Managerial Accounting Report: Triton Corporation Financial Analysis

This report provides a managerial accounting analysis of Triton Corporation, evaluating its financial performance across six operating divisions. The report utilizes tools such as the BCG matrix, ratio analysis, and relevant costing to assess the value contribution of each division. Key findings indicate that the bathroom accessories and pipes departments are underperforming and recommended for divestment. The report also identifies the factors influencing the payback period for equipment replacement and new development projects. Furthermore, the report suggests investment in improved techniques and investment appraisal techniques for future expansion and increased profitability, while also considering ethical and legislative aspects.

Managerial
Accounting
1

EXECUTIVE SUMMARY
Management accounting is provisions of financial data used for the purpose of decision
making by the commercial entities. It provided various tools and techniques for the analysis of
financial position of business. Present report provides financial evaluation of Triton Corporation.
For this purpose various financial and non financial tools are used such as BCG matrix, ratio
computation and relevant costing. By considering performance of the company, conclusion has
been drawn that bathroom accessories and pipe departments are not able to add value in the
business. As a consequence, decision of divestment in these departments taken by company is
viable.
In order to better opportunities for future expansion, company is recommended to make
investment in improved techniques. With the implementation of these techniques, company will
be able to make reduction in cost and time consumption. Along with this, management of Triton
Corporation will be able to make increase in profitability of business. In order to select viable
project for expansion company is recommended to consider investment appraisal techniques. In
addition to this they are required to consider ethical and legislatory aspects.
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TABLE OF CONTENTS
Introduction......................................................................................................................................3
Main body........................................................................................................................................3
Section A......................................................................................................................................3
Section B......................................................................................................................................6
Section C......................................................................................................................................7
Section D......................................................................................................................................9
Conclusion.....................................................................................................................................13
References......................................................................................................................................14
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ILLUSTRATION INDEX
Illustration 1: BCG Matrix...............................................................................................................6
4

INDEX OF TABLES
Table 1: Financial summary of operating departments of Triton Corporation................................7
Table 2: Applicability of BCG Matrix.............................................................................................7
Table 3: Computation of financial ratios of Triton Corporation....................................................12
5

INTRODUCTION
Managerial accounting is a field of finance which provides improvised provisions of
availing financial information in order to make better decisions for business. By making use of
these techniques, management of entity will be able to develop better control on their operational
activities for better performance of business. In addition to this, they will be able improve the
financial position in order to avail opportunities for growth and expansion (Kinney and Raiborn,
2012). This accounting includes preparation of management and financial reports in order to
provide accurate and reliable information to the managerial people while decision making
process.
Present project report is based on the evaluation of financial position of the Triton
Corporation. Stated company is engaged in manufacturing activities with six operating divisions.
In this report, analysis of six divisions will be done to assist the management of company in
making better decisions. For this aspect, various financial tools of managerial accounting will be
used such as ratio computation, investment appraisal techniques and budgetary tools. For this
aspect, practical applicability of these tools will be explained by considering the financial
information of business.
MAIN BODY
Section A
Evaluation of six operating divisions of company can be done by making use of BCG
growth share matrix. This matrix is developed by considering two assumptions. First assumption
says that increase in market share will result in increase in the generation of cash and its
equivalents. Second assumption is that increasing market share requires high investment in assets
for increment in capacity (Hill and Clarke, 2013). This aspect results in increase in cash
consumption. This matrix was developed on the observation that operating units of organization
can be mainly classified into four categories by considering its market growth and market share
factors. Description of these categories is enumerated as below- Dogs- This operating segment has low market share and growth. Due to this aspect, it
neither requires high cash consumption nor generates cash. Henceforth, dogs are said to
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be cash traps as they have little potential. This segment is required to be reinvested in
order to earn high profits. Question marks- Question marks have great potential opportunities thus; it requires high
consumption of cash. However, due to low market share, they are not able to generate
high cash. As a cumulative effect, it only makes increase in the net consumption.
