Financial Management: Techniques, Principles, and Role of Management Accountant

UNIT-15 FINANCIAL
MANAGEMENT

Table of Contents
INTRODUCTION...........................................................................................................................3
PART-1............................................................................................................................................3
1. Techniques and approaches used by the management accountant..........................................3
2. Principles guiding effective financial strategies to maximize the wealth of shareholders and
their stakeholders.........................................................................................................................4
3. Evaluation the role and function of the management accountant in regard to financial
control and monitoring................................................................................................................5
4. Techniques and approaches for detection of fraud.................................................................6
5. Recommendations for improve financial decision making by management accountants.......7
PART 2............................................................................................................................................7
1. Ratio analysis of Amcor PLC..................................................................................................7
2. Role of ratio analysis in operational and strategic decisions...................................................9
3. Comparing the role of investment appraisal techniques in maximizing return on investment9
4. Role of cash flow statements and break even analysis in financial decision making............10
5. Recommendation on use of management accounting techniques to improve decision making
and ensure long term stability of company................................................................................10
CONCLUSION..............................................................................................................................10
REFERENCES................................................................................................................................1

INTRODUCTION
This project shall be highlighting the functions of the management accountant and how they
benefit the organization. It shall be reflecting the various techniques like trend analysis, margin
analysis, capital budgeting which are used to formulate effective and efficient decisions for the
profitability of the company. It shall also disclose the principles that guide financial success of
the shareholders as are used by the management of the organization. It shall be showing the
major role-played in monitoring the operations and establishing due control such that frauds
could be easily detected. The recommendations which can be used to improve the financial
decision-making in the organization. The second part of the project shall be disclosing the ratios
for the Amcor plc. And on the basis of that shall determine the liquidity and the financial
position of the company.
PART-1
MA in an organization plays crucial role in the decision-making process. This decision-
making is facilitated by the usage of several techniques and approaches which help in budgeting
the level of activities that are to be undertaken in the future. On the basis of these predictions the
control and coordination is maintained in the organization with regard to the resource
availability, human resource management, profitability and future growth prospects.
1. Techniques and approaches used by the management accountant1. Trend analysis and forecasting- This is one of the most prominent techniques used by
the in the managerial accounting in which they study the past data, based on which
predict the future trends (Harelimana, 2017). Such forecasting is beneficial as it helps in
knowing the level of operations, associated costs, profitability and to assess the
requirements of the various resources.
Advantages
 Helps in effective budgeting Optimum allocation of resources
Disadvantages
 Market is uncertain Avoids flexibility of operations

2. Margin analysis- Another important technique used by the management of the company
to judge the optimal mix for the sales of the period. It helps in evaluating the break-even
point of the operations so that maximum benefit in terms of profit can be gained.
Advantages
 At-least the cost are realized Assessing the optimum level of operations
Disadvantages
 The breakeven shows the lower end and not the highest possible outcome. Actual results differ from the forecasted.3. Constraint analysis- This technique again proves to be beneficial in deciding the
bottlenecks of the company that are contributing to the various inefficiencies (Palepu and
et.al., 2020). Identifying such bottlenecks which can be in the form of process of
operations, product lines etc. can be rather beneficial as this can improve its profitability
and chances of growth.
Advantages
 Avoiding inefficiencies Maximizing operational efficiency
Disadvantages
 Certain bottlenecks are unavoidable Hampers the routine operations4. Capital budgeting- This is the approach that is used by the management accountant in
order to analyse and select the profitable long term capital expenditure decisions of the
company. Based on the net present value and the internal rate of return it can be decided
that whether a project should be accepted or rejected.
Advantages
 Making the accept-reject decisions Derives long term profitability of the business.
Disadvantages
 Complex procedure
 Requires highly efficient staff