BM414: Financial Decision-Making - Accounting and Finance Functions

This report provides a comprehensive analysis of accounting and finance functions within the context of financial decision-making. It begins with an introduction to financial decision-making and defines key accounting and finance functions, supported by relevant theories such as agency theory and positive accounting theory. The report then introduces ASDA, a British supermarket retailer, as a case study, outlining its key practices in management accounting techniques. The main body delves into the role of management accounting techniques in planning, controlling, and decision-making processes, focusing on techniques such as financial planning, marginal costing, and cash flow statement analysis. The report evaluates how these techniques enhance company practices, demonstrating research and understanding of their application. The evaluation section critically analyzes the application of these techniques to enhance organizational practices, emphasizing their significance in achieving organizational goals and improving operational efficiency. The report concludes by summarizing the importance of management accounting techniques for effective financial decision-making and emphasizes their role in enhancing business operations. The report references various books and journals to support its findings.

Accounting and finance
functions

TABLE OF CONTENTS
INTRODUCTION......................................................................................................................3
MAIN BODY.............................................................................................................................3
EVALUATION..........................................................................................................................5
CONCLUSION..........................................................................................................................6
REFERENCES...........................................................................................................................7

INTRODUCTION
Financial decision making is the process where choices are made as for the overseeing
fund of the business. The management accounting assumes a key job in taking different
money related decisions of the business which depend on the data mainly accessible to the
internal management group. This data isn't unveiled to outside users. There are various roles
of accounts and finance which has immense significance in the organizations. It doesn't have
its own hypothesis yet is obtained from different fields such as economics and sociology.
According to the agency theory, which is a part of finance economics whose fundamental aim
is to investigate the conflicts among investors and directors or managers and works with the
purpose to adjust objectives so that no contention emerges among them (Panda and Leepsa,
2017). Additionally, as indicated by positive accounting theory, got from contracting
literature in economics, which clarifies the outcomes of interest of managers and financial
accounting and reporting (Osho and Ajayi, 2018). It deciphers the expectations of real-world
events into accounting terms. In this, the organizations can expand their possibilities for
future endurance by proficiently arranging itself. This makes the job of accounting and
finance significant and essential.
In this report, ASDA is taken as an organization which is a British supermarket
retailer. It is headquartered in England, UK and was founded in 1949. Its is positioned as the
second largest supermarket chain. It provides diversified product range with respect to
general groceries, books, furniture, electronics and financial services. ASDA has successfully
implemented management accounting techniques in the organization such as financial
planning, marginal costing and cash flow statement analysis. This report provides an insight
about the role of management accounting techniques in the process of organizational
planning, controlling and decision-making process. Also, critically evaluating how it can be
applied for enhancing the organization’s practices.
MAIN BODY
Role of management accounting techniques
Management accounting techniques are very useful for the organizations in
implementing effective planning, controlling and decision making process. These techniques
analyse various events and business metrics which helps in gathering relevant information
which is used by the management for the purpose of taking better decisions. Some of the
techniques which are used by ASDA are stated below.

Financial planning
Financial planning helps in deciding the capital required for achieving the business
objectives and goals. It is the procedure where a total business planning part is carried out
and detailed analysis is done for accomplishing the necessary goal by taking into account the
market and competitor analysis and analysis the assets and other resources required and
accessible both money and non-money related (Alexander, 2018). This technique is being
implemented by ASDA which helps in lessening the effect of vulnerability, uncertainty and
furthermore helps in guaranteeing steadiness and benefits to the organization. The financial
plan has the total insights and information concerning the various sources of finance from
where resources can be organized or acquired with the purpose of effectively executing the
business plan and strategy for accomplishing growth and success.
Margin analysis
This marginal analysis is generally concerned about the additional advantages that is
emerging from the increased or enhanced production. This technique is most important in the
management accounting as it helps in analysing the complexities and uncertainty present in
the organizational framework and attempts to figure out how to maximize the benefits
(Chernega, Voloshynа and Kostakova, 2018). ASDA utilizes this strategy since it
incorporates break even point analysis (BEP) and cost volume profit which gives access to
relevant data which helps the management of the organization in taking effective business
decisions. It is utilized as a profit maximization tool which carry out cost benefit analysis for
every marginal or additional change in the quantity of items produced. This technique shows
how a marginal change in the production can affect the business activities.
Cash flow statement analysis
This technique is very helpful to the business organizations as it assists in determining
from where the money is created and the use of it over a particular period. It is significant for
identifying the liquidity and solvency position of the business. It is categorized into cash flow
from operating activities, investing activities and financing activities (Sankar and Kumar,
2018). ASDA has implemented this technique and effectively utilizes it as it encourages it in
distinguishing the different sources of money and furthermore how much income it is having
from it operating activities which is significant. It also helps in analysing the cash flow
position of the business in respect to the change in working change and profitability which
indicates its ability to carry out the daily business activities along with meeting the short term

