Accounting information as an aid to management decision making


 


Introduction


            One of the most essential elements to consider in businesses is to make sure that the financial assets of the firm are well managed, specifically in terms of the businesses capital. Consequently, management of accounting information is highly and crucially essential to the success of every firm and businesses. In most companies, the accounting information is vitally dependent to the financial performance. It is said that if sales vary during the year because of growth, seasonality or uncertainty, then managing the accounting information would be difficult.  Furthermore, a firm’s current liability such as inventory, receivables and short-term payables as well as the firm’s current assets varies in accordance to the fluctuations of sales. In this regard, the cash flow within the firm and businesses may be insufficient to sustain businesses operations, even if the profitability of the firm and businesses is satisfactory over the entire year. Therefore, there is a need for an efficient accounting information.


            Having been able to recognise the growth and development of the firm, it is also essential to evaluate the accounting information of an industry. Therefore, this research proposal aims on assessing and evaluating the accounting information approach implemented within an industry and identifies how it aids in management decision making.


 


Literature Review


            Having efficient accounting information is a principal priority for different organisations including those manufacturing industries.  A number of scholars have noted out that the financial aspect of a firm and businesses rules the game.  The vast majority of manufacturing industries are undercapitalised, therefore, most of these industries depend on different sorts of short-term financing which considers accounts payable, lines of credit and accruals. However, there are other problems that arise since these financing must be liquidated regularly.  With this, the corporations and industries must generate cash from elsewhere so as to meet their obligation. Moreover, during the time when inventory, receivables and sales are in a state of fluctuation, it brings a hard time and complexity to the manager to ensure the adequacy of cash flow. Thus, accounting information or accounting information is essential. Capital management or accounting information thus has a long range impact on the firm’s performance and they are critical to the firm’s success or failure.


The efficiency of financial management, specifically the accounting information is perceived by the success in achieving the firm’s goal. The shareholder wealth maximisation goal states that management should endeavour to maximise the net present (or current) value of the expected future cash flows to the shareholders of the firm. Net present value refers to the discounted sum of the expected net cash flows. Some of the cash flows, such as capital outlays, are cash outflows, while some, such as cash proceeds from sales, are cash inflows. Net cash flows are obtained by subtracting a given period’s cash outflows from that period’s cash inflows (Dayanada et al, 2002). The discount rate takes into account the timing and risk of the future cash flows that are available from an investment. The longer it takes to receive a cash flow, the lower the value investors place on that cash flow now. The greater the risk associated with receiving a future cash flow, the lower the value investors place on that cash flow.


The shareholder wealth maximisation goal, thus, reflects the magnitude, timing and risk associated with the cash flows expected to be received in the future by shareholders. In terms of the firm’s objective, shareholder wealth maximisation has been emphasised because this book has businessesfocus.


            In order to investigate and identify whether a manufacturing firm and businesses has been able to achieve its wealth maximisation goal, this topic of the research study is being proposed.


 


Research Aims and Objectives


            The goal of this paper is to evaluate the efficacy of the accounting information within an industry and how it aids in management decision makng. Specifically, this proposed study aims on achieving the following objective


1.    Know the fundamental concept of accounting information implemented within an industry


2.    Identify the perception of the employees about the accounting information of the firm


3.    Investigate and identify the elements that affects adequate accounting information within the firm


4.    Investigate how the firm has been able to manage the elements that hinders accounting information cash flow adequacy.


 


Significance of the Study


            This proposed study is significant in order to provide insightful details on how a firm should manage one of the essential assets of the firm which is its financials aspects. Moreover, this proposed study is will be significant in management/businesses firms, particularly for manufacturing industries in a sense that it will broaden their knowledge about managing their capital or financial asset and will help them weigh if the current accounting information are appropriate in Nigerian setting. Furthermore, it will contribute to businesses research. This can be used as a reference for future research that will focus on having efficient accounting information to be followed by different industries in Nigeria.


 


Reference


Dayanada, D., Harrison, S. Herbohn, J and Irons, R. (2002). Capital Budgeting: Financial Appraisal of Investment Projects. Cambridge University Press, Cambridge, England.


 


 



Credit:ivythesis.typepad.com


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