However, this segment has potential to get converted into stars thus, it is required to be
carefully analyzed for the worth of further investment or not (Bhimani and Bromwich,
2009).
 Stars- This segment represents the most effective part of portfolio. It is because, they are
able to generate high amount of cash due to strong market share. Portfolio of diversified
company is required to have stars in order to assure the future generation of cash.
 Cash cows- This segment act as a leader in a mature market. Due to this aspect, it is able
to provide more cash in comparison to its consumption (Kinney and Raiborn, 2012).
Value of cash cows can be determined by making use of discounted cash flow analysis or
present value method.
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Illustration 1: BCG Matrix
(Source: The BCG Growth-Share Matrix, 2015)

Table 1: Financial summary of operating departments of Triton Corporation
Electrical
Products
Floor
Boards
Car
Accessories
Industrial
Services
Bathroom
Accessories Pipes Total
Profit % 5.50 5.51 17.54 23.74 7.14 1.67 11.76
Product
Share 30.96 19.66 13.24 26.08 5.42 4.64
Material as
a % of total
cost 91.27 84.58 56.74 57.20 69.23 25.42 73.25
Table 2: Applicability of BCG Matrix
Department Segment as per
BCG Matrix
Description
Electrical
Products
Cash cow This segment has low growth rate but high product share.
This department requires high cost consumption in order
to make significant increase in the profits.
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Floor Boards Cash cow Similar to Electrical products, Floor boards is also covered
in the criteria of cash cow (Vanderbeck, 2012). However,
comparatively, it is providing high profit in less cost and
less market share.
Car Accessories Question mark Car accessories are providing good profits which show
potential growth opportunities. However, its market share
is quite low.
Industrial
Services
Star Industrial service segment represents the best part of
portfolio of Triton Corporation. It is because, it is
generating good cash and has high market share. In
addition to this, cost consumption of this department is
comparatively less.
Bathroom
Accessories
Dog Bathroom accessories have low market share and market
opportunities. This aspect shows that this department does
not have potential to provide effective profits to the
business. In addition to this, it is consuming high part of its
cost (The BCG Growth-Share Matrix, 2015)
Pipes Dog Similar to the bathroom accessories, segment of pipes is
also covered in the criteria of Dog. It is neither consuming
high cash nor it is providing high profits of the business.
By considering the above analysis, it can be noticed that bathroom accessories, pipes and
electrical products is adding less value but it requires high working capital consumption. Due to
these low value added items, profit of organization is reducing. In addition to this, market share
of Triton Corporation is adversely affected (Shim and et.al., 2008). Further, due to inappropriate
arrangement of portfolio segment, assets of business are not optimally utilized. As a
consequence, management of the organization will not be able to earn sufficient return on the
assets which will make reduction in their efficiency ratios.
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Section B
Analysis of sale strategy by considering BCG matrix
By considering the financial performance of department of bathroom accessories and
pipes, it can be noticed that both are providing fewer contribution to the profits of organization.
In comparison to other departments, it is providing fewer profits to company (Arai, Kitada and
Oura, 2013). Due to this aspect, decision of the management of sale of these departments is
appropriate. By making divestment in these options, they will be able to make utilization of these
resources in other departments in order to earn higher profits.
In accordance with the BCG matrix, products are classified as dogs that have low growth
rate and market share. Due to this aspect, this operating segment is not able to add value in the
assets of business. As a consequence, this segment is considered as negatively profitable. It is
because; invested amount in it can be used in other segments to earn high profits (Management
accounting, 2014). By considering this aspect, decision taken by Triton Corporation of sale of
bathroom accessories and pipes is viable, even though this department is able to earn profits.
