After a company has decided the kind of performance it expects from employees, it must develop:

• A. a cash flow statement to monitor liquidity
• B. a set of financial statements for external reporting
• C. a system of managerial accounting to measure and evaluate that performance
• D. an audit plan to ensure compliance with tax regulations

Answer: (C)

Verified step by step guidance

1. Understand the context of the problem: The question is about what a company should develop after deciding the kind of performance it expects from employees. This relates to measuring and evaluating performance, which is a managerial accounting function.
2. Clarify the purpose of managerial accounting: Managerial accounting focuses on providing internal reports and tools to help management make decisions, measure performance, and evaluate efficiency.
3. Eliminate irrelevant options: A cash flow statement monitors liquidity, which is not directly related to employee performance. Financial statements are for external reporting, and an audit plan ensures compliance with tax regulations, neither of which directly measure or evaluate employee performance.
4. Identify the correct approach: A system of managerial accounting is designed to measure and evaluate performance, making it the most appropriate choice for the given scenario.
5. Conclude the reasoning: The company should develop a system of managerial accounting to align with its goal of measuring and evaluating employee performance effectively.