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Financial Decision-Making Process Assignment

   

Added on  2021-02-21

11 Pages3428 Words121 Views
DECISION MAKING

INTRODUCTIONFinancial decision-making is a process of taking decisions as per analysis of financialreports of companies (Kumar and Goyal, 2015). These decisions are very crucial for companiesbecause as per it, organizations manage their financial resources. Under project report, role ofmanagement accounting techniques such as financial planning, financial statements analysis,budgetary control etc. and analysis is included. All these management accounting techniques arevery important because these are linked with financial and non financial information ofcompanies. Along with, company's financial performance is assessed on the basis of givenfinancial data of a company. Apart from it, different kind of financial ratios are calculated as perthe given income statement and balance sheet. The accounting and financial functions play animportant role because on the basis of these functions companies make their financial statementsas well as evaluate actual financial position (Knežević, Stanković and Tepavac, 2012). Withoutthese accounting and finance functions, this can be difficult for companies to manage theirfinancial resources. For better understanding about process of financial decision making, in report ASDAstores limited has been selected which is also known as ASDA. This is a British super marketretailer whose headquarter is at Leeds in West Yorkshire, United Kingdom. Company's productportfolio is large that contains a wide range of products such as groceries items, food products,clothing and fashion items for men, women, kids etc. The company was founded about 70 yearsago on 19 February, 1949 by Peter and Fred Asquith. It has 30 % of market share of UK ingrocery market. As per the information of year 2019, there are 633 stores at all around of UK andnumber of employees are 165000. Main bodyTASK 1.Role of MA technique for decision-making.The term management accounting is involved in providing monetary and non monetaryinformations to the managers so that they can look forward (Palepu and Healy, 2013). Some MAtechniques that are very crucial for companies such as:

Financial planning- This is a kind of accounting technique that is linked with the processof making financial plan on the basis of estimation of future income and expenses(Zopounidis and Doumpos, 2013). Such as in ASDA company, the financial planning canbe useful because on the basis of it, they can manage their financial resources in aneffective manner. As well as this can help to them in better allocation of fund to thevarious kind of activities. Analysis of financial statements- The financial statements consist different types ofstatements like income statement, balance sheet, cash flows, ratio analysis etc. The properanalysis of these financial statements can be helpful for companies to evaluate actualposition. Like in selected ASDA company, analysis of financial statement can be usefulfor evaluation of their financial position. Historical cost accounting- The term historical cost accounting can be defined as anaccounting which is used for assets as per the generally accepted accounting principles(Richard, Kirby and Chadwick, 2013). Such as in above ASDA company, the value ofassets can be measured as per original cost. Standard costing- It can be defined as a kind of costing technique that is related toestimating the future cost of various activities. This process of estimating of cost isknown as standard costing. Like in above ASDA company, they can use this accountingtechnique for proper estimation of future cost of manufacturing activities so that they cancompare actual cost with this estimation.Budgetary control- This is related to the management of financial performance ofcompanies with the use of preparation of budgets (Delen, Kuzey and Uyar, 2013). Underabove ASDA company, they manage the financial performance by preparing the budgetssuch as cash budget, operating budget etc. Marginal costing- It is a kind of costing technique in which both costs(fixed and variable)are considered in different ways. Like fixed cost as periodic cost and variable cost asproduct cost. For example in above company, they may use this costing technique forpreparation of income statement under this costing technique.Fund flow statement- It provides detailed information regarding to change in financialposition of companies for a particular time period (Kabir, Sadiq and Tesfamariam,

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