Approaches, Techniques, and Factors in Effective Decision Making

Financial management

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
Scenario A........................................................................................................................................3
1.Approaches, techniques and factors contributing in effective decision making. ...............3
2. Stakeholder management & managing conflicting objectives of the different group of
stakeholders............................................................................................................................5
3. Value of the MA techniques in controlling cost and in maximizing the shareholders value .6
4.Techniques for fraud detection and prevention and approaches for ethical decision making.
................................................................................................................................................7
5. Reflection...........................................................................................................................8
Scenario B........................................................................................................................................9
1. Financial ratios analysis of J Sainsbury PLC for the year 2020, 2019 & 2018..................9
2. Analysing investment appraisal techniques utilized in taking actions to maximize ROI 17
Recommendations to improve financial sustainability.........................................................18
3. Value of techniques..........................................................................................................18
4. Financial decision making in long term sustainability ....................................................19
CONCLUSION..............................................................................................................................20
REFERENCES..............................................................................................................................21

INTRODUCTION
Financial management is focused on the managing the financial resources of the business
organization with the objective of optimum utilizing it. It involves implementation of financial
management principles and techniques for effective utilization of resources. This report states
about the various techniques and factors which leads to improved decision and effective
management of the stakeholders in attaining the desired goals. It also covers the financial ratio
analysis of the Sainsbury PLC to gain an insight about the financial performance and position of
the business.
Scenario A
1.Approaches, techniques and factors contributing in effective decision making.
Different approaches for decision making
Knowledge Based Approac
Knowledge based approach uses a pre- determined criteria for measuring and ensuring
optimal outcome for the specific topic. This approach is highly useful in strategic and effective
decision making establishing reasoning and thought process behind every decision taken by the
management. Managers before taking any critical decisions are required to gather all the relevant
information and essential details for getting better understanding of the decision area and making
decisions that will give best outcome. This approach promotes open communication between
leaders and the employees. This approach is highly used in the organisation for making decisions
that have significant impact over the operations of business. The decisions are not taken simply
on beliefs or thoughts regarding particular topic but by making thorough analysis of all the
factors associated with the decisions.
Formal Approach
This is critical to the success of the organisation. This approach ensure that the decision
makers are having right information for making the decisions. Managers should be familiar with
the organisational strategies implemented. They should knowledge about the reasons due to
which projects are falling short. This approach follows a set structure for making decisions for
the business. It makes the company to make effective decisions analysing the decision areas
more adequately (Lusardiand Mitchell, 2017). In this approach decision are taken by the top
level executives and management team without involving lower level subordinates or staff. They
are required to follow the set instruction for achieving the goals of organisation.

Informal Approach
This approach uses the intuitive reasoning and is also subject to the cognitive biases. It is
the decision approach that do not uses and set structure for making decisions. This involves
making decisions on instant basis. This approach is followed in the organisation generally for
making the decisions which are required to be taken immediately in any of the situation. This
approach does not gives time to managers on deciding about various factors influencing the
decisions. Informal decisions are taken by the enterprise by involving employees and team
members for making more accurate decisions. Employees are involves as they are the people
who have more correct knowledge as deal with the operations more closely.
Make or Buy decisions
Make or buy decisions refers to act to make strategic choices between internal,
production of the items or to buy from external sources. Buy side decisions are known as
outsourcing. These decisions arise generally when the firm has developed part or product or is
significantly modified the product or part and is having issues with the current suppliers or
changing demand (Carvalho, Meier and Wang, 2016). These decisions are conducted over the
operational and strategic decisions. At strategic level includes analysis of future and current
environment. In these decisions it takes the decision which proves to be most beneficial for the
entity. These decisions are taken by analysing all the factors associated with the buying or
making the products or item.
Limiting Factor Analysis
There are different constraints that could affect the growth and sales maximisation
Along with taking decision management is also required to consider the factors that could affect
growth of the business and affects the maximisation of sales. These includes government
regulations which are required to be considered before taking any decisions as it has to comply
with all the rules and regulations. It has to analyse the market conditions regarding the products
its demand and supply (Taylor and Parsons, IP Reservoir LLC, 2018). Management has to
undertake competitor analysis of the decisions regarding the products or services.

