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Definition of Feedback

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Feedback

The retrospective process of measuring performance, comparing it with plan and taking corrective action.



Related Terms:

management control

This is difficult to define in a few words—indeed, an
entire chapter is devoted to the topic (Chapter 17). The essence of management
control is “keeping a close watch on everything.” Anything can
go wrong and get out of control. Management control can be thought of
as the follow-through on decisions to ensure that the actual outcomes
happen according to purposes and goals of the management decisions
that set things in motion. Managers depend on feedback control reports
that contain very detailed information. The level of detail and range of
information in these control reports is very different from the summarylevel
information reported in external income statements.


Ordinary least squares (OLS)

regression analysis a statistical technique that minimizes the sum of the squared deviations between a dependent variable and one or more independent variables and provides the user
with a y-intercept and x-coefficients, as well as feedback such as R2 (explained
variation/total variation) t-statistics, p-values, etc.


Abusive Earnings Management

The use of various forms of gimmickry to distort a company's true financial performance in order to achieve a desired result.


Abusive Earnings Management

A characterization used by the Securities and Exchange
Commission to designate earnings management that results in an intentional and material misrepresentation
of results.


activity-based management (ABM)

a discipline that focuses on the activities incurred during the production/performance process as the way to improve the value received
by a customer and the resulting profit achieved by providing
this value



Asset/liability management

Also called surplus management, the task of managing funds of a financial
institution to accomplish the two goals of a financial institution:
1) to earn an adequate return on funds invested, and
2) to maintain a comfortable surplus of assets beyond liabilities.


Bottom-up equity management style

A management style that de-emphasizes the significance of economic
and market cycles, focusing instead on the analysis of individual stocks.


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Budgetary control

The process of ensuring that actual financial results are in line with targets – see variance
analysis.


Cash management bill

Very short maturity bills that the Treasury occasionally sells because its cash
balances are down and it needs money for a few days.


Certified Management Accountant (CMA)

a professional designation in the area of management accounting that
recognizes the successful completion of an examination,
acceptable work experience, and continuing education requirements


Configuration control

Verifying that a delivered product matches authorizing
engineering documentation. This also refers to engineering changes made subsequent
to the initial product release.


Control

50% of the outstanding votes plus one vote.


Control account

An account maintained in the general ledger that holds the balance without the detail. The detail is maintained in a subsidiary ledger.


control chart

a graphical presentation of the results of a
specified activity; it indicates the upper and lower control
limits and those results that are out of control


control premium

the additional value inherent in the control interest as contrasted to a minority interest, which reflects its power of control


controllable cost

a cost over which a manager has the ability to authorize incurrence or directly influence magnitude


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Controllable profit

The profit made by a division after deducting only those expenses that can be controlled by the
divisional manager and ignoring those expenses that are outside the divisional manager’s control.


controllable variance

the budget variance of the two variance approach to analyzing overhead variances



Controlled disbursement

A service that provides for a single presentation of checks each day (typically in
the early part of the day).


Controlled foreign corporation (CFC)

A foreign corporation whose voting stock is more than 50% owned
by U.S. stockholders, each of whom owns at least 10% of the voting power.


Controller

The corporate manager responsible for the firm's accounting activities.


controller

the chief accountant (in a corporation) who is responsible
for maintaining and reporting on both the cost
and financial sets of accounts but does not handle or negotiate
changes in actual resources


controller

Officer responsible for budgeting, accounting, and auditing.


controlling

the process of exerting managerial influence on
operations so that they conform to previously prepared plans


Corporate financial management

The application of financial principals within a corporation to create and
maintain value through decision making and proper resource management.


Cost control

The process of either reducing costs while maintaining the same level of productivity or maintaining costs while increasing productivity.


cost control system

a logical structure of formal and/or informal
activities designed to analyze and evaluate how well
expenditures are managed during a period


cost management system (CMS)

a set of formal methods
developed for planning and controlling an organization’s
cost-generating activities relative to its goals and objectives
cost object anything to which costs attach or are related



Cutoff control

A procedure for ensuring that transaction processing is completed
before the commencement of cycle counting.


Demand Management Policy

Fiscal or monetary policy designed to influence aggregate demand for goods and services.


DLOC (discount for lack of control)

an amount or percentage deducted from a pro rata share of the value of 100% of an equity interest in a business, to reflect the absence of some or all of the powers of control.


Dupont system of financial control

Highlights the fact that return on assets (ROA) can be expressed in terms
of the profit margin and asset turnover.


Earnings Management

The active manipulation of earnings toward a predetermined target.
That target may be one set by management, a forecast made by analysts, or an amount that is consistent
with a smoother, more sustainable earnings stream. Often, although not always, earnings
management entails taking steps to reduce and “store” profits during good years for use during
slower years. This more limited form of earnings management is known as income smoothing.


