Financial Decision Making

Financial Decision Making

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK -1...........................................................................................................................................3
Role of management accounting techniques...............................................................................3
Management accounting techniques............................................................................................3
Critical analysis...........................................................................................................................4
CONCLUSION................................................................................................................................5
TASK-2 RATIO ANALYSIS..........................................................................................................7
A) Calculation of ratios...............................................................................................................7
B) Performance of SKANSKA PLC...........................................................................................8
REFERENCES..............................................................................................................................13

INTRODUCTION
For every business it is necessary to maintain record of their transaction so that on basis of it
financial statements are prepared. With help of statements financial performance is measured.
Also, effective and relevant decisions are taken by managers to improve financial performance.
Besides, it gives insight about profit and loss of overall organisation. Functions of accounting
include storing and analyzing financial information and make sure that all the monetary
transactions are done appropriately (Madhoun, 2020). Accounting helps in preparing the
financial statements is very important for knowing the company’s financial status. Finance
functions include financial planning, allocating funds, forecasting the cash outflows and inflows.
Finance function is important for the company to make sure that all the profits and losses are
being measured and the company is keeping account for all the transactions being done.
The present report will lay emphasis on importance of accounting function, duties, roles, etc.
within SKANSKA PLC. Also, ratios of two years will be calculated to analyse company
financial performance.
TASK -1
Role of management accounting techniques
Management accounting techniques play a crucial role in making plans for future and it
also helps managers in taking decision regarding financial position of company. There are many
techniques that can be used by SKANSKA PLC to identify all details related to financial
situation of company and it helps managers in identifying, analysing, interpreting and
communicating all information so that necessary decisions can be taken. These management
techniques help in make plans, controlling all activities and taking decisions which are beneficial
for company (Ameen and et.al., 2018).
Management accounting techniques
Financial planning – It is the technique which is used by companies to make plans which will
help in taking decision. It is a process use for estimating capital requirement in an organisation
and also helps in determining competition. It helps managers in identifying current position of
company and it will help them in making financial policies related to investment and
arrangement of funds when required.
Analysis of financial statements – It is management technique which is applied by companies
to analyse financial statements. This will help managers in identifying financial position of

SKANSKA PLC and evaluation of financial performance. If company requires fund then they
can make plans after analysing financial statements. It helps in taking decisions and controlling
all activities.
Historical cost accounting – This management technique will help managers in calculating
value which is used in accounting process. In historical cost accounting asset value is recorded at
its original cost in balance sheet (Madhoun, 2020). The price of asset is recorded at cost
purchased by company. Benefit of this technique is that it helps in knowing original value of
assets and liabilities in financial statement.
Budgetary control – It refers to making budgets after analysing previous year data because it
helps in making decisions which is beneficial for managers in taking decision. It helps in
managing income and expenditure. Budgets are made to make an estimate that how much
income will be generated in future and how much expenses a company has to bear.
Decision making – It is the process of identifying a decision, relevant information is collected
and alternative solutions are being find out so that it can be applied by company for future
growth. This helps managers in planning and controlling day to day activities so that
organisation can run smoothly.
Cash flow statement – Cash flow statement is a statement in which information of cash inflow
and outflow is being summarised. It helps managers in taking financial decisions and plans can
be made for future growth. It measures how well an organisation is managing it cash position,
generating revenue to pay its liabilities and expenses that are incurred (Pasch, 2019).
Marginal costing – This management accounting techniques helps in measuring variable cost
and fixed cost. Variable cost refers to cost which changes according to change in output and
fixed cost remains same, it does not change. This technique helps managers in planning,
controlling and correct decisions are taken.
Critical analysis
Management accounting techniques play an important role in taking financial decision
because it helps managers in identifying current position of an organisation and how much
revenue is being generated. It also measures overall performance by calculating expenses which
is incurred and mangers try to reduce expenses and make plans so that more revenue can be
generated. It is important for every company to apply management accounting techniques to
determine financial position of company and necessary steps can be taken to improve