Financial Management and Information Strategic Requirements - Research Paper Example

Accounting Capstone Research Project The business environment is steadily altering and evolving. Moreover, business enterprises themselves alter over a period and as they develop, the information requirements of the business will alter. Conversely, the information systems required assisting development and growth is normally dynamic. Therefore, it is essential to review the information required for the perpetual alignment of the business operations with the underlying altering market needs especially within a business environment where even small companies face the effects of the globalization with foreign competition utilizing universe wide supply chains, increasing their own markets transnationally and engaging within the e-business. The critical success factor method is useful in examining altering information strategic requirements to meet the market demands. Accounting skills Accounting skills necessary for company’s success and stability are normally numerous and they aid making vital strategic decisions of the company. The skills entail keeping track of the underlying companies businesses devoid of possessing effect on the direction of the business enterprises in strategic business decisions (Plugge, 2012). Gathering data and presenting them to the corresponding management are vital in decision making for the company and analyzing numerical figures and underlying business environment then reporting to the management the present, expected and future performance of the company (Milberg & Winkler, 2013). This also entails recommending of appropriate steps to the management for advancing future performance. Accounting skills for company’s success and stability normally emphasis on the strategic input within accounting methods that are vital nurturing technology knowledge, leadership capability, comprehension of wide business environment and capability of communicating with the prevailing colleagues within the diversity of the corporate departments and operations. Financial management skills Financial Management skills necessary for company’s success and stability entails processes of planning, checking and evaluations of the entire financial aspects of the organizations, which encompasses skills of anticipating and tracking cash inflow and outflow or organizations that is revenue, funding and investments. Success and stability entail examination of investment in the organization in regard to operating costs, staff cost, purchasing assets, paying of the operating suppliers and staff coupled with paying of investors (Hira & Hira, 2008). Financial Management skills entail grasping of the underlying financial procedure and corresponding financial side of the company such as the historical financial performance. Historical monetary performance aids in analysis of the economic performance in future such as budgets, projections and predictions (Hira & Hira, 2008). Moreover, financial forecast skills entail detailed analysis forecast of cash flow, transactions, cost of merchandises sold and expenditures. The accounting and financial management knowledge and skills essential are purely utilized determining information needed, organization of the strategic planning procedure, and organization of the information systems planning procedure. Nevertheless, the tool can be utilized as a multipurpose administration and applicable to solving a broad variety planning, eminence and functioning problems across a variety of companies. The essential factors entail competitive strategy and positioning, the environment, temporal factors and corresponding managerial positions. Moreover, the factors are normally classified as internal versus external, and monitoring versus building. Monitoring entails scrutiny of the prevailing conditions such as performance management whilst corresponding building factors refer to those mandatory to either plan or alteration for the prospect, which aids in establishing and communicating a distinct strategy for the underlying corporate advancement (Plugge, 2012). The company’s stakeholders (investors, lenders and workers) normally use financial statement such as balance sheet and income statement information and ratios computations in making vital determinations associated to the underlying situations and operational efficiency of the company. These ratios are vital to investors, lenders and workers about operational efficiency of the company. Question 2 Ratios utilized by investors in determining health of Company Ratios the investors will utilize in determining the health of the company include gross profit margin coupled with net profit margin ratios, liquidity ratio and current ratio. Gross and net profit margin ratios allow the investors to make comparisons with the corresponding previous financial statements for the company thus allowing assessment of the trends both positive and negative (Plugge, 2012). Ratios utilized by lenders in determining health of Company Ratios that lenders will utilize in determination of the health of the company include solvency ratios such as Debt-to-Worth Ratio, Working Capital, Net Sales to Working Capital, and Z-Score. Solvency ratios aids in measuring the stability of the business and its consistent capability to repay debt (Schniederjans et al, 2007). Thus, the ratios act as indication of the underlying financial health and the viability of the business. Ratios utilized by employees in determining health of Company Ratios that employees will utilize in determining the health of the company are liquidity ratios, which include current and corresponding quick ratios. Liquidity ratio aids investors in the determination of the company’s capability to cover its underlying expenses. Current ratio in reflection of the prevailing financial strength of the company Question 3 Diverse capital budgeting revenues Payback methods is normally less advanced means of analyzing capital expenditures and it entails performance of original screening of the proposed capital ventures (Hira & Hira, 2008). The method calculates the anticipated numbers of years that the underlying development takes in recovering its underlying original venture via prospect cash flow. Durango administration ought to implementation judgment in order to decide on whether the payback period to be satisfactory (Schniederjans et al, 2007). Accounting rate of return (AAR) methods