Managerial Accounting Report

This report analyzes the financial performance of Triton Corporation, a company with six operating divisions. It examines the profitability and financial returns of each division, identifies low value-added items, and critically evaluates the arguments for selling two divisions. The report also explores factors influencing payback periods, the importance of reducing gearing ratios, and the implementation of a decentralization program. Ethical issues in management accounting are also discussed.

MANAGERIAL
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
A. Framing report to managing direct....................................................................................1
(a) Identifying each product divisions....................................................................................1
(b) Expressing low value added items by reflecting financial returns and profitability position
................................................................................................................................................4
B. Critically implicating arguments which are based on selling of two divisions.................5
(C)...........................................................................................................................................7
(i) Identification and analysis of factors which helps in influencing longer pay back period 7
(ii) Analysis of relative importance of strategic aim in reducing gearing ratio to continue
investing in modernisation programme..................................................................................8
D Ascertaining the decentralisation programme on which decision making is pushed down9
2. Critically analysing management accounting functions and ethical issues......................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Managerial accounting is considered as very important aspect of every organization. It
should be followed in very systematic manner as it has direct relationship with profit margin and
financial. The overall report is classified in four parts which are discussing various elements of
managerial accounting. It is discussing about specific product divisions which produces very low
value added items and has a requirement of huge working capital with critical analysis of selling
these divisions. It has also discussed about gearing ratio of all the six divisions of Triton
corporation with its specific analysis. The present report has determined factors which are
influencing payback period and critical analysis of decreasing gearing and investment in
modification. It has also given major recommendations on basis of relying on financial ratio
analysis and different budgetary control for coordinating and controlling group. All the ethical
issues are elaborated in Triton Corporation accounting function and for expansion in overseas.
There is presence of method for framing strategic decision in context of long term viability of
both bathroom and pipes division. The plans such as decentralisation has to be imposed in this
report.
A. Framing report to managing direct
(a) Identifying each product divisions
The assessment of various divisions in light has been increasing day by day. As the
specific organization which has drafted six operating divisions such as Floor boards, electrical
products, industrial services, Pipes, bathroom services and car accessories. Triton Corporation
has generated sales in large volume in last year of electrical products and then Industrial services.
The cost of sales of floor board is in very huge proportion by comparing to other 5 divisions
margin. The most of salary consumption was performed by industrial services but in context of
profitability is also in good position (Chen, 2012). The pipe division is consuming too much
salary but not reflecting in terms of profit which is least among all divisions.
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40.00%
27.00% 30.00%
25.00%
8.00%
3.00%
Illustration 1: Market share
Electrical Products
Floor Boards
Car Accessories
Industrial Services
Bathroom Services
Pipes
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5.500
5.512
17.544 23.739
7.143
1.667
Illustration 2: Operating Profit margin
Electrical products
Floor boards
Car accessories
Industrial services
Bathroom Accessories
Pipes
 Electrical products: 40% is market share of electrical products in the period of recession
as it is one of the basic necessity in every household and organization as well. It has
interrelationship with sales which is in huge proportion among all divisions but its
material cost is also simultaneously higher. By observing profit contribution of Triton
corporation it is represented as 5.5 after writing off all payments of variable cost like
salaries and wages, material etc. it is not indicated as very efficient operating margin as
Triton Corporation is not having capability for controlling cost of this specific division.
There is a huge requirement of working capital.
 Floor Boards: Among all six divisions, its market share is of 27% which has absence of
capability for contributing in operating profit due to high material cost and high salaries.
Triton corporation is not controlling its variable cost ion this specific division as for
modifying it properly there is a requirement of huge working capital.
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 Car accessories: As per this division, sales are not at up-to level but in context of its
variable cost like material cost is consuming very less amount, salaries in very systematic
manner so Triton Corporation has ability to achieve very huge proportion that is 17.54
which is not highest but gains second position in terms of operating profit and market
share as well.
