DOWNLOAD THE COMPLETE PROJECT

1349 Users found this project useful

THE IMPACT OF ACCOUNTING INFORMATION ON MANAGEMENT'S DECISION-MAKING PROCESS

CHAPTER ONE

INTRODUCTION

1.1   Background to the study

One of the marks of the executive is the ability to decide. One of the obligations of free men is the willingness to decide. One of the qualities of effective people is the courage to decide. Making decisions is part of our every day’s lives. Considering organisational life, it is often one of the main functions and tasks of management, as underlined also in the statement above. Indeed, management and decision-making are often regarded as belonging together, as management usually makes the major decisions of the organisation.[2]   Decision-making involves the selection of the best course of action.[3] In order to decide on the best option, management has to judge the effectiveness of various alternatives. Therefore they need some guidance that is usually provided in form of data and information.[4] For this reason they often rely on financial and economic information gathered by management accounting.[5]  Management accounting can be defined as “[…] the process of identification, measurement, accumulation, analysis, preparation, interpretation, and communication of information that assists executives in fulfilling organizational objectives […]a formal mechanism for gathering and communicating data for the ends of aiding and coordinating collective decisions in light of the overall goals or objectives of an organization."[6]   As can be derived from this definition, accountants play a crucial role in providing information for making economic and financial decisions. These decisions are an important element for the organisation. Implementing the wrong ones can affect the company in a very negative way and may sometimes also lead to its bankruptcy. Young, J.[7] even goes so far to claim that “The road to bankruptcy is paved with poor decisions.” As the outcome of a decision cannot always be predicted with certainty, management often faces the risk of choosing the wrong ones. Hence, management always needs to have some courage as well when facing decisions.   Apparently, good decisions are important and ensure the wellbeing and also the survival of an organization. Also ‘Wexiödisk AB’, which is currently Scandinavia’s leading supplier of dishwashing machines for professional users, has to assure its future by implementing the right decisions.  

1.2  Problem discussion 

In order to circumvent financial disasters through wrong and ineffective decisions, there is nowadays a vast pool of financial tools available which can be used to support the decisionmaking process. Nevertheless accounting tools applied vary from organisation to organisation. One tool that proved to be very effective in one organisation, might fail in another. Different information are required for these diverse purposes, therefore organizations have to focus on different accounting tools to support their decisions-making process.    Wexiödisk uses its own tools and techniques. At present, the company is operation quite successfully, as its position as Scandinavian’s market leader shows. Hence, it can be assumed that without making the right decisions this position would hardly be possible. Management accounting tools applied in Wexiödisk might have contributed to some extent to these beneficial decisions.  

1.3   Research question 

Which accounting tools are used by Wexiödisk? How does the organisation use those in the decision-making process?   

1.4   Purpose OF THE STUDY

The purpose of our paper is to find out which accounting tools are used in Wexiödisk and to inform the reader about how those affects the decisions made by the company.    In order to contribute to the attainment of the purpose the paper will pursue the following structure. As a start, the methodology will provide the reader with an insight into the process of how the study was conducted. Afterwards, the chosen theories are introduced, which include ideas of various accounting tools as well as decision-making. Fieldwork data, collected during our study, will be eventually presented and then compared with the theories in use. This allows for drawing conclusions that will be shown in the final section.

1.5   Limitations of the study

Due to a lack of time for our research, we could not conduct this study as deep as we wanted and so some questions that we had did not find any answer.   The most of the information we got come from interviews and questionnaires. During the interview we had sometimes the feeling that the interviewees are used to employ other words and vocabulary than we do. We couldn't choose other methods in addition as the research participants time was very limited. Indeed, such methods required more time than just a few months.    The managers did not have so much time to allocate to our study. With more interviews we could have also a more clear answer to our research question.   As there is a huge amount of accounting tools available, only some of them will be investigated. There are some tools that are said to allow for an examination of the relationship between accounting information and decision-making, as will become apparent later on. So the focus will be on these selected ones.   We have to underline also that no one of us has an experience before in conducting a study in this extent. For us it was hard to conduct this bachelor thesis, especially the analysis was very difficult to do. Fortunately we got some help and support. We hope that this work is pertinent. 2Methodology   The purpose of this section is to explain how we carried out our study and how we analysed the data. The methodology will be started by presenting the research journey which enlists reasons for choosing the actual topic and criteria for picking a company. In the next section the approach of the chosen research method will be described. Under the headline case study an explanation of the research strategy will be given. The research tools introduce the reader to the data collecting methods in use that will be followed by a defence of the data collection methods. Finally, the last paragraph will deal with the value of the study.

2.1Research Journey When deciding on a topic of interest for our study, we were quite intimidated. We found ourselves confronted with a vast pool of possible research topics and it was quite difficult to choose one. By considering the interests of our team-members we narrowed the range of topics. Two of us are pursuing studies in the accounting field whereas one is mainly concentrating on the field of leadership. Hence, the decision was made to combine both areas and the final topic emerged.    In the next step, which consisted of choosing an organization we took several characteristics into consideration: company type, seize and location.   Type – One criterion for our choice was its field of operation. It should be occupied in the private sector, because public companies have a different understanding of internal accounting, which often does not primarily aim at profits. We are more familiar with companies that are operating in the manufacturing sector. For writing a reliable paper we decided therefore to focus on this organisational type.   Seize -  Our tutor recommended us to take a middle-sized to a large company, as such organizations usually have own departments for internal accounting and a top management that is responsible for strategic decisions. In smaller organizations these tasks often flow together in one department and are interconnected. To meet the purpose of our paper, we need to clearly separate these organizational responsibilities. Location – In order to get a deep insight into the company, it is necessary to work closely with the company and to meet organizational members personally.

The company should be easy to reach in order to conduct some interviews to get a good impression of the internal processes and reliable results. A company nearby could limit our time and budged problems. After having decided on some companies, we tried to establish contacts with them. This was done on the AMAR 2006, which is an information event organized by Växjö University on the 9th of March, where we got in touch with the representatives of Swedish companies. Unfortunately, most of them were not very familiar with the field of students’ support and advised us to contact the firms via e-mails. Unfortunately, the companies either denied our request or did not reply at all. Eventually, one of our group-members got the hint to contact the company “Wexiödisk AB” that will be presented in more detail in later chapters. It turned out that the financial manager was quite in favour of supporting students in their studies. So we made an appointment for a first meeting. 

  DOWNLOAD THE COMPLETE PROJECT