Exchange controls

Governmental restrictions on the purchase of foreign currencies by domestic citizens or
on the purchase of the local domestic currency by foreigners.


Extraordinary Gain or Loss

Gains and losses that are judged to be both unusual and nonrecurring.


extraordinary gains and losses

No pun intended, but these types of gains
and losses are extraordinarily important to understand. These are nonrecurring,
onetime, unusual, nonoperating gains or losses that are
recorded by a business during the period. The amount of each of these
gains or losses, net of the income tax effect, is reported separately in the
income statement. Net income is reported before and after these gains
and losses. These gains and losses should not be recorded very often, but
in fact many businesses record them every other year or so, causing
much consternation to investors. In addition to evaluating the regular
stream of sales and expenses that produce operating profit, investors
also have to factor into their profit performance analysis the perturbations
of these irregular gains and losses reported by a business.


Extraordinary item

A transaction that rarely occurs, and which is unusual, such as
expropriation of company property by a foreign government. It is reported as a separate
line item on the income statement.


Extraordinary positive value

A positive net present value.


Financial control

The management of a firm's costs and expenses in order to control them in relation to
budgeted amounts.


Foreign exchange controls

Various forms of controls imposed by a government on the purchase/sale of
foreign currencies by residents or on the purchase/sale of local currency by nonresidents.


Immigration Reform and Control Act of 1986

A federal Act requiring all employers having at least four employees to verify the identity and employment
eligibility of all regular, temporary, casual, and student employees.


Institute of Management Accountants (IMA)

an organization composed of individuals interested in the field of management accounting; it coordinates the Certified management
Accountant program through its affiliate organization
(the Institute of Certified management Accountants)


internal accounting controls

Refers to forms used and procedures
established by a business—beyond what would be required for the
record-keeping function of accounting—that are designed to prevent
errors and fraud. Two examples of internal controls are (1) requiring a
second signature by someone higher in the organization to approve a
transaction in excess of a certain dollar amount and (2) giving customers
printed receipts as proof of sale. Other examples of internal
control procedures are restricting entry and exit routes of employees,
requiring all employees to take their vacations and assigning another
person to do their jobs while they are away, surveillance cameras, surprise
counts of cash and inventory, and rotation of duties. Internal controls
should be cost-effective; the cost of a control should be less than
the potential loss that is prevented. The guiding principle for designing
internal accounting controls is to deter and detect errors and dishonesty.
The best internal controls in the world cannot prevent most fraud
by high-level managers who take advantage of their positions of trust
and authority.


internal control

any measure used by management to protect
assets, promote the accuracy of records, ensure adherence
to company policies, or promote operational efficiency;
the totality of all internal controls represents the
internal control system


least squares regression analysis

a statistical technique that investigates the association between dependent and independent variables; it determines the line of "best fit" for a set of observations by minimizing the sum of the squares
of the vertical deviations between actual points and the
regression line; it can be used to determine the fixed and
variable portions of a mixed cost


Log-linear least-squares method

A statistical technique for fitting a curve to a set of data points. One of the
variables is transformed by taking its logarithm, and then a straight line is fitted to the transformed set of data
points.


Management

management refers to the individuals in an entity that have the authority and the responsibility to manage the entity. The positions of these individuals, and their titles, vary from one entity to another and, to some extent, from one country to another depending on the local laws and customs. Thus, when the context requires it, the term includes the board of directors or committees of the board which are designated to oversee certain matters (e.g., audit committee).


Management accounting

The production of financial and non-financial information used in planning for the future; making decisions about products, services, prices and what costs to incur; and ensuring that plans are implemented and achieved.


management accounting

a discipline that includes almost
all manipulations of financial information for use by managers
in performing their organizational functions and in
assuring the proper use and handling of an entity’s resources;
it includes the discipline of cost accounting


Management Accounting Guidelines (MAGs)

pronouncements of the Society of management Accountants of
Canada that advocate appropriate practices for specific
management accounting situations


Management buyout (MBO)

Leveraged buyout whereby the acquiring group is led by the firm's management.


management buyout (MBO)

Acquisition of the firm by its own management in a leveraged buyout.


Management/closely held shares

Percentage of shares held by persons closely related to a company, as
defined by the Securities and exchange commission. Part of these percentages often is included in
Institutional Holdings -- making the combined total of these percentages over 100. There is overlap as
institutions sometimes acquire enough stock to be considered by the SEC to be closely allied to the company.


management control system (MCS)

an information system that helps managers gather information about actual organizational occurrences, make comparisons against plans,
effect changes when they are necessary, and communicate
among appropriate parties; it should serve to guide organizations
in designing and implementing strategies so that
organizational goals and objectives are achieved


management expense ratio (MER)

The total expenses expressed as an annualized percentage of daily average net assets. MER does not include brokerage fees and commissions, which are also payable by the Fund.


