Budgetary Control

A well designed and implemented financial management is expected to contribute positively to the creation of a firm’s value (Kiringai, 2002). Dilemma in financial management is to achieve desired trade- off between liquidity, solvency and profitability (Lazaridis & Tryfonidis, 2006). Cost control as a subject has received attention which are significant from scholars in the various areas of business and strategic management. cost control has also been the major concern of business practitioners in all types of business organization since cost control has implications to organization's health and finally its survival. High performance reflects management effectiveness and efficiency in making use of company’sresources and this in turn contributes to the country’s economy at large (Naser and Mokhtar, 2004). 
There are various measures of cost control. For example, return on sales reveals how much a company earns in relation to its sales, return on assets determines an organization’s ability to make use of its assets and return on equity reveals what return investors take for their investments. The advantages of financial measures are the easiness of calculation and that definitions are agreed worldwide. Traditionally, the success of a manufacturing system or company has been evaluated by the use of financial measures (Hope and Frazer, 2003). 
Liquidity measures the ability of the business to meet financial obligations as they come due, without disrupting the normal, ongoing operations of the business. Liquidity can be analyzed both structurally and operationally. Structural liquidity refers to statement of financial position measures of the relationships between assets and liabilities and operational liquidity refers to cash flow measures. Solvency measures the amount of borrowed capital used by the business relative the amount of owner’sequity capital invested in the business. In other words, solvency measures provide an indication of the business ability to repay all indebtedness if all of the assets were sold. Solvency measures also provide an indication of the business’ ability to withstand risks by providing information about the operation’s ability to continue operating after a major financial adversity (Harrington and Wilson, 1989). 
Profitability measures the extent to which a business generates a profit from the factors of production: labor, management and capital. Profitability analysis focuses on the relationship between revenues and expenses and on the level of profits relative to the size of investment in the business. Four useful measures of profitability are the rate of return on assets (ROA), the rate of return on equity (ROE), operating profit margin and net income (Hansen and Mowen, 2005). Repayment capacity measures the ability to repay debt from both operation and non-operation income. It evaluates the capacity of the business to service additional debt or to invest in additional capital after meeting all other cash commitments. Measures of repayment capacity are developed around an accrual net income figure. The short-term ability to generate a positive cash flow margin does not guarantee long-term survivability (Jelic and Briston, 2001). Financial efficiency measures the degree of efficiency in using labor, management and capital. Efficiency analysis deals with the relationships between inputs and outputs. Because inputs can be measured in both physical and financial terms, a large number of efficiency measures in addition to financial measures are usually possible (Tangen, 2003).