Financial Management Report: ASDA Case Study on Strategic Decisions

This report provides a comprehensive analysis of financial management principles, decision-making processes, and financial strategies, using ASDA as a case study. It explores formal and informal approaches to support effective decision-making, including knowledge-based approaches, stakeholder analysis, and 'make or buy' decisions. The report also examines key financial management principles essential for long-term financial sustainability, such as risk-return trade-offs, the time value of money, and the principle of diversification. Furthermore, it delves into the role of management accounts and accounting control systems within an integrated business system, and how financial decision-making impacts the long-term financial sustainability of an organization. The report also includes an overview of limiting factor analysis and key factor analysis. The content examines financial management challenges, principles, and the practical application of these concepts within a real-world business context.

Project
Contents

INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1. Different formal and informal approaches used to support effective decision making........1
TASK 2............................................................................................................................................3
P2. Key financial management principles required by organisations to achieve effective
financial strategies for long term financial sustainability............................................................3
TASK 3............................................................................................................................................5
P3. Role of management accounts and their values as part of an integrated system...................5
P4. Use of accounting control systems and their value as part of an integrated business system
.....................................................................................................................................................7
TASK 4..........................................................................................................................................10
P5. The ways in which financial decision making is important for supporting long term
financial sustainability...............................................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Financial control refers to the strategic making plans, organising, directing, and controlling
of economic undertakings in a company or an institute. It also includes making use of
management concepts to the monetary assets of an agency, even as additionally playing a crucial
part in economic management (Kembauw and et. al., 2020). Financial Management manner
making plans, organizing, directing and controlling the monetary sports together with
procurement and utilization of funds of the organisation. It manner making use of preferred
management principles to financial resources of the agency. Financial management is one of the
maximum critical elements in enterprise. In order to begin up or even run a hit commercial
enterprise, they may want tremendous know-how in economic control. In order to complete this
project, ASDA is taken in to consideration. It is a British supermarket chain and it was
incorporated in 1949 and is headquartered in Leeds, England. This report will consider
information about different formal and informal approaches used to support effective decision
making, key financial management principles required by organisations and role of management
accounts and their values. Moreover, it will define about use of accounting control systems and
the ways in which financial decision making.
TASK 1
P1. Different formal and informal approaches used to support effective decision making
Knowledge-based approach: A concept which primarily focuses on quantitative,
objective and factual information to inform decision-making. Knowledge-based approach is a
method that includes adapting theories, understanding, and traditions from a whole variety of
disciplines and making use of them to the coaching engagement, as and while suitable
(Yuniningsih, Pertiwi and Purwanto, 2019). These may consist of theories from management,
psychology, exchange management, and organizational way of life; understanding from
spirituality, family systems, sustainability, and mindfulness; and traditions from self-assist and
the human capability actions.
The role of stakeholders in decision-making: The contribution of internal stakeholders
(the employees and manager’s perspective on the situation) and the contribution of external
stakeholders (e.g. suppliers or investors vested interests) to decision-making. Influence of
stakeholders on the organizational management. Stakeholders are the human beings or
1

