Financial Management Principles and Strategies

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FINANCIAL MANAGEMENT PRINCIPLES AND STRATEGIES
Financial Management Principles and Strategies
Name of Student
Name of the University
Author Note

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FINANCIAL MANAGEMENT PRINCIPLES AND STRATEGIES

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FINANCIAL MANAGEMENT PRINCIPLES AND STRATEGIES
Table of Contents
Answer to Learning Outcome 1.........................................................................................................4
Different Approaches to Support Effective Decision Making.......................................................4
The role of stakeholder in decision making using the knowledge tacit knowledge.......................5
Make or Buy Decision....................................................................................................................7
Different production constraint that prevent the sale and growth maximization...........................8
Key factor analysis.........................................................................................................................9
Answer to learning outcome 2..........................................................................................................11
Financial management principle which are used for effective of management of strategy.........11
Ethical Financial Management:....................................................................................................13
Maximizing shareholder wealth...................................................................................................13
Suggested improvements to reduce costs, enhance value and quality.........................................15
Answer to Learning outcome 3........................................................................................................17
Evaluation of the role of the management accountant and the accounting control system..........17
Important function of the management accountant......................................................................17
Role of Auditing in Business management..................................................................................18
Answer to learning outcome 4..........................................................................................................19
Financial Decision in the Sustainable performance.....................................................................19
Liquidity ratio...............................................................................................................................19
Net Working Capital................................................................................................................20
Current ratio.............................................................................................................................20
The Acid Test ratio...................................................................................................................21

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FINANCIAL MANAGEMENT PRINCIPLES AND STRATEGIES
Return on Investment – ROI........................................................................................................21
Accounting Rate of Return (ARR)...........................................................................................21
Discounted Cash Flow (DCF)..................................................................................................22
NPV - Net Present Value..........................................................................................................22
Use of statements to help in decision making..............................................................................22
Cash flow statement (CFS).......................................................................................................22
Trial Balance............................................................................................................................23
References........................................................................................................................................25

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FINANCIAL MANAGEMENT PRINCIPLES AND STRATEGIES
Answer to Learning Outcome 1
Different Approaches to Support Effective Decision Making.
A knowledge-based structure is a method of artificial intelligence that targets to
apprehension the understanding of human experts to backing decision-making. Instances of
knowledge-built systems comprise expert system, which are so named because of their trust on
human proficiency (Santoro, et.al, 2018).
The knowledge base comprises a group of information in a specified arena - therapeutic
analysis, for instance. The inference device assumes understandings from the information kept in
the knowledge base. Knowledge-based structures also contain an edge through which users
question the technology and intermingle with it (Dalkir, 2013.).
Knowledge management system are of two types -Explicit knowledge and implicit knowledge.
Explicit knowledge (also called communicative knowledge) is Knowledge that can be
instantly expressed, organised, retrieved and put into words. It can be effortlessly conveyed to
others. Maximum forms of explicit knowledge can be kept in a media file. The information
included in Records, manuals, audio visuals are good models of explicit knowledge (Shintani, and
Ellis, 2013).
Tacit knowledge is the form of Knowledge that is hard to transmit to another person by
medium of inscription or articulating it. However, the capability to speak a language, play a
musical gadget, and use intricate gadget necessitates all kinds of knowledge that is not always
recognised explicitly, even by expert practitioners. The procedure of converting tacit knowledge
into explicit knowledge is identified as codification, articulation. The tacit features of knowledge
are those that cannot be codified, but can only be communicated by training or individual
experience (Rebuschat, 2013).

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FINANCIAL MANAGEMENT PRINCIPLES AND STRATEGIES
Tacit knowledge can be distinguished from explicit Knowledge in three major
areas:
 Process of transferring knowledge
Explicit knowledge can be organised and effortlessly transferred, tacit knowledge is
spontaneous and unarticulated knowledge that cannot be communicated, understood without the
acquainting subject'. Unlike the transfer of explicit knowledge, the transfer of tacit knowledge
requires close interaction and the build-up of shared understanding and trust (Yang, Wang and Jin
2014).
 Acquisition and accumulation methodology
Explicit knowledge can be created through rational inference and learned by practical
understanding in the applicable framework. On the other hand, tacit information can only be learnt
through applied involvement in the applicable framework.
 Possible combination and methods of annexation
Explicit knowledge can be gathered at a particular place, kept in independent arrangements
and adopted without the involvement of the subject. Tacit knowledge on one side, is individual
circumstantial. It is distributive, and cannot simply be accumulated.
The role of stakeholder in decision making using the knowledge tacit knowledge.
Financial statistics is used by a variety of investors, this information therefore, wants to be
truthful to help, and to conform to legislation. Financial information has to follow a severe
auditing procedure. The figures of the financial data therefore, has to be correct, trustworthy, up-
to-date and comprehensible (Trianni, Cagno, and Farné ,2016.).

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FINANCIAL MANAGEMENT PRINCIPLES AND STRATEGIES
Different stakeholders have different needs from the organisation’s financial accounts
Company Managers – require the information to empower them to handle and run the business
proficiently.
Shareholders – will require the information to evaluate how successfully management are
carrying out the business, how much they can extract in dividends and how lucrative the business
is to invest in for long term (Sayce, et.al).
Trade contracts – trader or the supplier of the raw material on credit to the business, wants the
information to know organization credibility in making payment.
Finance Providers – such as banks who will need to identify that the company can have enough
money for the repayments of loans provided.
The Government – how much tax the company is owing to pay and also any taxation which the
establishment gathers on behalf of the administration (Adam Cobb, 2016).

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FINANCIAL MANAGEMENT PRINCIPLES AND STRATEGIES
Make or Buy Decision
When creating this decision a variety of investigation require to be considered comprising both
quantitative and qualitative foundations (Jami, and Walsh, 2014).
Martin (2015) has charted a variety of features to consider within this decision making procedure
(cost/benefit examination):
 Cost Budget factor
 Enhanced quality control
 competent suppliers
 production supply
 project strategy secrecy is essential to defend proprietary technology
 Minimum Expenses on transportation and warehousing
 Governmental, environmental, or societal reasons
 Productive use of surplus plant capability to support appropriation fixed overhead
Factors supporting purchase from outside
 Third party expertise in productivity, know-how and quality are more than that of the buyer
 Deficiency of expertise in –house production
 Lesser-volume requirements
 Budget aspects (costs fewer to buy the item)
 No need to plan a separate strategy for the item.
Costs for the make analysis
 Direct labour overhead
 Progressive inventory-carrying cost