A Comparative Analysis Of The Effectiveness Of Three Solvency Management Models

The introduction of the Altman’s Z-score model in 1983 and much recently the Enyi’s Relative Solvency Ratio model in 2005 has divergently provided financial analysts with alternative methods of analyzing corporate solvency which hitherto was exclusively done using the traditional historical record based ratio analysis, with particular reference to the current ratio. To test the relevance and effectiveness of the three models, real life performance data were extracted from the annual reports of 7 quoted companies, analyzed using the three models and the results compared to show the strengths and weaknesses of each. The result revealed that the current ratio and the Z-score models suffer from many limitations including imprecision while the Relative Solvency Ratio combines the capability of an effective indicator with the precision required of a true predictor

The TOC-ABC choice debate for product mix decisions : introducing asset specificity as an alternate explanation

Though constructed with different purposes, the theory of constraints and activity based costing systems pose a choice problem in respect of product mix decisions. We believe that the existing explanation of short versus long run criterion to explain firms\u27 choice between these two systems is incomplete and offer an alternate explanation based on asset specificity. We argue that the extent to which specialized resources are deployed to make products in a mix determines the choice. We present a 2*2 matrix stating that when asset specificity is high, a firm is likely to choose ABC instead of TOC since ABC makes a large portion of costs visible to enable control. However, the choice is likely to be a TOC-ABC combination when the manufacture of asset specific products is also constrained by bottlenecks.<br /

Observable outcomes and performance effects of the application of theory of constraints to organizational management

The objectives of the study were to empirically examine the relationships among the three elements of the Theory of Constraints (TOC), a number of observable outcomes expected to be associated with application of TOC, and business unit performance. Measures were developed for each of the elements of TOC and a number of observable outcomes (OUTCOMES) expected to be associated with practice of TOC. TOC is defined as consisting of scheduling logistics (LOGISTICS), the Thinking Process (THINKING), and non-traditional performance measures (MEASURES). A previously developed and widely used measure of business unit performance (PERFORMANCE) was employed. The sampling frame for this research consisted of business unit employees who had some knowledge of TOC. Discussion groups and web sites devoted to TOC were monitored to identify these individuals. The questionnaire was sent via email and posted on a web site. A total of 180 usable responses were received. A response rate could not be accurately calculated because it could not be determined how many individuals had access to the survey. Responses collected from the different sources were compared and no significant differences were found. The statistical analysis revealed that adoption of the individual elements of TOC independently had varying relationships to business unit performance. When used alone, LOGISTICS was negatively related to PERFORMANCE. THINKING did not have a significant relationship to PERFORMANCE. Use of MEASURES was positively related to PERFORMANCE, and the presence of OUTCOMES had a positive relationship with PERFORMANCE. The complete model of all four factors (LOGISTICS, THINKING, MEASURES, and OUTCOMES) was positively related to PERFORMANCE. Interacting effects of these four factors were found to be complex. OUTCOMES were found to have a moderating effect on the relationship between two of the elements of TOC and PERFORMANCE. From these results, the data suggests use of TOC is effective as an aid to improving business unit performance. However, the negative relationship between some individual elements of TOC and the complex interaction relationships suggest managers should be cautious in adopting TOC in a piecemeal fashion. Failure to adopt all three elements of TOC could result in unwanted consequences

Activity-Based Costing (ABC) – An Effective Tool for Better Management

Activity-based Costing (ABC) is a powerful tool for the an organization to have an accurate and effective cost for its product avoiding cost distortion that may lead sustainable development and growth which is mandatory to be competitive in the era of globalization and complex business environment. The article contains some brief description of international journals on ABC. Author has tried to bring up the main essence of these journals. The mentioned journals cover a wide range of topics from theoretical aspects of ABC to its application. Author has discussed some specific cases in different countries. Some of our journals highlight the impact of ABC on the European firms where as some other has tried to discuss the American context of ABC. Analysis contains some data on the Nestle Bangladesh Ltd. which maintains the ABC. We have tried to analyze how successful the company is in implementing ABC. In the analysis of journals, author focused on different era of business like service sector, technology business, manufacturing sector and many more. Implementing ABC in these different sectors is a little bit different. ABC has to be implemented considering the characteristics of that sector. In total ABC has been proved to be successful for almost all the sectors. There have been some modifications in ABC also. Some other concepts have also been discussed here like theory of constraints, time driven ABC and many more. Keywords: ABC, management accounting, manufacturing sector, time driven ABC

Do Different Cost Systems Make a Difference?

Presents a survey of several U.S. manufacturing companies to determine whether managers within companies that use different cost systems believe the information provided by those systems differs. Reason for the decision of companies to continue to use other types of cost systems; Emphasis on activity-based costing; Association of variable costing with the theory of constraints literature

Ürün karması kararları açısından geleneksel maliyet muhasebesi yöntemleri ile kısıtlar teorisinin karşılaştırılması

