Financial Decision Making

FINANCIAL DECISION MAKING

Table of Contents
INTRODUCTION.................................................................................................................................3
TASK 1.................................................................................................................................................3
Accounting and Finance are crucial for an organization. Analyze the role of accounting and finance
at Alpha limited.................................................................................................................................3
TASK 2.................................................................................................................................................7
With the help of financial statements of Alpha Limited, calculate the ratios and form the
interpretation of the company’s performance....................................................................................7
CONCLUSION...................................................................................................................................10
REFERENCES....................................................................................................................................11

INTRODUCTION
Financial decision making is a crucial task of the financial manager of an
organization. Financial decision making deal with allocating and borrowing of funds that are
required for the purpose of investment. The financing decisions consist of two sources that
can be used to raise finance for the operational activities in the organization. The different
sources are company’s equity that include share capital and retained earnings and borrowings
that include bonds, debentures, loans etc. The main objective of the financial decision making
is to have and maintain a balanced capital structure which must be a balanced mix of debt and
equity.
Alpha Limited is a UK based Manufacturing company. The organization was
established in the year 1954 and is planning to expand its business operations in the various
other regions of UK in the coming 10 years. The study revolves around the financial decision
making of Alpha Limited (Ahmed and et.al., 2021).
TASK 1
Accounting and Finance are crucial for an organization. Analyze the role of accounting and
finance at Alpha limited.
It is not possible for the businesses to operate effectively until and unless they are
well equipped with the finances in the organization. The efficient financial management is
very crucial in the organization to measure and enhance the performance of the business. The
accounts and Finance department of an organization performs various individual goals
(AHMED and et.al., 2021).
Finance is referred as an administrative area or a combination of various
administrative functions that revolve around the cash and credit incomes of an organization.
The Finance department is responsible for acquiring of funds in the organization through
various sources. The roles and responsibility of Accounting and Finance department at Alpha
Limited are as follows-
Accounting department has a significant role to play in an organization. The department
functions to prepare the financial statements, payroll, journal, ledger etc. Basically the
department of accounting functions to manage all the monetary transactions of the
organization. The department is also responsible to record all the transactions related to
income and expenditures of the organization. Hence it can be concluded that Accounting
Department is a key component of an organization. The accounting department performs
various functions such as Finance functions, tax functions, accounting functions and audit
functions for the organizations. The functions of accounting department are explained below
in detail-
Financial accounting- Financial accounting deals with preparation of reports that are
generated for the external users of the organization. The external users of the organization

include creditors, regulators and stockholders. The financial accounting consists of three
types of reports. The reports are cash flow statement, income statement and balance sheet.
These reports are prepared on a routine basis either annually, quarterly or half yearly basis.
The purpose behind the preparation of the financial report is to help the external users in
taking proper decisions. The report consists of the transactions which are monetary in nature.
The reports are verified by the CPA and the reports focus on the organization as a whole. It
uses the structure proposed by the GAAP i.e. the Generally Accepted Accounting Principles
(Bazley, Bonaparte and Korniotis, 2021).
 Income statement- The Net income and costs can be followed the assistance of
monetary bookkeeping. This statement is vital for organization as it can take choices
in like manner. In the event that net income is less and costs are all the more so
organization can make enhancements in like manner.
 Cash flow statement- This statement gives data about inflow and outflow of cash. It
functions as link between the income statement and monetary record. An organization
can quantify its ability of generation of cash by utilizing this statement.
 Balance sheet- Balance sheet has different sides' assets and liabilities. Resource side
incorporates plant and hardware, cash and cash counterparts, stock and other
theoretical assets. Then again, liabilities side has throughout the entire transient
obligations.
Audit Function-
Audit work is essential for an organization to eliminate blunders or to wipe out the
danger of extortion. This capacity not just watches that bookkeeping information is precise or
not yet in addition answerable for testing that organization's activities are legitimate or not.
Auditor is liable for checking the interior controls of organization. This department is
answerable for checking the interior controls quality. It additionally decides concurrence with
the approaches and technique of an organization. Risk management quality is additionally
assessed by the audit department (Blasch and et.al., 2021).
Management Accounting-
The administrators of the organization use accounting data to keep themselves
mindful in a superior manner prior to examining it inside organization. It permits
administrator oversee better and perform control functions. Management accounting is a
mechanism of correspondence. It sets up correspondence between various degrees of
management. Lower management needs the data with minute information too, the center
level management needs standard data and top management needs moderately short data of
long stretches. It empowers the correspondence inside organization and outside world. With
the assistance of accounting information dynamic should be possible. For dynamic
information is given in the relative structure, for example, monetary proportions and tend
examination should be possible with this information. Management accounting can
communicate the targets or objectives for accomplishment inside determined time. It very
well may be finished by budgetary control and cost accounting. All these are significant piece
of management accounting. It tends to be utilized for money related and non-financial reason.