to shareholder is not the objective of management audit, it is a part of statutory audit.

84. The control process in an organization starts with …………………. .
(a) measuring performance
(b) evaluating performance
(c) comparing performance to standard
(d) establishing standards
Answer:
(d) Control Process-

  • Establishing Good and Standard
  • Measurement of Actual performance
  • Evaluating performance
  • Comparison
  • Follow through process.

85. The Concept of zero base budgeting was introduced in 1970 by:
(a) Joseph L.’ Massie
(b) Lester R. Bittel
(c) Peter Pyhrr
(d) Peter F. Drucker
Answer:
(c) Concept of Zero base budgeting was introduced by Peter Pyhrr in 1970 in the United States. It is defined an operative planning and budgeting process which requires such manager to justify his entire budget in detail from scratch (hence Zero base).

86. Which one of the following is called the siamese twins of management?
(a) Planning and Organizing
(b) Co-orcnation and Co-operation
(c) Directing and Controlling
(d) Planning and Controlling
Answer:
(d) Planning and Controlling are closely linked to each other. These are called Siamese twins of Management.

87. The Traditional Control techniques are:
(a) Budgetary Control and CPM
(b) PERT and CPM
(c) Zero base budgeting and Management audit
(d) Budgetary control and Standard costing
Answer:
(d) Techniques of Control are of two types :

  1. Traditional techniques.
  2. Modern techniques.

Traditional Techniques are :

  • Budgetary Control
  • Standard Costing
  • Financial Ratio Analysis
  • Internal Audit
  • Break-Even Analysis.
  • Statistical Control

Modern Techniques of Control are :

  • Zero Base Budgeting
  • Network Analysis
  • Management Audit.

88. Operating Analysis is ………………….. .
(a) Transactional Analysis
(b) Security Management
(c) Risk Management
(d) None of these
Answer:
(d) Operation Analysis is designed to add value by transforming input into useful outputs. There has no connection or relation between Operating Analysis and Transaction analysis/ or any other specific management.

89. CPM Stands for ……………….. .
(a) Critical Programme Method
(b) Crucial Path Methodology
(c) Critics Programme Management
(d) Critical Path Method.
Answer:
(d) CPM: Critical Path Method is an important network technique for management control to reduce time for periodic maintenance.

90. Steps to controlling functions:
(a) Establishing Goals and Standards
(b) Corrective Actions to be taken
(c) Measure the actual performance against standards
(d) Follow-through
(i) A-B-C-D
(ii) C-B-D-A
(iii) A-C-B-D
(iv) D-C-B-A
Answer:

Controlling function:

  • Establishing goals and standards .
  • Measure the actual performance against established standards
  • Corrective Action to be taken
  • Follow-through.

91. ………………….. is the relation between various elements of financialstatements expressed in mathematical terms.
(a) Ratio Analysis
(b) Management Audit
(c) Internal Audit
(d) PERT
Answer:
(a) ‘Ratio Analysis’ is the relation between various elements of financial statements expressed in mathematical terms.

92. Which one is not a traditional control techniques:
(a) PERT & CPM
(b) Management audit
(c) Standard costing
(d) Break-even analysis
Answer:
(a) Despite the never technique of planning and control, some of the traditional techniques are still very popular because of their special significance and continuing utility.
They are as under-

  • Budgetary control
  • Standard costing
  • Financial Ratio Analysis
  • Break Even Analysis
  • Statistical Control.

93. The process of adjusting future action based upon information in past:
(a) Decision making
(b) Feedback
(c) Follow though
(d) Control
Answer:
(b) Feedback is the process of adjusting future action based upon the information about past performance. It is based upon interdependence of different parts of a system.

CS Foundation Business Management Ethics and Entrepreneurship Notes