DECISION MAKING IN
ACCOUNTING
J/O/C JKA THARAKA
5796
INTAKE 37
Requirements:
Choose one of organization on chose and discuss the role of
accounting in decision making in that organization
Points include in essay
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REASONS WHY MANAGEMENT ACCOUNTING IS IMPORTANT FOR
DECISION MAKING
DECISION MAKING METHORDS
DECISION MAKING LEVELS
PROCESS OF DECISION MAKING
ROLE OF ACCOUNTING WHEN MAKING DECISION
I TAKE AS A PRACTICAL EXAMPLE OF THE ANNUAL REPORT OF
DIALOG AXIATA PLC
REASONS WHY MANAGEMENT ACCOUNTING IS IMPORTANT
FOR DECISION MAKING
The financial decision of any organization is generally supported by a
variety of quantitative methodologies, whether they are basic
techniques or the latest technologies, the ultimate goal is to help
management make a more informed decision.
We should discuss the importance of presenting and analyzing
management information and evaluating the various techniques in
terms of how useful they are to help management make more informed
decisions. We should use examples to illustrate our discussion of an
organization of our choice.
I take as a practical example the annual report of Dialog Axiata PLC
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They mainly consider these Financial Review to make decision
 Group Revenue
 Group EBITDA (earnings before interest, taxes, depreciation,
and amortization)
 NET Profit after Tax (NPAT)
 Capex
 Operating Free Cash Flow (OFCF)
 Dividend Payout & Dividend Yield
 Group Gross Debt to EBITDA
BY USING giving the details about all the above mentioned points, a
company becomes able to make appropriate decisions
They use these financial review to get these decision
Decrease cost
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How to increase sales
How to increase profitability
When can new capital be purchased
What is the best source of finance, and what is its duration.
How to increase Subscribers
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WHEN MAKING DECISION THEY USE DECISION MAKING
METHORDS
They are
 Basically, there are different types of decision-making processes
 Whether” decision this includes options for the type of decision,
yes / no, / or. This decision is taken to leave any doubt in any
organization.
 Which” decision: These decisions involve the choice of one or
more substitutes from a set of resources.
 Contingent decisions: These are the decisions that decision
makers make until a condition is met.
Decision Making Levels
Decision making is essential for any and every business. There are
levels of decision making that help a company to decide how urgent it
is to take any decision:
Strategic Decisions
These are the decisions of highest levels. Here the concern of a
business is general direction, long term aims, objectives, and goals.
These decisions are least structured and majorly imaginative. They are
more risky and out of the uncertain results, partially since this reach far
enough due to its importance.
Tactical Decision
This type of decision supports strategic decisions. They are inclined to
be of medium significance, medium range, and moderated or medium
consequences. In this type of decision making, the managers of
company are required to research about the data that can possibly help
the company to decide about the extension or a unit.
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Operational Decision
These decisions are related to the day-to-day losing the hold the
business. These are mainly the routine decisions of any company, take
by junior or middle managers.
As a large scale company dialog most of time use Strategic Decisions.
They annually use to assemble and make these decisions
These decisions are important for any small or a large company. For
example, Dialog Axiata PLC creates millions of data every day against
thousands of cost and sales headings. This data gives a clear picture
of trends that the business can use in forward planning. It also helps
the managers to record the performance of the company and take all
necessary decisions. These decisions include investment of the profits
earned, buying or selling of assets, paying off the loans, etc. These
decisions are very important for the company financial
Process of Decision Making
Decision making is considered the study of identifying and selecting
alternatives and substitutes based on the preferences and values of
the person responsible for making decisions. Most of these decisions
mean that there are options that should be considered for a company,
while others say that it is sometimes mandatory for a company to
decide against its survival benefits. Following is the process that a
decision
maker
follows
when
making
some
essential
decisions: Defining the problem
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Before making any decision, it is very important to know the real
problem, against which the decision must be made. The main objective
of a decision factor is to clarify the company and all the initial, desired
and most serious conditions that may arise from this problem.
