Financial Management Report: Principles for Long-Term Sustainability

This report provides a comprehensive analysis of financial management principles within the context of a business, specifically using Sainsbury's as a case study. It begins with an introduction to financial management, encompassing strategic planning, organization, and control of financial undertakings. The report then delves into formal and informal approaches to decision-making, techniques such as decision trees and Pareto analysis, and the factors influencing these decisions. Stakeholder management and the resolution of conflicting objectives, including maximizing shareholder wealth, are also examined. Furthermore, the report explores management accounting techniques in cost control, the roles of managerial accountants, and the benefits and limitations of different decision-making approaches. It emphasizes the importance of financial management principles for achieving long-term sustainability, including setting objectives, productive investments, and debt control. The report also covers the role of management accountants, accounting control systems, and techniques for fraud detection, providing a detailed overview of the financial management practices essential for business success.

FINANCIAL
MANAGEMENT

TABLE OF CONTENT
INTRODUCTION
MAIN BODY
CONCLUSION
REFERENCES

INTRODUCTION
Financial management in a business refers to
strategic planning, organization, directing &
controlling the financial undertakings of
business. The financial management also
includes application of management principles
in the business.
They also play an effective role in decision-
making and also have an effective role in fiscal
management. Present report is explained
taking Sainsbury for financial management.

FORMAL AND INFORMAL APPROACHES IN SUPPORTING
THE DECISION MAKING PROCESS.
Formal Approach
In the organizational context formal approach comprises of the
systems, structures and the processes that helps them in business
decision making.
It is an approach where the step-by-step structure is followed by the
organization for making more deliberate and thoughtful decisions
by adequately structuring the information and defining alternatives.
The formal approach is used by the organization in formalizing
relationships between the processes and staff of Sainsbury.

TECHNIQUES USED IN
DECISION-MAKING
Decision tree – It refers to business tree which is a graphical
representation of the business options available and possible
outcomes of every option. The decision tree is used as statistical
analysis.
Pareto analysis – It is technique that is used for making choice
between multiple options. In this different options are ranked on
their importance. It involves the business to take decisions
regarding the projects that is having highest ranking.

CONTRIBUTING FACTORS IN
DECISION-MAKING
Business Nature
This is an important factor to be considered by the organization before taking any
decisions. This is important for analyzing the reliability of business decisions as the
chosen decision may not bring same results for the business as compared with other.
Economic-financial factors
This includes the economic trend of the market. It involves considering inflations,
customer behavior and like factors in its decisions. Financial factors include the
resources available with the company for making decisions.

STAKEHOLDER MANAGEMENT AND MANAGEMENT OF
CONFLICTING OBJECTIVES
Stakeholder management
Stakeholders have significant influence on the success or failure of the work.
Management of stakeholders is concerned with harnessing positive influences & to
minimize effect of negative influences .
It is mainly concerned with identifying stakeholders, assessing the interests and
influence, developing communication management plan and engaging & influencing
the stakeholders.

MANAGING THE CONFLICTING
OBJECTIVES OF SHAREHOLDERS
Organizing Finance
It helps management in effectively managing the financial resources for carrying out
the operations of company. Proper organization helps company in proper allocation
of resources among different operations so that there is interruption in processes.
Maximizing shareholder's wealth
Investment are made for earning adequate returns over their funds. The stable and
good performance of Sainsbury helps in maximizing wealth of shareholders by
increasing the share prices.

MANAGEMENT ACCOUNTING
TECHNIQUES IN COST CONTROL
Role of managerial accountants
Management accountant is concerned with collection, recording & reporting
the financial information from the several units and departments of organization.
They are also required to observe & analyze the resources available with the
business for proper allocation of resources. They are required of performing several
tasks for ensuring the financial security of company considering all the risks related
to business.

BENEFITS AND LIMITATIONS OF FORMAL & IN FORMAL
APPROACHES
Formal approach helps company in organizing and collaborating the
activities carried in organization.
This approach helps Sainsbury in setting clear targets and in
coordinating the each activity of different functional as well as
hierarchical departments. Decisions are made considering all the
information and data which makes them more effective and reliable.
Limitation of formal approach is that decisions take time in
formation and implementation as defined structures is required to be
followed.

