Financial Reporting Analysis: Techniques and Decision Making for ASDA

This report delves into the principles of financial reporting, focusing on decision-making processes, stakeholder management, and various techniques used in financial analysis. The report examines the application of different approaches and techniques, such as knowledge-based approaches and SWOT analysis, to effective decision-making within an organization. It also explores stakeholder management, addressing conflicting objectives and the importance of balancing interests. Furthermore, the report evaluates the value of management accounting techniques in cost control and maximizing shareholder value, including marginal analysis and capital budgeting. It identifies techniques for fraud detection and discusses ethical decision-making approaches. The report also analyzes investment appraisal techniques and their effectiveness in maximizing return on investment, and how financial decisions support long-term sustainability, with recommendations for management accountants to improve financial sustainability. The content is based on the context of ASDA Limited, providing practical examples and insights into real-world financial reporting scenarios.

Principles of Financial
Reporting

Contents
INTRODUCTION...........................................................................................................................................4
MAIN BODY.................................................................................................................................................4
Scenario A....................................................................................................................................................4
1. Evaluation of a range of techniques, approaches and the factors which contribute for effective
decision making.......................................................................................................................................4
2. Stakeholder management and the management of conflict objective of different stakeholder
groups......................................................................................................................................................6
3. Value of management accounting techniques in cost control or maximising shareholder value........7
4. Identify the techniques for fraud detection and the approach to ethical decision making.................8
5. Write a reflection on the basis of learning...........................................................................................9
Scenario B....................................................................................................................................................9
1. Evaluate how data obtained might help to inform operational or strategies decisions for the
organization.............................................................................................................................................9
2. Compare and contrast the three different investment appraisal techniques and evaluate their
effectiveness to help to maximise return on investment (ROI).............................................................12
3. Demonstrate the value of techniques in helping to inform financial decision making......................16
4. Analyse that how financial decisions making support the long term sustainability...........................17
5. Recommend that how management accountant helps to improve financial sustainability..............17
CONCLUSION.............................................................................................................................................18
REFERENCES..............................................................................................................................................19

INTRODUCTION
Financial management is an inner aspect of governance at large. It concerns the roles of the
finance people in the organization. Solomon described the word financial management; "It's
about the productive use of an essential economic tool, including investment resources"
Financial management is involved with the efficient control of the company assets. In simple
terms, Financial Accounting may be named as Corporate Finance or Company Management as
conducted by business companies. Financial management has been one of the key components of
management process that is immediately subjected to different organizational functions such as
staff, promotion and distribution. Financial management encompasses multifaceted strategies
over a wide region (Burger and Middelberg, 2018). Financial accounting is the integration of
corporate development concepts to a firm's financial resources. Successful planning of the
finances of a company provides excellent fuel and routine systems to ensure proper working.
When budgets are not addressed properly, a company may face obstacles that can have
significant consequences for its progress and expansion. This report has been mainly based on
the ASDA limited which established in UK and dealing into online food, grocery and many other
things. This report contains various topics such as, stakeholder management, approaches, tools
and factors for decision making procedure. Along with analysis various investment appraisal
techniques and ratio analysis to know the position of the company.
MAIN BODY
Scenario A
1. Evaluation of a range of techniques, approaches and the factors which contribute for effective
decision making
The decision-making process is an advisory activity undertaken by a qualified committee
to allow every company to work more effectively. Hence, it is a continual and complex operation
that characterizes most other organizational-related activities. Because it's an ongoing method,
decision-making process plays an important role in an organisation success. Because intelligent
minds are engaged in the decision-making process, in addition to social competence, it needs
strong technical training combined with competencies and expertise. For the effective decision

