Contents. Preface... xiii. CHAPTER 1 Introduction to Management Accounting and Control CHAPTER 2 Management Reporting... 29

Transcription

1 v Preface... xiii CHAPTER 1 Introduction to Management Accounting and Control... 1 The Concepts of Management, Accounting, and Control... 2 A Definition of Management... 2 A Definition of Accounting... 3 A Definition of Control... 4 Bringing it Together: Management Accounting and Management Control... 5 Management Accounting... 5 Management Control... 6 The Role of a Controller in an Organization... 9 Skill Set of a Controller The Management Control Function in a Corporation Management Accounting vs. Financial Accounting Financial Accounting Contrasting Management Accounting and Financial Accounting Performance Measurement and Performance Reporting An Example of Performance Reporting Performance Measurement beyond Financials Trends in Management Accounting and Control Ethical Aspects of Management Accounting and Control CHAPTER 2 Management Reporting Information Needs in Business What is Information? Information Supply vs. Information Demand Management Reporting as a Key Information Tool Scope and Definition of Management Reporting The Management Reporting Process Management Reporting Dimensions What For? Management Reporting Purposes Charifzadeh508211_ftoc.indd 5

2 vi What? Content of Management Reports Inductive Methods Deductive Methods Information Sources How? Preparing and Communicating Management Reports Amount of Information Order and Structure Relationships between Pieces of Information Presentation and Visualization When? Timing Issues in Management Reporting Reporting Cycles Duration of Report Preparation Timeliness and Punctuality Who? Parties Involved in the Management Reporting Process Emerging Trends in Management Reporting Reporting Factories Self-Reporting Cooperative Reporting CHAPTER 3 Managing Cost Cost Management Cost Accounting vs. Cost Management The Focus of Cost Management Cost Management Tools An Overview Problems of Volume-Based Cost Allocation Activity-Based Costing and Process-Based Costing How Activity-Based Costing Works How Process-Based Costing Works Activity-Based Costing and Process-Based Costing a Comparison Process- and Activity-Based Management Control Cost Reduction and Process Efficiency Improvements Pricing and Product Mix Product and Service Design Planning and Budgeting Target Costing Determining the Cost Gap in Target Costing The Target Costing Process Splitting Target Cost into its Sub-Values Target Cost Index and Target Cost Diagram A Critical Reflection: When is Target Costing Appropriate? Charifzadeh508211_ftoc.indd 6

3 vii Life Cycle Costing Cost and Revenue Elements Across the Product Life Cycle Contribution Margin Method of Life Cycle Costing Discounting Method of Life Cycle Costing A Critical Reflection: What Life Cycle Costing Can and Cannot Do CHAPTER 4 Budgeting Planning in Management Control The Budgeting Cycle Uses of Budgets The Master Budget Preparing an Operating Budget The Revenue Budget The Production Budget The Direct Materials Budget The Direct Labor Budget The Manufacturing Overhead Budget The Manufacturing Costs Per Unit The Cost of Goods Sold Budget The Non-Manufacturing Costs Budgets The Budgeted Income Statement Discussing the Operating Budget Preparing a Financial Budget The Cash Budget Preparation of the Cash Budget The Budgeted Cash Flow Statement Discussing the Cash Budget and the Budgeted Cash Flow Statement Motivational Aspects of Budgeting Motivation Versus Planning Top-Down versus Bottom-Up Budgeting Budget Manipulation Strengths and Weaknesses of Traditional Budgeting The Strengths of Budgets The Weaknesses of Budgets CHAPTER 5 Alternative Approaches to Budgeting Budgeting Necessary Evil or Valuable Management Tool? Overview of Alternative Budgeting Approaches Approaches Complementing Traditional Budgeting Incremental Budgeting Zero-Based Budgeting Charifzadeh508211_ftoc.indd 7

4 viii Setting Up a Zero-Based Budget Zero-Based Budgeting Example Activity-Based Budgeting Activity-Based Budgeting Example Improvement Approaches to Budgeting Better Budgeting Continuous Improvement ( Kaizen ) Budgeting Abolishing Budgets The Beyond Budgeting Approach CHAPTER 6 Performance Measurement Financial Statements The Importance of Performance Measurement Measuring Financial Performance Sources of Financial Information The Balance Sheet Five Major Elements of the Balance Sheet Non-current Assets Current Assets Non-Current Liabilities Current Liabilities Owners Equity Market Values Versus Book Values Important Balance Sheet Concepts Total Assets Financial Debt Identifying Financial Debt Net Debt Net Working Capital Capital Employed The Income Statement The Multi-Step Profit Cascade Earnings Before Taxes (EBT) Earnings Before Interest and Taxes (EBIT) Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) The Statement of Cash Flows Preparing a Statement of Cash Flows Sources and Uses of Cash Determining Cash Flow with the Indirect Method Cash Flows from Operating Activities Cash Flows from Investing Activities Cash Flows from Financing Activities Charifzadeh508211_ftoc.indd 8