obligations of the business. The cash flow statement analysis provides a complete and deep
understanding about the organizations current position based on which further business
decisions are taken.
Thus, all these three techniques are very crucial for the effectively planning,
controlling the business processes and taking appropriate business decisions.
EVALUATION
Planning, controlling and decision making are the significant part of the
administration procedure. All these together empowers the workers to move in the direction
of accomplishing the targets of the organization. Planning has a fundamental role in the
development and sustainability of the organization which requires the management to
comprehend the present situation of the business and recognize the zones of significant
improvement. The management accounting (MA) procedures is exceptionally huge as it gives
significant data dependent on the past exhibition which assume a fundamental job in the
planning process for the future performance (Kabeyi, 2019). MA helps in building up the
budget which is an essential part of the planning process. The cash flow statement analysis,
financial planning and marginal analysis are very effective in formulating the business plan,
practicing control over the business activities and making better choices. The cash flow
statement analysis is additionally helpful in effective planning as it will furnish insights
regarding the cash available with the organization to meet its day to day needs and
furthermore the base money it required to maintain in order to run the business easily for a
particular period. MA is additionally valuable in the control process as it is based on the
budgets which is a part of planning process and the actuals are compare with the budgeted
ones which helps in deciding any fluctuations in the outcome. In the event that there is any
difference, the reason behind the difference is identified and important and restorative moves
are made to decrease the variations. These strategies built up certain control parameters
which cautions the management of ASDA about the uncertain activities or events which were
not previously taken into account in the plan. Identification of these events are critical in
ensuring the objective of the organization will be achieved or not.
The various techniques utilized by the organization which helps in taking appropriate
decisions, for example, what ought to be offered, whether to put resources into acquisition or
not (Boardman and et.al, 2017). These procedures help in deciding the ideal activity level
required for successful operation. It helps in collecting important data considering the various

aspects of the business which helps in taking proper evaluation on which decision is taken.
This decision is for the accomplishing the organizational goals according to the plan and
within the budget limit. It helps in growth and progress of the business. But, to execute and
actualize these procedures requires exceptionally talented work force having experience in
planning, control and compelling decision making. Therefore, it can be said that MA
strategies have a significant and critical task to carry out in for adequately dealing with the
planning, controlling and decision making of the organization.
These techniques can be adequately applied according to the business necessity like in
ASDA, margin analysis, financial planning and cashflow statement analysis is implemented.
Margin analysis can be applied when the business is searching for extending its business or
presenting new item in the market (Deo, 2016). Financial planning can be utilized to prepare
the financial plan for accomplishing business objectives. Cash flow statement analysis will be
utilized for realizing the liquidity position of the business and assets accessible to meet the
current needs before putting into new venture or plan. Thus, it can be applied for improving
the business practice.
CONCLUSION
It can be summarized from the above that management accounting (MA) techniques
has a significant part in the business. It provides support to the organizations like ASDA in
differed ways for meeting the needs. These procedures help in viable management of the
business operation with respect to the plan formulated by the organization. These techniques
have shown the role of account and finance in an organization. The advantages related with
money related financial planning, cash flow analysis and margin analysis are high and can be
adequately and effectively utilized by the organizations with further upgrading their practices.
This may result into achieving the business objectives and target in a productive and
appropriate manner and reduces any loss that may emerge due to uncertainty. Hence, it tends
to be said that financial decision making is the pivotal part for very organization as every
single aspect is required to be concentrated before taking any decision. For making it right,
the different management accounting techniques are created which has a significant task to
carry out in planning, controlling and in decision making. In this manner, financial decision
making turns out to be very effective along with management accounting techniques.

REFERENCES
Books and Journals
Alexander, J., 2018. Financial planning & analysis and performance management. John
Wiley & Sons.
Boardman, A. E. and et.al, 2017. Cost-benefit analysis: concepts and practice. Cambridge
University Press.
Chernega, O. B., Voloshynа, S. V. and Kostakova, L. D., 2018. PARADIGM OF
MARGINAL ANALYSIS OF PROFITS OF ENTERPRISES WITH A MULTIPLE
PRODUCTIVE PROCESS. Scientific Bulletin of National Mining University. (6).
Deo, P., 2016. EVALUATING A CASH FLOW STATEMENT. International Journal of
Business, Accounting, & Finance. 10(1).
Kabeyi, M. J. B., 2019. Organizational strategic planning, implementation and evaluation
with analysis of challenges and benefits for profit and nonprofit
organizations. IJAR. 5(6). pp.27-32.
Osho, A. E. and Ajayi, D. A., 2018. Relevance of Accounting Theory to Business Corporate
Governance Performance in Nigeria. Research Journal of Finance and Accounting
www. iiste. org ISSN. pp.2222-1697.
Panda, B. and Leepsa, N. M., 2017. Agency theory: Review of theory and evidence on
problems and perspectives. Indian Journal of Corporate Governance. 10(1). pp.74-95.
Sankar, D. G. and Kumar, B. R., 2018. Empirical analysis on financial performance through
cash flow statements. International Journal of Accounting & Finance Review. 3(1).
pp.1-12.