making require to apply different approaches, techniques and apply various factors to take right
decision for the Roast Ltd such as:
Approaches:
Knowledge based approach: Knowledge-based management approach is a decision-
making process which utilizes specified tests to assess and guarantee the excellent results for a
particular topic. It has been used by developing a thought pattern and logic underneath a position
to bring successful and reasonable choices. Information-based method means recognizing
perception as a means of accomplishing productivity in companies; revealed that high a strategy
for managing and maximizing performance in organizations. The provision of a knowledge-
based strategy is crucial for any corporation entity, so that the choices made for improvement
have some empirical basis. This approach is mainly based on the qualitative and quantity
approach to inform for decision making. It impact on large manner on the business activities to
get success in the business for longer period of time (Ndikwe and Owino, 2016).
Formal and informal approach: The informal solution is structured to settle a conflict
between the two entities by the staff person or contingent individual requesting explanation
and/or consultation, then by the service provider supplying exclusively classified information
advice and guidance. A formal framework is developed for the interpretation and layout of
database structure charts being used as conceptualizations in a multi - dimensional metadata
application stack and as assistance in the structure of many other declarative aspects. It gives the
company a cohesive approach to either the decision-making process. This process avoids the
observational decision-making approach and provides explanations of the purposes for decision
making. It greatly improves the probability of selecting products that match the corporation's
numerous different strategic priorities. The uncertainty linked to the responsibilities is reduced
by logical equivalents.
Techniques used in decision making
Decision matrix: A decision matrix is a collection of values in multiple rows that
requires the expert to methodically recognize, assess, and rate take place between valuation and
details pairs. Components of a continuum of judgments indicate choices based on parameters for
the decision. A decision matrix is equivalent to a checklist of advantage / disadvantage, but it

does encourage you to put a level of intelligence on each element. That thing they can evaluate
the different possibilities one against another extra appropriately.
SWOT analysis: SWOT is a structure for evaluation and strategy-building, concentrated
on obtaining critical details for effective decision - making. It is also an acronym for strengths,
weaknesses, chances and risks. Generally relevant parties will assemble in a come up with ideas-
type meeting and complete a SWOT chart of 4 categories. It is a methodology of strategy
formulation used only to support an individual or persons recognize strengths, weaknesses,
opportunities and threats of an organization or require careful planning. Strengths: Company or
site conditions which give it a competitive advantage over all others (Ben‐Shahar, Sulganik and
Tsang, 2016).
Factors affecting decision making:
Financial factor: Financial factors influencing financial decisions have included the
essence of the undertaking, the volume of the undertaking, the anticipated gain, the expense and
dangers associated the financial leverage of the undertaking, the board composition, the
aspirations of the shareholders, and the maturity of the undertaking, the stability of financial
resources and its capital expenditures.
2. Stakeholder management and the management of conflict objective of different stakeholder
groups
Management of stakeholders is critical as this is the backbone of project success
partnerships. Such requirements include developing a steady relationship, getting confident and
important, and knowing how their lead to productivity to the productive fulfillment of project
goals. The management of stakeholders is probably the most critical element for effective project
execution, and yet is often perceived as a marginal operation or something that can be
subcontracted to daily business. A management approach which focuses specifically on key
constituents. Its focus on partnerships with local relevant parties tends to make it more
comprehensive. The term "stakeholder management" suggests that such individuals can be
persuaded to react better to a campaign, but the reality is that a project leader sometimes has no
legitimate power and often needs to rely on interaction to attain his / her goals.

Numerous stakeholder groups may have competing interests. For example: Owners usually
want massive returns, and thus may be unwilling seeing the organization pay very high salaries
to employees. A judgment call to transfer factories abroad may minimize employee costs.
Essentially, all investors have an interest in the company results and it is not supported by an
incredibly harmful investor dispute. For instance, improperly engaged employee can result in
lower production, output and lower income. Generally still, there will be tension between
management and workers contributing to strike dispute such as layoffs. It is anticipated that the
management should understand any need to balance the interests of the various investors and
sales staff who are associated with generating profitability and having a fair return from their
resources. The procurement department aims to accomplish the task in even less order to
enhance its performance. Each company and share holder has their own objectives and the leader
must identify his or her objectives (Ramírez, Seeliger and Di Pietro, 2016).
3. Value of management accounting techniques in cost control or maximising shareholder value
A management accounting division is one of the critical departments of the business, but
due to its "underneath the cover" mode of operation, many businessmen do not know that.
Accounting professionals at administration are stakeholders who build inner analyzes to direct
the ultimate marketing strategy. Managerial accountants ought to analyse different incidents and
organizational indicators to turn data into meaningful information knowledge that can be utilized
in their decision-making phase by the leadership of the firm. They intend to even provide reliable
information about the functioning of the firm by evaluating every single product line, execution
of a project, service, etc. Accounting management strategies improve client operational
performance. All is achieved with a quantitative tool for determining and present the data in
management accounting. They are noticing variations with that. On that point, they will be
making advertising measures. Other workers also would be inspired by this, since if the quality is
high, they would receive credit for it. The management accounting improves performance of
business effectively. There are mentioned some techniques of management accounting that used
by the company for the control cost of business along with maximizing shareholder such as:
Marginal analysis: Developers ought to learn the ability to purchase for every degree of
the operation in order to evaluate utilizing marginal analysis. This is understood as the
significant value of an action, as has been discussed. To determine how many beverages to buy,

