Financial Management Report: Approaches, Techniques and Factors

This report delves into the core principles of financial management, focusing on decision-making processes within a business context, specifically using Persimmon plc as a case study. It explores formal and informal approaches to decision-making, highlighting techniques such as T-charts and Pareto analysis, while also considering influential factors like the nature of the business and capital structure. The report emphasizes the importance of stakeholder management, addressing conflicting objectives and the significance of management accounting techniques in cost control and maximizing shareholder value, including cost accounting, financial planning, and budgetary control. Furthermore, it examines fraud detection methods, ethical decision-making, and the application of auditing and corporate governance. The reflection section summarizes key learnings and underscores the importance of these financial management tools in achieving business objectives.

PRINCIPLE OF FINANCIAL
MANAGEMENT

TABLE OF CONTENT
• INTRODUCTION
• TASK 1
• CONCLUSION
• REFERENCES

INTRODUCTION
• Financial management deals with management of financial resources in the best
possible manner. It refers to allocating the financial resources of company to the most
productive operations.
• Present study is about the financial decision-making and its importance for the
business enterprise. The research is based on Persimmon plc that is a real estate
company. The report will cover the decision making approaches, techniques and factors
influencing.
• This will also cover the stakeholder management and cost accounting for minimizing the
costs. Study provides and understanding about information essential for strategic and
operational decisions.
• This covers the investment appraisal techniques in in decision-making and the financial
decision for long term sustainability of business enterprise

Approaches and techniques contributing
to effective decision making.
Formal Approach
• It is the approach comprising of structures, systems and
processes which helps management in decision-making. In
this approach step by step format is followed by
organization for the purpose of making acceptable and
viable decisions.
• The structure defines the information that defines the
alternatives. It is used by organizations for formalizing the
relationship among the staff and processes of company.

Informal Approach
• This could be defined as approach consisting of unwritten
rules, networks and the relationship building for decision
making purposes.
• There should be a strong relationship between the senior
and lower level management for getting correct and
reliable data and information's from all the departments
on which the decisions of management will be based.

Techniques used in Decision-
making.
• T-Chart : This chart is used for assessing the positive and
negative points of a decision. This enables company in
taking decisions with maximum positive points.
• Pareto Analysis : The technique is useful in case of
multiple options are available with the company for
making the decisions. In this technique options are ranked
and the one with highest rank is chosen.

Factor contributing in decision-
making.
Nature of business
• It is the major factor to be considered by the organization in making
decisions. The nature of business defined the viability of choices
available to company. For instance manufacturing concerns decision
are taken considering their production capacity.
Capital Structure
• This refers to sources of funds available to company. The business
is available with enough funds or not for making any decisions is
important.

Stakeholders management and of conflicting
objectives of different stakeholders
• Stakeholders refers to the parties having interest in the
company and it operations.
• They are the individuals or group having interests in
business portfolios, projects and projects as they are also
affected with their decisions.
• Every business enterprise is having stakeholders whose
interest are required to be considered by organization.
They play an important role for the business in decision-
making.

Managing conflicting stakeholder
objectives
• There is a great importance of managing the interests of
different stakeholder.
• These stakeholders are concerned with maximizing their
values. The suppliers of the company are concerned with
the payments schedules for their supplies, customers are
concerned with receiving high quality goods at low costs
(Manes-Rossi, Orelli and Padovani, 2017).
• The shareholders of company are concerned with
receiving high returns over their investments maximizing
their wealth

Management accounting techniques in cost
control and maximizing shareholder value.
• Management accounting is concerned with the
management of business resources and cost control
strategies.
• It is of great importance for company in achieving its
defined goals and objectives.
• Management accountants perform their roles by
ensuring that the resources are used in best possible way
and processes are being run the most cost effective
manner.

Cost accounting
• This is concerned with analyzing the cost associated with
the manufacturing of each product.
• It provides important information about the variable and
fixed costs incurred by organization (Maas,Schaltegger and
Crutzen, 2016).
• The cost accounting uses various concepts and tools for
minimizing the costs of production.

Financial planning
• The objective of company is to
achieve maximum returns
reducing the costs and its
operations(Cheraghi,
Choobchian and Abbasi, 2019).
• Financial planning helps
business in having a defined
business plans for the future
activities. This provides
company a structured path to
follow..

Budgetary Control
• It is an effective tool used by organization in decision
making. It involves making forecast about the future
income and expenditures of company.
• This requires company to make in depth analysis of the
market conditions, inflations and all the other factors for
making budgets(D'Onza, Greco and Allegrini, 2016).
• Company make comparison between the actual and
budgeted outputs.

