Discuss about the Measurement in Australian Public Companies.
This report aims to ascertain the importance and role of performance measurement in management control system. It focuses on how support control is meted out to the management systems through measurement of the performance. The performance of the organizational resources is evaluated to pursue organizational strategies. Thereby striving towards achievingstrategic objectives, competitive advantage(Mauboussin and Rappaport, 2015). Australia’s olive industry has solidly grown to be technically sophisticated from cottage industry with being more export oriented. With the passage of time, the Australian olive oil quality has shown a consistent improvement alongwith production efficiencies focusing on high quality and reasonable product, accessible worldwide. Australian Olive Oil Projects limited in one such company which is associated with growing and manufacture of olive oils variety from olive harvesting. The report will analyze the performance of the company towards the achievement of corporate vision and goals(Fischer, Prinz, and Lotz, 2010).
Management Accounting helps the managers to utilize the provisions of financial information to familiarize themselves, prior deciding about the issues prevailing within the organization, which alleviates the management and control functions performance(Nixon and Burns, 2012). While cost accounting is apart of management accounting. It is a method of collection, record, classify and evaluate a preferable approach appertaining to cost efficiency as well as capability. It imparts exclusively cost information which the management requires for controlling the current operations and future planning(Moorthy and Yacob, 2013).The olive oil industry is prospering with advancing time as it is meeting up with its vision to achieve a feasible and cooperative olive oil which produces products of high quality for home and foreign markets(Alonso and Northcote, 2010).
This business of Orchard was founded with an objective of development and management of quality projects of olive when significant amplification was experienced in Australian plantings. The company is listed on the Stock Exchange of Australia to cater the financial capacity to accomplish opportunities presented in dawning olive industry.The company aims to:
Every company has a stated vision, mission by which corporate goals are established. This is further classified into incorporating strategies to achieve the corporate goals. To accomplish greater organizational success, an efficient performance management system is to be established.
Following approaches shouldbe undertaken to an Effective management(Sidorov, 2014).
It is crucial for the managers to be apprehensive about the progress of their employees about corporate goals. Steady assistance is to be meted out to its employees to strive for the targets when they are supposed to be missed (Adams, Lin, and Zou, 2011). Adequate monetary and nonmonetary rewards need to be availed to acknowledge success. It’s crucial on the part of managers to review the productivity of its employees from time to time to track down the advancement in goal accomplishment. The olive oil company also undertakes various strategies to meet up with its objectives. It aims to improve its productivity alongwith profitability and management of environment throughout the stages of the supply chain(Kumar and Zattoni, 2015).
The chief executive officer of AAPL Paul Challis in his review on 30th September 2015 highlighted that 9,51,700 liter harvestation exceeded the expectation and is maintaining an upward trend in manufacture (Voopl.com.au, 2011). The company has bagged largest operating profit in the companies history with a record harvest thereby confirming company’s decision to streamline its operations. Mr. Paul has stated their focus in the short term that includes balance sheet consolidation as the cash benefits arising from harvest sale are to be incorporated in the account. The company is proposing to a stretch of substantial harvest at one time while the world price is retracing to historically immense level as a result of diminishing levels of production in Europe. The company is intending to flow through the retail price over the years to come.
AAPL has experienced an excess of operating cash flows for the year 2015 measuring $202, which is 189 less to 2014 operating cash flow exceeding $ 598 (Voopl.com.au, 2011). However structured debt informs of Commercial bills and hires purchase contract were streamlined by $ 3,76,708 against $2,10,099 in 2014. In past twelve months, the company has upgraded its business net financial position leading to increasing upto 3.32cents per share from .37 cents per share (Voopl.com.au, 2011).
Source: (markets.ft.com)
The chart above reflects a considerable upward trend in the performance of the company since 2014.
Source: (www.voopl.com.au)
The above summary chart reflects the financial performance of the company with an increase in net profit after tax in the year 2015 to be highly more than the previous years.
An Executive compensation comprises of financial as well as nonfinancial rewards which are received by the executive regarding their service. This is typically a combination of salary, bonus, call options or shares of the company. This all takes into consideration the government regulations, executive and organization desires, tax law and rewards by performance(Heaney, Tawani, and Goodwin, 2010).
Source: (markets.ft.com)
According to the reports of Financial Times, one of the leading business news reflects the highest revenue in comparison to the previous year’sperformance. The charts emulate the operating margin to be up with 31.30% (Markets.ft.com, 2016). Similarly, its net profit, as well as operating margin, reveal an upward trend. Therefore company’s report, as well as reports provided by business news, provides substantial evidence that AAPL is performing to the best of its capacity, with efficient utilization of all its resources. The company is striving positively towards the achievement of its organizational goals through its outstanding performance.
Source: (voopl.com.au)
The Board of Directors of Australian Agricultural Projects Limited appointed remuneration committee is subject to determine and review the remuneration policies for the executives and directors. The Remuneration Committee if required acquires independent advice on pertinent remuneration packages on the basis of existent trends in similar companies and objectives of a centralized entity. The company pursues remuneration principles devised to attract and retain qualified and professional candidates striving towards the accomplishment of strategic objectives, thereby achieving a wider result of value creation for shareholders. The remuneration structure highlights are based on the following:
Remuneration of the executives is outlined by of employment agreements. The executive directors are more likely to receive compensation based on performance but do not draw any retirement benefits except statutory superannuation. The managerial personnel bag benefits as car allowances and the company provide fringe tax benefit on these perks. However, there were no remuneration transactions based on performance during the financial year 2014.Agricultural Projects Limited are seeking to provide Long Term Incentives(LTI) to their key managerial personnel. These incentives are aimed to provide options over and above ordinary shares to hook management personnel within the entity by their position.