aids in the determination of the average return on the prevailing proposed venture mainly based on the project has approximated revenues and expenses. It normally assumes that the transactions do not influence the revenues and expense. DCF methods entail NPV and corresponding IRR. NPV calculates the present value of the anticipated prospects cash flow utilizing a predetermined discount rate whilst IRR method calculates the markdown rate that results DCF to be equivalent zero. Therefore, IRR method does not demands a Durango company to assess proposed capital ventures. Moreover, IRR computation is compared with the underlying hurdles rate and corresponding cost-of-capital rate. NPV is mostly utilized for DCF, conversion of the prospect-anticipated cash flows to the corresponding present value amount. In case the amount is positive then Durango ought to temporarily accept the proposed venture. Conversely, in case the amount is negative, Durango Company ought to reject the proposed venture (Schniederjans et al, 2007). NPV is purely based on the underlying economic considerations and the strategic considerations might depict other prevailing alternatives of the IRR method in calculating the real rate of the return on the proposed capital project. This makes NPV method as the most effective method of assessing the proposed capital projects of the Durango. Thus, Durango management ought to establish a particular hurdle rate for every project, which is time consuming. Question 4 Production departments to use process, job order, and activity-based costing Activity-based costing will be used in purchasing and receiving departments mainly based on the underlying number of purchase orders. Thus, ABC process will enable Durango Company to eradicate non-value-added activities mainly experienced in manufacturing the product or offering suitable a service (Hira & Hira, 2008). Job order costing procedure is used in the sales department. The process normally receive sale order for the batch of commodities, a manufacture order, manufacturing overhead allotted to the job utilizing a predetermined rate. The procedure is utilized in the receiving and distributing department of the Durango Company. It will enable enactment of detailed flowchart of good within the company. Question 5 Economic features of outsourcing labour Outsourcing possesses destructive explanation particularly when it entails worldwide outsourcing. Since majority of the economic activity is advanced within developed countries originates from the service sector, the possibility of internationally outsourcing services escalates the fear of job losses. Economic trade theory depicts that states normally don’t lose employment, outsourcing is have negative impacts in regard to the form of the distributional impact and corresponding temporary unemployment. Business management aspects of outsourcing labour Outsourcing could escalate the productivity of firms. There exist a tradeoff amidst production cost and corresponding transaction costs. Outsourcing could reduce the production costs, but it can also result to escalation of external transactions cost, which results to dealing with the third party (McIvor, 2010). Moreover, outsourcing could result to an increase in firm productivity in case it reduces production costs more that it escalates transaction costs. Hence, outsourcing can become more attractive when the difference in production costs escalates or when advances are made within the transaction technology. Question 6 Economic achievement for prospect economy Durango Manufacturing Company’s capability to accomplish the desired 10% growth in revenue is dependent on maximizing earning and decreasing operating costs, the produce of suitable results to the shareholders thus contributes to the economic and social advancement within the communities. Creating worth for prevailing shareholders will sustain the company over particular duration. Fluctuation of significant economic accomplishment is dependent variety of factors such as general economic and stock market situations, variations of operating outcomes couple with financial conditions, differences amidst real operating and financial outcomes and anticipated investors and stock analysts. Environmental stewardship Operation in a responsible manner of Durango Manufacturing Company will aids in mitigating its negative effect on the environment in more than five years. Amount in millions, except per share amounts 2008 2009 2010 2011 2012 Net shares $77.714 $75,295 $77,567 $81,104 $83,680 Operating Income $15,743 $15,188 $15,732 $15,495 $13,292 Net Earnings attributable to Durango Company $12,075 $13,436 $12,736 $11,797 $10,756 Net Earnings Margin from Continuing Operations 14.4% 14.1% 14% 14.4% 11.1% Diluted Net Earnings Per Common Share from Continuing Operations $3.36 $3.35 $3.47 $3.85 $3.12 Diluted Net Earnings per Common Share 3.64 4.26 4.11 3.93 3.66 Dividends per Common Share 1.45 1.64 1.80 1.97 2.14 Question 7 Strategy to advance the opportunities for Durango to achieve its revenue goals Strategy is believed to right for the long-term health of the Durango Company with main impartial of distributing total shareholder return (Ciampi, 2009). Durango’s long-term financial targets will increase sales by 10% faster than the corresponding market grows within the categories and geographic. The long-term financial targets strategies will aid in delivering Core EPS growth and generate free cash flow productivity by 90%. Capital spending strategies will be efficiency as the main component of the entire cash management strategy. Moreover, assist in realizing business development plans and possess cost controls to transport to the cash generation targets. Capital expenditures principally assist in capacity development, modernization and corresponding cost savings. Restructuring program strategies will aid in maintaining a competitive cost structure of Durango such as manufacturing and workforce optimization. The program will also increase productivity and save cost in the areas of supply chain, research and advancement, marketing and corresponding overheads (McIvor, 2010). Moreover, program will be designed to mainly accelerate cost reductions by streamlining administration and other supplementary thus aiding to fund the Company development strategy. Question 8 Tyco International is a coveted world leader in manufacture and service of electrical and electronic appliances