Business Studies for Class 12 Chapter 8 Controlling Index Terms

Learn CBSE Business Studies Index Terms for Class 12, Chapter 8 Including Definitions and Meanings

1. Controlling – Controlling is regarded as an important management function. Thus, it is something that every manager needs to perform in order to exercise control over their subordinates. Proper controlling measures are often found to be helpful in improving the effectiveness of the other functions of the management.

Controlling ensures efficient and effective use of the resources of the organisation in order to achieve the organisational objectives.

2. Critical Point Control – Critical point control means keeping the focus on key result areas where deviations are not acceptable and should be attended to on a priority basis. In other words, critical points of control are Key Result Areas (KRAs) which are strategic control points that ensure actual work completion as per specific norms.

3. Management by Exception – Management by exception is an important principle of management. Control is based on the belief that an attempt to control everything results in controlling nothing. Thus, only significant deviations which go beyond the permissible limit should be brought to the notice of management. For example, if an organisation presupposes that there will be 2% defective product in the whole production, then corrective action will be taken only when defective products will be more than 2%.

4. Breakeven Analysis – A break-even analysis is an economic tool that is used to determine the cost structure of a company or the number of units that need to be sold to cover the cost. Break-even is a circumstance where a company neither makes a profit nor a loss but recovers all the money spent.

The break-even analysis is used to examine the relationship between fixed cost, variable cost, and revenue. Usually, an organisation with a low fixed cost will have a low break-even point of sale.

5. Budgetary Control – Budgetary control is a technique of controlling that involves preparing plans in the form of budgets. A budget refers to a financial or quantitative statement that defines the targets to be achieved and the policies to be followed in a specific period of time. The actual performance is then compared with the budgetary standards. This comparison helps in identifying the deviations and, thereby, guides in taking appropriate corrective measures. A budget can be prepared for different divisions of the organisation, such as sales budget, production budget, purchase budget, etc. However, for the budgeting to be effective, future estimates must be made carefully. Budgeting also acts as a source of motivation for the employees by setting the standards against which their performance will be assessed.

6. Return on Investment – Return on Investment estimates the profit or loss generated on the amount of money invested. ROI (Return on Investment) is generally expressed in the percentage to analyse an organisation’s profit or the earnings of different investments.

In simple words, Return on Investments estimates what an individual receives back as compared to what they invest. Return on Investment can be used in different ways to calculate the profitability of the business. It can be used by a company to estimate inventory investments, pricing policies, capital equipment investments, etc.

7. Ratio Analysis – Ratio analysis is referred to as the study or analysis of the line items present in the financial statements of the company. It can be used to check various factors of a business, such as profitability, liquidity, solvency, and efficiency of the company or the business.

Ratio analysis is mainly performed by external analysts as financial statements are the primary source of information for external analysts.

The analysts rely very much on the current and past financial statements in order to obtain important data for analysing the financial performance of the company. The data or information thus obtained during the analysis is helpful in determining whether the financial position of a company is improving or deteriorating.

8. Responsibility Accounting – Responsibility accounting is a kind of management accounting that is accountable for all the management, budgeting, and internal accounting of a company. The primary objective of this accounting is to support all the planning, costing, and responsibility centres of a company.

Responsibility accounting generally includes the preparation of a monthly and annual budget for an individual responsibility centre. It also accounts for the cost and revenue of a company, where reports are accumulated monthly or annually and reported to the concerned manager for feedback. Responsibility accounting mainly focuses on responsibility centres.

9. Management Audit – A management audit is an independent and systematic analysis and evaluation of a company’s overall activities and performances. It is a valuable tool used to determine the efficiency, functions, accomplishments, and achievements of the company.

The primary objective of the management audit is to identify errors in management activities and suggest possible changes. It guides the management to manage the operations most effectively and productively.

In other words, a management audit is involved in the evaluation and assessment of the management system and information in the various departments or the entire company. Its reach has been extended to review system and subsystem, authorisation, procedure, accountability, quality of data generated, and quality of personnel.

10. PERT – PERT or Program (Project) Evaluation and Review Technique is an activity to understand the planning, arranging, scheduling, coordinating, and governing of a project. This program helps to understand the technique of a study taken to complete a project and identify the least and minimum time taken to complete the whole project. PERT was developed in the 1950s with the aim of the cost and time of a project.

11. CPM – CPM or Critical Path Method is a well-known project modelling technique in project management. It is a resource utilising an algorithm that was developed in the 1950s by James Kelly and Morgan Walker.

CPM is mainly used in projects to determine critical as well as non-critical tasks that will help in preventing conflicts and reduce bottlenecks. In essence, CPM is about choosing the path in a project that will help in calculating the least amount of time that is required to complete a task with the least amount of wastage.

The Critical Path Method or CPM has been used in many industries starting including defence, construction, software, and aerospace.

We hope that the offered Business Studies Index Terms for Class 12 with respect to Chapter 8: Controlling will help you.

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