Accounting for Decision Makers

Learning outcome 1: Examine key accounting concepts and principles and the process involved in producing financial reports.

Learning outcome 2: Interpret and analyse financial reports, using appropriate tools and explain the nature of earnings management and its relevance to users of financial reports.

Learning outcome 3: Appraise the need for regulation of financial reporting, including accounting standards and describe the problems faced by standards setters in an international context

Learning outcome 4: Assess and apply key concepts and techniques in management accounting and control.

Question 1
Following are the financial statements of a major UK online retailer of clothing, accessories, beauty products and grooming items, targeted mainly at young adults.

Income statement for the year ended 31 August

The following additional information is available:

Given the nature of the business, 20% of total sales revenue represents credit sales while 80% of cost of sales represent credit purchases.

Required
Aqua plc, a Korean fashion chain are keen on acquiring the above company, primarily to gain a footing in the UK online market for young adults. They have appointed you as an advisor to help them arrive at a decision regarding the acquisition. Your opinion needs to be provided in the form of a report, limited to 1000 words, and addressed to Mr Lee Junho, the CFO of Aqua plc. It should analyse the above financial statements using the various ratios introduced on the module in the backdrop of recent global sociopolitical developments and any other research deemed necessary. The ratios need to be presented in the form of a table, as part of the appendices and do not count toward the word limit. The word limit does not include any abstract, bibliography or appendices. Hire Writers Now!

The CEO of Aqua plc is, however, very dubious about the analysis. She argues, "Accountants distort the nature of economic reality. An accounting evaluation alone should not be the basis for acquiring the above company."

Critically evaluate the above statement using scholarly research and examples, where necessary. Your answer should be no longer than 500 words. This does not include the abstract, bibliography and any appendices.

Question 2
Using scholarly research and examples where necessary, compare the utility of the following management accounting techniques in driving business decision making:

• Marginal costing v absorption costing
• Fixed budget v flexed budgeting
• Accounting rate of return v Internal rate of return

Your answer should not only showcase the difference between the methods but also illustrate their utility, using hypothetical business scenarios.

Your answer may not exceed 1500 words. This does not include the abstract, bibliography and any appendices.