Financial Decision-Making: Importance of Accounting and Finance Functions

FINANCIAL
DECISION-MAKING

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Accounting and finance function ................................................................................................1
TASK 2............................................................................................................................................5
Ratio analysis of the company and analysing the performance.................................................5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Financial decision making means the decision taken by the manager to fix the financial
problems in all the organization, it also help in the allocation of funds and borrowing of the funds
for the investment decisions. Through this company can borrow money from various sources
through which they raised their funds such as by issue of the capital, by borrowing form others
in form of debenture, bonds and loans. Their main purpose is to use the optimization of the
capital structure properly. These decisions are important for the long term growth and increase
their efficiency, all this decisions are very important for the expansion and solve the problem of
the financial issues (Brown, Farrell and Weisbenner, 2016). This report is based on the
company name SKANSA PLC, it is a construction company which is started in 1984, they are
planning to expand their operation in the Europe in next 10 years. In this reports, there is the
importance of finance and accounting functions and their duties and roles and ratio analysis with
their competitor to know the exact performance in the market.
TASK 1
Accounting and finance function
In the SKANSA PLC, the use of the accounting and finance team is very important for
making decisions and for planning, reporting and control the short and long term strategy for the
maximization of the profits. They also help in merger and acquisition management of the cash
and risk management,.
Finance functions- It is the most important part of the financial management because it
consider all activities that include control and planning of the resources and allocation of wealth,
it involves many function like acquiring and utilization of the funds for increase the operation. It
is the lifeblood of the regular activities of the finance decisions . In SKANSA PLC, this
decisions help manager in making investment decisions in the management of working capital
and management of the cash. It also help them I increase of revenue, profit and save costs. This
functions also help in making financing decision which is depend on the equity and borrowed
funds and dividend decisions also to maintain balance between the profit which is retained by
them for paying dividend to the shareholders.
Accounting functions- Accounting functions refers to the system of the financial that
help in the recording of the financial information ,help in financial analyses of the company and
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reporting of the transactions in the books of accounts. They also help in the preparation of the
budgets and financial projections. They also help in the reconciliation of the two financial
systems. Accounting department is very important for both internal and external users because in
the external clients they provide the financial statement information for making decisions and for
the owner it show the performance of their company. In SKANSA PLC, they help in summarize
of all information and communicate this to the interested parties and management, they help in
making the systematic record and protection of business assets and analyses the position of the
company inters of liquidity and efficiency (Bruch and Feinberg, 2017).
Importance of accounting and finance functions
 Record keeping- the main function of accounting is to record the transactions in the
proper way to maintain its systematic. In SKANSA PLC, for the expansion they have to
record of every transactions in the ledger and then final accounts is made to find out
adequate profit and loss.
 Communication of results- Accounting department help in communicating the financial
transactions to different parties of all the business. It is benefit for the investors, creditors
and employees.
 Meeting legal requirements- Accounting help in recording of all financial statements
in such a way that enable the owner to fill the income tax return and sales return.
 Identify the need of the finance- Finance functions help in to meet the adequate funds
for the regular working of the business like maintenance cost, salary to staff, raw
material. In context to SKANSA PLC, they maintain their regular working capital
through this functions.
 To expand, modernize and diversify- every business wants to grow their business in
other countries for the long term benefit . In SKANSA PLC, manager of this organization
wants to expand their business in Europe so there is the need of finance function.
 Investment- In every business different types of funds are raised which mean they have
to invest them in such a way that business get higher returns, and cost of funds is lower
than return on investment.
 Identify the sources of funds- In every business there is the need of the funds for
running. Through finance functions owner look at different areas for the funds raised. In
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