Role of Management Accounting in Improving Organisational Performance

LFBM203 Assessment Part 2
project

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
SCENARIO – 1...............................................................................................................................3
Ratio Analysis..............................................................................................................................3
Sources of Finance.......................................................................................................................3
SCENARIO – 2...............................................................................................................................4
Costing.........................................................................................................................................4
Cost Volume Profit Analysis.......................................................................................................5
SCENARIO – 3...............................................................................................................................5
Cost of Capital.............................................................................................................................5
Investment Appraisal Methods....................................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
The improvement of the organisational performance depends upon various components
of the management accounting like ratio analysis, sources of finance, costing method, cost
volume profit analysis, cost of capital and investment appraisal methods. Thus, the below
prepared report explains what is the role of these components of the management accounting in
improvement of the performance of the organisation like benefits of ratio analysis and
appropriately suited sources of finance for the organisation.
MAIN BODY
SCENARIO – 1
Ratio Analysis
A quantitative study of the financial data prepared, presented and disclosed by the
management to arrive at a meaning relation between these elements of the financial data like
liquidity, solvency, turnover and profitability (Husna and Satria, 2019). Now, such ratio analysis
in the management accounting has various merits which can be discussed as below:
 It involves analysis of the trends thus allowing planning and forecasting of the performance
of the business which is very essential for the future prospects of the business.
 It also involves analysis of the previous trends thus allowing estimation of the budget of the
business on the basis of which the operations of the business will be carried out.
 It ensures that the operations or the business are being carried out efficiently and effectively
to get an idea about success of the operations of the business.
 Through such an analysis the users of the financial statements and information are equipped
with significant information to base their decisions on so that they can make properly
informed decisions and avoid facing losses and unnecessary failures.
 Through such an analysis, two or more than two firms can be compared with each other as
such measure of comparison is standard for all the businesses.
 The analysis also facilitates determination of liquidity as well as the long – term solvency of
the business to determine the performance of the business.
Sources of Finance
Finance means funds or money which every business organisation requires for starting or
to purchase new capital assets, launching of new goods or services, upgradation of the machinery
or running its operations. Therefore, the sources through which such funds or money can be