 Industrial services: In the aspect of operating profit margin, it is leading division. It had
gained this position by maintaining its sales as it had not controlled its variable cost. This
can be refereed as one of strategy for gaining profit from its operations (Weygandt,
Kimmel and Kieso, 2015). The proportion of sales and variable cost is not matching as it
has huge spread or variations so it is not imposing huge market share but it has gained
maximum profit from its operation among all six divisions of 23.74%.
 Bathroom accessories: This specific duration has very less contribution in aspect of
sales but in average manner Triton Corporation had controlled its variable cost such as
low salaries and wages which has also imposed very less market share but in context of
operating profit it is not at worse position such as floor boards and electrical product. It is
generating profit from its operation of 7.14%.
 Pipes: This division is not even capable to generate sales then operating profit and
market share is not possible also in good position. The sales are least as 6 million and in
turn its variable cost is 5.9. So it can be clearly viewed that Triton Corporation is not able
to handle this division in very efficient manner as it has a requirement for specific
modification which can improve its stability in this division such as need of working
capital.
(b) Expressing low value added items by reflecting financial returns and profitability position
The division of Industrial services has the best position in context of profitability and
financial returns. It has gained huge profit with operation in a portfolio of Triton corporation of
23.74% which is followed up by car accessories and then bathroom services (Nitzl and Chin,
2017). There is a requirement of tracking sales, operation along with its variable cost. The low
value added services can be evaluated as per operating profit margin are mentioned below:
1. 1.67 operating margin of pipes.
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2. 5.5 operating margin of electrical products.
3. 5.5 operating margin of floor boards.
There is a huge requirement of working capital with perspective of pipes and measure
should be undertaken for controlling cost. Triton Corporation must be able to keep a proper track
on material cost of electrical products as it has direct relationship to margin. It has incorporated
with huge sale but it left behind due to poor control of variable cost. The accessories of bathroom
were at average position so for improving sales they must be having capability for tracing its
variable cost along with its operations (Butler and Ghosh, 2015. It is considered as very essential
and vital for each household and organization as well. They should use very effective tools for
promoting and satisfying existing customer and for a new segment as well.
B. Critically implicating arguments which are based on selling of two divisions
Improving the long term viabilities of firm which in turn desired of making the suitable
changes in the operational practices. Therefore, in relation with making the suitable changes in
the operational activities as well as making satisfactory rise in the capital structure of firm which
required to sale the bathroom accessories and Pipes (Weygandt, Kimmel and Kieso, 2015).
Therefore, the decision made by professionals in relation with selling off these divisions which
will be profitable and helpful as per meeting requirements of Triton corporation. However,
below listed table is consisted of all the relevant information regarding operational managements
of the firm.
By considering the profitability retained by both the division in business on which
Accessories are comparatively bringing the more satisfactory returns to business. There has been
sale of 7 million while Pipes made the sales revenue of 6 million (Epure, 2016). Thus, on which
the costs of various operations has been deducted which brings the outcomes as variable costs in
Accessories are 6.5 million while in pipes it was 5.9 million. Thus, in relation with such
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outcomes, it can be said that accessories are having comparatively low costs as compared with
pipes. The proportionate differences in both the costs derived information that pipes are
comparatively non profitable and helpful for the business in terms of meeting the satisfactory
level of revenue generation. Moreover, here operating profit of accessories is 0.5 million while
pipes reflect 0.1 million of profitability. In accordance with measuring the OP margin,
accessories have 7.14% while pipes have 1.67%. Considering such outcomes, it can be said that
accessories will be beneficial in bringing satisfactory gains over the operational activities while
pipes are comparatively less profitable.