you have to take a collection of "yes" or "no" choices on how to purchase an extra beverages.
This technique mainly uses to control the cost activities in business.
Capital budgeting: Capital budgeting is responsible for assessing the details needed to
take the requisite capital purchasing decisions. In the study of capital budgeting, strategic
accountants measure the net present value ( NPV) and the intrinsic rate of return ( IRR) to allow
staff focus on new statements affecting capital budgeting.
Trend analysis: Statistical method and prediction are directly associated with the
definition of commodity cost patterns and processes, but also with the detection of observe
significant from the statistical parameters and the explanations for these deviations (Gudz and
Stetsiuk, 2020).
4. Identify the techniques for fraud detection and the approach to ethical decision making
The company has introduced a Big Data Analytics framework that provides multi-source
transaction processing and review. Through using machine learning to browse for dishonest
thought patterns in large amounts of semi - structured or unstructured claim-related data,
businesses are trying to detect forgery in actual - time. There are applied various types of Fraud
detection techniques such as:
Sampling: For some fraud detection applications sampling is important. And there is a lot
of data surrounding population, sequencing will be even more successful. But it also has its own
downside. Sampling cannot be able to properly monitor the identification of fraud, because it
takes into account just a few individuals. Likely to be fraudulent do not happen spontaneously
and an entity needs to check all the activities to verify identity successfully.
Ad-hoc: Ad-Hoc was nothing more than a theory for figuring out fraud. It lets you go
exploring. They can assess the money transfers and discover out if there is any scope for fraud.
They may have a theory to check to finding about whether any illegal procedures are being
followed to and can search on another.
These methods are used by the organisation for the fraud detection and keep safe all the
data in the business entity.

Approach of ethical decision making: Business should take a rational approach to successful
decision-making by determining behavior based on its impact of the disease. It considers its risks
and harms prior to actually making any options. The approach aims to attain the highest benefit
to the market. In addition and at the same time creating the least damage or preventing the
greatest hardship. For corporations the approach is useful since every decision is taken as based
on of this analysis results.
5. Write a reflection on the basis of learning
The research included learning different types of methods and strategies to take corrective
action. I found some challenges throughout this venture and also comprehended how to maintain
various issues.
Issues - The biggest problem I confronted mostly during making of this research was that of
researching provided theories and assignments. I used internet to find necessary details, but there
were several possibilities that made it more difficult. That is because the time frame to
implement the work was too small. But also shortage of site involved in providing concrete
evidence, I also considered it a major issue.
Things I'm learning - In addition to the problems I'm learning some outstanding stuff
throughout this project that can support me in potential. I am studying, for example, how and
where to find useful knowledge from sources on the internet. I learn things about strategy
implementation theory as well as techniques for making informed decisions (Oster and Deakins,
2018).
Scenario B
1. Evaluate how data obtained might help to inform operational or strategies decisions for the
organization
Every organisation can prepare financial statement at the end of the financial year that
helps to present actual position of business in front of inner and outsider stakeholder. On the
basis of these financial data they are take all the relevant decision that helps them to understand
the requirement. Most of the companies are using to ratio analysis for the analysis the position of
company and includes last year outcomes.

Ratio analysis: Ratio analysis is a basis for assessing and selling prices financial risk and
carrying out foundational market value of the company. A financial ratio is obtained from the
company’s financial and is measures represent the financial importance of specified data
variables extracted from such financial information. There have been several users of economic
indicators, classified by their importance to several parts of the organization of an organization
and their value to particular demographics.
Current ratio:
2017 2018
Current assets 347 447
Current liabilities 138 308
Calculation 347/138 447/308
Current ratio 2.51 times 1.45 times
Quick ratio:
2017 2018
Quick assets 227 148
Current liabilities 138 308
Calculation 227/138 148/308
Quick ratio 1.64 times 0.48 times
Return on capital employed:
2017 2018
Operating profit 51 127
Capital employed 879 1135
Calculation 51/879*100 127/1135*100
ROCE 5.80% 11.19%