This study examines the importance of the theory of constraints compared to the conventional cost accounting in making adequate product mix decisions. To this end, an application in a chemistry enterprise was executed to determine product mix decisions and their effect on profitability by comparing the theory of constraints variable costing method with the full costing method in respect to the throughput approach, the contribution margin approach and the unit profit approach respectively.Bu çalışma, en uygun ürün karması kararlarının alımında geleneksel muhasebe sistemine kıyasla kısıtlar teorisinin önemini sergilemektedir. Bu amaçla, ürün karması kararlarının belirlenmesinde bir kimya işletmesinde uygulama yapılmış ve bu ürün karması kararlarının karlılığı nasıl etkilediği; kısıtlar teorisinin süreç katkı muhasebesi yaklaşımının, değişken maliyet yönteminin katkı payı ile tam maliyet yönteminin birim kar yaklaşımlarıyla karşılaştırılması yöntemi ile detaylı bir şekilde incelenmiştir

Activity-Based Costing and Firm’s Value of Manufacturing Companies in Nigeria

This study focuses on Activity-Based Costing (ABC) and firm’s value. An ex-post facto research design was employed. Data were collected and statistically analysis using multiple regression. The results show that ABC effectiveness is significantly and positively related to firm’s value. The results show that ABC effectiveness is significantly and positively related to firm’s value. The result indicates that firms with greater degree of cost accountant competency, corporate resource facilitation, and price competitive force appear to have a higher effect on cost driver fitness, cost calculation accuracy, cost information creditability and cost reporting usefulness. The cost accountant competency, whose knowledge, skill, coordinate, knowledge sharing and competence, is very necessary in organization to ensure that cost accountants can do task in their responsibility completely and to achieve goals. Managers and executives of firms should apply the relationship among ABC effectiveness and firm’s value to the actual business situation. Managers should effectively utilize the resource and capability of the firm in order to ABC effectiveness. Clearly understanding of ABC effectiveness can help gain competitive advantages and achieve higher level of firm’s value. Importantly, to maximize the benefits of ABC effectiveness, they should provide resources such as cost accountant competency, resource facilitation to support in order to ABC effectiveness and to increase firms' competitive advantage and crucially to gain firm’s value. Keywords: Activity-Based Costing Effectiveness, Cost Calculation Accuracy, Cost Driver Fitness ,Cost Information Creditability, Cost Reporting Usefulness, Firm’s value

Comparison of the Theory of Constraints with the Traditional Cost Accounting Methods in Respect to Product Mix Decisions

Bu çalışma, en uygun ürün karması kararlarının alımında geleneksel muhasebe sistemine kıyasla kısıtlar teorisinin önemini sergilemektedir. Bu amaçla, ürün karması kararlarının belirlenmesinde bir kimya işletmesinde uygulama yapılmış ve bu ürün karması kararlarının karlılığı nasıl etkilediği; kısıtlar teorisinin süreç katkı muhasebesi yaklaşımının, değişken maliyet yönteminin katkı payı ile tam maliyet yönteminin birim kar yaklaşımlarıyla karşılaştırılması yöntemi ile detaylı bir şekilde incelenmiştir.This study examines the importance of the theory of constraints compared to the conventional cost accounting in making adequate product mix decisions. To this end, an application in a chemistry enterprise was executed to determine product mix decisions and their effect on profitability by comparing the theory of constraints variable costing method with the full costing method in respect to the throughput approach, the contribution margin approach and the unit profit approach respectively

The cost of choice: how corporate real estate managers evaluate business space options

Firms are faced with a wider set of choices when they identify a need for new office space. They can build or purchase accommodation, lease space for long or short periods with or without the inclusion of services, or they can use “instant office” solutions provided by serviced office operators. But how do they evaluate these alternatives and are they able to make rational choices? The research found that the shortening of business horizons lead to the desire for more office space on short-term contracts often with the inclusion of at least some facilities management and business support services. The need for greater flexibility, particularly in financial terms, was highlighted as an important criteria when selecting new office accommodation. The current office portfolios held were perceived not to meet these requirements. However, there was often a lack of good quality data available within occupiers which could be used to help them analyse the range of choices in the market. Additionally, there were other organisational constraints to making decisions about inclusive real estate products. These included fragmentation of decisions-making, internal politics and the lack of assessment of business risk alongside real estate risk. Overall therefore, corporate occupiers themselves act as an interial force to the development of new and innovative real estate products

Impact of the contemporary manufacturing environment on cost accounting information systems "an Egyptian case study"

This thesis examines the relevance of current cost accounting systems to the manufacturing environment. Egyptian manufacturing companies in the ex-public industrial sector have suffered from relatively various obstacles, with problems in production planning and control in particular. These impediments were responsible for negative effects on costs and caused low profitability for these companies in most years. Cost accounting systems were basically established for the purpose of preparing financial statements not for operational control.The literature was reviewed to explore changes in the manufacturing environment with emphasis on the developments in production planning and control systems and also to investigate the developments in cost accounting systems.To examine this research phenomenon empirically, a case study was conducted in an Egyptian EI-Nasr automotive manufacturing company. Data was collected from published and unpublished reports and by semi-structured interviews within the case company.The thesis is divided into two main parts: Part I to cover the literature review in this area. Part II for the case study analysis. The study covered three major areas of analysis. First is an overview of all factors which shape the old and new manufacturing environments and the developments in the systems of production planning and control. Second is a detailed investigation of the traditional and new cost accounting systems. Third is the main findings and conclusion including exposing the relationship between the different planning and control systems and the various cost accounting systems. It also includes a wide range of suggestions for improving the cost accounting systems of the studied case company.The major findings of this study were that manufacturing environment played a significant role in designing cost accounting systems. It concluded that planning capabilities of the company and suppliers play a significant role in the process of cost reduction and improve the competitive position