2. Stakeholder management & managing conflicting objectives of the different group of
stakeholders.
Managing the stakeholders refers to the process through which an individual could
monitor, organize and improves the relationships with that of the stakeholders. It includes
systematically determining the stakeholders, assessing their expectations and needs, planning and
executing several tasks for engaging them in the management of the company. The conflict of
the objective among the different stakeholders could be managed through several ways that are
as follows-
Setting objectives for achieving the financial goals- It means as setting the different
goals as per the term in order to achieve the finance related goals in effective manner. Setting up
short, long and the medium term goals is counted as an important task towards becoming as
financially secure (Armour and et.al., 2016). Making an annual financial plan provides an entity
with new opportunities in formally reviewing the goals, reviewing progress and updating it in
timely manner. In case the company never set the goals prior to developing plan, the period of
planning provides an opportunity in formulating it so that the firm could perform within the set
target or financial footing. Adequate financial & the retirement planning begins with the setting
goals with an inclusion of short, long and medium term objectives. The main short period goal
involves setting the budget and starting with an emergency fund. The medium term objectives
involves key insurances, however long run goals require emphasizing on the retirement.
Ethical FM- It is essential for the financial managers in handling the large sum of an
organization's money. It is important to have the code of ethics in the finance for living up with
those principles each day. The role of an ethics in FM is to protect, balance and preserves the
interest of stakeholders. The standards that are found in the ethical code involves acting with
integrity & honesty, avoiding the conflict of an interest in the professional relationships and
avoiding appearance of such type of conflicts (Holynskyy, 2017). Facilitating the people with
objective, understandable and accurate information also acts as the ethical FM. Disclosing all
appropriate information whether it is negative or positive in complying with all the rules and the
regulation by governing the position of company provides an accurate picture to the users.
Wealth maximization- It means as the concept with regard to increasing value of the
business for the purpose of increasing value of shares that is held by their stockholders. This

concept need management team of an enterprise in consistently searching for highest or
maximum returns on the funds that are invested in business, however mitigating any kind of
attached risk relating to loss. This called for detailed assessment of cash flows in association with
of the prospective investment and constant attention towards strategic direction of an entity.
Delivering long term sustainable growth- It is crucial for the companies to embrace
expectations of the society as the part of their business strategies is rising. Increasing the reliance
on the sustainable issues by the business is seen as critical towards growing interconnectedness
& future business value (Finkler, Smith and Calabrese, 2018). Financial management helps the
company in promoting sustainable type of development and the business practices. Allocating
the capital budget for the sustainable issues enhance the competitive edge of business.
3. Value of the MA techniques in controlling cost and in maximizing the shareholders value
MA plays a vital role in facilitating the information about the management in relation to
the affairs of an entity and to stakeholders. It relates to provision of using relevant information
for the decision-making, cost control, planning and evaluation of performance. It is counted as
primary role of MA to advise and inform the management regarding the latest position of an
enterprise (Ghasemi and et.al., 2016). MA are been assigned with managing the cost elements of
product among the responsibilities and aligns the cost with efficiency so that goals can be
accomplished effectively.
Marginal costing- This technique is been for fixing the selling price, selecting the best
sales related mix, optimum use of the scarce resources, in taking buy or make decisions, rejection
or acceptance of the bulk order. This is mainly based on fixed, variable, contribution and the
cost.
Budgetary control- This tool helps in future financial requirement are arranged &
estimated in accordance to orderly basis. It is been used for controlling financial performances of
the business enterprise. The business activities are been directed in the desired direction and
provides a guideline based on which the task would be performed along with ensuring full
control over the cost so that large amount of profits can be gained.
Cost Accounting- It is the technique of MA that provides an information relating to the
cost data as per product, department, process and branch wise. Such cost data are been compared
with the pre-determined one which in turn helps in deciding reasons responsible for difference
resulted between different types of costs.