Impact of Management Accounting on XYZ PLC Company Performance Report

This report provides a comprehensive analysis of the role of management accounting in enhancing the performance of XYZ PLC, a holding company with three strategic business units: X-Square Financial Ltd., York Manufacturing Ltd., and Zebra Investment Ltd. The report delves into the significance of management accounting techniques for internal decision-making, planning, and control. It examines the application of ratio analysis and sources of finance for X-Square Financial Ltd., cost analysis and cost-volume-profit analysis for York Manufacturing Ltd., and cost of capital and investment appraisal methods for Zebra Investment Ltd. The report highlights how these methods contribute to improved financial management, strategic planning, and overall company performance. The conclusion emphasizes the critical role of financial and management accounting in assessing market position and making informed decisions. The report references various books and journals to support its findings.

LFBM203-Assessment
Part 2

Contents
INTRODUCTION...........................................................................................................................3
TASK...............................................................................................................................................3
Management accounting and how it impacts the performance of the company..........................3
Critical Analysis of the factors affecting the company for achievement of the primary
objective.......................................................................................................................................3
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
The financial management and analysis procedure is identified as the method which has been
proposed to help any type of organization assess the financial position of the company in the
market, due to the fact that the overall management of the finance which has been raised through
different sourcing options, is the top most priority for the company. The administration of the
financial activities or the data will help the company review internal and external allocation of
the valuable resources and as a result impact the profitability along with the wealth of the
company. In the following report the analysis for XYZ PLC which is the holding company with
three different strategic business units and having three different scenarios related to the sub
units namely the X-Square Financial Ltd., York Manufacturing Ltd. and Zebra Investment Ltd.
Furthermore, the report will discuss how the role of management accounting plays a critical role
in improving the overall performance of the company and a critical examination of different
topics combined in each scenario.
TASK
Management accounting and how it impacts the performance of the company
The management accounting process is defined as the various techniques which are required for
presentation of financial information for the internal purposes and to propose key decisions for
the company (Yatsyk, 2020). Furthermore, the management accounting procedure is also
identified as the process which can benefit the organizations in identification, measurement,
accumulation and analysis which could be put to use for the future. Following are the advantages
of the management accounting process which maintains the position of XYZ PLC:
 Helps in the decision making process which could be used for the future.
 Planning and performance of the tasks.
 Controlling and organizing the operations along with the direction process.
 Understanding the financial data of the company.
 Identification of the business problems and other similar areas.
 Conducting the strategic management procedure for all departments.
Critical Analysis of the factors affecting the company for achievement of the primary objective
Scenario A

The first sub strategic unit for company is the X-Square Financial LTD, which deals in funding
the young and newly established start-ups which require support from the branch director who
has successfully completed the CPD course for improving the business position of the company
through the usage of the Ratio Analysis and the identification of the various sources of finance.
The various benefits of the ratio analysis procedure are mentioned below:
 The analysis will help the company in forecasting and planning for future decisions by
performing the trend analysis through the correctly observing the trends in the market.
 The management can easily draft a relevant budget for the future through the ratio
analysis, as this method takes into account the various financial and business items which
are present in the financial documents of the company. (Yao, 2019)
The second most important aspect about effective and efficient management of the financial
position of the company, is identified as the sources of finance and what options the company
adopts to give effect to the financial resources requirements:
 Retained Earnings – Every type of organization often aims at maximization of the profits
by selling a product or service whose price is higher than the costs. After generation of
the profits by selling such items, the company may invest adequate amount of profits
towards investment purposes.
 Debt Capital – The amount of the funds which are being sourced by the company through
the external sources such as banking institutions, where the issuer or the borrower issues
the corporate bonds or promissory.
 Equity Capital – The most commonly used option for the company is to raise the capital
from the public in return for the proportionate ownership stake in the company, by way of
shares issued in the public. Here the company need not to make interest payments.
Scenario B
In these second case the company is York Manufacturing Ltd., which is involved in the
production of washing machines and the newly employed director has been studying the business
journals, to understand the costing and cost volume profit analysis. The process for calculation of
the cost analysis is defined as follows:
 The first and foremost criteria for the cost analysis process is to determine the reason for
which the company needs to perform the analysis.

