Principles of Financial Management

Learner Name ID
Unit Number and Title Unit 15 – Financial Management
Credit Value
Academic Year
Assignment Title Principles of Financial Management (Part 1)
Analysis of Financial Statements for Decision Making (Part 2)
Issue Date
Submission Deadline
IV Name
IV Date
Statement of Authenticity:
I certify that the work submitted for this unit is my own and the research sources are fully
acknowledged.
Learner Name: Date:
0

Table of Content
Assessment Part 1
1.0 Introduction p
2.0 A critical evaluation of a range of approaches, techniques and
factors which contribute to effective decision making in an
organization p
2.1 How the management accounting function will support
organisational decision making p
3.0 Evaluate the principles which guide effective and efficient
financial strategies to maximize shareholder value and meet
stakeholder needs p
4.0 Critically evaluate the role and function of the management
accountant especially in regard to financial control and monitoring
p
5.0 Techniques for fraud detection and prevention and approaches
to ethical decision making p
5. Recommendations on how management accountants can
improve financial decision making p
References p
Conclusion p
1

1.0 Introduction
Management accounting is a function of accounting process that organisation make use in
short and long run. As management is a vital part for an organisational sustainability,
therefore, accounting management is also crucial to get enable sound performance of
business practices. There are various principles and methods of accounting that play their
own significance as per organisation size, scope and area swerved. It is necessary to maintain
records, data and statistics into proper documented form in order to make appropriates
decision regarding cost consumption and overall revenue. Management of accounts shows
how the cost will be cover during the financial year, what decision and strategies are needed
to develop effective plans for future growth and sustainability of the organisation.
According to the institute of management accounts(IMA), it is the function which
assist in sound decision by showing all potential capabilities of organisation under monetary
terms that needs to be better to promote sustainable development (Chunfei, 2019). This
report is going to undertake UK organisation I.e Davison Canners Ltd. It provides bakery and
catering services. The company maintain all financial records during the year so that they
could compare, contrast and evaluate their performance with past results. This could be done
through adapting appropriate techniques and approaches of management accounting along
with effective principles and accounting standardised which the essential to format strategies
and enhance decision aspects.
2.0 A critical evaluation of a range of approaches,
techniques and factors, which contribute to effective
decision making in an organization
Decision making is the essential criteria for organisations to perform with effectiveness.
Decisions needs to be relevant and accurate which could help in making the organisation
fruitful and profitable (Adshead, 2018). This process involves various procedures such as,
collecting information, evaluate sources, analysing factors and important elements and come
to an effective decision. These decisions are important to have alternative solution for
business problems and resolve present crises that stops their growth. Morrison using both
formal and informal approaches for decisions making which are described below:
Formal decision making:
2

knowledge based approach: this approach signifies upon decision making criteria as
per human preference. It is well stated that human problem will be clearly understandable by
a human only. For that instance, companies using this approach to by taking humans
experience, knowledge and their area of expertise in making decision for company’s
strategies. It is depended upon artificial intelligence through which human connects with the
company for problem solving and giving reliable solutions. Morrison’s use this approach to
better understand about what marketers and customers wants. They prefer to analyse the
market first and make the changes as per requirements (Agasandyan, 2017).
Participatory decision making: under these approaches of decision making,
organisation put focused on getting participate into formulation of company’s strategies.
Employees and members are a vital part of organisation that needs to be mutually agreed on
company’s decision. This way, effective organisations could come up by the influence of
other opinions and advices. This approach is useful for Morrison’s as they initiate their
employees to take participate and give their opinion what would be the best for company
(Ebrahimpoor and Afzali Mehr, 2020).
Informal decision making;
Subjective: informal decision is used where there are small concepts and less data
collection. This subjective approach is all based on the changes occurring into environment
and market. Through this approach, past performance are resulted into proper changes. In
other words, decision is being made by checking on past records and profitability. Morrisons
uses this approach for b the help of financial data due to have different departments and
complex functions. Some reliable decision and aims would be set through past experience. As
the company come up with the aim to increase its sales through 10% more from the last year.
Stakeholders contribution: effective decision making are depend upon company’s
stakeholders who being an essential part of organisation. Employees, investors are the
stakeholders who are totally liable to contribute in companies’ profits and losses so that
decision must be done after taking their consent. Managers of Davison Canners Ltd first
initiate the plan and communicate it with all the stakeholders, after taking their consent and
advices, changes will be made for effective outcome.
Shareholders: shareholders are also come into contact while making decision as they
are non-active member of company which have their contribution in making the firm
financially strong. Shareholders of Davison Canners Ltd support and maintain company’s
3