USE OF FORMAL APPROACH & INFORMAL
APPROACH FOR SUPPORTING THE DECISION-
MAKING.
The formal and informal approaches are used by Sainsbury for considering
resources that are critical in decision-making.
The approaches are used for satisfying the needs & objectives of company
by an informed decision-making process. Formal & Informal approach
builds healthy relations within organization that helps company in
effective decisions with the collaboration and acceptance from all the
departments.
This makes the managers to consider the proper terms and information and
also considering the past cases which makes the decisions more reliable.

DETERMINING OF PRINCIPLES OF FINANCIAL
MANAGEMENT THAT ARE REQUIRED FOR ACHIEVING THE
LONG TERM SUSTAINABILITY.
Setting objectives
Sainsbury frames objectives to be achieved by the
company within the given time frames. These are short term
and long term financial objectives aligning the mission and
vision of company. Defined objectives give the management
clear vision and the resources to be used.
It also helps in making strategic decisions for investments
and other activities that will help company in achieving long
term growth and sustainability.

CONTINUE
Maximizing shareholder's wealth
Investment are made for earning adequate returns over their funds. The
stable and good performance of Sainsbury helps in maximizing wealth of
shareholders by increasing the share prices.
Productive Investments & debt control
Company is required to manage and invests its funds in short term
productive investments that maximizes the value of money. Sainsbury should not
keep its funds blocked in company. Also it should keep control over its debts.
Raising too much debt will increase the financial risk of company.

EXAMINING FINANCIAL MANAGEMENT PRINCIPLES & IMPORTANCE
FOR ACHIEVING LONG TERM SUSTAINABILITY.
Financial management principles are essential as they guide
the company in achieving its financial goals and objectives.
Profits are made by company when the financial resources
are productively managed and applied in income generating
areas.

EVALUATING IMPORTANCE OF FINANCIAL MANAGEMENT
PRINCIPLES.
Financial principles are very essential as they help the
organization in increasing wealth of shareholders and business.
As ultimate goal of every business is to achieve profits and
maintaining the profitable.
This objective cannot be achieved if there are no adequate funds
for running the business. It provides the management for
effective utilization of existing resources and making proper
allocation.

CONTINUE
Preparation of Budgets
This is another important role of management accountants. Preparation of budgets for the
company. Budgets are very important for appropriate resources allocation and keeping the expenses
under control. It provides a well structured spending plans ensuring that company achieves the required
profits. They prepare budgets on the basis of past data and making required adjustments in current
budget

EVALUATING THE ROLE OF MANAGEMENT
ACCOUNTANTS.
Cost Analysis
It is the primary role of cost accountant to ensure that
all the costs are under control. Accountant make regular
analysis of costs for identifying areas where the cost are
increasing and identifying the reasons of increase. They ensure
that unproductive and inefficient areas of cost consumption are
eliminated by the company.
.

USE OF ACCOUNTING CONTROL SYSTEMS.
Accounting control systems defines the principles, rules,
regulations and standards that are required for the preparation of
financial statements. These financial statements include income
statement, statement of financial position.
They ensure that methods and procedures implemented by firms
help in ensuring validity & accuracy of financial statements.
These control systems are not ensuring compliance with the laws,
rather they are framed for making the company comply.

EVALUATION OF ROLE OF
MANAGEMENT ACCOUNTANTS AND
ACCOUNTING CONTROL SYSTEMS
Management accountants perform all the functions
related to the financial resources of company.
Ethical aspects in financial management includes
that the finance of company is raised from ethical
sources and unethical practices are not being
followed.
It ensures that interest of shareholders are not
diluted by running organization properly earning
adequate return by maximizing the wealth of
shareholder.

TECHNIQUES FOR FRAUD
DETECTION
Auditing
The auditing process will enable the company to identify the areas where the frauds are being
conducted. Audit is conducted by professional auditor who identify the transactions in which fraud is
being conducted.
Governance
There should be strong governance and monitoring of the transactions being carried out by the business
enterprise. Monitoring and control will identify the frauds at their initial stage and this will be
preventing it from large damages.

CONCLUSION
From the above study it could be concluded that business cannot survive without adequately managing
its financial resources.
They are required to manage its financial resources using appropriate methods and concepts that are
essential for the management of the organization for making informed decisions. The cost accountant
play plays an important role in managing the financial resources of company.

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.