Financial Decision Making and Accounting's Role at ASDA Limited

This report provides an evaluation of the role of accounting and finance in ASDA Limited, a major UK supermarket chain. It explores the significance of financial decision-making, encompassing financial planning, budgeting, and cost analysis. The report highlights how accounting and finance techniques, such as capital budgeting, marginal costing, and cash flow statements, are used to determine objectives, formulate financial statements, manage costs, and improve profitability. The analysis covers various aspects, including determining business objectives, financial planning, decision-making, and the formulation of financial statements. It also examines the role of accounting and finance in cost analysis, budget preparation, cash flow management, communication, and overall managerial processes, concluding with the importance of these functions for ASDA's strategic goals. The report references the utilization of management accounting techniques to enhance product and service quality, manage human resources, and make pricing decisions. Additionally, it emphasizes how accounting and finance contribute to risk management, helping ASDA control uncertainty and convert threats into opportunities to achieve its business goals.

Financial Decision making

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Evaluation of role of account and finance in ASDA Limited.....................................................1
CONCLUSION................................................................................................................................4
REFRENCES...................................................................................................................................5

INTRODUCTION
Financial decision making is a process of taking essential business decision by using
techniques and theories of finance and accounting. Finance and account used for recording
of financial transaction in systematic way preparation f financial statement, analysis of
profitability and identification of performance of the organization by measurement of profit
ratio. For understating the concept in better way ASDA Limited has been taken. It is one of
the biggest retailer supermarket organizations of Britain. Headquarter of ASDA Limited is
situated in Leeds, West Yorkshire. It provides, grocery, and general merchandise serves to
their customers through their supply chain of supermarket. In this report role of account and
fiancé describe in brief manner, and use of managerial as well as financial accounting
techniques for achieving of business organizations goal and attain competitive business
advantage has been defined clearly.
TASK 1
Evaluation of role of account and finance in ASDA Limited
Finance and accounting both are the major part of business organizations, theses branches help in
asking systematic record of transactions and with the use of different software’s and technique
managers will able to find out the real profit and loss of the organization by operating heir
business activities. Finance and account useful for critically analysis of performance
measurement of organization as well as providing an understanding statement through which
stockholders unable to determine the position of business entity within the market. Following are
the role of account and fiancé in ASDA Stores limited:
1) Determining of objective: Accounting strategies will help manager of ASDA to
determine their goal for long as well as short purpose through which they able to attain
vision of their business. With the uses of budgetary techniques manager able to decade
their goals. Manager decide goal on the basis of their needs and requirement of capital
budgeting structure basis(Lee and Andrade, 2015).
2) Financial planning: Various management accounting technique and methods help in
planning strategies with the use of capital budgeting technique, NPV, Internal rate of
return, cost of capital all these techniques useful for identifying which investment is more
profitable for financial purpose. This is essential for business organization as success of a
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business entity depends on how well they use their operating and financial resources for
being a leading business organization in world economy market.
3) Help in decision making: Marginal costing, standard costing and techniques used for
calculation of cost, manger of ASDA will able to determine their cost and on the basis of
activities they able to choose division which incurred minimum cost. The company take
accusation related decision on the basis of amylases their cost statements. All theses
mechanism helpful for taking essential decision through which organization able to retain
their goals. And able to build strong goodwill among public.
4) Formulation of financial statements: ASDA used account and fiancé tools for
preparation of their financial stamens, theses statement are essential for their annually
record it will use as proof document during auditors audit procedure.
5) Analysis of cost: Manager of ASDA used standard costing, job costing technique to
determine their cost of supply chain as well as cost of grocery items and cost incurred
during providing financial service to their customers. On the basis of cost identification
they are able to control cost by eliminating higher cost incurred activities(Mitchell, and
Lusardi, 2015).
6) Preparation of budget: Fiancé and Accounting sector play essential role in each and
every organization context whether it is profitable and non profitable. It will help in
formulating of budget which is the main basis of future activities. Without budget
organization not able to maintain their position in market. Manager of ASDA used
activity based budgeting method for formulation of budget through which they able to
allocate their resource in effective manner. As it is one of the biggest organizations thus it
is necessary for their manager to use this method through which organization will able to
utilizes their resource optimally.
7) Identification of cash flow activities: Financial techniques useful for preparation of cash
flow stated through which manager Abe to understand the flow of cash and cash
equivalent activities within the business premises. ASDA use cash flow statement to
