Strategic Management Accounting - Essay Example

Download file to see previous pages... Current Situation Electronic Boards plc is electrical engineering company and it has been in the business since 1970’s. Company has almost 200 employees and it has been profitable over the last several years. Since establishment to 1985 company has been conducting operations without maintaining true accountancy systems. However, financial crisis has hit the company and it recorded a loss of ?1.7 million. This loss also had an impact the liquidity position of the company. The company’s management director Jack Watson has recently decided to develop the management accounting system for the firm to keep the track record of entire operations and to make sure that the company is able to understand how different products are performing. This report will analyze and outline the main factors that the company needs to consider in establishing a useful management accounting function within the company. ...
Investing In Different Projects It has been found that the company directly purchases new technology or equipment in order to improve the productivity without analyzing the cost and benefit ratio of the investment. Therefore after establishing accounting system, the management would be able to make decisions by analyzing the cost and return of the investment and thus it can be helpful in increasing the profitability as only profitable investment will be accepted and others will be rejected (Jaffe, 2007). Moreover, it will be helpful in reducing the interest charges and high bank charges as the company will not be investing in every other technology that comes up. Identifying Areas Of Improvements As the company will have proper management accounting system, so with this the company will be able to identify areas where it can reduce costs and thus it can be helpful in increasing profitability. CONCLUSION Management accountings system, once developed, will provide more insight about the current status of business and would enhance its capacity to ability to develop and enhance its capacity to compete and forecast its future needs. Moreover, the company would be able to improve its profitability and at the same time manage situations like recession in a better way. References Jaffe, J. (2007). Corporate Finance, Pashupati Printers Pvt Ltd: Delhi. Keown, A., Martin, J., & Petty, J. (2011). Foundations of finance (7th ed.). Boston, MA: Prentice Hall. Johnson, G., & Scholes, K. (2001). Exploring Corporate Strategy: Text and Cases. 6edition, Prentice-Hall: ...Download file to see next pagesRead More