Analytical Essay: Role of Management Accounting in Walmart Company

This analytical essay examines the role of management accounting within Walmart, a multinational retail company. It explores how management accounting aids in forecasting, decision-making (like make-buy analysis), cash flow management, performance variance identification, and inventory control using techniques like just-in-time management. The essay details various methods employed, including ratio analysis, investment appraisal, marginal costing, standard costing, budgeting, and cash flow analysis, highlighting their benefits. It emphasizes how these methods facilitate departmental coordination, informed decision-making (financing, investment, dividends), and employee motivation, while acknowledging the importance of accurate information. The essay concludes by summarizing the importance of management accounting methods and its role in addressing problems related to management accounting reports, such as cash shortages. References include books and online resources that support the analysis.

Analytical essay This project
focuses on management
accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Role of management accounting within Walmart company........................................................3
Methods of management accounting...........................................................................................4
Benefits of new method of management accounting to Walmart company................................5
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................1

INTRODUCTION
Management accounting is a process of providing the data and information related to
internal, external, financial and non-financial trends and statements for making decision. In this
context, this report will cover the role of management accounting in Walmart company. Walmart
is a multinational retail company located in United States. Further, the report will also discuss
the different types of methods along with benefits of new methods of management accounting in
Walmart company.
MAIN BODY
Role of management accounting within Walmart company.
Management accounting helps in preparing reports and budgets by using the information
provided by the financial statements. Such a report is available only to internal stakeholders of
the company. The role of MA includes:
 Helping forecast the future: MA helps the managers in taking decision and forecasting
future trends by answering most critical questions like whether company need to buy
another company or not (Jamaluddin, Mohd Husin and Omar, 2018).
 Helping in make-buy decision: This also help the managers of the company in
identifying and analysing the cost they incur if they buy the product from supplier and the
cost of making the product in-house for making appropriate decision.
 Forecasting cash flows: With the help of budgets and trend charts, the managers of
Walmart easily predict the cash flows sources and their impact on the cash availability at
the time of emergency. This helps the managers in maintaining the minimum cash
balance with the company by preparing cash budgets.
 Helping understand performance variance: The managers prepare budgets which reflect
the expected figures rather than actual. So, this helps the managers of the company in
identifying the gaps between the actual and expected one and in case of negative outcome
it helps the managers in adopting appropriate strategies.
 Helping in inventory management: MA provides tools to the company for managing the
stocks in the company effectively and efficiently. For example; in Walmart company the
managers use just in time management technique to reduce production time and cost, also
use economic order quantity to maintain right amount of inventory at right time in

warehouse. By this the company can easily maintain optimal stock without incurring high
inventory holding cost and ordering cost (Hadid and Al-Sayed, 2021).
Methods of management accounting
The methods of management accounting are based on the financial accounting information,
cost accounting information, future information, mathematics and other miscellaneous data. This
involves:
 Ratio Analysis: With the help of this the managers can easily determine and analyse the
profitability, liquidity, activity and efficiency performance of the company and also
compare it with competitor’s performance (Modell, 2020).
 Investment appraisal technique: This is a technique with the help of which the managers
can find out suitable and profitable investment plans which give company higher return.
The best method for this is considered as net present value method. Sometimes, higher
return proposal is not beneficial for the company in long term which need to be properly
address.
 Marginal costing: This is a method which provide break-even analysis and margin of
safety calculation to the company. With this the mangers get to know the no profit no loss
sales point and adopt appropriate way to increase sales for further increasing profit of the
company.
 Standard costing: Standard costing is a method of management accounting with the help
of which the managers of the company determine the variance between the actual and
expected figures in the term of material, labour wages, overheads, profit etc.
 Budgeting: Preparing and creating budgets is work as a base for the next year actual. By
doing this the company can identify expected expenses and cost the company incur to
produce the product of the company. And also, the expected sales revenue the company
gain and earn what amount of expected profit. This helps in variance analysis.
 Fund flow and cash flow analysis: This is a method which help the company in
identifying the cash inflow and outflow from the three main activities of the organization.
The three activities include the operating, financing and investing activity. But sometime
this analysis might result in the shortage of cash which need to be consider by managers
(Ostaev and et.al., 2020).

 Financial planning: This method indicate that the management accounting helps in
planning th finances of the company. Such as making decision regarding from where to
acquire funds i.e., sources of funds including equity and debt and where to invest that
funds. The selection criteria of the investment proposal are based on that the rate of return
must be higher than the cost of acquisition of funds.
Benefits of new method of management accounting to Walmart company.
The various benefits the methods, tools and techniques of management accounting
provide to the company which help in making appropriate decision and further helps in achieving
goals and objectives of the Walmart company.
 It helps the company in maintaining the coordination between the departments and
processes with the help of which the efficiency of the production of the company will
increase automatically (Latan and et.al., 2018).
 It enables the managers for involving detailed analysis for making the correct decision
such as financing decision, investment decision and dividend decision which must be in
the favour of the company.
 Traditional methods of the management accounting benefit the company in only profit
maximization but the new and modern methods help the company in not only profit
increment but also maximizing the wealth of shareholders.
 It serves as a tool which help the company in motivating their employees. Evaluating the
daily performance of the employees helps in making decision regarding whether to
promote the employees or not, whether to provide them incentives or not.
 As the new methods of the management accounting is uses proper scientific tools that
why it unable to provide accurate information. It is because it depends upon the expected
figure not real figures (Uyar, 2019).
CONCLUSION
The report concludes the management accounting methods and their benefits. The report
critically analyses the benefits of management accounting methods and the role of management
accounting to address the problems regarding the management accounting reports. The report
states that cash flow analysis may lead to cash shortage in future which need special attention of
managers of the company.

REFERENCES
Books and journals
Jamaluddin, A., Mohd Husin, N. I. and Omar, N., 2018. The role of management accounting in a
turnaround strategy. Asia-Pacific Management Accounting Journal (APMAJ). 13(3). pp.131-148.
Hadid, W. and Al-Sayed, M., 2021. Management accountants and strategic management
accounting: The role of organizational culture and information systems. Management Accounting
Research. 50. p.100725.
Modell, S., 2020. Across the great divide: Bridging the gap between economics-and sociology-
based research on management accounting. Journal of Management Accounting Research. 32(2).
pp.1-15.
Ostaev, G. Y. and et.al., 2020. Assessment of the effectiveness of the management of agricultural
organizations in management accounting. Amazonia Investiga. 9(28). pp.260-271.
Latan, H. and et.al., 2018. Effects of environmental strategy, environmental uncertainty and top
management's commitment on corporate environmental performance: The role of environmental
management accounting. Journal of Cleaner Production. 180. pp.297-306.
Uyar, M., 2019. The management accounting and the business strategy development at
SMEs. Problems and perspectives in management. (17, Iss. 1). pp.1-10.
Online
Management accounting techniques of Walmart company. 2003-2021 [Online]. Available
through:< https://www.ukessays.com/essays/management/management-accounting-techniques-
of-walmart-company-management-essay.php#:~:text=Wal-Mart%20can%20use%20inventory
%20management%20accounting%20to%20inventory,suppliers%20to%20determine%20if
%20stock%20is%20available%20cheaper.>\
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