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The four steps involved in the control function are establishing performance standards, measuring the actual performance, comparing the actual performance to the standards and finally taking correction action (Baack, Reilly, Minnick 2014). All these steps are important as they ensure the right goals are set, define the measurements used to determine if the goal was met and enables us to evaluate if adjustments need to be made. This process helps set clear expectations.
The various ratios are used by accountants and managers differently in the control function because for accountants the planning process in these areas affect several parts of the company. The common goals for accountants and financial officers are profitability and cost of capital which applies to department activities along with increasing efficiencies in company operations which applies to the entire organization (Baack, Reilly, Minnick 2014).
Control is of the utmost importance to an organization's success and managers must continually improve its effectiveness and efficiency (Baack, Reilly, Minnick 2014). Managers do by communicating the standards for the department, identify how they measure the standards and continually provide feedback to employees. This allows the employees to know if they are on track and if not what plan is put into place to meet those standards.
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