L1- Introduction To MA Flashcards
Define Financial Accounting
To give an account of the financial performance on a given date, which would allow investors to make decisions about resource allocation between different companies
Define Management Accounting
To give an account of the financial performance which would allow the managers in the company to make decisions about resource allocations between different products/projects/plans
Who is the targeted user of MA
Internal users—- Managers
Targeted users of Financial Accounting
External users— stockholders and creditors
What restrictions placed on MA
No mandatory rules for preparing reports
What restrictions placed on FA
Must follow GAAP when preparing financial statements
Types of info in MA
Financial and Non Financial info
Types of info in FA
Financial info
Time orientation in MA
Emphasises the future planning and decision making
Time orientation in FA
Historical orientation (reports what has already occurres)
Aggregation of MA
Detailed info about product line, departments, etc
Aggregation of FA
Info about overall firm performance
What are the 3 key functions of MA
–Planning
–Decision Making
–Controlling
Define Planning
Establishing goals (long, medium and short-term) and specifying how to achieve them
Example of Planning
iPhone 14 Pro launched in 2022 will generate what level of sales/profits in next 1 year, 3 years, 5 years?
Define Decision-Making
selecting a course of action from competing alternatives.
Example of Decision-Making
To maintain the sales of iPhone 13 after the launch of iPhone 14 Pro, should Apple reduce the price or spend
more on marketing to maintain sales?
Define Controlling
Gathering feedback to ensure that the plan is being properly executed or modified as circumstances change
Example of Controlling
Lower than planned sales… How to correct the situation? Should we focus on increasing sales of entire
portfolio or change product mix to focus towards high value-added models alone to achieve planned profit
targets?
True or False. MA is closely linked to business strategy
True
Which questions does business strategy answer?
–Which product market should we be catering to?
–How should we compete with other players in the same segment?
–How Technology, Scale/Size and Efficiency all have an impact on the strategic capability of an organization
Which product market should we be catering to?
–Should Sony drop the movie business? What will be the financial implications
–Or invest in Men in Black: International, Spider-Man: Far From Home, Angry Birds 2, the Jumanji sequel and Bad Boys for Life? What are the potential costs and revenues?
How should we compete with other players in the same segment?
- By being more cost efficient : Dropping Opex of Mobile Phones Division by 50% through closure of Beijing Factory and Some
Markets like Middle East and South America. How much will we save? - By being more innovative by coming up with new flagship products like the famous Xperia Z. What will be the research and
development costs? Potential revenues?
How Technology, Scale/Size and Efficiency all have an impact on the strategic capability of an organization.
–The financial implications of all the above.
–Home Entertainment & Sound segment sales has stagnated with slight increase in profitability so “a strategic decision
involves not to pursue scale in order to focus on profitability