By summing up the outcomes, it can be said that selling accessories will bring more
suitable outcomes to firm as compared with pipes as it reflects appropriate revenue and gain to
business. The market shares of these divisions among which accessories have 8% and Pipes are
on 3%. Thus, in relation with such outcomes, it can be said that there will be suitable gains and
operational practices which in turn will be adequate and helpful in terms of meeting the financial
goals in required time period (Nitzl and Chin, 2017). To enhance the long term viabilities, the
firm is required to make satisfactory changes in operational functioning. As per addressing the
salaries payable to the employees enrolled in these divisions on which accessories as 1 million of
salaries to workers while pipes has 2 million wage charges. Thus, in consideration with such
outcomes, it can be said that there is need to make reduction in the costs incurred in pipes
division.
Moreover, as per ascertaining the profitability of both the divisions and sales made by
them, it can be said that there is need to have suitable changes in the operational practices as well
as management of operations. Analysing the strategic plans which will be beneficial in relation
with generating the appropriate gains and making profitable return over the operational practices.
Strategies are comprised with improving the operational practices as well as making the
alternative solution to reduce costs incurred in such division. Building a suitable environment
and making necessary changes in the operational practices which will assistive as per meeting
the financial goals in the right time. It will be effective in terms of improving the market share in
both segmentations (Weygandt, Kimmel and Kieso, 2015). Thus, there will be profitable gains
and revenue generation as per balancing the outcomes and meeting suitable operational needs.
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(C)
(i) Identification and analysis of factors which helps in influencing longer pay back period
There are various factors that can be explored and analysed with respect to longer payback
period. Some of them are mentioned below:
Downward trend of sales: There is greater impact of sales on assessing that what will be
the payback period of particular asset. Overall trend of sales help in determining that how much
amount has been generated by the business within specific period. It tends to reflect the duration
within which overall earnings can be generated by the company (Masood and Ashraf, 2012). Due
to decreased sales of the company, it can take longer time to recover the money back that has
actually been invested in a particular asset.
Lack of usage of equipment purchased: In case of not being able to gather adequate
amount of revenues, or which was expected out of it, in the specific period, then in that case,
management may have to increase the duration being fixed as pay back period (Butler and
Ghosh, 2015). There are chances that company may not be using a particular equipment, the way
it was planned by the management. This may also affect total cash outflow out of the equipment.
Riskiness of finances chosen: based on overall risk involved in gathering the ownership
of a particular asset helps in deciding that whether it will be able to generate adequate amount of
revenues or not. It is significant that short term financing equipment are riskier in comparison to
that of long term. Hence, if the payback period is relatively short, then in that case, there are
chances that organization may not be able to generate profits and thereby increasing overall
payback period attached to it as well (Amba, 2014).
Company experiencing losses: It the company is involved in experiencing losses, then in
that case, there are chances that it may not be able to recover the money invested in a particular
asset back, in the defined time. It can lead to enhancement of overall period required to generate
the cash which was actually invested by it in particular asset. Hence, loss plays an important role
in defining whether it will be fruitful to invest in a particular asset or not.
Ineffective Manager’s decisions as well as operations: There are higher chances of this
factor to take place when it comes to ineffective organizing of asset leading exceeded pay back
period. Ineffective decision-making aspects of the management ultimately affecting overall
operations of the business. Further, there can be impact of wrong type of asset being chosen or
not been able to derive adequate cash out of asset due to its wrong placement in the company
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(Buigut and Kibet, 2013). Hence, it can be stated that due to ineffective output generated out of
the asset, it automatically decreases pay back period of the asset.
(ii) Analysis of relative importance of strategic aim in reducing gearing ratio to continue
investing in modernisation programme
When an organization tend to have ha gearing ratio of more than 50%, then it is generally
to be called as “highly geared.” Gearing ratio have strong focus on overall capital structure that
has been adopted by the organization. It helps in identifying the proportion of finance that is
provided by debt relative to the finance that has been provided in the form of equity. It also helps
in defining liquidity position of the company. It also has strong focus upon long term financial
stability of the business as well. It plays substantial role in deciding that what proportion of asset
have actually been invested ion a business that has been financed with the help of long term
borrowings (Chen, 2012).