organizations who've an interest, declare, or stake within the organisation. Hence, stakeholders
generally recognition at the overall performance of the corporation and make sure that it stays at
a suitable degree. Stakeholders do now not have any function within the control of the
organization, but they do have an impact on the organizational management.Stakeholders
impacts the choice making system. They make sure that the organizational work environment
remains dynamic, stimulating, and rewarding and there are accurate operating situations
available in the organisation in order that the enterprise can perform properly.
Stakeholders may be divided into predominant classes specifically (i) internal stakeholders,
and (ii) external stakeholders. Internal stakeholders have direct affect on the resources of the
organisation (Ameliawati and Setiyani, 2018). External stakeholders are humans who've no
direct position within the organizational operations, however they have got a few interest in it or
its activities. The needs positioned forth by means of the external stakeholders motivate the
company to carry out in addition to to reap its objectives and goals. Internal stakeholders in an
business enterprise includes its personnel and the management, even as the external stakeholders
are buyers, customers, providers, lenders, regulatory groups, government companies, change
unions, neighbourhood community, stress businesses, and well known public and many others.
The organizational stakeholders affect maximum the management of the agency particularly the
manner of selection making. Stakeholders impacts the selection making manner. They make
certain that the organizational paintings environment stays dynamic, stimulating, and profitable
and there are accurate operating situations to be had within the employer in order that the
company can perform well.
‘Make or buy’ decisions: Reaching a strategic decision to internally make or externally
buy based on significant influencing factors. A make-or-buy selection is an act of selecting
among manufacturing a product in-residence or shopping it from an external dealer. Also called
an outsourcing decision, a make-or-purchase decision compares the costs and benefits associated
with producing a necessary proper or provider internally to the expenses and blessings involved
in hiring an outside dealer for the sources in query (Mitchell and Calabrese, 2019). To compare
charges as it should be, a business enterprise must recollect all factors regarding the acquisition
and garage of the objects versus creating the items in-house, which may also require the
acquisition of recent gadget, in addition to storage prices.
2

Limiting factor analysis: Determine the impact of different constraints on production
which could prevent sales/growth maximisation. In control accounting, proscribing elements
consult with the restrictions in availability of manufacturing assets that save you a commercial
enterprise from maximizing its sales. Limiting issue analysis is the approach used to determine
out the way to maximize your production output regardless of the numerous limitations that
confront the production method (Chernov, 2020). It is the aim of each business to maximise
income; therefore, it's miles essential to investigate the pleasant mixture of restricting elements,
to yield maximum go back. It would possibly show extremely tasking to make the most out of
the assets available. As such, you’ll want a proper know-how of ways exceptional to research the
limiting factors inside your enterprise’s operations.
Key factor analysis: The use of internal and external factors to determine the profitability
of a product or service. Key component is not anything however a limiting issue or deterring
issue on income volume, manufacturing, labour, materials and so on. The limiting thing normally
differs from one to every other
Volume of income- the limiting factor is that production of required quantity of articles
Volume of production- the proscribing factors are as follows in adequate supply of
uncooked substances, hard work, and incapability to promote the produced articles and so forth
The proscribing elements are studied inside the lights of the contribution. The restricting
issue is bearing the inverse relationship with the volume of contribution. To take a look at the
worth of the commercial enterprise proposals a number of the restricting factors, the contribution
is taken into consideration as a parameter to rank them one after some other.
TASK 2
P2. Key financial management principles required by organisations to achieve effective financial
strategies for long term financial sustainability
Financing is the process of collecting finances to invest to ensure right usage. Proper
financing required to follow 6 centre concepts of finance to make sure the maximization of
benefit. Briefly, finance is the management of price range (Plaskova, Prodanova and Reshetov,
2020). The individual who is accountable for coping with the fund is properly referred to as
financial managers. Principles act as a guiding principle for the investment and financing choice.
Financial managers take working, investment, and financing selections. Some of this associated
3

with the fast time period and a few long terms. The Principles of Finance all people need to
Know whether or not it's far for people or groups. Principles imply widespread guideline of a
company to perform its sports. The principles of financial management are mentioned as follows:
 The principle of risk-go back exchange-off: Risk and go back are carefully associated
with every (Haydarov, 2020). More threat, greater go back is a not unusual
announcement. Naturally, an investor expects more return for taking more chance.
 The precept of internet cash flows: To put into effect any investment choice, it's miles
critical to determine the initial cash outflow to provoke the venture and cash inflows
acquired from the challenge.
 The principle of internal financing: It should be foremost to elevate funds from the inner
resources.
 The principle of the time price of cash: The value of money adjustments because of trade
in time. One should opt for these days’s one taka (Tk.L) than that of the destiny.
 The precept of debt compensation: It is crucial to repay the debt capital in time.
 The precept of Diversification: It is not wise to make investments the entire fund in a
single venture. The fund should be diverse to diversify its chance.
 Principle of liquidity and profitability: There is a bad relationship between liquidity and
profitability as -Liquidity – Profitability
 Principle of recuperation: An essential precept of business finance is the precept of
restoration. It is very a whole lot vital that whether or not the phrases of recovery will be
flexible or inflexible.
 The principle of minimum flotation expenses: Flotation costs are needed for outside
financing. The cost of capital will increase because of flotation price. So, the problem of
minimum flotation cost is to be stored in deep situation.
 Ideal principle of financing: Ideal principle of raising funds is to run properly. Ideal
precept of financing method contemporary assets are to be received from quick-term fund
and fixed property are to be procured from long-time period fund.
 Principle of recuperation: An critical precept of business finance is principle of recovery
(Nowicki, 2018). It could be very much important that whether or not the phrases of
recuperation may be flexible or inflexible.
4

