Budgetary control

Budgetary control is the process during which actual results are ascertained and compared with budgeted figures (variance analysis). The found differences are called variances (or deviations) and are usually further analyzed.  A remedial action can be taken based on this analysis. The correctiv


Objective is a more detailed goal, which the entity aims to achieve in the future in order to fulfil its goals.   A few examples of objectives: If the entity goal is to increase profitability, the objectives could be: reduction of indirect costs by 10% during year 20xx increase of sales

Direct (prime) costs

Direct costs are costs directly and clearly identifiable with cost object (usually product or service). That means the costs DIRECTLY associated with the production process of specific product. Together with indirect costs (overheads) they form total costs of the entity.  They are sometimes cal

Absorption costing

Absorption costing is a type costing method or rather the approach to costing. It is sometimes called as full costing method as it values the product (or jobs, batches, processes etc.) by direct costs and allocated, apportioned and absorbed share of production indirect costs (production overheads)

Return on costs (ROC)

Return on costs (ROC) is one of profitability indicators. It expresses the amount of profit attributable to unit total cost.   Calculation formula     Comparison it is particularly suitable for comparison within the company - especially as an indicator of changes in costs ov

Dividend yield

Dividend yield is one of the indicators of market value and capital market. It is an important indicator used when making investment decisions. It helps assess what annual yield (dividend) is obtained by shareholders for each unit of share value held.   Calculation formula    

Operational plan

Operational plan is short-term (for a few months to approx. 3 years, typically for just 1 year) prepared by lower level management that focus on specific parts of the entity, e.g. on production or sales. Operational plans are based on more general strategic (corporate) plan and work it out into bigg

Variable costs

Variable costs are costs that change with the production volume. If the level of production decreases, total variable costs decrease as well and vice versa.  But unit variable costs remain unchanged with the changed production volume. Opposite to variable costs are fixed costs.   Behavi

Costing methods and their types

The purpose of costing methods is to determine the cost of a so-called cost object. This is most often cost unit, i.e. usually a single piece of product. In particular, the costing is used to value inventory, for example for the purpose of their proper accounting, product valuation, management of in

Joint and by product costing

Joint and by product costing are specific costing methods that are used for the purpose of assigning costs to separate products in cases where two or more different products are manufactured together in the same production process – so called joint products OR main and by product.  &nbs

Price to book ratio (P/B) / Market value to book ratio (M/B)

Price to book ratio (P/B) or Market value to book ratio (M/B) is one of the indicators of market value and capital market. It is the ratio of the market value of shares with its carrying value. The carrying value may be measured in various ways, one of which may be shareholders' equity. &n

Dividend payout ratio

Indicator Dividend payout ratio expresses what proportion of profit is paid out as a dividend / profit sharing. The rest of the profit may be used by the company for further development.   Calculation formula     Interpretation shareholders favoring  profit will prefer

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