Determining needs
Requirements are the conditions that any acceptable solution to the
problem must meet or meet. They explain what is the most basic and
essential step in solving a problem. If a company is facing a problem,
especially in relation to finance, managers need to know and report the
basic requirements of this problem. This is considered the first step in
solving any problem
Establish Aims objectives
Then the manager sets some goals. Aims are the broad statements of
target and desirable values related to programs. Here also requirement
plays a good role. These decide out on what is the most basic and
important step to find a solution for any problem. If a company faces a
problem, specially related to finance, then the managers are expected
to know and tell the basic requirement of that problem. This is
considered to be first step for solving any problem.
Identification of Alternatives
Decision making is a natural mental process to select a course of
action from several alternatives options. Alternatives provide different
approaches and ways to change the initial situation into the desired
one. It is compulsory that requirement must meet the alternatives, or
alternatives must also meet the requirements.
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Explanation of Criteria
After knowing the problem, finding the requirements and defining the
alternatives, the next step is to explain the criteria that the manager will
follow to find the problem to that solution. Decision criteria are based
on the goals and objectives of the decision maker. It is really important
to define the criteria that include the large number of steps that are
essential for decision making process.
Identifying alternatives
Decision making is a natural mental process for selecting a course of
action among several alternative options. The alternatives offer
different approaches and ways to change the initial situation to the
desired one. It is mandatory that this requirement meets the
alternatives or the alternatives meet the requirements.
To easy these process dialog divided their services like this
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Dialog mobile
Dialog broadband
Dialog TV
Dialog products
They analysis financial report of those and identify problems.
Explaining the criteria
Once you know the problem, find the requirements and define the
alternatives, the next step is to explain the criteria that the manager will
follow to find the problem for this solution. The decision criteria are
based on the goals and objectives of the decision maker. It is really
important to define the criteria that include the large number of
essential steps in the decision making process.
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Basically, these criteria should be
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Able to differentiate among the substitutes and to support the
comparison of the performance of the substitutes of a business or a
department,
Finish to comprise all objectives,
Meaningful and operational,
Non-redundant, and
Less in numbers
Selecting a decision-making tool
Each correct way of making a decision includes an appropriate
decision-making tool. These tools include input engagement,
substitution assessment, and problem measurement.
Validate solutions against problem statements
This is the last step in the decision-making process. It summarizes the
problems, the requirements of the solution, details about alternatives,
criteria and then the selection of decision-making tools.
Dialog axiata’s future accept
According their mission and vision they expect to increase their
costumer’s ilandwide to be leading telecommunication brand
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To achieve their target they use to
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Audience targeting
Make or buy evaluations
Define Budgets
Controlling Planning
To make an all these thing possible and profitable costs analysis is
very importance.
Before calculate budget for next year they mainly consider about last
year budget.
Example
According 2015 annual report their mobile subscribers were decrease
To avoid this they increase their 2016 budget to improve their services
to gain custermours. After year when we consider about 2016 annual
budget report we can clearly see improvement of profit of mobile
network because of increase of mobile subscribers?
That is how they use financial detail to increase profit.
Summary
Decision making is an important step for every business. It is a
natural mental process to select a course of action from several
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alternatives options. Each and every decision making process
produces final choices. In business, decision making process plays
an important role, and any decision related to finance is of utmost
importance. The finance department of an organization generates a
handful of financial information, which helps in decision making
process. It includes tools, methods, techniques and processes. There
are three types of methods techniques of decision making process. It
is a natural mental process to select a course of action from several
alternatives options. Each and every decision making process
produces final choices.
References
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James Reason (1990). Human Error. Ashgate.
Baker, D., K. Sorenson. (2002), “Guidebook to Decision-Making Methods.”
-Department of Energy, USA
Annual report of dialog Axiata 2016
Annual report of dialog Axiata 2015
Wikipedia
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