Financial Management: Approaches, Techniques, and Stakeholder Management

This study explores the range of approaches, factors, and techniques contributing to effective decision making in financial management. It also focuses on stakeholder management and the role of management accountants. The case study evaluates the data collected from AstraZeneca Company and discusses investment appraisal techniques and financial decision making for long-term sustainability.

Financial Management

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
SCENARIO A..................................................................................................................................1
Evaluating range of approaches, factors and techniques which contribute to effective decision
making within company..............................................................................................................1
Stakeholder management and the management of conflicting objectives of various stakeholder
groups..........................................................................................................................................3
Examining value of management accounting techniques in cost control and maximising
shareholder value........................................................................................................................3
Evaluating methods for fraud detection and prevention and appropriate approach to ethical
decision making..........................................................................................................................4
Reflection....................................................................................................................................5
SCENARIO B..................................................................................................................................6
Identifying and evaluating the data collected of AstraZeneca Company...................................6
Different type of investments appraisal techniques....................................................................8
Demonstrating the value of techniques for appropriate decision making...................................9
Evaluating how financial decision making helps in supporting long term sustainability.........10
Effective recommendations for how management accountant helps to improving financial
sustainability.............................................................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................13

INTRODUCTION
Financial management is considered to be as an appropriate mean which is very useful in
carrying out a plan, giving direction, controlling and effectively monitoring the various range of
financial activities to effectively utilize the funds of an enterprise (Mien and Thao, 2015, July). It
helps in managing the portfolio of the company and raising capital for effective functioning of
the organization. This study is very useful as it helps in effectively evaluating the various formal
and informal approaches which are effectively used to support decision making. Moreover, this
study also tends to focus on exploring the key financial management principles which has been
effectively used in order to support financial strategies. Subsequently, this study tends to focus
on evaluating the role of management accountants and also examine the use of accounting
control system. Moreover, this study is very significant as it helps in effectively evaluating
various set of ways which in turn are prominent for financial decision making and it also helps in
supporting sustainable performance.
AstraZeneca is considered to be as a multinational biopharmaceutical and pharmaceutical
organization which was founded on 6th April 1999. It is headquartered in Cambridge, England,
UK. It mainly deals in pharmaceutical products.
SCENARIO A
Evaluating range of approaches, factors and techniques which contribute to effective decision
making within company.
The financial decision making is one of the most prominent measure with the management
of the organisation and are responsible for taking appropriate decision associated with
stakeholder’s equity, liabilities of the company and insurance of bonds (Martin, 2016). Decision
making within the financial management is mainly related with the financial details, asset
management and investment in order to attain higher degree of goals and objectives of the
company.
Formal Decision making is associated with appropriate structure, process and system.
Formal decision a very useful for the organisation because it outside increase in the overall
efficiency and attaining economics of scale (Zietlow and et.al., 2018). On the contrary, informal
decision organisational structure where there is no chain of command. Informal decision-making
is based on unwritten rules and it’s taken by considering relationship with the employers and
employees within organisation.
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Investment decision: Investment decision is mainly associated with where the capital of
the company must be invested in order to gain higher degree of profitability. It means that the
investment should be made in those assets and projects where the returns generated are higher
when compared with acceptable returns.
Financial decision: Financial decision is another crucial decision which has been made by
the financial management of the organisation which relates to the financing mix of the company
(Petty and et.al., 2015). It is my mainly associated with allocation of funds and borrowing which
helps in maximising the value of the investment which has been made by the organisation.
Dividend decision: Dividend decision is another decision which has been made by the
financial manager of the company which is mainly associated with the pay-out to the
shareholders. It is very useful in determining quantum of profits. Dividend decision is very
useful because the Retention of property and distribution policies of the organisation tends to
have significant effect on the wealth of the company.
Factors associated with decision making are:
There are range of significant factors which eventually contributes to the decision making
process which mainly includes range of cognitive bias, past experience, policies, laws,
perception, social factors, competitive factors, sunk outcomes, environmental factors,
behavioural factors, etc. which in turn largely results in high degree of decision making.
Key techniques associated with decision-making are:
The key techniques associated with decision-making within the organisation or
brainstorming, marginal analysis, cost benefit analysis, financial analysis, ratio analysis,
financial analysis, Pareto analysis and Delphi technique.
Brainstorming
Brainstorming decision making technique is very useful because it is designed to improve
the range of ideas which are highly available for the organisation to explore (Renz, 2016). It is
very useful in generating new ideas in order to solve range of problems.
