Managerial Accounting Assignment Example | Topics and Well Written Essays - 750 words

Managerial Accounting - Assignment Example In an article by Shanker, she recognizes the importance of accounting information in providing managers with solid information that they could base their decision making (Par 1). The author further points out that accounting information eliminate the need for business executives to use personal perception and gut to make decisions (Shanker par 1). In addition, the article recognizes that accounting is used in understanding the appropriateness of strategies used to attain short term goals. Shanker points out that short term financial goals such as an increase in sales, amount of debt, number of creditors and level of loss can be accurately determined by providing accounting information (par 1). The article is of the assumption that to acquire accurate and effective accounting information; a business entity should be formulated in three steps. Firstly, the cash numbers should be acquired. Shanker points out that cash is the most significant asset in an organization (par 2). For this reason, executives should analyze how cash-wise an organization is, and use the information to plan for short and long-term financial expenditure. For instance, if a business has cash balance of $50,000 and requires purchasing assets worth $120,000, the manager should come up with alternatives that would raise the money without using the cash balance of the business. To understand the current financial data in organizations, most executives use ratios to analyze the financial position of their businesses (Shanker par 2). For instance, the current ratio is used to determine the ability of a company to pay its short-term debt. It is determined by comparing its current assets and liabilities. The second step is to mind the budget. This can be determined by analyzing the value of income and expenditure at a specific time. This ensures that the business runs of a specific budget. Shanker is of the assumption that; if a