Theories have stated that a high level of long term borrowings can be quite riskier to the
business, since, the payment of interest and repayment of debt can not be an optional aspect as
that in the case of dividend. The time duration of issuance of debt is longer in comparison to that
of equity. Hence, it also increases overall payback period that is required to be kept for debt as
well, affecting long term financial aspects of the company
However, gearing can be stated as a financially sound aspect of overall capital structure of
the business if the company has been involved in strong and predictable cash flows. It increases
overall financial risk of the company, thereby affecting strategic aim and objectives of the
company. Even if the company is involved in generation of lower profits, it has to pay off high
interest rates every year, until it has paid off all the debt generated (Amba, 2014). In terms of
large amount of long term debt, there are higher chances that the organization become more
susceptible to loan defaults and bankruptcy. It also hinders various plans of organization, such
as, expansion, relocation, etc. hence, it can be stated that it can affect overall aim and objectives
of the entity by hindering its normal business processes.
A high gearing ratio represents high proportion of debt to equity where as low gearing
ration reflects the opposite. Sit can be stated that capital that is generated from creditors is rather
riskier in comparison to that of other methods. It acts as a fixed liability on entity, where, despite
of generation of losses or low profits, owners have to pay back to the creditors. It affects overall
functioning of the company, as it can go into debt due to its accumulation year by year, at the
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time of losses. It may also result in being a major cause of company’s liquidation aspects
(Gearing in Relation to Financial Risk, 2016).
Hence, it becomes important for the management to develop a strategy that can help in
ensuring that what gearing ratio will actually be maintained by the company. It helps in
fulfilment of aim and objectives being framed by the company, otherwise it becomes difficult to
come up with adequate profits for it.
D Ascertaining the decentralisation programme on which decision making is pushed down
Initiating a decentralisation program which will be helpful as per balancing and managing
the operational activities of the firm. Thus, in relation with such practices and the outcomes
derived from such operations, it can be said that there is need to have appropriate operational
control and implication of techniques to resolve such issues. In terms of bringing the financial
stability and balancing capital structure of Triton Corporation, it can be said that there is need to
have satisfactory budgeting system. Analysing financial positions and health of business ratio
analysis will be very effective in relation with improving efficiencies and managing the
operational cost. Moreover, to justify the profitability, liquidity and efficiency of business, there
is need to have financial analysis.
1. Advising a managing director
Considering the operational activities of Triton Corporation, it can be said that
implication of budgetary system and financial analysis will be helpful in deciding the financial
strategies for business. Therefore, there can be effective development of various operations
which will be indicative and helpful as per developing the suitable working environment of
business. Similarly, in relation with the budgetary controlling system, it can be said that the
budgets are prepared for making balanced financial operations which will be effective and
helpful as per raising up the financial health (Weygandt, Kimmel and Kieso, 2015). Setting a
limit of expenditures in the operations which in turn will be useful and adequate as per reaching
the operational goals in the right time. It encourages the managerial professionals in planning
and administrating the operational activities of firm in relation with making suitable changes in
operations.
There are various budgeting methods and techniques which can be used by Triton
Corporation. Operating the business activities will be helpful as per meeting the targeted goals in
the right time. It ascertains the efficiency of firm in making financial operational efforts in the
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work. Estimated expenses will be beneficial as per reducing the costs and meeting the goals. It
will bring appropriate execution of operations such as managing the financial resources and
developing coordination among workforce. Thus, the productive efforts made by employees will
improve efficiency of firm as well as the better allocation of capital funds in industrial
operations. Thus, monitoring financial transactions will be appropriate as per making suitable
changes in the operational performance of firm.
Liquidity of Triton Corporation:
Basis Formula Details Ratios
Current ratio Current assets 35 1.75:1
Current Liabilities 20
Interpretation: By considering the results of Triton Corporation on the basis of its
current ration which represent the short term solvency of business. Thus, current assets of firm
was 35 and liabilities was 20 on which the ratios have been derived as 1.75:1. The idol ratio of
Current ratios is 2:1 on which it can be said that the firm will have appropriate capital structure
which in turn will be fruitful and beneficial as per meeting the operational gains.