 The precept of minimal flotation charges: Flotation charges are wanted for outside
financing. The price of capital will increase due to flotation value. So, the matter of
minimal flotation price is to be saved in deep situation.
 Ideal principle of financing: Ideal precept of elevating finances is to be run properly
(White and Van Dyk, 2019). Ideal principle of financing manner contemporary assets is
to be acquired from short-time period fund and fixed property is to be procured from
long-term fund.
 Principle of the minimum price of capital: Investable budget aren't discovered free of
value. Also fee of capital are not the equal for different sources. At this regard, such
measures are to be taken that could show the manner to lower the value of capital.
 Principle of dividend coverage: It is crucial to the monetary manager that what number of
earnings will be dispensed to the not unusual shareholders as dividend and how many is
to be saved as retained profits for re-investment.
 The principle of precedence: There can be several challenge profiles. Among them,
which initiatives are to take delivery of precedence bears importance.
 The principle of company’s purpose congruence: The goal of financing to run projects is
to earn some profit. But, the specific purpose is to be determined.
 The precept of the business cycle: Effective and corrective measures are to be taken at
one-of-a-kind degrees of the business cycle.
Conflict between Management and Shareholders
Conflicts among an organisation's management and its shareholders are normally called
agency charges and are borne through shareholders. Activist shareholders and improved
company governance more and more address organization-related conflicts, however these
conflicts can be mainly excessive for shareholders of smaller and intently-held companies.
Management Risk Assessment- The management crew may be extra willing to tackle higher
ranges of danger, – running, economic or making an investment – whilst their shareholders
desire maximized returns inside the shape of capital profits and dividends. Shareholders are
usually risk-averse, that is viewed as prudent and conservative. If their management crew gets a
big part of its repayment in annual salaries and inventory alternatives, managers have much less
to lose because salaries are steady, and inventory alternative values upward push in response to
multiplied volatility, a shape of danger.
5

Returns for Shareholders- The shareholders choice minimized taxes, in place of maximization
of shareholder wealth. Management groups every now and then make the most this by placing
salaries in excess of industry norms, presumably because repayment expenses are tax deductible
and decrease taxable earnings. It may be hard to stability the go back necessities of your
shareholders with distinctive lengthy-term goals and tax situations. Their commercial enterprise
may also form a plan that comes at the rate of shareholder returns. Common examples fuelling
these decisions include issue approximately leaving a legacy, carrying out “empire constructing,"
which involves obtaining agencies at a fast tempo, even if it includes taking on too much debt, or
sacrificing profitability.
Control of Debt and Equity- Management teams sometimes modify capital structures –
the mix of debt and fairness financing employed – in ways that hold a degree of manipulate
instead of a mixture that maximizes wealth in your shareholders. Another example is poison-pill
amendments followed with the aid of boards of directors in aid of a control crew that purposely
causes the business enterprise’s shares to lose tremendous value in the occasion of a antagonistic
takeover, presenting excessive returns to shareholders at the rate of your organization's leaders.
The principle of the shareholder- A principle shareholder is a person or entity that owns 10%
or extra of a enterprise's balloting shares. The corporation can be private or publicly traded. This
is not to be careworn with a majority shareholder or majority stakeholder, that is a person or
entity that owns 50% or extra of an organisation's balloting stocks. Principal shareholders are
challenge to special Securities and Exchange Commission (SEC) submitting guidelines that
pertain to insider buying and selling. Smaller traders often look to the conduct of the most
important shareholder as an illustration of the employer's overall performance. If the principal
shareholder makes a massive extra funding in the organization, for instance, this is probably an
illustration that the company is acting nicely.
TASK 3
P3. Role of management accounts and their values as part of an integrated system
Management accounting refers back to the powerful use of all the ones facts that's
associated with management and which evolves the efficient selection making of the
organisation and management accounting systems refers to the process of series of applicable
6