Management fee

An investment advisory fee charged by the financial advisor to a fund based on the fund's
average assets, but sometimes determined on a sliding scale that declines as the dollar amount of the fund increases.


management fee

The fee paid to the fund’s manager for supervising the administration of the fund.


management information system (MIS)

a structure of interrelated elements that collects, organizes, and communicates
data to managers so they may plan, control, evaluate
performance, and make decisions; the emphasis of the
MIS is on internal demands for information rather than external
demands; some or all of the MIS may be computerized
for ease of access to information, reliability of input
and processing, and ability to simulate outcomes of
alternative situations


management style

the preference of a manager in how he/she interacts with other stakeholders in the organization;
it influences the way the firm engages in transactions and
is manifested in managerial decisions, interpersonal and
interorganizational relationships, and resource allocations


method of least squares

see least squares regression analysis


Money management

Related: Investment management.


Multiple-issuer pools

Under the GNMA-II program, pools formed through the aggregation of individual
issuers' loan packages.


noncontrollable variance

the fixed overhead volume variance;
it is computed as part of the two-variance approach to overhead analysis


open-book management

a philosophy about increasing a firm’s performance by involving all workers and by ensuring
that all workers have access to operational and financial
information necessary to achieve performance improvements


Operational Earnings Management

management actions taken in the effort to create stable
financial performance by acceptable, voluntary business decisions. An example: a special discount
promotion to increase flagging sales near the end of a quarter when targets are not being met.


Ordinary Annuity

An annuity where the payments are made at the end of each
period


ordinary annuity

a series of equal cash flows being received
or paid at the end of a period


Passive investment management

Buying a well-diversified portfolio to represent a broad-based market
index without attempting to search out mispriced securities.


performance management system

a system reflecting the entire package of decisions regarding performance measurement and evaluation


Portfolio management

Related: Investment management


quality control

the implementation of all practices and policies
designed to eliminate poor quality and variability in the
production or service process; it places the primary responsibility
for quality at the source of the product or service


Real Actions (Earnings) Management

Involves operational steps and not simply acceleration
or delay in the recognition of revenue or expenses. The delay or acceleration of shipment would
be an example.


Risk controlled arbitrage

A self-funding, self-hedged series of transactions that generally utilize mortgage
securities as the primary assets.


Risk management

The process of identifying and evaluating risks and selecting and managing techniques to
adapt to risk exposures.


Shelf life control

Deliberate usage of the oldest items first, in order to avoid exceeding
a component or product’s shelf life.


Society of Management Accountants of Canada

the professional body representing an influential and diverse
group of Certified management Accountants; this body produces
numerous publications that address business management issues


Statement on Management Accounting (SMA)

a pronouncement developed and issued by the management
Accounting Practices Committee of the Institute of management
Accountants; application of these statements is
through voluntary, not legal, compliance


statistical process control (SPC)

the use of control techniques that are based on the theory that a process has natural variations in it over time, but uncommon variations
are typically the points at which the process produces "errors", which can be defective goods or poor service


Strategic management accounting

The provision and analysis of management accounting data about a business and its competitors, which is of use in the development and monitoring of strategy (Simmonds).


strategic resource management

organizational planning for the deployment of resources to create value for customers and shareholders; key varibles in the process include the management of information and the management of change in response to threats and opportunities


supply-chain management

the cooperative strategic planning,
controlling, and problem solving by a company and
its vendors and customers to conduct efficient and effective
transfers of goods and services within the supply chain


Surplus management

Related: asset management


synchronous management

the use of all techniques that help an organization achieve its goals


Top-down equity management style

A management style that begins with an assessment of the overall
economic environment and makes a general asset allocation decision regarding various sectors of the financial
markets and various industries. The bottom-up manager, in contrast, selects the specific securities within the
favored sectors.


total quality management (TQM)

a structural system for creating organization-wide participation in planning and implementing a continuous improvement process that exceeds
the expectations of the customer/client; the application
of quality principles to all company endeavors; it is also known as total quality control


Value-based management

A variety of approaches that emphasize increasing shareholder value as the primary goal of every business.


Visual control

The visual inspection of inventory levels, enabled by the use of
designated locations and standard containers.


Wage/Price Controls

An incomes policy in which wages and prices are constrained by law not to rise by more than a specified percentage.


Working capital management

The management of current assets and current liabilities to maximize shortterm liquidity.



 

 

 

 

 

 

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