Financial Management: Approaches, Techniques, and Factors for Effective Decision Making

Financial
Management

Table of Contents
Table of Contents.............................................................................................................................2
INTRODUCTION...........................................................................................................................1
SCENARIO 1..................................................................................................................................1
1. Evaluation of range of approaches, techniques and factors which contribute to effective
decision making in an organisation.............................................................................................1
2. Stakeholder management and the management of conflicting objectives of different
stakeholder groups.......................................................................................................................3
3. The value of management accounting techniques in cost control and maximising
stakeholders value........................................................................................................................3
4. Techniques for fraud detection and prevention and the approach to ethical decision making4
5. Reflection about the learnings of above topics........................................................................5
SCENARIO 2..................................................................................................................................5
1. Identification of the way in which data obtained might help to inform operational and
strategic decisions for the company.............................................................................................5
2. Comparison and contrasting of three investment appraisal techniques and evaluation of their
effectiveness in helping to maximise return on investment.........................................................8
3. Demonstration of the value of techniques in helping to inform financial decision making....9
4. Analysis of the way in which financial decision making supports long-term sustainability...9
5. Recommendation for the way in which management accountant helps to improve financial
sustainability..............................................................................................................................10
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Financial management is a process which is followed by companies when they are
willing to analyse the performance of company. While using it different types of final accounts
are formulated. These are profit and loss account, balance sheet and cash flow statement. For all
the accountants it is very important to make sure that the information which is used by them to
generate the financial statement is accurate. Apar from this they are also responsible to make sue
that are following all the essential principles and rules to generate accounts. It can help to retain
the investors and establish a good market image (Ashmarina, Zotova and Smolina, 2016). Main
aim of this report is to enhance understanding of financial accounting and its importance for a
business to improve financial sustainability. This assignment is segregated in two parts first one
is based upon analysis of key elements of financial accounting. Second part is based upon John
Lewis Partnership Plc which is one of the largest retailers of United Kingdom. It was founded in
year 1929 by John Spedan Lewis. The report covers various topics such as range of approaches,
techniques and factors that contribute in effective decision making, stakeholders management,
value of management accounting techniques, techniques for fraud detection and reflection upon
learning of them. Additionally, use of data to inform operational and strategic decision,
discussion of investment appraisal techniques, value of techniques helping to inform financial
decision making and they way in which it supports long-term sustainability etc. are also
discussed in this project.
SCENARIO 1
1. Evaluation of range of approaches, techniques and factors which contribute to effective
decision making in an organisation
Effective decision making is very important for all the companies as it helps to analyse
the ways in which all the predetermined goals of an organisation could be met. There are various
types of approaches, techniques and factors are used to support the decision making. All of them
are as follows:
Knowledge based approach: This approach is highly focused with quantitative
objective and factual information so that effective decisions could be formulated. In order to
make sure that highly efficient strategies are formed to improve the performance of business this
approach is used (Barr and McClellan, 2018). It is a form of system which is highly focused with
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the capturing of human intelligence so that decisions for future betterment of organisations could
be made. Main purpose of it is to analyse the actual position of business and then find effective
ways to deal with all the adverse impacts of operations which may take place in future.
Formal approach: It is the specific approach or technique which is used in effective
decision making so that performance of business could be improved. When it is applied by the
managers then they pay attention towards proper structure, processes and systems so that they
can assure that decisions taken by them are resulting positively for business. It helps in effective
decision making because with the help of it, the management can make sure that they have
formed specific strategies by keeping structure, processes and systems in mind. The types of
formal approaches which could be used by companies to form decisions are formal meetings,
video conferencing etc.
Informal approach: This approach is based upon relationships, personal networks and
unwritten rules. When it is used in companies then the decisions are formulated by taking help
with the individuals with whom the managers are having good relations. They guide them to
make highly effective and efficient decisions so that they can improve the performance of
business (Brusca, Gómez‐villegas and Montesinos, 2016). Some of the informal approaches to
make decisions are informal group discussion, asking staff to suggest their views for the
strategies etc.
Some of the key factors which are focused to formulate effective decisions for business
are as follows:
Risk for business: It is one of the key factors which are focused by managers while
planning to make effective decisions. With the help of it, such strategies could be formulated that
may result in enhancement of performance of business. It contributes in the effective decision
making because with the help of it, management will form such judgements which can help to
deal with all the risks which may take place in future.
Actual performance: It is also a factor which help to formulate effective decisions for
business. With the help of it, the managers determine the actual situation and position of business
so that effective strategies for dealing with all the negative aspects could be formed (Chandra,
2017).
The above factors facilitate the effective decision making which help to improve
performance of organisation and meet the desired aim.
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