2017 2018
Gross profit 517 544
Net sales 2022 2534
Calculation 517/2022*100 544/2534*100
Gross profit ratio 25.57% 21.47%
2017 2018
Net profit 36 81
Net sales 2022 2534
Calculation 36/2022*100 81/2534*100
Net profit ratio 1.78% 3.20%
2017 2018
Operating profit 51 127
Net sales 2022 2534
Calculation 51/2022*100 127/2534*100
Operating profit ratio 2.52% 5.01%
Related to the variables assessed previously, it could even be observed that their plurality
of the 2018 ratios is not in fine condition as compared to 2017. Including the current ratio in
2017 was 2.51 times but in the subsequent week it fell by 1.45 times. This indicates the company
can't meet the optimal 2:1 criteria ratio in 2018. The poor output in 2018 is due to the significant
rise in their interest expense compared to 2017 in 2018. And overall rapid ratio is also lower in

the year 2018. In 2017, it was 1.64 times, but reduced in the following years and became 0.48
times. This means that in 2018 they must implement the requisites of the fantastic quick
conjunction 1.5:1 incidents, and just like the initial number. Its because the value of the quick
assets was lowered in 2018. As in 2017 it was 227,000 even though in 2018 it was 148,000. And
therefore their efficiency in trying to charge visualization tool production was decent units in
2017 in 2018. As in 2017, it was a growth of 5.80 per cent in the previous year or even enhance
of 11.19 per cent in 2018.
2. Compare and contrast the three different investment appraisal techniques and evaluate their
effectiveness to help to maximise return on investment (ROI)
Investment assessment methodology that the organization employs to evaluate the best
choice for investment decisions between several alternatives. These techniques are a portion of
the overall traditional budgeting. The leader of ASDA uses this data to identify favorite projects
which will have more added benefit in coming years. Because once pricing technique has been
developed for investment managers, they should create strategies which will help raising the cost
of producing products. An example of various investment assessment techniques is given below
which is as adopts:
Payback period: Typically, the payback period is often used to properly assess costs and
benefits related by reviewing the risks associated without first undertaking individuals. An
investment can have either a brief or a longer payback period. A smaller rate of return indicates
that now the transaction will be 'able to pay it back' relatively soon, that is, the expense of the
spending will be simply obtained by the investment capital created by the transaction (Safari,
2017).
Investment: 100000
Year Cash flow Cumulative cash flow
1 30000 30000
2 40000 70000
3 90000 160000
4 120000 280000
5 150000 430000

Payback period= Year before cost recovered + amount to be recover / next year cash flow
= 2 + 30000/90000
= 2.33 years
This is indicating that cost of this project will be covered in 2.33 years and this will be beneficial
for companies.
Net Present value: A development's net present value ( NPV) reflects the shift in the properties
of the system / earnings of the company that will benefit from the development's recognition
during its lifespan. It constitutes the modern percentage of cash capital employed of both the
venture divided by the total sale price(Pandey and Pandey, 2019).
Cost of capital- 10%
Investment- 100000
Year Cash
flow
PV
factor
Discounte
d cash
flow
1 30000 0.909 27270
2 40000 0.826 33040
3 90000 0.751 67590
4 120000 0.683 81960
5 150000 0.621 93150
303010
NPV= Discounted cash flow-investment
= 303010-100000
= 203010

The net present value of project is positive that is of 203010 pounds and company should accept
this project.
Accounting rate of return: The process of ARR (Accounting Rate of Return) has been used to
evaluate the investment projects according to their earnings. Ventures that receive the maximum
are identified whereas and those who do not conduct to the mark are dismissed. The ARR is even
further segmented into the required rate of return, ordinary capital expenditure, and divisional
income (Nigatu Mersha and et.al, 2016).
Accounting rate of return:
Formula: Average net income / Initial investment * 100
Calculation of net income:
Formula: Net cash inflow – depreciation
Depreciation = Initial investment / life of project
= 600000 / 6
= 100000

Net income:
Calculation of average net income:
Project A: Average Income = (-75000) + 0 + 150000 + 200000 + (-50000) + (-50000)
= 175000
= 29167
ARR = 29167 / 600000 *100
= 0.0486 * 100
= 4.86%
Project B: Average Income = 50000 + 50000 + 50000 + 100000 + 100000 + 100000
= 450000 / 6
= 75000
ARR = 75000 / 600000 *100
= 0.125 * 100