Financial analysis of sale decision of two departments
Electrical
Products
Floor
Boards
Car
Accessories
Industrial
Services Total
$M $M $M $M $M
Sales 40.00 25.40 17.10 33.70 116.20
Cost of Sales
Materials 34.50 20.30 8.00 14.70 77.50
Salaries & Wages 1.20 1.80 2.10 3.00 8.10
Other Cost 2.10 1.90 4.00 8.00 16.00
37.80 24.00 14.10 25.70 101.60
Profit Before
Interest and Tax 2.20 1.40 3.00 8.00 14.60
Profit % 5.50% 5.51% 17.54% 23.74% 12.56%
Resources available from divestment of two departments 12.40
Additional profit on this resource consumption 1.56
Total profit 16.16
Change in profit (16.16-15.2) 0.96
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In accordance with the above analysis, it can be noticed that sale of two departments will
provide minimum additional profit of .96 $M. This profit has been computed by making profit
statement without considering the operating activities of bathroom accessories and pipes of
Triton Corporation. Further, cost incurred on these two departments has been utilized for
resources for other four departments (Kaimenaki and Cohen, 2011). This aspect has provided
additional profit of 1.56 $M and total profit after sale of these two departments is 16.16 $M.
Both practical and financial evaluation shows that sale of bathroom accessories and pipes
departments is a viable decision for the maximization of profits. In addition to this, other
departments have good market share (Arai, Kitada and Oura, 2013). Thus, it will provide better
opportunities for growth and expansion. Further, management of Triton Corporation will be able
to focus on their core activities in order to operate in an effective manner.
Section C
Identification of factors that influence duration of payback period for the purpose of
equipment replacement programmes and new development projects
Pay back period is part of investment appraisal techniques. By the computation of this
pay back period, time period is determined in which company will be able to recover the amount
of initial investment (Bardy, 2006). In accordance with the approach of pay back period, project
will minimum pay back period is attractive for the company. There are various factors which
affect the duration of payback period. Description of these factors is as follows- Inflow- Inflow are net earnings earned by the equipment or new development project. In
situation where replaced asset and development project is productive then it will provide
higher inflow (Burns and et. al., 2004). Due to this aspect, company will attain pay back
period earlier. On the other hand if project is not able to provide good inflow then there
will be delay in the duration of payback period. Initial investment- Initial investment is the amount investment by the business
organization for the purpose of purchase of equipment or implementation of development
project. If high amount is invested by company, then payback will time consuming. On
the other hand, if amount of investment is low, the business organization will be able to
have quick recovery of the invested amount.
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 Trend of inflow- Pay back period of the project is also affected by the trend of inflow. It
is because, concept of pay back period is based on the recovery of initial investment. In
situation where, inflow had increasing trend for the beginning, then pay back period will
be achieved earlier (Kaimenaki and Cohen, 2011). However, in situation where, inflow of
the project is less in beginning and it is increasing after passage of some time then pay
back period will be delayed. This aspect shows that pay back period of the investment
project will be affected by the increasing or reducing or stable trend of the inflow.
 Duration of project- Duration of the project affect the inflow of the project by which pay
back period is affected. Investment project with higher duration will be able to provide
early recovery of amount of initial investment (Kate-Riin, 2012).
Triton Corporation is required to consider above described aspects while selection of
investment project. On the basis of these factors, company will be able to select profitable
project with minimum pay back period (Shim and et.al., 2008). This approach will make increase
in duration of post pay period by which revenue of company will be enhanced.
Analysis of relative importance of the strategic aim of reducing gearing and continuation of
investment in modernization programmes
Gearing ratio is computed for the measurement of proportion of debt funds in comparison
to equity. This ratio depicts the financial risk of the company which is subjected to the
obligations of business. High gearing ratio shows high proportion of debt which can lead to the
situation of insolvency (Shim and et.al., 2008). In addition to this, higher ratio also indicates
high deal of leverage in which company is making use of debt for the continuation of business
activities. Reduction in gearing in financial position of the company is also essential because it
shows stability in business (Correia and Flynn, 2012). In addition to this, high gearing will
require increase in payment of interest obligations which will make reduction in the profitability
of business.