determine reason of cash out flow activities and then making portfolio through which
organization able to increase their cash inflow activities.
8) Help in communication: Fiancé and accounting help in communication procedure also.
Financial stamens is the method of communicate directors to their shareholders related to
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the financial position and upcoming policies and future activities of the ASDA Limited.
Even shareholders also have right to give suggestions and feedback regarding policies by
amassing testaments. Theses also useful for auditors to eyelet overlap activities of the
organization.
9) Continues administration function: Techniques of managerial accountings used to
procurement of fund its relations with procurement of capital, source of funds, capital
budgeting design. Financial management also help in administration functions.
10) Basis of managerial process: Accounts and fiancé ate the basis of whole management
process from planning to controlling process, accounting and financial technique are
helpful for business organizations. Manager of ASDA use capital budgeting for and
budgets for planning and organizing process as well as thy use cash flow stamen directing
of uses of financial source and various techniques, KPI, just check, EOQ, benchmarking
is used as performance measurement technique of controlling through which manager
able to identify difference of their current and dissert gal. It will help in formulation of
stateliest to reduce the differences (Fraczek and Klimontowicz, M 2015).
11) Improve profitability: Manager of ASDA use account and fence technique and their
theories for measure of their organization profitability. By using marginal cast and
standard costing their manger able to recognize profit earn during the specific period of
time by business organization, ad various ratio, net profit, gross profit ratio help in
identifying profit amount of the ASDA. As well as marginal costing method is the bias of
identification of BEP through which manager able to identify the relationship of profit
and others factors and financial and operating leverage.
12) Tax calculation: It is essential for every organization to follow ethical and law w
functions during run busied organization, account and fiancé technique useful for
manager of ASDA they calculate the flue of tax and gals able to enjoy benefits of various
exemptions they had due to payment of government tax, they can enjoy schemas benefit
introduced by government of UK.
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Graph 1Techniques of management accounting .
These techniques use by manager of ASDA for taking daily basis decision.
Management accounting techniques useful for ASDA to enhance their organization proactive
which includes enhancing the QUALITY of product and service as well as quality of their
human resources.
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Graph 2 Management accounting process
This graph used by manager of ASDA to give them guideline regarding business activities.
Manager of ASDA formulates incentive policy on the basis of performance evaluating of their
employers. They can attain competitive advantage by reducing their cost and improving quality
of serves by using various inventories, costing mechanism of management accounting. Although
manager of ASDA will able to determine their price on the basis of their rival industries to earn
more profit by using pricing strategies, which includes, cost, discounting, skimming price
penetration strategies. ASDA target market area is wider and they run their business at different
places of UK and outside UK thus management accounting policies and framework help them to
select ad take decision regarding effective pricing policies which will help in earning profit for
the organization. Management accounting plays essential part for this business organization to
achieve their predetermined goals. Account and fiancé techniques and theories help the manager
to identify risk and manage their organization so they will be able to control the uncertainty and
have chances to convert threat into opportunity. It is important to ASDA for using tools of
accounts and fiancé in their day to day business activities’ in order to run their business in
systematic manner to achieve the goal of business organization (James III, 2016).
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CONCLUSION
From the above analysis it has been identified that for taking decision regarding organization
it is essential for management department to use financial and accounting tools and
techniques. These tools useful for them to record, analysis, collect and interpret their data in
effective information. Business organization use various mechanism which includes, costing
technique, profit measurement tools, BEP technique, KPI, benchmarking, cash flow
statement, capital budgeting techniques, al theses techniques helpful for financial planning,
taking decision regarding portfolio investment, interpretation of financial position of
organization and able to analysis the risk and control uncertainty. Account and fiancé play
vital role in ruining business organization without theses sectors an organization will never
able to build strong position in competitive world environment.
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REFRENCES
From books and journal
Loibl, C., 2018. 26 Living in Poverty: Understanding the Financial Behaviour of Vulnerable
Groups. CENTRE FOR DECISION RESEARCH, UNIVERSITY OF LEEDS, UK, p.421.
Lee, C. J. and Andrade, E .B., 2015. Fear, excitement, and financial risk-taking. Cognition and
Emotion, 29(1), pp.178-187.
Mitchell, O.S. and Lusardi, A., 2015. Financial literacy and economic outcomes: Evidence and policy
implications. The journal of retirement, 3(1), pp.107-114.
Fraczek, B. and Klimontowicz, M., 2015. Financial literacy and its influence on young customers’
decision factors. Journal of Innovation Management, 3(1), pp.62-84.
James III, R. N., 2016. An economic model of mortality salience in personal financial decision making:
Applications to annuities, life insurance, charitable gifts, estate planning, conspicuous
consumption, and healthcare. Journal of Financial Therapy, 7(2), p.5.
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