Financial Management: Approaches, Principles, and Decision-making

FINANCIAL
MANAGEMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
LO 1.................................................................................................................................................3
P 1. Applying different informal and formal approach in order to support decision making....3
M 1. Addressing advantages and disadvantage of informal and formal approach.....................3
D 1. Examining use of different informal and formal approach in order to support decision
making.........................................................................................................................................4
LO 2.................................................................................................................................................4
P 2. Determining key financial management principles which in turn is required to achieve
long term financial sustainability................................................................................................4
M 2. Critically examining the key financial management principles and its importance to
achieve long term financial sustainability...................................................................................5
D 2. Critically evaluating the importance of key financial management principles...................5
LO 3.................................................................................................................................................5
P 3. Evaluating role of management accountants.......................................................................5
P 4. Use of accounting control system........................................................................................6
M 3. Critical evaluation of role management accountant and accounting control system.........6
LO 4 Financial decision-making support for long term sustainability............................................7
Use of data in making company operational and strategic decisions..........................................7
Comparing and contrasting investment appraisal techniques and their effectiveness in helping
in increasing ROI........................................................................................................................7
Value of techniques in assisting firm to make financial decisions.............................................9
Financial decision making and long term sustainability.............................................................9
Management accounting use to improve financial sustainability.............................................14
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Financial management is considered to be one of the crucial approach which helps in
strategically plan, organize, direct and effectively control the financial undertaking within the set
organization. It is considered to be an appropriate approach which helps in strategic decision
making. This study determines the various different approaches in order to support effective
decision making. It also helps in analysing financial management principles in order to support
financial strategies. Furthermore, this study also helps in analysing the role associated with the
accounting control system and management accountants. This study further demonstrates various
ways where financial decision making helps in supporting sustainable performance.
LO 1
P 1. Applying different informal and formal approach in order to support decision making.
Formal approach mainly comprises of system, structure and processes which in turn helps
in strategic decision making. Formal organizational structure in turn helps in formalizing the
relationship between members and process of the Barratt development. This in turn helps in
creating better business environment which helps in better decision-making process. Formal
consensus tends to support various layers of top executives which helps in better decision-
making process. Organization system is considered to be as the defined structure which helps in
dividing organization into various hierarchical structure. This helps in reducing chaos and better
transmission of decision across departments which eventually leads to better decision making.
Organization process is mainly linked with planning, assigning tasks, accomplishing goals, etc.
which in turn helps in better decision making. On the contrary, informal approach mainly
comprise of relationship, unwritten rules and networks which in turn helps in supporting decision
making. Relationship between the managers and employees of the organization in turn helps in
making strategic decision within the management of the Barratt development. Unwritten rules
mainly comprise of the unconscious accumulation of the history, customs, beliefs, vested
interest, deep feelings, etc. which in turn largely support decision making. Social networks and
connects within and outside the organization aids to better decision making.
M 1. Addressing advantages and disadvantage of informal and formal approach.
The advantage of the formal approach in the organization helps in collaborating the
activities within each organization. It helps in setting clear idea and coordinate activities of
various functional and hierarchical departments of the Lloyd banks. On the contrary, the major

disadvantage of the formal approach is that, it is associated with high degree of specialization.
The key advantage of the informal approach is that, it helps in complying with rapidly changing
the market and is more adaptable to the changing environment. This in turn results in better
decision making. On the contrary, the major disadvantage of the informal approach is that, there
is no systematic procedure and results in delay in the decision making process. It also results in
more emphasize on the individual interest while making strategic financial decision.
D 1. Examining use of different informal and formal approach in order to support decision
making.
The network helps in considering the most critical resources of the organization. This in
turn helps in satisfying the needs and objective of the company and helps in speedy business
transaction of Barratt development. Relationship within the organization is useful because it aids
in collectively taking decision and attain common organizational goal. Formal consensus is
considered to be useful because it helps to collaborate various layers of the executives who in
turn focuses on layering various executive layer in the organization.
LO 2
P 2. Determining key financial management principles which in turn is required to achieve long
term financial sustainability.
Setting objectives in order to achieve long term financial goals: The company set long term
medium term and short term goals of the company. This helps management in making strategic
decision related with the investment and in turn leads to long term growth of the Barratt
development.
Organizing the finances of company: The key principle is to effectively manage and organize
the finances of the company in order to create more wealth.
Maximizing the wealth of the shareholders: Every shareholder of the organization expects a
strategic return on investment.
Limiting debt and investing in income producing assets: The management of the company
should in turn focus on limiting the various debt and expenses of the company and in turn focus
on investing in financial products or assets which in turn gives valuable return.