In present competitive era, business organizations are required to make continuous
improvement in their operational activities in order to achieve competitive advantage. In
situation where, company will not be focused towards the improvement, then rivalry firms will
take away the market share of the firm (Vaivio, 2008). Due to this aspect, management of the
Triton Corporation should make investment in the modernization programmes. With these
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programmes they will be able to implement innovative and economical ideas in the business
scenarios. In addition to this, they will be able to make reduction in the cost consumption in
order to make increase in profitability of business.
Investment in modernization programmes will also assist management of Triton
Corporation in attracting customers for the enhancement of market share of business. It is
because, improvement in production process or implementation of modern techniques positively
affects the buying behavior of the potential users (Vanderbeck, 2012). Due to this aspect, for
survival in competitive environment it is essential for business organizations to improve or
modify the business practices.
Section D
Reliability of financial ratios analysis
Financial ratios of company are used to determine the performance of company by
considering figures of financial statements. Financial ratio analysis can be termed as appropriate
use of ratios in order to make interpretation of financial statements for the identification of
strengths and weaknesses of business (Financial ratios and financial ratios analysis, 2010).
However, ratio analysis is appropriate it is comparison of information. It is because, a single ratio
is merely a figure which numerical relationship between variables. Ratios can be used for trend
analysis, comparison with industry average or standards and for inter-firm comparisons.
Despite of certain benefits, there are various limitations of the financial ratio analysis.
This analysis is not a conclusive yardstick for the assessment of financial performance of
business. In addition to this, reliability of ratios is directly affected by accuracy of data used in
computation (Belkaoui, 2001). This analysis is not able to identify some factors such as change
in prices, economic trend etc which can lead to false interpretation. Furthermore, minor mistake
in the ratio computation can provide manipulated information which can affect decision making
capacity of business. This aspect will enhance possibility of window dressing in accounting. In
such circumstances, computation of ratio will not provide appropriate information which will
create miss-management in business environment.
Table 3: Computation of financial ratios of Triton Corporation
Particular Formula Ratio
Net profit 11.76
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Sales 129.2
Net profit ratio Net profit/Sales*100 11.76%
Current asset 35
Current liability 20
Current ratio Current assets/ current liabilities 1.75
Debt 48
Equity 32
Gearing ratio Debt/Equity 1.5
By considering the financial ratios of Triton Corporation, it can be noticed that current
ratio and gearing ratio is less than ideal (i.e. 2:1). These values depict that company is required to
make modification in their capital structure and allocation of ratio for better liquidity and
solvency position (Bhimani and Bromwich, 2009). However, by these ratios aspects of
improvement or reducing efficiency cannot be identified. It is because, comparison of single
value is not possible.
Use of budgetary controls for coordination and control of the group
Budget can be defined as statement showing allocation of financial resources for the
completion of particular set of activities in a specified time frame. Comparison of these budgeted
values with actual financial figures is known as budgetary control (Correia and Flynn, 2012).
These practices assist organization in planning and coordination between different operating
activities. In addition to this, management of the entity will be able to make better decisions by
appropriate monitoring of business results. Management of Triton Corporation will also be able
to motivate employees in order to achieve aims and objectives of business in an effective
manner.
By the preparation of budget, uniform goals are communicated to all the operating
departments of the company. In this manner, they remaining four departments will be able to
understand their role and responsibility. In addition to this, they will be aware about activities of
other department by which they can coordinate with them for the completion of task in an
effectual manner (Hill and Clarke, 2013). By the implementation of this approach, efforts of all
departments are coordinated. Along with this, situation of deficiency or over-allocation of
resources will also be managed by the mutual understanding of departments.
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Budgetary control is also an effective tool that can be used for the purpose of controlling
of business activities. This can be done by monitoring of business operations in a proper manner
in order to prevent variances between actual and budgeted figures (Budgetary control, 2011).
Further, identified variances will assist management of Triton Corporation in making viable
decisions for making improvement in future operations of business. In addition to this, standard
benchmark will be set for the operating activities in order to assure that standard performance is
provided by employees.
