Assignment - Financial Decision Making
Added on 2020-10-05
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FINANCIAL DECISIONMAKING
Table of ContentsINTRODUCTION...........................................................................................................................3TASK 1............................................................................................................................................3Role of Accounting & Finance with in an organisation..............................................................3TASK 2............................................................................................................................................9Calculation of different ratios.....................................................................................................9CONCLUSION..............................................................................................................................12REFERENCES..............................................................................................................................13
INTRODUCTIONFinancial Decision Making is a process through which managers of organisationsevaluate different type of opportunities by analysing their financial statements such as BalanceSheet, Income Statement and Cash Flow Statements. Financial Decision Making also enablescompanies in making decisions by analysing risk & returns in different alternatives which furtherhelps in achieving long tern sustainable growth. Organisation prepare financial statements to findout efficiency & profitability of their business performance. The below report explain role ofAccounting & Finance Function with in an organisation. After that, this report calculate varioustypes of ratios to check efficiency of financial performance of Alpha Limited by comparing andevaluating ratios of two financial years.TASK 1Role of Accounting & Finance with in an organisationAccountingAccounting is an activity in which business organisations analyse, evaluate and interprettheir overall financial transactions. Companies prepare & maintain books of accounts to recordtheir financial transaction under accounting process. Every organisation complete the process ofaccounting with the purpose of finding out their financial efficiency and profitability. Further,companies prepare and maintain books of accounts to disclose its financial information so that itsexternal & internal user can make various decisions such as Investment Decisions, ProductionDecisions and Pricing Decisions. Thus, Accounting plays a vital role in decision making. Accountant of Tesco also maintain books of accounts to check performance of its allstores. As Tesco is a multinational UK based company and offering variety of groceries andother general products & services across the globe. Tesco offer its products & services throughdepartmental stores, Super Markets and Malls. Company make investment in establishment of itsstores in new countries for expansion for this company needs to check its financial soundnessand it is not without Accounting(Minnis and Sutherland, 2017). Finance Finance is process of maintaining and managing funds of companies so that they can usethem in an efficient manner. It also helps company in raising new funds with the use of different
sources. Chief Financial Officer of Tesco manage companies funds which in turn help companyin making its future financial plan and decision making.Thus, Accounting & Finance both benefits firm in maximising profits, market share andbrand image. Further, both the function plays a crucial role in evaluating and analysing FinancialHealth of Tesco(Vanauken, Ascigil and Carraher, 2016).Role of Accounting Two types of accounting is done with in an organisation Financial Accounting &Management Accounting. Management Accounting plays a role in providing companiesfinancial information to its manager so that they can make future decisions whereas FinancialAccounting helps firm in achieving future goals and provide sufficient liquidity so thatcompanies can smoothly run their business.According to the view point of (Berger, Minnis and Sutherland, 2017), AccountingFunction plays a significant role in resolving various problems by evaluating & analysingdifferent situations occurring in Tesco during its business process. Further, Different roles ofplayed by Accounting in Tesco are discussed below-Cost Analysis-Cost Accounting Function of Accounting plays an important role inanalysing and evaluating cost each products & services offered by companies. Accountant ofTesco use this function with the purpose of enhancing profits & sales volume by eliminatingextra cost. By recording cost of products accountant of Tesco can set its profit margin and canachieve future sales target.For Example- Accountant of Tesco wants to establish a new hyper store in a new countrywith an objective of its business expansion. Than with cost accounting function accountant canevaluate Cost required in construction of store such as cost of land, cost of furniture & interiorand various other facilities like air conditioning, staff members salary & marketing expenses.Thus, Cost Accounting Function of accounting benefits Tesco in examining cost ofestablishment of its stores with this company can achieve its future goals and profits(Lakis andMasiulevičius, 2017).Decision Making- Managers of Tesco makes various decisions so that company can runits operations smoothly. All the decisions related to business operations cannot be run without
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