Cost benefit analysis
Cost benefit analysis is very useful for the decision making process because it is one of
the most systematic approach which is very useful in evaluating the strength and weakness of
alternative set of ideas in order to provide the best possible approach to attain better set of results
and outcomes for the company.
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Delphi technique
Delphi technique is another method of decision making which is useful for effectively
surveying range of experts and panels through a round of responses and questionnaire.
Stakeholder management and the management of conflicting objectives of various stakeholder
groups.
Stakeholder management is one of the most prominent approach because it is useful in
evaluating, monitoring, organising and also improving the relationship between the various
stakeholders who are present within the organisation (Sofat, and Hiro, 2015). Stakeholder
management is useful to identify and analyse the needs and expectations of the stakeholders and
also implement appropriate task for the welfare of stakeholders. A stakeholder app management
is very useful in assessing the requirements of the various stakeholders of the company in order
to keep them updated and satisfied.
The key stakeholders within the organisation are employees, suppliers, consumers,
government, communities, competitors, etc. who in turn are considered to be the key
stakeholders of an organisation. Different stakeholders within the group tends to have different
objectives. The interest of different and very stakeholder group with the organisation tends to
conflict because different stakeholders have different objectives within the organisation (Sofat,
and Hiro, 2015). Owners are considered to be the key stakeholders of the organisation in order to
keep the business running for the long period of time in order to gain higher profitability and
gain better returns. The key objective of the employee is to ensure that the business is growing
and performing substantially where in order to move upward for high career achievement within
the organisation. Customers want quality products and services from the company which helps in
creating high degree of customer satisfaction. The key objective of the government stakeholders
within the organisation is to collect tax from the company. Community stakeholders key
objective is that company is working in a sustainable manner which results in high degree of
advantage for the society.
Examining value of management accounting techniques in cost control and maximising
shareholder value.
Management accounting techniques are considered to be highly prominent because it is
very prominent for measuring and effectively increasing the profit margins of the company.
However, it is also very useful because it helps in lowering the operational expenses.
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Management accounting techniques is very prominent as it helps the financial management of
the company because it helps in controlling cost and maximizing shareholders profit. It is very
prominent as it helps the management of the organization to effectively focus on expanding the
operations of the business (Atmadja, and Saputra, 2018). It can be done by effectively analysing
the various financial statements of the organization. It mainly includes income statement, balance
sheet, statement of retained earnings and cash flow statements.
Management accounting technique associated with the maximization of the shareholder
value and cost control can be effectively done with the help of budgetary control tool. However,
budgetary tool is useful because it helps in setting the budget and effectively keeping track of all
the costs and expenses. It helps in providing clear picture related with the income and expenses
of the organization. It helps in setting optimum level of budget for the particular period. This
way it is very useful attaining economies of scale, controlling cost and maximizing shareholders
profit. Budgetary control is very useful because it helps in determining the cause of variance
which eventually helps in taking appropriate corrective action for the future (Tools and
techniques of Management Accounting, 2020). Financial planning and financial statement
analysis is one of the most prominent approach because it helps in effectively maximizing the
value of the shareholder by taking appropriate set of action. Sound financial planning and
complete analysis of the comparative financial statements are considered to be of utmost
importance because it eventually helps in maximizing the value of shareholders.
Evaluating methods for fraud detection and prevention and appropriate approach to ethical
decision making.
Fraud detection is considered to be one of the set of activities which has been undertaken
in order to prevent property, assets and money which are being obtained due to false pretences.
Fraud is considered to be unlawful activity which has been carried out by individuals associated
with the organisation (Brusca, Gómez‐villegas, and Montesinos, 2016). Fraud tends to largely
influence the goodwill and productivity of the company by carrying out illegal activities within
the business operation.
Auditing is considered to be one of the most prominent approach which helps in the
detection of the fraud while carrying out business operation. The auditor tends to check all the
financial activities and financial statements of the company in order to ensure the business has
been carrying it operations in an effective and efficient manner.
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Data analysis technique is one of the most prominent approach which helps in detecting fraud
within the organisation. Data mining, segmenting of the data, data clustering and automatically
finding out various factors which are mainly associated with the fraud. This is an expert system
which has in coding expertise in evaluating and detecting fraud within the organisation.
Pattern recognition is also one of the most prominent approach which helps in detecting fraud
by clustering and finding classes of suspicious behaviour associated with operational activities.