Margin analysis
• This refers to measuring the break-even points so that
company can have an optimum sales mix with minimal
costs.
• It is an essential technique of management accounting for
keeping the costs under control. Company adopt effective
strategies and policies for reducing the costs of
production.

Techniques for fraud detection and
ethical decision making.
FRAUD DETECTION
Auditing
This refers to inspection and checking of all the business
transactions carried within organization.
Majority of the frauds are incurred in the financial
transactions. Auditing is conducted by professionals of all
the financials. This enables them to identify any frauds
being conducted so that they can be identified at their initial
stage.

FRAUD PREVENTION
Corporate Governance
• The corporate governance refers to establishing proper control and
monitoring procedures of all the business transactions.
• This involves keeping adequate checks in the enterprise for
preventing the frauds. Company should have checking of all the
inventory moving in and out of the organizations(Devi and Devaki,
2019).
• The material purchase orders, consumption of materials in the given
process, wastages and like other activities carried within business.

Ethical Decision-making
• It refers to practicing ethics in decisions taken. It deals
with the establishment of ethical values in the business.
• Decisions should not be taken considering the interest of
single party. They should not be taken to deceive and
person or party.
• Operations of the business should be carried out using
ethical standards.

Reflection
• The above study was an interesting part as it deals with financial sector.
This study has helped in getting the understanding and knowledge about
the approaches of the business decision-making.
• Decisions decide the future operations of business.
• I have learned that the major business decision are taken considering the
decisions techniques like t-chart, pareto analysis, decision matrix so that
they are much accurate and reliable.
• Also there are other factors to be considered that are influencing the
business decisions like economic factor, nature of business and like other.

CONTINUE
• The business not runs all alone it is associated with different parties
known as its stakeholders. They are concerned with every business
decisions that have effect over them.
• Organizations are required to ensure that the business decisions are
not depriving the interest of any one stakeholder as it will be giving
rise to conflicts between the stakeholders(Epstein and et.al., 2017).
• Further it has also provided an understanding about the different
management accounting techniques used for controlling the costs
and reducing them to minimum

CONCLUSION
• The above study has provided an in depth understanding about the financial
management in an enterprise. Business cannot run successfully without having
appropriate strategies and techniques.
• Report has provided about the different approaches used in decision-making like he
formal and informal approaches.
• They enable the management to take decisions considering all the factors related with
the business.
• Management also uses different techniques for supporting the big decisions with
techniques such as decision tree, decision matrix and other. Along with this it has also
provided about the factors influencing the decision-making in company. The report has
provides about the techniques used by company for fraud detection and using ethical
considerations in decisions taken by management

CONTINUE
• Hemmer, T. and Labro, E., 2019. Management by the
numbers: a formal approach to deriving informational and
distributional properties of “unmanaged” earnings.
Journal of Accounting Research, 57(1), pp.5-51.
• Moreno, W.G.C., Alegre, I., Armengou-Orús, J. and Aguado,
A., 2019. Self-construction in informal settlements: a
multiple-criteria decision-making method for assessing
sustainability of floor slabs in Bucaramanga, Colombia.
Journal of Housing and the Built Environment, 34(1),
pp.195-217.

REFERENCES
• Maas, K., Schaltegger, S. and Crutzen, N., 2016. Integrating corporate
sustainability assessment, management accounting, control, and reporting.
Journal of Cleaner Production. 136. pp.237-248.
• Manes-Rossi, F., Orelli, R. L. and Padovani, E., 2017. Accounting for
Financial Sustainability. Different Local Governments Choices in
Different Governance Settings. In Financial Sustainability in Public
Administration (pp. 109-138). Palgrave Macmillan, Cham.

CONTINUE
• Cheraghi, S., Choobchian, S. and Abbasi, E., 2019. Factors
Affecting Decision-Making Process in Renewable Energies
Investment in Agricultural Sector, Iran. Journal of Agricultural
Science and Technology. 21(7). pp.1673-1689.
• D'Onza, G., Greco, G. and Allegrini, M., 2016. Full cost
accounting in the analysis of separated waste collection
efficiency: A methodological proposal. Journal of environmental
management.167. pp.59-65.

CONTINUE
• Devi, A.M. and Devaki, M.A., 2019. Applications of
Quantitative Techniques in Decision Making of Business
Organisation.
• Epstein, E., and et.al., 2017. The future of stakeholder
management theory: A temporal Perspective. Business
Ethics Quarterly. 10(1). pp.i-xiii.