Solvency ratio of Triton Corporation:
Basis Formula Details Ratios
Debt-Equity ratio Loan 48 2.18
Shareholder's equity 22
Interpretation: In consideration with the solvency ration which have been measured
through analysing the Deb-Equity ratio. It will be helpful in bringing the information relevant
with the long term solvency of firm. Thus, to analyse the outcomes on which elements will be
considered such as loan and Shareholder's equity. Loan amounted to 48 while a shareholder's
equity is to be considered as 22 which brings the suitable outcomes as 2.18. Thus, in relation
with such outcomes it can be said that the firm is capable of meeting long term solvency.
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2. Critically analysing management accounting functions and ethical issues
Management accounting is the most important and helpful techniques which will be
appropriate as per balancing the operational activities as well as managing the internal
operational activities of the firm. Internal operations of firm will have appropriate execution and
management that will be useful and effective as per analysing the costs and monitoring business
operations. It consists of preparing various reports such as budgets, costs sheets, accounts of
various transactional activities etc. Thus, such reporting required proper administration which
will be effective as per analysing actual needs (Budgetary control, 2018). It provokes managerial
professionals in decision making as well as managing operational expenses of firm.
Considering the ethical requirements of management accounting techniques is that it
requires proper execution and management of operations as well as preparation of proper reports.
It will be informative to professionals in terms of analysing the requirements and making suitable
analysis over business operations. Moreover, it will bound managerial professionals in decision
making as well as analysing the requirement of firm in due period.
CONCLUSION
On the basis of above report it can be said that managements of operational activities as
well as identification of business needs are the prime factors which are to be considered by
professionals. Triton Corporation has various range of products which are intended to be sold out
for making effective analysis over the market and making suitable gains to business. Moreover,
as per analysing the operational activities of industries in various divisions it can e said that there
is needed to make suitable development in the operational practices. Thus, the business have to
bring suitable alternatives in expenses and make appropriate changes accordingly.
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REFERENCES
Books and Journals
Amba, S. M., 2014. Corporate governance and firms' financial performance. Journal of
Academic and Business Ethics. 8. p.1.
Amba, S.M., 2014. Corporate governance and firms' financial performance. Journal of Academic
and Business Ethics. 8. p.1.
Buigut, K. and Kibet, J., 2013. The effect of capital structure on share price on listed firms in
Kenya. A case of energy listed firms. European Journal of Business and
Management. 5(9). pp.29-35.
Butler, S. A. and Ghosh, D., 2015. Individual differences in managerial accounting judgments
and decision making. The British Accounting Review. 47(1). pp.33-45.
Chen, M. Y., 2012. Visualization and dynamic evaluation model of corporate financial structure
with self-organizing map and support vector regression. Applied Soft Computing. 12(8).
pp.2274-2288.
Epure, M., 2016. Benchmarking for routines and organizational knowledge: a managerial
accounting approach with performance feedback. Journal of Productivity Analysis. 46(1).
pp.87-107.
Masood, O. and Ashraf, M., 2012. Bank-specific and macroeconomic profitability determinants
of Islamic banks: The case of different countries. Qualitative Research in Financial
Markets. 4(2/3). pp.255-268.
Nitzl, C. and Chin, W. W., 2017. The case of partial least squares (PLS) path modeling in
managerial accounting research. Journal of Management Control. 28(2). pp.137-156.
Weygandt, J. J., Kimmel, P. D. and Kieso, D. E., 2015. Financial & managerial accounting.
John Wiley & Sons.
Online
Budgetary control. 2018. [Online]. Available through
:<http://www.fao.org/docrep/W4343E/w4343e05.htm>.
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Gearing in Relation to Financial Risk. 2016. [Online]. Available through
<http://www.accountingnotes.net/financial-management/gearing-in-relation-to-financial-
risk/10885>
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