data from the commercial enterprise operation after which changing them into control accounting
information (Moşteanu and Faccia, 2020). Role of management accounting in context of ASDA
is as under:
Planning: It is preparation for the success of the objectives in advance. Planning is carried
out as a way to obtain quick time period in addition to long time desires of the organization so
control accounting helps in forecasting the budgets in order that estimations for the charges and
earning can be performed in advances and via this control accounting systems facilitates in
reading the applicable facts in order that desires of the company can be finished.
Organizing: organizing refers to the proper business enterprise of people inside the
enterprise in order that a right framework may be established and roles and duties of every
department may be assigned (Thom, 2019). Management accounting facilitates in taking the ones
choices in regard to challenge of roles and duties so that a proper hierarchy of the paintings can
be maintained within the organization and in this management accounting structures also plays a
completely essential function in measuring the overall performance of the people of management
in order that operations of the organisation may be adjusted in right ways.
Controlling: Control is the technique of measuring the actual overall performance and
then evaluating it with expected overall performance in order that control may be hooked up
within the corporations so that the general performance of the agency can be stepped forward
and this could be executed thru management accounting and control accounting systems as
management accounting allows in imparting applicable statistics to the corporation in order that
dimension of performance can be finished well and management accounting system helps in
defining the information that's applicable for this reason.
Decision making: The fundamental role of control accounting and control accounting
gadget is supplying powerful choice making to the business enterprise so control accounting
allows the management to take better selections for the company.
Management accounting performs a completely principal position in an organisation control
accounting helps in assisting controlling, planning, organizing, selection making of the
employer. Management accounting is a technique of evaluating the statistics relating to the
organisation as a way to use that information in effective selection making of the enterprise.
Management accounting integrates in every and every level of the organization as all of the
records that are related to the company whether they may be economic or no longer, they're
7

associated with internal surroundings of the agency or outside surroundings of the organisation,
whether the records are associated with the social and cultural problems of the organization. In
quick all the facts that is associated with the business enterprise and might affect the selection
making is blanketed in management accounting (Morozko and Didenko, 2018). Management
accounting could be very useful for the company as it affects the selection making and decision
making of the employer leads to the success of the company so there may be a direct hyperlink
among management accounting and increase of the organization so the benefits of management
accounting in ASDA are as follows.
 Management accounting enables in increasing the efficiency of the capabilities of control.
 Management accounting facilitates in fixing the target, solving the charges of the goods.
 Management accounting allows in forecasting and getting ready the budgets so company
can estimate its profits and prices.
 Management accounting enables in imparting equipment and strategies that increases the
reliability of functions of commercial enterprise (Pratiwi and et. al., 2019).
 Management accounting helps in organising the planning and manage in all the levels of
organization.
 Management accounting helps in evolving better decision making for the commercial
enterprise.
 Management accounting helps in locating methods to lessen the cost of manufacturing in
order that better income may be generated.
 Management accounting allows in organising right communiqué amongst all of the levels
of the company.
 Management accounting helps in figuring out the overall performance of the business
enterprise.
 Management accounting enables in reducing the extra prices of the employer so that the
blessings will be earned by way of the organization.
P4. Use of accounting control systems and their value as part of an integrated business system
Accounting controls includes the techniques and procedures which are implemented by a
company to help make certain the validity and accuracy of its monetary statements. The
accounting controls do not ensure compliance with legal guidelines and regulations, but rather
8

