Financial Management: Approaches and Decision Making Report

This report provides a comprehensive overview of financial management, encompassing strategic planning, organization, direction, and control of an organization's financial undertakings. It explores various approaches to support effective financial decision-making, including a knowledge-based approach and the use of decision matrices and T-charts. The report highlights the importance of economic conditions, capital structure, and stakeholder roles in the decision-making process. It also discusses setting objectives for achieving financial goals, the significance of ethical financial management, and the role of management accountants and financial management systems. Furthermore, it examines principles for delivering sustainable growth, such as the use of return on investment and effective resource utilization, along with techniques for fraud detection and prevention. The report concludes by emphasizing the essential role of management accounting in informed decision-making and the need to balance stakeholder interests to achieve organizational goals.

FINANCIAL
MANAGEMENT

TABLE OF CONTENT
■ INTRODUCTION
■ MAIN BODY
■ CONCLUSION
■ REFERENCES

INTRODUCTION
■ Financial management refers to strategic planning, to organize,
direct and control of financial undertakings of the organization.
■ Financial management include application of management
principles over financial assets of organization. It plays and
important part in fiscal management of business (Matthew, 2017).
■ Present report will be providing approaches used for supporting the
financial decisions.
■ It will also provide principles for supporting the effective financial
strategies. The role of accountants and management accounting in
business and the ways in which the financial decision making helps
in sustainable performance.

Different Approaches used for supporting
the effective decision making.
■ Knowledge based approach
■ Knowledge based approach involves recognizing
knowledge as the resource to gain organizational
competitiveness, knowledge suggests the method for
managing and improving the performance of
organization.
■ It is essential for the business enterprise to have
knowledge based approach so that the decisions taken
for the improvements are having some authentic base
(Almumani, 2018).
■ This have significant impact over the decision making
approach of the executives of organization.

Techniques used in decision making
■ Decision matrix – It is used by managers in
evaluating all options for decisions. In this
matrix all options are placed in first column of
the table and factors affecting the decisions in
first row. It involves scoring and weighing
factors based on their importance and selects the
best options
■ T -Chart – The chart is made for weighing plus
and minus of options. This ensures that all the
negatives and positive are considered in making
decisions (Ax, and Greve, 2017).

Factors contributing in effective decision
making
■ State of Economy
■ Economic conditions greatly contribute in
decision making process. Strong economic
conditions attract high investments for the
organizations. The expectations are also high of
the investors.
■ Capital structure and money market.
■ It is easy to make decisions for raising capital
in companies having strong and developed
capital market. This provides the manager with
the bargaining powers (Dudin, Lyasnikov,,
Yahyaev, and Kuznecov, 2014).

Role of stakeholders in decision making
■ Stakeholders are important for the business and
play critical role in decision making process of
company. All the stakeholders have different
interests in the business and managers are
required to manage their conflicting objectives.
■ It is concerned with systematically identifying,
analyzing, planning and the implementation of
the actions concerned with engagement with the
stakeholders

Managing conflicting objectives of
different stakeholder groups
■ Manager is required to understand necessity of
balancing interests of various stakeholders.
■ Shareholder and sales teams are concerned with
the revenue and profit generations for having
adequate returns over their investments.
Operations team expects to complete task in less
time increasing their efficiency.
■ Every departments and stakeholders have their
own interests and it is essential for the manager to
identify their interests

Setting objectives for achieving the
financial goals
■ Companies are require to make short term as
well as long term goals for the business. A
business is required to set goals for overreaching
the goals and objectives of business.
■ Short term goals are made by organization for
achieving and getting near to the future goals.
Success of the business is achieved by short term
goals helping to achieve the long term vision of
company (Mohagheghi, Mousavi and Vahdani,
2017).

Ethical Financial management
■ Ethical financial management is focused
towards achieving the financial goals and
objectives using ethical means.
■ The finance should not be raised through
unethical means. It should not include
misstatements or mold its financial figures for
representing profitability in the financial
statements ((Caffi and Rossi, 2018).
■ There are many companies who misrepresent
their financials for raising funds from outside
authorities.

Role of management accountants and
management accounting control systems
■ Role of Management accountant
■ Management accountant performs series of tasks for
ensuring the financial security handling all the
financial matters of company. It helps the business in
driving its management and strategies.
■ A management accountant ensures that all the
processes and operations are carried on properly by
the business keeping all the costs under control
(Zhang, 2016).

Financial Management Systems
■ Financial planning
■ Objective of every business is to earn maximum
possible profits. The objective is achieved when
management have sound and proper financial
planning. It is management accounting techniques that
helps the organization to plan before investing funds.
■ This prevents unnecessary wastage of the resources
and costs. It ensures that the resources of company are
allocated appropriately. Sound financial plans will
result in achieving the objectives maximizing the
wealth of shareholders (Petty, J.W., Titman, S.,
Keown, Martin, Martin, and Burrow, 2015).

Managing principles delivering
sustainable growth.
■ Use of Return on Investment
■ Return on investment is otherwise called as Return on Capital Employed. The rate of
return shows the efficiency of the business concern. For this purpose, the capital
employed is calculated in terms of real money value (Brusca, , Gómez‐villegas, and
Montesinos, 2016).
■ Effective utilization of resources
■ Management accounting principles emphases that resources must be effectively utilized.
This will help companies developing sustainably.

Techniques for fraud detection and
prevention
■ It is important to detect fraud as it may put the
whole business in danger. Businesses suffers million
of loss because of frauds.
■ It is important for the organization to detect the
frauds at early stage and to implement the fraud
prevention techniques so that if any fraud is
undergoing it can be prevented at early stage.
(Ogiela, 2015).

CONCLUSION
■ From the above analysis it has been concluded that
management accounting plays essential part in
taking essential decision regarding running business
organization. To maintain position in this
competitive market place managers needs to satisfied
wants and needs of their stakeholders and formulate
policies in a way by which they can achieve their
organizational goals by giving full satisfaction to
their employe

REFERENCES
■ Almumani, M.A.Y., 2018. An Empirical Study on Effect of Profitability Ratios &
Market Value Ratios on Market Capitalization of Commercial Banks in Jordan.
International Journal of Business and Social Science. 9(4).
■ Ax, C. and Greve, J., 2017. Adoption of management accounting innovations:
Organizational culture compatibility and perceived outcomes. Management Accounting
Research. 34. pp.59-74.