The Effects of Financial Accounting Reporting on Managerial Decision Making

The Effects of Financial Accounting Reporting on Managerial Decision Making

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Financial reports provide an overview of a business’s profitability and financial condition in both the short and long term. They are necessary sources of accounting information about companies for a wide variety of users. In. every business, there, needs information. This information needs range from financial, production, marketing, etc. Generally, the larger the organization the greater the management’s need for information. The financial report plays a vital role in the decision-making process of business organizations. The main purpose of financial reports is the provision of financial information as a record making. It has been said that accounting is the language of business. It might also be said that the ability to apply accounting knowledge is critical to success in business: A business prepares various reports at the end of each fiscal period. This report summarizes the changes that have taken place during the period. For this financial report to be useful, the data be presented in such a way that the user will recognize, Similarities, differences, and trends from one period to another to enable them to make decisions. The accounting information contained in the financial reports enables management to make more informed decisions.

A financial report should provide adequate information in all areas of organization and economic activities; it should be able to disclose the nature and accurate accounts of the transactions fun that the true and fair view financial position of the organization can be ascertained. Financial reports serve a lot of useful purposes to different users namely, shareholders, Creditors, Banks, government agents, employees, potential investors, and the management of the entity itself. The above-identified groups of persons rely on the information supplied by the given firm through financial reporting in which they have the interest to ascertain the organization‟s state of affairs which serves as an important guide in deciding the extent to which they commit their fund. It is the “communication of financial information useful for decision making such as investment, credit, and other business decisions” such communication include, general. Purpose financial statement, balance sheet, equity report, cash flow reports, and notes to these statements.

1.2 STATEMENT OF THE PROBLEM

The problem of this research is that the management does not know the various ways of presenting financial accounting reporting, which often affects managerial decision-making. There is no proper allocation of resources in the organization which leads to non-achievement of the profit maximization objective. Also, the inability of the management to recruit trained and professional personnel, as a result, the quality of the decision made by this organization are very poor.

1.3 OBJECTIVE OF THE STUDY

The research work covers the effect of financial accounting reporting on managerial decision-making.
The studies have the following objectives:
To know whether the various ways of presenting financial accounting reporting have any effect on managerial decision-making in the company.

To examine the attitude of management in the allocation of resources which often leads to the achievement of profit maximization objective.

To determine the level at which management recruits trained and professional personnel which leads to quality decision making.

1.4 RESEARCH QUESTIONS

Based on the objectives, the following research questions were developed:

Do the various ways of presenting financial accounting reporting have any effect.

References

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