Ethical decision making is mainly associated with the procedure to choose and evaluate
various set of alternatives which are consistent and comply with various set of ethical principles
(Olamide, Uwalomwa and Ranti, 2015). It is very useful in eliminating and perceiving unethical
options which has been carried out within the organisation.
Utilitarian approach is one of the most effective approach for ethical decision-making because
it helps in assessing the actions of the individuals within the organisation. It also strives to attain
greatest good for the welfare of the company.
Common good approach is one of the most prominent ethical decision-making approach which
helps the individual taking those actions which are beneficial for the community as well as for
the organisation.
Reflection.
It was very exciting and interesting for me to gain wide degree of knowledge on key topics
associated with the financial management. This study was very beneficial as it has helped me
gain wider set of perspective on the the approaches of decision making. I have examined that,
there are two approaches of decision making which includes formal decision making and
informal decision making. I have evaluated that, formal decision making is based on structure,
process and system and informal decision making is based on unwritten rules. It was very
exciting for me to evaluate that, there are three prominent decision in financial management
which includes investment decision, financial decision and dividend decision. I have also
examined the key factors such as cognitive bias, laws, perception, past experience, policies,
social factors, environmental factors, behavioural factors, competitive factors, sunk outcomes,
etc. which in turn largely influence decision making. This study has helped me gain wide degree
of knowledge which helped me understand that, cost benefit analysis, brainstorming and Delphi
techniques are key techniques for effective decision making. Moreover, this study has also
helped me in understanding the importance of stakeholder management within the organization.
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Stakeholder management is useful to identify and analyse the needs and expectations of the
stakeholders. It was very interesting for me to analyse the conflicting objectives of various
stakeholder groups such as employees, suppliers, consumers, government, communities,
competitors, etc. within the organization. I understood that, each stakeholders has different set of
objectives which results in conflicting issues. Furthermore, I have analysed that budgetary
control tool is one of the most prominent management accounting approach because it helps in
effectively controlling the cost and attaining economies of scale. I have also understood that,
financial planning and financial statement analysis is an effective approach because it helps in
effectively maximizing the value of the shareholders. I was very excited to identify the methods
for fraud detection. I have analysed that, auditing, data analysis technique and pattern recognition
are key approaches to detect fraud within organization. I have also understood that, Utilitarian
approach and common good approach are key prominent ethical decision making approach
which helps in better attainment of goals for organization.
SCENARIO B
Identifying and evaluating the data collected of AstraZeneca Company.
Particulars Formula 2019 2018
Liquidity ratio
Current ratio
Current assets /
current liabilities
1.84 1.79
Quick Ratio
(Current Assets -
Inventory) /
Current
Liabilities
1.30 1.10
PROFITABILITY
RATIOS
Operating Profit
Margin (%)
Operating profit/
gross revenue
9.79 8.10
Net Profit Margin
(%)
Operating
Income/ Net
Sales
7.47 4.53
Gross Profit Total Sales – 7.74 5.52
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Margin (%) COGS/Total
Sales
Efficiency Ratios
Asset turnover
ratio
Sales / Net
assets
2.66 2.43
Inventory
turnover ratio Sales / Inventory
6.17 5.06
Debtors Turnover
Ratio
Net credit sales/
Average account
receivable
10.84 11.70
Current ratio: The current ratio of the AstraZeneca Company in the year 2018 is 1.79 and in the
year 2019 is 1.84. The current ratio of the company has increased which states that, the
AstraZeneca Company has increased its capacity to meet the company’s short term obligations.
Quick Ratio: The quick ratio of the AstraZeneca Company in the year 2018 is 1.79 and in the
year 2019 is 1.84. The quick ratio of the company has increased which states that, the
AstraZeneca Company is more financially secure in converting the receivables into cash.
Operating Profit Margin: The Operating Profit Margin of the AstraZeneca Company in the year
2018 was 8.10 and in the year 2019 is 9.79. The Operating Profit Margin of the company has
increased which states that, the AstraZeneca Company has
Net Profit Margin: The Net Profit Margin of the AstraZeneca Company in the year 2018 was
4.53 and in the year 2019 is 7.47. The Net Profit Margin of the company has increased which
states that, the AstraZeneca Company has
Gross Profit Margin: The Gross Profit Margin of the AstraZeneca Company in the year 2018
was 5.52 and in the year 2019 is 7.74. The Gross Profit Margin of the company has increased
which states that, the AstraZeneca Company has
Asset turnover ratio: The asset turnover ratio of the AstraZeneca Company in the year 2018 was
2.43 and in the year 2019 is 2.66. The asset turnover ratio of the company has increased which
states that, the AstraZeneca Company has improved their efficiency to effectively control the
overall cost of the business.