Triton Corporation will be able to set standards for the four departments for future
activities by making use of budgetary control (Zawawi and Hoque, 2010). Further, preparation of
budgets will assist them in planning for use of resources in order to maximize profitability and
market share of business. In addition to this, by considering these values they will be able to
monitor performance of employees in order to achieve their desired objectives.
Critical analysis of function of management accounting and ethical issues during
international expansion
International expansion of business requires huge skills and resources. Due to this aspect,
it is associated with huge risk. For this aspect, company is required to manage their operational
activities in a proper manner. Analysis of functions of management accounting of Triton
Corporation is as follows- Planning- It is crucial function of management accounting because it prepares road path
for the achievement of success. Triton Corporation will prepare plan for the global
expansion by setting target. They will proceed with their star segment in order to avail
better opportunities (Kinney and Raiborn, 2012). Planning process of the company will
be supported by forecasting activities of cash flow, projected profit and financial position.
Forecasting will assist management of company in making alteration in strategic
activities in order to cope up with quantified budgets (Functions of Cost & Management
Accounting, 2015). By considering above described information, master budget will be
prepared by them. On the basis of this budget, allocation of budget will be done in
different departments. Decision making- Decision will be made by Triton Corporation by considering
information of management accounting. For this aspect, they will analyze available
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strategic options by making use of relevant techniques such as limiting factor analysis,
cost-volume profit analysis, relevant costing, profitability analysis and investment
appraisal techniques. Monitoring and control- In order to control and monitor the operational activities of
international expansion appropriate measures will be used by Triton Corporation such as
budget and standard costs (Wildavsky, 2006). Modification in action plan will be done by
considering computation of variances. For effective management, routine cost reports
will be prepared in timely manner.
 Accountability- Triton Corporation had provided main focus on the provision of
accountability in order to assure effective performance measurement. This task will be
completed by setting targets for the business units and for the individual departments
(Zawawi and Hoque, 2010). In this manner, company will be able to assign responsibility
for achievement of aims and objectives in an effective manner.
In addition to the above described aspect, Triton Corporation is also required to act in an
ethical manner while implementing plan for international expansion. During this project, they
will various ethical issues such as employment, corruption, pollution and human rights. In order
to prevent these issues company is required to set working conditions and payment policy in
accordance with their legislatory norms. Further, they should act ethical by considering benefit
of both domestic and international market. They are required to respect and promote and
individual human rights (Zawawi and Hoque, 2010). For this aspect, they must not support
regime which may oppresses citizen of foreign country or promotes discrimination or restrict
basis rights. In order to prevent ethical issues regarding pollution, Triton Corporation should
eliminate hazardous materials. However, ethical issues in this aspect high cost consumption for
eco-friendly practices. This issue can be resolved by Triton Corporation through making use
similar domestic standards in new locations with expertise skills and knowledge. By
implementation of above described aspect, company will be able to manage ethical issues in an
appropriate manner in order to achieve the objective of global expansion.
CONCLUSION
In accordance with the present project report conclusion can be drawn that management
accounting plays crucial role in the decision making process. It provides accurate and reliable
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information to the management of corporate entities so they can make appropriate decision in
timely manner. For this aspect, organization can make use of various tools and techniques.
However, business entity cannot rely on the single tools because all tools have certain
limitations. By considering this aspect, financial analysis of the organization must be supported
by evaluation of both financial and non financial factors. In addition to this, companies are
required to eliminate factors which are not adding value to the business. It is because, it will
make reduction in effectiveness and profitability of business. Further, instead of continuing these
operations, companies are required to make divestment. Resources of these segment should be
allocated to the other segments in order to earn profits. For global expansion, companies are
required to consider functions of management accounting along with the ethical issues. In this
manner, organization will be able to achieve prosperous opportunities for expansion. Along with
this aspect, they will also be able to comply legislatory aspects.
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