goodwill into competitive market. These functions are basically influence to make aware
about policies and performance of company. Davison Canners Ltd use effective planning and
aspects by maintaining accounts so that shareholders would make believe in shares and be
prepare for adjoining hands with company.
2.1 How the management accounting function will support
organisational decision-making.
Decision making is a vital part for sound growth of organisations for the aim of sustainable
development. There should be evaluation of formal and informal approaches in context with
organisational effectiveness. These decision making have both positive and negatives sides as
it is all depended on practical performance which an organisation face while doing task and
activities (Fuller, 2018).
There are many advantages and disadvantages of these approaches:
 Through decision making, communication will flow in better way of coordination
which is essential for organisational effectiveness. As employees feel valuable and
eliminate delays in doing work.
 Work will be done into more prominent criteria. As decision are being made so the
work will complete within specific period of time.
Disadvantages:
1. knowledge base approach could be resulted into time taking procedure so that it is not
suitable for the situation where prompt decisions are required.
2. Stakeholders interference may create chaos in effective decisions as there are several
perception comes under segmentation that would not result in sound decisions.
Formal and informal decision making are undoubtedly significant for effective decision
making. There are several approaches used by Davison Canners Ltd that impact on their
profitability. Under formal approaches, companies using artificial intelligence in order to
track customer’s insights to take their preferences and understand market trends. As per
informal approaches, Davison Canners Ltd create much consent of shareholders, employees
and investors while making decisions regarding cost and financial decisions (Agnieszka
Cyndecka, 2019).
4

As the stakeholders are more aware about marketers and opportunities which will be
addressed by them into fruitful manner. These factors create positive impact of company’s
goodwill and brand name to competence against rivals. The more effective decisions are, the
more will be the chances of getting sustainable growth. Subjective approach is also reliable
for inform decision by checking past performance and drive conclusion for current scenario.
3.0 Evaluate the principles which guide effective and
efficient financial strategies to maximize shareholder value
and meet stakeholder needs
Financial management is part of management procedure; which organization use for
formulate those policies through which they can maintain long term sustainability. Following
are the principle which management department of Davison Canners Ltd use, these are
defining below:
Risk & return principle: This principle based on the concept that investors invest
their capital in those organizations where they get higher return thus they are interest in both
risk as well as return policy. Higher risk represents or expected high earning of profits thus
on the basis financial manager need to form portfolio in which higher as well as lower rate of
risk portfolio are available (Gerber, and Shiu, 2020).
Time value of money: This principle based on the concept is that value of today's
money is more worthy then future value of investment, thus organizations need to focus on
valuing their current financial worth otherwise they are not able to maintain their position in
business environment. Management department of Davison Canners Ltd focus on formulate
those policies and strategies of finance through which they are able to maintain their financial
capital by investing their current money sources in higher returning investment portfolios.
Profitability and liquidity: It is considering as essential and relevant financial
management principle which useful in managing assets or financial capital of organization.
Organization need to focus on invest their money in those project which help in maximize
their profits on the other side they also consider liquidity rate of investment how effect their
securities change or converted into cash. On the basis of that management department of
Davison Canners Ltd take decsi9on regarding which alternative is beneficial for their future
business activities.
5