with operations in about 100 nations. Like Durango, this company faces fraud cases owing to incompetency in financial management. There were various deficiencies in processes of internal organizational policies propagating fraud. Top management of Tyco ostensibly issued acquired loans that either attracted low interest of were interest-free in disguise as bonuses. Moreover, Tyco board of management was unwary of such loans and never approved them. Top management sold company stocks without seeking consent of investors and other stakeholders as a requirement by SEC rules. Financial fraud arose because of extravagant expenditure, unapproved credits and bonuses (Ciampi, 2009). Misuse of funds in this company culminated from deficiencies in internal wheels. Overriding existing control mechanisms, inadequate management review, and poor attitude by top management are such deficiencies. Inappropriate definitions of ranks of responsibility and authority create difficulty in identifying individuals to hold accountable for problems. Various aspects of organizational culture contribute to fraudulent and unethical practices. Tyco management might have indulged in "creative accounting" as a way of improving perceptions of its performance financially. These philosophies of management encourage fraudulent behavior whereby employees attribute all financial problems to accounting errors. In defrauding Tyco, top management offered kickbacks to employees and board members to overlook fraudulent practices thereby encouraging unethical corporate culture. Furthermore, fraudulent personnel habitually up code service bills thus claiming for higher expenditure from finance departments. One of the ways of significantly mitigating fraud is through segregation of responsibilities. This can be achieved by formulating shared duties in financial management. Controlled access to accounting schemes and financial assets ensures restricted entry to solely authorized staff (Ciampi, 2009). Devolving responsibility across an organizational framework spreads risks thereby minimizing chances of unscrupulous schemes by greedy employees. Furthermore, managements ought to be wary of situations fostering fraud thereby controlling working environments closing windows of opportunity for fraudulent practices. Constant oversight and review of internal control provides for adjustments on internal policies with regard to technology and personnel. These mitigation measures adjust internal functions in organizations thereby minimizing flaw and loopholes for fraud risks. Question 9 Assessment of IT controls lacking in Durango Durango Company lacks IT control mainly internal control systems. This internal control entail information systems, which the main methods and records for identifying, assembling, analysis, computation and reporting of the transactions that normally maintain accountability for assets, liabilities, revenue and expenses (Ciampi, 2009). Internal control IT systems aid in general accounting and office procedures such as performance review, distribution systems and corresponding manufacturing systems. Ways of mitigating lack of structure IT control in Durango Company Lack of structure IT control in Durango Company can be mitigated by identification, establishing and execution of efficient internal controls as the measures will ensure acquiescence with the underlying regulatory needs, timely precise reporting, exclusion of the deception, waste, unlawful admittance to and the utilize of assets, misuse of the prevailing resources and satisfaction of the administration objectives (McIvor, 2010). Lack of structure IT control can be mitigated by initiation of appropriate administrative and operational controls that will advance competence in day-to-day processes of the Company thus ensure the management’s objectives and decision. This can also be mitigated by developing preventive controls and detective controls, which will prevent errors and irregularities from occurring and assuring that swift corrective action in Durango Company. Question 10 Members of Durango audit committees provide an oversight of schemes of interior control, which include overseeing managerial acquiescence with appropriate procedures policies and management of risks. For instance, for organizations forming a nationwide network, this committee provides annual review of organizational conformance to re-chartering prerequisites. However, for processes implemented by audit committees to be effective, there ought to be an oversight chair. Such a chair holds an inclusive position whose description tailors to personal circumstances when required (McIvor, 2010). The position of chair provides a basis for recruiting, assessing, succession arrangement and payment. A detailed assessment of the chair’s effectiveness follows a guarantee of comfort and acceptability of organizational policies of change. The chair, in his capacity and with competencies, reports to shareholders on effectiveness of policies for further review. Secondly, audit committees offer an oversight of process of financial reporting and auditing. They review noteworthy issues in reporting and accounting; in addition, they review fresh pronouncements in regulation and professionalism thus comprehending latent influences on financial statements. Furthermore, contemplating how administration advances interior interim financial data is vital in assessing accuracy and completeness of financial reports. To improve effectiveness of audit committee, there ought to be a healthy interaction between audit committee and management. Working relations ought to be interactive, confidential and transparent between senior management and audit committee. Such warranting issues increase integrity levels in officials with responsibilities of financial reporting. Additionally, these officials manage conflicting interests, maintain identity and confidentiality, and act in a way that withstands scrutiny. Fostered responsibility, moral decision-making, transparency, accountability and quality reporting of financial information improve corporate governance. Thirdly, audit committees review organizational policies for reporting arising problems within management. They exercise fundamental responsibility of reviewing whistle-blowing policies and processes. Moreover, they review anti-fraud policies related to discovery of faults or unlawful acts. 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