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Inventory turnover ratio: The inventory turnover ratio of the AstraZeneca Company in the year
2018 was 5.06 and in the year 2019 is 6.17. The inventory turnover ratio of the company has
increased which states that, there is a high degree of demand for the products of the AstraZeneca
Company in the market.
Debtors Turnover Ratio: The debtors Turnover Ratio of the AstraZeneca Company in the year
2018 was 11.70 and in the year 2019 is 10.84. The debtors Turnover Ratio of the company has
decreased which states that, the AstraZeneca Company has poor collection process and in turn
affects the overall productivity of the company.
Different type of investments appraisal techniques
Computation of NPV
Year Cash inflows PV factor @ 10% Discounted cash inflows
1 50000 0.909 45454.54
2 64000 0.826 52893
3 53000 0.751 39820
4 67000 0.683 45762
5 71000 0.621 44085
Total
discounted
cash inflow
228014
Initial
investment
150000
NPV (Total
discounted
cash inflows -
initial
investment)
78014
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Computation of IRR
Year Cash inflows
0 -150000
1 50000
2 64000
3 53000
4 67000
5 71000
Internal rate of return (IRR) 28%
Computation of Average rate of return
Year Cash inflows
1 50000
2 64000
3 53000
4 67000
5 71000
Average profit or cash inflow 61000
Average initial investment 150000
average initial investment
[(initial investment + scrap value)
/ 2]
ARR 41%
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Computation of Payback period
Year Cash inflows Cumulative cash inflows
1 50000 50000
2 64000 114000
3 53000 167000
4 67000 234000
5 71000 305000
Initial investment 150000
Payback period 2
0.6
Payback period 2 year and 6 months
Investment appraisal techniques are generally used by the organization and the expert for
checking the feasibility of different capital expenditure or project. These project generally used
to demand the good amount of the investment to be made as a result all the organization used to
look for minimum cost project. Different appraisal techniques are as NPV, IRR, Payback period
and ARR.
Net present Value
Net present value technique in the organization used to help the company in
understanding the profitability of the proposed investment which organization is looking to made
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(Alam, 2018). This technique is generally used in the organization to find out the profitability of
investment by looking at the current as well as future cash flow which will be generated by the
project for the organization. If NPV of the project is positive project is consider to be valuable
for the organization, at the same time if the NPV is the negative project is not consider to be that
valuable for the organization.
This method in the organization generally involves using discounting factor under the
time value which is not used in any of the other technique. Also, in this project it is difficult to
find out the discounting factor related to the project in the organization.
Internal rate of the return
This is the technique which is used by the organization under capital budgeting technique to
proposed investment. IRR in the organization used to make the discounting rate which used to
makes the present value of cash flow to generate from project (Barr and McClellan, 2018).
This technique in very easy to understand in the organization. Also this technique is
consider to be time value money. At the same it has been also analysed that this technique used
to require a good amount of the efforts made by employee in an organization.
Payback Period
It is another appraisal technique in which viability of the project is checked in the organization. It
generally used to define the time period after which the organization will able to cover the cost
of the investment done in the organization.
This method also used to not consider the time value of money concept in measuring the
payback period. At the same time this technique used to not guarantee the success for the
organization.
Demonstrating the value of techniques for appropriate decision making.
Financial management is very useful to focus on evaluating the debt, ratios and equities of
the company.
Cash flow statements: Cash flow statement is one of the most prominent financial statement
which focus on providing aggregate set of data associated with the cash revenues and cash
expenditure of the company for the particular period. Cash flow statement comprises of
investing activities, operating activities are pronouncing activities. It is very useful in evaluating
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the cash inflows and cash outflows and also investment during a particular period. Cash flow
statement is very useful in decision making because it informs the financial management of the
organisation about the cash position of the company (Ogiela, 2015). It is very useful in
determining whether the organisation has enough amount of cash to carry out their business
activities with utmost degree of accuracy. This is very useful for the decision-making because it
has the financial manager to gain knowledge related with company’s liquidity, anticipate future
deficits and various other set of key information for decision making process.
