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Financial Decision Making Process - Doc

   

Added on  2021-02-19

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FINANCIALDECISION MAKING
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Table of ContentsINTRODUCTION...........................................................................................................................3MAIN BODY ..................................................................................................................................3TASK - 1 .........................................................................................................................................3Role of the accounting / finance or management accounting system in planning, controllingand decision making process..................................................................................................3TASK 2............................................................................................................................................6(a) Calculation of ratios..........................................................................................................6(b) Comment on performance of Alpha limited company on the basis of ratio calculation..7CONCLUSION................................................................................................................................9REFERENCES..............................................................................................................................11
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INTRODUCTIONThe financial decision making may be defined as a process of taking decision regardingto various aspect of finance such as about liabilities, stakeholders, assets etc. In addition, thesedecisions should be taken by companies in an effective manner because any wrong decision canlead to loss (Opstrup and Villadsen, 2015). The aim of project report is to define about role offinance and accounting in aspect of companies. In the project report, some managementaccounting techniques such as financial planning, standard costing, marginal costing etc. aredefined. The role of these accounting techniques is not limited till management of financialaspect but also for non financial aspects too. Basically, there are various kind of finance andaccounting functions that leads to success of organisation. It depends on companies that howwell they implement their accounting functions. For better understanding of above mentioned accounting techniques, a company isselected that is Wm Morrisons. This company is being considered as fourth largest supermarketin United Kingdom. Its headquarter is in Bradford, West Yorkshire, England. Company has largeportfolio of products that consists a wide range of items such as food products, health &medicines, clothings, households and many more. The company was founded in year 1899 byWilliam Morrisons in United Kingdom. As per the financial year of 2018, companies' revenuewas of 1726.2 crores GBP (About Morrisons company, 2019). The company's key practicesrelated to management accounting techniques are that they use these in various kind ofoperations and activities. As well as it helps them in order management of all financial and nonfinancial aspects. Basically, the role of accounting techniques for them is essential for betterdecision-making and assessment of financial performance. MAIN BODY TASK - 1 Role of the accounting / finance or management accounting system in planning, controlling anddecision making process.There are various kind of management accounting systems and each of them play asignificant role in the context of management of companies financial and non financialperformance (Aprea and Wuttke, 2016). As well as, it depends on companies that they should
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implement these accounting techniques in an effective manner because these are helpful forbetter planning, controlling and decision-making. Herein, below some types of managementaccounting techniques are mentioned that are as follows:Standard costing- It can be defined as a kind of costing method that is related withprojection of future possible expenditures of various operations which becomes as astandard for companies. On the basis of it, companies can compare actual level of costwith these standard costs. Due to this, entities can assess the areas in which they need toimprove. Herein, the aspect of above Morrisons company, they use this technique ofmanagement accounting in order to evaluate the difference between actual cost andestimated cost.Budgetary control- This is a kind of technique in which various kind of budgets areprepared in order to compare the actual result with budgeted information (Marchetti,Castelli, Massaro and Valle, 2016). This is almost similar as standard costing butdifference is that under it income and expenditures both are compared with budgetedresults. Like in the context of above chosen Morrisons company, they apply thistechnique for effectively management of income and expenses. Analysis of financial statement- It is essential for companies to analyse their financialstatements so that they can assess actual financial performance (Goldmann, 2017). By useof this management accounting technique, companies can analyse various kind offinancial statements such as income statement, cash flows etc. for controlling theirfinancial performance. Herein, the aspect of above company they use this technique forproper analysis of their financial statements.Cash flow statement- It may be defined as a kind of statement that is related withrecording activities regarding to flow of cash in an organisation. This is prepared byoperating, financing and investing activities. In this cash inflow indicates the excess ofcash receivables while cash outflow shows the negative cash position (Zeng, Chen,2016). For example in above selected Morrisons company, they prepare this statementthat helps them in proper assessment of cash position. So these are example of management accounting techniques which have their significant impacton companies performance as well as in growth.
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