 Evaluation of the costs which are required for the cost analysis, such as the direct costs,
indirect costs, real costs, tangible costs and intangible costs. (Cheng, 2021)
 Compare to the previous projects from the current cost analysis and identify the similar
costs and calculations which can be included in the analysis.
 Defining the stakeholders or identification of the shareholders is crucial for calculation of
the cost analysis, where the shareholders may invest their money in the organization.
 Listing the prospective benefits for the company is also important and this step includes
the assessment of the money which the project will generate.
 Deduct the amount of costs from the overall outcome which signifies that the cost
analysis ratio must be assessed by subtraction of the overall project costs.
 The last step in the cost analysis procedure is to interpret the relevant results by the
company through the assessment of the outcomes derived from the whole procedure.
Furthermore, the cost volume profit analysis is the method which has been used for identification
of the changes in the variable and fixed costs affect a firm’s profit and may use the method to see
how many units are required to sell to break even or attain a specific minimum profit margin.
Below mentioned is the process which has to be followed to assess the cost volume profit ratio:
 Sum the relevant fixed costs such as the rent expense, insurance amount, salaried to
employees, property tax paid, marketing and advertisement expenses, accounting
procedure expense, legal expenses, equipment or depreciation amount.
 Determination of the overall selling price of the products or services which the company
has been manufacturing, through the assessment of various factors which are related to
the dynamic environment and the commodity sold.
 Calculation of the variable costs is the next step which has to be followed by the
company for assessment of the correct cost volume profit analysis. Here the calculation
of the costs includes the direct material and labour along with the variable overhead.
 The next step for the company is to calculate the contribution margin through the usage
of the variable costs per unit and the unit selling price. The variable costs need to be
subtracted from the unit selling price. (Han, 2018)
 Complete the Cost Volume Profit analysis where the Break-Even Sales Volume ($) =
Fixed Costs ÷ Contribution Margin Ratio (%)
Break-Even Sales Volume (units) = Fixed Costs ÷ Unit Contribution Margin

Target Sales Volume = (Fixed Costs [$] + Profit Target [$]) ÷ Contribution Margin Ratio
(%)
Target Sales Volume (units) = (Fixed Costs [$] + Profit Target [$]) ÷ Unit Contribution
Margin
Scenario C
The Zebra Investment Ltd., is planning to undertake the three mutually exclusive projects and the
Investment director of the company requires an analysis and explanations of the Cost of Capital
and the Investment Appraisal methods to understand how these methods can benefit the
workings of an organization. The following is the method is adopted for administration of the
cost of capital:
 The calculation of the cost of debt is the first step which needs to be followed by the
companies which are having debts as the secondary source of finance. Here, the formula
opted is as follows:
 The cost of equity or the amount of funds which are raised through the public issue of
shares of the company often require the assessment of the cost of equity or the return
percentage on the same, which is defined as follows:
 The last step for the company is to calculate the weighted average cost of capital through
the formula described below:
Furthermore, the investment director has also wished to discuss the Investments Appraisal
Methods, which are defined as follows:
 The most popular method of the investment appraisal procedure is the identification of
the payback period or the time period which the project will take to recover the cost
which has been incurred on it.
 The next method is the Net Present Value method where the company assess the sum of
the discounted future cash inflows along with the outflows. (Malik, 2021)

 Profitability index is also identified as the method for assessment of the value related to
the investments made, where the method defines how much the company will invest per
dollar of the investment.
 Discounted Payback period is the method where the payback period is calculated on the
basis of the discounted future cash flows.
CONCLUSION
The following report helps the company of any kind irrespective of its nature or the internal and
external way working, understand the benefits of the financial and management accounting
procedure. It is important for the organization to critically analyse its position in the market as
the maintenance financial position is the most important aspect for an organization.

REFERENCES
Books and Journals
Malik, A., Egan, M., du Plessis, M. and Lenzen, M., 2021. Managing sustainability using
financial accounting data: The value of input-output analysis. Journal of Cleaner
Production, 293, p.126128.
Han, W., 2018. A fundamentals of financial accounting course multimedia teaching system
based on dokeos and Bigbluebutton. International Journal of Emerging Technologies in
Learning, 13(5).
Cheng, P. and Ding, R., 2021. The effect of online review exercises on student course
engagement and learning performance: A case study of an introductory financial
accounting course at an international joint venture university. Journal of Accounting
Education, 54, p.100699.
Yao, L., 2019. Financial accounting intelligence management of internet of things enterprises
based on data mining algorithm. Journal of Intelligent & Fuzzy Systems, 37(5),
pp.5915-5923.
Yatsyk, T. and Shvets, V., 2020. Cryptoassets as an emerging class of digital assets in the
financial accounting. Economic Annals-XXI, 183.
Thenikusuma, K. and Muis, N., 2019. The effect of implementation regional financial accounting
system, human resource competency and infrastructure facilities to the quality of
financial report. Human Resource Competency and Infrastructure Facilities to the
Quality of Financial Report (January 10, 2019).
Al Karaawy, N.A.A. and Al Baaj, Q.M.A., 2018. The impact of international taxation systems
variations on the application of financial accounting principles. Academy of Accounting
and Financial Studies Journal, 22(2), pp.1-11.