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Financial Decision Making : PDF

   

Added on  2021-02-21

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Financial Decision Making

Table of ContentsINTRODUCTION...........................................................................................................................3TASK 1............................................................................................................................................3Functions of accounting and finance...........................................................................................3Management accounting techniques............................................................................................4TASK 2............................................................................................................................................7a.) Calculation of financial ratios.................................................................................................7b.) Interpretation and assessment of the financial position of company......................................8CONCLUSION .............................................................................................................................10REFERENCES..............................................................................................................................12

INTRODUCTIONFinancial decision is a strategic process which is related with making decision in relationwith the financing mix of the company. It is very useful in allocation of funds which in turnresults in making investment, financing, liquidity and operational decision in a systematic andefficient manner. Financing is referred to as an effective source which is mainly concerned withthe equity of the stakeholders and the liabilities of the company in order to attain long termsustainable growth and objectives of organization. This study will highlight on variousaccounting functions and role related with accounting and finance. This study will also evaluatethe financial ratios of the company with the help of financial statements. ALPHA ltd. is a UK based manufacturing company which was established in the year1954. ALPHA supply various components of metal to leading companies of the UK. Thiscompany tends to focus on expanding its operations of the business in the various other part ofthe UK. TASK 1Functions of accounting and finance.Financial decision is a strategic process which in turn is responsible for taking decisionsrelated with the equity of the stakeholders and the liabilities of the company in order to attainlong term sustainable growth and objectives of organization (Schaltegger and Burritt, 2017).Financial decision of the business can be related with the investment, financing, dividend,liquidity and operations of the business. Financial decision are very crucial for the organisationbecause it is useful in maximizing the shareholder value in an efficient and strategic manner. It isuseful in taking effective decision related with the income and expenditure of the business inorder to maintain sufficient financial resources in order to smoothly carry out the operations ofthe ALPHA limited company. Financial accounting is very useful in keeping track of all thefinancial transactions of the business in order to provide baseline for the various stakeholders ofthe company (Collier,2015). It is very useful in interpreting the financial health and position ofthe company by assessing the creditworthiness, solvency position and liquidity position of theALPHA limited company. Accounting and finance are very useful in preparation of an effectivebudgeted plan which in turn helps in carrying out the business within the set budgeted plan andin case of deviation take necessary actions to resolve any financial problem.

Management accounting plays a key role in formulation of plan, organizing, controllingand decision making of the company. The key role of accounting and finance is to helpstakeholders of the organization make strategic decision. It is very useful in interpreting thefinancial information and communicating the same to the management and stakeholders of thecompany in a strategic and efficient manner (Petersen, Kushwaha and Kumar, 2015). Accountingand finance are useful in determining the cash flow of the business which in turn is very useful incredit analysis, estimation of risk and profitability of the company. Finance and accounting playsa key role in administrating the assets of the business. Management accounting is very useful incritically analysing the financial performance of the company by effectively preparing variousinternal financial reports and records which in turn aids to strategic decision making.Management accounting also helps in effectively analysing the cost of the ALPHA limitedcompany in order to determine the income and expenditures of the company (Maas, Schalteggerand Crutzen, 2016). It is useful in determining and evaluating the budget plan which is useful inmaking various strategic financial decision. Controlling the activities of the business is one ofthe common aspect of the management accounting which helps in reducing the cost of thebusiness and attain higher economies of scale. This helps in determining the underperformingand outperforming units of the ALPHA limited company. It is also useful in determining thehighly profitable units of the business and gain higher profitability by reducing operational costof the company (Kubilay, and Bayrakdaroglu, 2016). Management accounting is very useful inplanning as it helps in effectively predicting the future elements for growth and detectingfinancial patterns in order to make strategic decision according to the latest market trend (TheRole of Accounting & Finance in Business Management, 2019). Planning helps managementaccounting in creating long term policies of the business. It is useful in analysis of financialrecords and in turn helps in improving the performance and profitability of the ALPHA limitedcompany. Management accounting techniquesManagement accounting techniques are very useful in interpreting the financial data andcommunicating the same to the stakeholders of the company in order to achieve long termsustainable growth and development of the business. Financialplanning: This tool is mainly concerned with attainment of organizationalgoals and objectives of the company by effectively evaluating the financial policies of the

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