Financial Decision Making | Assignment
Added on 2020-11-12
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Financial decision making
Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1Evaluation of the role of accounting and finance........................................................................1TASK 2 ...........................................................................................................................................4Calculation of the ratios to analyse company performance.........................................................4CONCLUSION................................................................................................................................7REFERENCES................................................................................................................................9
INTRODUCTIONIn business era, the management of an organisation take various crucial decision forimproving the overall performance and productivity. The process of taking valuable decisionrelated to financial resources within company by the upper level management on the behalf ofvital shareholder is known as financial decision making (Agarwal and et.al., 2014). In thisprocess several kind of liabilities and responsibility that are linked with business operation andhelp to accomplish the financial goals. The entire process of financial decision making includesthe 3 main judgement that are helpful in better functioning these decision are dividend,investment and financial decision. To better understand the importance of financial decisionmaking ALPHA limited is selected. The company is a manufacturing company that wasestablished in 1954. In this report, accounting and finance function and their important role are discussed inthe context of selected company. In addition, with the help of financial statements ratio arecalculated to analyse the overall performance of company during an accounting year. TASK 1Evaluation of the role of accounting and finance.The systematic method of determining, recording, analysing, measuring, distributing,checking, summarising, calculating, interpreting and communicating valuable financialinformation is known as accounting (Arnold, 2012). The maintaining of account according to thespecific standard helps to ascertain the profit or losses within a specific period of time that aid tocalculate the values and nature of companies assets, capital, equity and liabilities. It is stated thataccounting helps to give information on the different aspects of business such as total resourcesavailable, means employed to finance those resources and the outcome attained by using theseresources. In ALPHA limited, manager use the method of accounting in comprehensiverecording of useful financial transaction that are related to business operation. They prepareuseful financial statements that contain the detail summary of company activities, actualfinancial position and strength and cash flows on a certain time period. They use to generatedifferent streams of accounting like management and cost accounting that supportive for themanager to take sound, appropriate and authentic business decision. Thus accounting is a reliableprocess for recording, arranging and analysing financial substance which assist in the impressive1
management of the business activities. There are various important role of an accountingfunction that bring advance decision making to an organisation. Some of these are definedbelow: Financial accounting: This is mainly related to providing of useful financialinformation to the manager at each level so that internal manager are able to makemeaningful decision to improve performance and gain profitability. In context to APLHAlimited, responsible accounts department are liable to report each and every dealing ofbusiness activities in to appropriate financial statement so that future judgement can bemade and current financial strength and position of company can be determined. It iscritically evaluated that responsible manage of respective company use to make essentialdetermination so that desired goals and objective are attained (Baker and Ricciardi,2014). Thus, it is stated that financial accounting assist companies to create assortedstatements so that internal and external party are able to take their decision as per theinformation collected of that particular period. For example, account department use toprepare income statements with the help of overall financial dealing in specific timeframe that help to ascertain gross and net profit. This statement help both internalmanager to make appropriate changes for better improvement and external stakeholder. Tax function: In business term, the concept of tax accounting is based on calculatingtaxes for a particular period. It is stated the companies must follow the certain rules whilepreparing for tax return. Accounting department follows the tax principle in order tocalculate the tax such as balance sheet items that are accounted while preparing financialstatements and tax payables. For example, if ALPHA limited prepare annual statementsby following the concept of FIFO in order to record their stock level for financialpurpose, thus they can implement LIFO method for calculating tax for specific timeframe. Management accounting: Management Accounting: This is the most important role ofaccounting department as they connect finance authority of an organisation with otherfunctional departments. Essentially the role of accounting function in context tomanagement accounting is that it support the internal manager to make useful decisionfor future growth and development. Manager of ALPHA limited, make various effectivestrategies that aid to perform following task in most suitable manner resulting in2
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