Subject Financial Management DFM1 Prepared by Susan Lim Email susanlimipkedumy

Subject financial management dfm1 prepared by susan

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Subject: Financial Management (DFM1) Prepared by: Susan Lim Email : [email protected] Dividend Decisions (1) Also represent a financial decision. The dividend paid is directly related to the financing decision, as retained earnings are one of the most important sources of finance. (2) The balance between current dividend and current growth reflected in share price. (3) Manager will need to decide whether to pay a certain amount of dividend or not. In the event dividend is paid, there is a need to decide on the quantum of the dividend, high or low? It is important that manager consider all aspect carefully before deciding on the dividend policy as this can have an impact on the share price of the company. Part 2: Financial Accounting vs. Management Accounting (1) Management accountants provide internally-used information. (2) Financial accounting function provides externally-used information. (3) Management information provides a common source from which are prepared financial accounts and management accounts. (4) The differences between financial accounts and management accounts: Financial accounts Management accounts Financial accounts detail the performance of an organisation over a defined period and the state of affairs at the end of that period Management accounts are used to aid management to record, plan and control activities and to help the decision-making process. Limited companies must, by law , prepare financial accounts There is no legal requirement to prepare management accounts The format of published financial accounts is determined by law and by accounting standards . In principle the accounts of different organisations can therefore be easily compared. The format of management accounts is entirely at management discretion : no strict rules govern the way they are prepared or presented. Financial accounts concentrate on the business as a whole , aggregating revenues and costs from different operations, and are an end in themselves. Management accounts can focus on specific areas of an or ganisation’s activities. Information may aid a decision rather than be an end product of a decision.
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___________________________________________________________________________________________________________________ Page 6 of 19 IPK COLLEGE 1664, JALAN KULIM, 14202 BUKIT MERTAJAM, PENANG TEL : 012-5203212 / 0125113212 / 04-5512588 Subject: Financial Management (DFM1) Prepared by: Susan Lim Email : [email protected] Most financial accounting information is of a monetary nature. Management accounts incorporate non-monetary measures. Financial accounts present an essentially historic picture of past operations. Management accounts are both a historical record and a future planning tool. Examples of decision making that management accountants can help management with are: Breakeven analysis - what products or customer segments are currently profit making or loss making? Chapter 4 Key factor analysis - should products be made in house with available resources or should their manufacture be outsourced to somewhere cheaper? Chapter 5 and 6 Pricing decisions - should the prices of strongly selling items be increased to try and increase overall profit?
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