Break even analysis: Break even analysis is one of the most effective financial tool because it
helps in determining at which phase the product of the company will be profitable. Break even
analysis is one of the valuable technique for decision making. It is very useful in identifying the
total amount of sales the business requires in order to earn optimum amount of profit. It is also
very useful in analysing excessive fixed cost within the organisation process.
Income statements: Income statement is enough appropriate financial tool which helps in
evaluating how profitable the organisation is for the particular period. It is very useful in
examining the revenue, income and expenses of the company during a particular period (Brusca,
Gómez‐villegas, and Montesinos, 2016). It is one of the most prominent tool which helps in
decision-making because it helps in comparing the performance of the company with the
companies of similar size. It is very useful in controlling the operating expenses and COGS of
the company in order to keep the profitability of the company intact.
Evaluating how financial decision making helps in supporting long term sustainability.
The financial decision making is a useful measure where management of the organisation
are responsible for taking appropriate decision which are related with stakeholder’s equity,
liabilities of the company and insurance of bonds. The financial management of the organization
in turn tends to use the various financial statements in order to increase the profitability of the
business. Investing, financing and operational decision within the organization in turn eventually
leads to high degree of operational efficiency and productivity for the business (Olamide,
Uwalomwa and Ranti, 2015). Financial decision making plays one of the crucial role because it
helps in attaining the high degree of sustainability for the business. It is very prominent in
effectively carrying out all the business operations with high degree of accuracy and efficiency.
It is useful in reducing operational flaws within the business and leads to high degree identifying
the cause of the variance. It is also very useful in appropriate decision making and attainment of
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economies of scale. However, financial decision making is very useful in supporting the long
term growth and sustainability of the AstraZeneca Company. It is also very useful in analysing
how the market works in order to increase the profitability of the business. It is very useful in
effectively analysing the risk which leads to higher growth and sustainability of the business.
Effective recommendations for how management accountant helps to improving financial
sustainability.
For improving the financial stability of the company variety of different type of the technique
which can be used by the Management accounting technique. Some of them are as follows:
Inventory Management: It is the technique which can be used by the organization for managing
the inventory operation of the organization. Inventory management technique help the business
in keeping control over the different inventory of the organization (Candee and et.al., 2018). The
modern technique of inventory management in the organization used to keep the complete
information about all the inventory of the organization such as assets, raw material and different
work in progress product. This eventually will help the organization to place variety of the new
order in the organization on the timely basis.
Budgeting
Budgeting is an effective tool as it helps in setting the budget and also keeping track of
all the income and expenses. It is very useful attaining economies of scale, controlling cost and
maximizing shareholders profit. It is an effective approach to forecast the spending of the
business for the specific time span. Budgeting is very useful because it helps in determining the
cause of variance which eventually helps in taking appropriate corrective action for the future.
Cost accounting
It is a significant management accounting technique as it is very useful in evaluating the cost
incurred on the operations of the business. It also helps in assessing the cost which has been
effectively carried out within the business (Zietlow and et.al., 2018). It is very useful in
examining the effective variable and optimum cost associated with the carrying out the business
operations. It is an appropriate approach as it helps the management of the organization in order
to produce the products at the lowest possible cost. It is very useful to attain the profitability of
the company in order to achieve long term sustainability.
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CONCLUSION
From the study it has been summarized that, there are two approaches of decision making
which includes formal decision making and informal decision making. Formal decision making
is based on structure, process and system and informal decision making is based on unwritten
rules. The key factors which in turn largely influence decision making are cognitive bias, laws,
perception, past experience, policies, social factors, environmental factors, behavioural factors,
competitive factors, sunk outcomes, etc. The key techniques linked with decision-making within
the organisation are brainstorming, cost benefit analysis, financial analysis, ratio analysis and
Delphi technique. It has been concluded that, stakeholder management is useful in analysing the
needs and expectations of the stakeholders. Each varied stakeholders have conflicting objectives
in organization. This study identifies key financial ratios of the company. Investment appraisal
techniques is used by the company and the expert for checking the feasibility of different capital
expenditure. It is classified into NPV, IRR, Payback period and ARR. Moreover, cash flow
statement, break even analysis and income statement are key techniques for appropriate decision
making. Inventory management, cost accounting and budgeting are effective recommendations
for management accountant to improve the financial sustainability of business.
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Online
Tools and techniques of Management Accounting. 2020. [ONLINE]. Available through<
https://accountlearning.com/tools-and-techniques-of-management-accounting/ >
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