are designed to help a company operate within the exceptional feasible manner for all
stakeholders (Young and Legister, 2018).
Separation of Duties- Assigning unique obligations to each employee that divides
accounting obligations is a fundamental control device to make sure that the people accountable
for economic reporting are cut loose the human beings tasked with making coins deposits and
asset purchases. Similarly, each person engaging in audits must be as far eliminated from
monetary obligations as feasible to make sure impartiality. The in addition apart these functions
are in a corporation, the lower the threat for fraud related to each.
Access Controls- Access controls preserve people out to maintain fee inside the enterprise.
Setting permission stages to safeguard statistics and physical assets is one of the maximum
ordinary controls groups use because they're so clean to implement. In password-protected
regions, secure passwords and -step authentication processes make it tough for employees to use
others’ login credentials (Al Breiki and Nobanee, 2019). Additionally, changing passwords
frequently enables access controls to remain steadfast over the years. Access logs and usage
records reviews are automated capabilities that can be used to regularly audit software systems to
discover discrepancies. They also can function evidence in identifying culprits while errors arise,
or fraud is present.
Required Approvals- Designating managers to be accountable for transaction
authorizations is an inner control characteristic that funnels purchase choices thru the most relied
on personnel. Authorizations may be required for huge payments, unusual prices, and
unexpected value increases. In large agencies required approvals may additionally follow a
hierarchy, necessitating multiple layers of agreement earlier than being finalized. The aim with
this approach is to weed out needless expenses at each stage to decrease waste and reduce
incidence of fraud.
Asset Audits- Auditing is the most broadly used inner accounting manage. Financial
audits like cash reconciliations are accomplished regularly to verify that actual balances suit
accounting balances. Differences may be analyzed and investigated, wherein important, to bring
about accurate financial reviews. However, asset audits are not surely electronic in nature – they
also consist of physical audits. Any time a coins drawer is tallied or uncooked material counts
are confirmed, an asset audit is being done. These on-web site audits should be done regularly to
ensure economic accuracy. Counting coins have to be executed hourly or each day, even as
9

bodily asset tracking is normally done quarterly or yearly (Vakhrushina and et. al., 2018).
Manually counting property in this manner is crucial due to the fact fraud can occur off the
books to bypass financial document audits.
Templates- Standardizing monetary files creates consistency, which makes it easier for
the duration of the auditing process. While a few reviews like a balance sheet or P&L statement
have a trendy layout, different files can vary notably among enterprise teams. Creating and the
usage of the equal templates for estimates, invoices, buy orders, funding requests, receipts, and
price reviews creates comparability across like items during an audit. Streamlining these items is
a crucial inner accounting manipulate that organizations generally tend to overlook in the rush to
implement more obvious manipulate systems.
Trial Balances- Double-entry accounting guarantees that the books are usually balanced.
However, errors and fraud can nonetheless exist in a double-entry accounting device, that's why
trial balances have to be used along with this method (Kembauw and et. al., 2020). Trial balances
are a form of accounting control that infuses additional reliability into the device by means of
retaining an inner report of credit and debits to allow agencies to identify troubles early on.
Reconciliations- Bank, provider statement, and credit score card reconciliations can
element into other accounting manage systems, however undertaking those reconciliations is an
inner manage in and of itself as properly. Understanding which items have cleared, are in-transit,
or have not but published allows businesses to discover mistakes and fraud. Furthermore,
appearing normal reconciliations informs strategic business decisions and day-to-day operations.
Data Backups- Data backups are the maximum forgotten internal accounting control gadget.
Because accurate economic information requires technological interaction among structures, lack
of economic inputs can skew reporting and muddle audits. When era fails, beyond reports and
vital facts can pass missing, delaying reporting and impairing essential accounting capabilities.
Backing up computer files to the cloud safeguards statistics from loss while computer systems
end up corrupted or servers fail.
Implementing the proper accounting controls is meaningless unless employees are ready to
behave after they observe a hassle or hit upon suspicious pastime. Formal rules must be created
to educate employees on how to respond whilst troubles arise (Yuniningsih, Pertiwi and
Purwanto, 2019). All employees should know who they are able to tell whilst there's suspicion of
10