5 ix Analyzing the Statement of Cash Flows Change in Net Working Capital CHAPTER 7 Performance Measurement Key Performance Indicators Performance Indicators A Note of Caution Financial Ratios Profitability Ratios Profit Margin EBIT Margin (Return on Sales) Gross Profit Margin Return on Investment Ratios Return on Equity (ROE) Return on Assets (ROA) Return on Capital Employed (ROCE) A Note on the Time Dimension Asset Management Ratios Total Asset Turnover Fixed Asset Turnover Inventory Turnover Days Sales in Inventory (DSI) Days Receivables Outstanding (DRO) Days Payables Outstanding (DPO) Cash Conversion Cycle Days Working Capital (DWC) A Comparison Capital Structure and Financial Leverage Ratios Total Debt Ratio Debt-to-Equity Ratio Equity Multiplier Interest Coverage and EBITDA-to-interest Ratio Net Debt-to-EBITDA Financial Leverage Calculating the Leverage Effect Liquidity Ratios Current Ratio Quick Ratio Cash Ratio Systems of Performance Measures The DuPont System Charifzadeh508211_ftoc.indd 9

6 x Non-Financial Performance Measures Typical Performance Measures in Logistics Delivery Reliability Supply Chain Cycle Time Replacement Time Typical Performance Measures in Human Resource Management Employee Satisfaction Absenteeism Rate Staff Fluctuation Rate Typical Performance Measures in Manufacturing Productivity Capacity Utilization Reject Rate Throughput Time Typical Performance Measures in Marketing Customer Churn Rate Click Through Rate (CTR) Price Elasticity of Demand Using Performance Measures in Business Time Trend Analysis Peer Group Analysis (Benchmarking) A Benchmarking Example Problems of Benchmarking Major Criticism of Key Performance Indicators CHAPTER 8 Value-Based Performance Measurement The Goal of a Business Firm Shareholder Value as the Overall Goal A Justification of Shareholder Value Shareholders vs. Stakeholders Shortcomings of Traditional Performance Measures Measuring the Creation of Shareholder Value Residual Income Economic Value Added (EVA) The EVA Formulas Net Operating Profit After Taxes (NOPAT) Capital Employed (CE) Return on Capital Employed (ROCE) Weighted Average Cost of Capital (WACC) Cost of Equity Charifzadeh508211_ftoc.indd 10 9/6/ :52:21 PM

7 xi A Numerical Example of Calculating EVA EVA Adjustments Using EVA as a Superior Performance Measure Three Competing Metrics The Underinvestment Problem of ROCE Ways to Increase EVA The Value Driver Tree Portfolio Management Decisions with EVA Criticism of EVA Alternative Value Concepts Economic Profit Cash Value Added Market Value Added Value-Based Management Systems CHAPTER 9 Strategic Management Accounting and the Balanced Scorecard Strategic vs. Operating Management Accounting Phases in the Strategic Management Process and the Role of the Controller Finding and Formulating a Strategy Implementing a Strategy Corporate-Level Strategies vs. Business-Unit Level Strategies Corporate-Level Strategies Business-Unit Level Strategies Selected Instruments of Strategic Management Accounting External vs. Internal Factors Environmental Analysis Industry Analysis Porter s Five-Forces Model Generic Strategies Value Chain Analysis Product Life Cycle Analysis BCG s Portfolio Matrix SWOT Analysis The Balanced Scorecard Genesis of the Balanced Scorecard Key Characteristics of the Balanced Scorecard Structure of a Balanced Scorecard Financial Perspective Customer Perspective Internal Business Process Perspective Learning and Growth Perspective (Innovation and Learning) Charifzadeh508211_ftoc.indd 11 9/6/ :52:21 PM

8 xii Cause-and-Effect Links The Strategy Map Features of a Balanced Scorecard Developing a Balanced Scorecard Step 1: Formulate the Strategy and Clarify the Strategic Objectives Along the Perspectives Step 2: Set up the Strategy Map Step 3: Define Measures for the Strategic Objectives Step 4: Define Initiatives and Responsibilities for Each Objective Step 5: Feedback and Continuous Improvement The Balanced Scorecard as a Strategic Management System Application in Corporate Practice Criticism of the Balanced Scorecard CHAPTER 10 New Developments in Management Accounting and Control Hot Issues and Future Challenges in Management Accounting Management Accounting in Networks and Supply Chains Management Accounting for Quality Six Sigma The Role of Management Control in Six Sigma Six Sigma in Practice Integrating Human Behavior into Management Accounting Environmental Management Accounting Integrated Reporting Integrating Financial and Management Reporting The Integrated Reporting (IR) Framework Management Accounting and Control with Big Data The Role of the Controller in Big Data A Critical View on Big Data Bibliography Index Charifzadeh508211_ftoc.indd 12 9/6/ :52:21 PM