MCS refers to Management Control System which assimilates and utilizes information and date to evaluate the performance of organizations resources like physical, human, and financial. This control system directs the behavior of the resources of the organization towards implementation of organization strategies. It is an incorporated technique aiming for collection and utilization of information towards motivation of employee behavior and performance evaluation. The control system inculcates many accounting techniques striving to evaluate the performance of activity based costing, balance scorecard, budgeting, just in time(JIT), Kaizen(continuous improvement), target costing, total quality management(Cosenz and Noto, 2015). The necessity for planning and having a control over the system is essential because the organization has its objectives to fulfill, which should be distinctive. The managers of the the company should be ambivalent towards their personal goals, along with formulation of the entire plan to accomplish organizational objectives.
The increase in productivity has always been recognized as a vital source of income improvement and output growth of farm sector in Australia. Agricultural productivity and growth in Australia are estimated by utilizing ‘ex-post’ and ‘ex-ante’ methods. By utilization of results we initially illustrate the productivity patterns and growth overtime. After that comparison of the approximated capital services and labor inputs to disclose the difference prevalent between the two methods.
The company holds the prominent technical team and has an advanced capacity to institute projects of new olive groves, administer existing groves and grow into other markets. With the company focusing to achieve and maintain good health of its orchard along with emphasizing on incurring the minimal cost to the producer without adversely affecting the quality of the product. The recent data provided by the company in its financial report discloses commendable performance especially when it comes to the logistics relating to handling a record harvest. Therefore confirming that the company is positioned well to achieve the stated objectives. The company is forecasting good health of its agriculture and assessing a rejuvenating program of pruning. Also, the company is not planning to make any compelling capital expenditure over the coming twelve months. The company is looking forward to focusing its attention entirely on strengthening its balance sheet on a short term basis thereby consolidating profits from the harvest of current year. The company will ingeminate that the company’s future performance will be bound with the yearly harvest. The company further expects its harvest on the total average basis to advance in the medium term. The company continues to remain accessible to investment in agriculture that would aggregate skill base and the current asset. Company’s ongoing success and projects viability are primarily linked the total value of its harvest. The two managed investment scheme projects are likely to have an initial term up to 2025 following which management and lease agreements might be renegotiated further.
Conclusion
Consolidated entity performance is taken into account while formulating comprehensive compensation of key managerial personnel, since its incorporation. This has resulted in the level of compensation remaining unchanged despite the ups and downs in the compensation levels caused because of appointment and resignation of key managerial personnel.Australian Agricultural Projects Limited are seeking to provide Long Term Incentives(LTI) to their key managerial personnel. These incentives are aimed to provide options over and above ordinary shares to hook management personnel within the entity by their position. The long-term incentives are being considered to bolster the continuance of employment and to equip additional incentives to the receiver. Subjecting to consent by the shareholders in the general meeting, the directors may be solely issued options.
The company has brought in a policy that restrains the directors and the employees of the consolidated entity accessing transactions that are operating or planning to achieve a ceiling to the economic risk or are devised or intending to curb exposure to company securities that are unvested.
References
Adams, M., Lin, C. and Zou, H. (2011). Chief Executive Officer Incentives, Monitoring, and Corporate Risk Management: Evidence From Insurance Use. Journal of Risk and Insurance, p.no-no.
Alonso, A. and Northcote, J. (2010). The development of olive tourism in Western Australia: a case study of an emerging tourism industry. International Journal of Tourism Research, 12(6), pp.696-708.
Cosenz, F., and Noto, L. (2015). Combining system dynamics modelling and management control systems to support strategic learning processes in SMEs: a Dynamic Performance Management approach. Journal of Management Control, 26(2-3), pp.225-248.
Fischer, M., Prinz, J. and Lotz, K. (2010). Obligatory attention to action goals. Journal of Vision, 5(8), pp.119-119.
Heaney, R., Tawani, V. and Goodwin, J. (2010). Australian CEO Remuneration*. Economic Papers: A journal of applied economics and policy, 29(2), pp.109-127.
Kumar, P. and Zattoni, A. (2015). Ownership Structure, Corporate Governance, and Firm Performance.Corporate Governance: An International Review, 23(6), pp.469-471.
Markets.ft.com. (2016). Australian Agricultural Company Ltd, AAC:ASX financials – FT.com. [online] Available at: https://markets.ft.com/data/equities/tearsheet/financials?s=AAC:ASX [Accessed 6 Sep. 2016].
Markets.ft.com. (2016). Australian Agricultural Projects Ltd, AAP:ASX interactive chart – FT.com. [online] Available at: https://markets.ft.com/data/equities/tearsheet/charts?s=AAP:ASX [Accessed 6 Sep. 2016].
Mauboussin, M. and Rappaport, A. (2015). Transparent Corporate Objectives-A Win-Win for Investors and the Companies They Invest In. Journal of Applied Corporate Finance, 27(2), pp.28-33.
Moorthy, K., and Yacob, P. (2013). Green Accounting: Cost Measures. Open Journal of Accounting, 02(01), pp.4-7.
Nixon, B. and Burns, J. (2012). Strategic management accounting. Management Accounting Research, 23(4), pp.225-228.
Sidorov, I. (2014). Synergy Of Corporate Structures And Internal Management. Business Strategies, (1), p.2.
Stein, J. (2015). Editorial. Performance Measurement and Metrics, 16(3).
Voopl.com.au,. (2011). Victoria Olive Oil Project. [online] Available at: https://voopl.com.au/webdata/files/2015%20Financial%20Statements%20-%20Aust%20Agricultural%20Projects%20(signed)(1).pdf [Accessed 7 Sep. 2016].
Voopl.com.au. (2011). Victoria Olive Oil Project. [online] Available at: https://www.voopl.com.au/ [Accessed 6 Sep. 2016].
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