= 12.5%
Project C: Average Income = 100000 + 150000 + (-75000) + (-75000) + 0 +175000
= 275000 / 6
= 45833
ARR = 45833 / 600000 * 100
= 0.0764 * 100
= 7.64%
3. Demonstrate the value of techniques in helping to inform financial decision making
Decision-making is the method by defining a position, collecting data and reviewing
alternate remedies. Financial decision making is a procedure that is liable for the decisions
relating to the company's assets and major shareholder total liabilities, and also some support
makes. Established appropriate investment targets: set these same goals and objectives as well as
the danger would be willing to withstand. A financial decision that concerns the level of funding
to be received from different lengthy-term investments outlets such as equity capital, preferred
shares, debentures, bank loans, etc. In certain words, it is a judgment on the company's 'capital
structure (Bishev and Boskov, 2016).'
Break even analysis: This application helps a choice-maker to assess the possible
alternatives due to price, total price, and variable costs. Break-even analysis is a metric by which
you will assess the amount of revenue forced to support all maintenance expenses. The decision-
maker may use this method to assess the break-even point for the organization as a whole rather
than about any of its goods. At break-even, overall income is the equivalent of total expense, and
income is zero.
Cash flow statement: A cash flow statement offers knowledge on a business' adjustments
in marketable securities by identifying free cash flow through operational, acquisition, and
finance operations. It is a main document that must be arranged within each income statement
whereby a company presents its financial reports. Monitoring any company's cash scenario is
important. The financial statements will represent the earnings and therefore does not provide the

currency contributors any hint. The cash flow statement shows the crucial data about what the
industry is now doing with both the real money.
Simulation: This process involves constructing a framework that makes a significant
structure or an established one. Simulation is effective in addressing complicated problems
which other approaches could not easily solve. Recent months have seen enormous use of
computer systems for simulation. The external factors and related interdependencies are
introduced into another template. A collection of results is generated whenever the model is
programmed over the computer. Simulation methods are important for comparing possible
approaches and choosing the right one. Simulation can also be used to establish pricing models,
sales channels, wealth distribution determinations, transportation, etc.
4. Analyse that how financial decisions making support the long term sustainability
The central field of result-oriented strategy is competence in all aspects of financial
performance. That necessitates, that being said, even more, and also more crucially, anything
distinct than with the ability to implement accounting standards appropriately. They can only
manage money difficulties professionally with complete knowledge and strong skills in using
financial methods and evaluations. Those who are reasonably steeped in budget preparation,
vital-performance indicator analyze or capital appreciation calculations can take part in the
finance and accounts decision-making process. These activities are working in effective manner
and help to for long term sustainability.
And when a corporation has a successful business structure and responsible economic
management, this could always prosper in market competition. They cannot compete in the
international market if businesses make misplaced investments or technological advancements.
The development of the organization based on how successfully its executives make the decision
on their business transactions monetarily. This includes keeping a leading position in the market
and defending rivals. Companies are taking financial measures using efficient methods which
can monitor the workers in an organization.
5. Recommend that how management accountant helps to improve financial sustainability
Most of the companies are also not currently using financial management as well as
management accounting tools to help include decision-making and impact knowledge on

sustainability. It can affect the overall performance of corporations. This is that because it is
useful to acquire situation properly for improved impact of corporate social responsibility and it
can also becomes easy with the support of financial management. But corporations should use
these accounting methods to take corrective steps. This accounting approach should be followed
by their executives, but also in Continental clothing business (Ziuzin, 2017).
CONCLUSION
On the basis of above research project this could be concluded that financial management
has been one of the particular word that requires to taken into consideration by commercial
enterprises. There are indeed a wide variety of precepts that businesses must recognize. The
study focuses on the various main selecting optimal processes, processes and influences. In
addition to evaluating stakeholders, it is also important for businesses such as determining the
financial condition of the company. The second part of the questionnaire suggests on diverse
accounting methodologies that may be beneficial for important decision-making. There are a
number of approaches like accounting ratios, investment assessment methods and many others.
Examples of nominal value, payback and required rate of return are understood on multiple
occasions of the particular organization, ASDA, according to the document. The next section of
the article suggests the effect of political methodologies in strategic decisions over the lengthy
period. The final section of the study illustrates guidelines to organizations about the use of
accounting methods in leadership. Since there are a wide variety of methods and structure for
management accounting to resolve financial problems.

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