Financial Decision Making: Importance of Accounting and Finance Functions

FINANCIAL DECISION
MAKING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK- 1...........................................................................................................................................1
Accounting functions:-.................................................................................................................1
Finance functions:-.......................................................................................................................3
TASK- 2...........................................................................................................................................5
Ratio Analysis..............................................................................................................................5
Interpretations..............................................................................................................................6
Suggestions..................................................................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Financial decision-making is the process in which the internal management of the
company indulge to ensure the long term profitability and sustainability of the business
organization. It can be ascertained that these decisions can be related to the capital structure,
choice of investments, capacity of taking the financial risks, dividend decisions, working capital
decisions and the various budgeting requirements of the company. The current project that is
undertaken by the company shall be disclosing the importance of the accounting and the finance
functions in the organization. The accounting function is associated with representing the true
and fair view of the business. Whereas the finance function involves the decisions related to
acquisition and the utilization within the organizations. The project report shall be highlighting
the variants of the accounting and finance function in the company that are used for facilitating
the various decisions. Apart from that the second part of the report shall be demonstrating the
ratio analysis that is undertaken to assist in comparisons and finding out the deviations in the
current policy. Further the interpretation is driven from these ratios to suggest the investors
whether to choose the company for the investments or to reject the proposal for the same.
TASK- 1
The accounting and finance functions play significant role in the organization and have
some crucial variants that are helpful in assisting the decision-making process by the internal
management of the company for its welfare and long term survival in the market. Apart from that
these functions can be used by the other stakeholders of the business who have some or the other
interest associated with the company. The accounting and finance functions, duties and their
roles in the businesses are:-
Accounting functions:- Financial accounting- This process is concerned with the recording, classifying, posting,
summarizing and interpreting the financial transactions that are undertaken by the
business. It is associated with the preparation of the financial statements like the income
statement, balance sheet, cash flow statement and the statement of equity which is then
used to depict the financial results and performance of the business in a particular period.
These financial statements are prepared in accordance with the universally accepted
accounting standards, accounting policies, procedures, norms and methods. This shall be
facilitating the process of comparison among the statement of the two entities and making
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the improvements in the deviations in accordance with that comparative analysis. The
financial accounting proves to be of major significance to the internal and external users
of the financial statements who base their decisions on the results that are depicted in
these statements. The representations and disclosure policies that are followed by the
business are the major compliance requirements that are mandatory for the business. The
results are oriented to show the profitability, liquidity, operational efficiency, solvency
and market performance of the company (Klačmer Čalopa, 2017). Based on these
positions of the organization the future growth prospects of the business can be defined
and formulating the long term goals and objectives that can derive competencies in the
market. Management accounting- The management accounting is one of the essential functions
of accounting wherein the internal management of the company formulates various
decisions like organizational objectives, future budgets in respect of operating capacity,
sales level, cost control, production techniques etc. This is done with the help of
communicating the financial information of the business to the managers who then take
the future based on it. The major responsibility of the management is in respect of
budgeting which quantifies the various decisions that are to be executed in the routine
operations of the business. This step is taken post the financial statement of the company
are framed by the accountants as this information is only communicated to the
management. One of the most significant roles that are played by the management
accountants are that they formulate the short term and the long term goals and objectives
of the business and in response to that also rightly directs the workforce in the
achievement of the same. This leads to successful and target oriented operations in the
business and in sync with that the company is able to build the competitive advantage in
the industry. Auditing- The auditing function of accounting also plays crucial roles in the business as
the examination of the books of accounts shall be governing the true and fair view
pertaining to the financial statements that are prepared by the business. The auditing and
assurance monitors that the accounts of the company are free from any kind of material
misstatements and is representing the rightful view as to the position of the business. The
auditing is one of the essential requirements of the business in order to build the
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