Strategic Management Accounting

Managerial accounting focuses on the needs of internal users (managers) and on data relevant for decision making.

There are three steps needed to prepare a financial analysis. The first step is to establish the facts about the organization, which would include reviewing the financial statements such as the balance sheet, statement of operations, statement of changes in net assets and the statement of cash flows. The second step is to compare those facts over time, to the facts of similar organizations and to include vertical, horizontal and ratio analysis in the process. Ratio analysis includes liquidity, profitability, activity and capital structure. The third step in preparing a financial analysis is to use judgement and perspective to evaluate the comparisons and make decisions (Norwicki, 2015).

The financial analysis of a business organization involves the complete assessment of the liquidity, profitability, competitiveness and stability of the business. The process is done through using the financial statements of the business. The financial reports are generally presented to top management for purposes of decision making and setting up goals.

The financial perspective uses financial performance measures to determine whether the organization’s strategy and actions are profitable. An organization’s financial goals may be as simple as: to survive, to succeed, and to prosper. Survival can be measured by cash flow, success can be measured by growth in sales and income, and prosperity can be measured by increased market share and return on equity. Managers are encouraged to use financial measures like these to demonstrate their financial position to shareholders. (Kaplan and Norton

Feedback: Management accounting is the preparation and use of accounting information systems to achieve the organization's objectives by supporting decision makers inside the enterprise. LO 4

Corporate Strategy has been defined by numerous authors. Grant (1995) claims corporate strategy deals with the way a corporation manages a number of different businesses. Lynch, R, in both his third and fourth edition books on corporate strategy refers to Penrose (1959) definition of corporate strategy as “the pattern of major objectives, purposes or goals and essential polices or plans for achieving those goals, stated in such a way as to define what business the company is in or to be in and the kind of company it is or to be”

Financial analysis is the examination of pecuniary and financial information to accomplish the companies’ commitment. This investigation resolves the migration of organizations’ possessions, to explicate external and internal operations (Berman & Knight, 2012, p 38). This just says, a way to gauge an organization achieved and failed operations. In this logic, one may agrees that a financial analysis appraises businesses’ operating effectiveness, liquidity, and capital structure.

“Competitive strategy involves positioning a business to maximize the value of the capabilities that distinguish it from its competitor’s” (Porter 1980:47). A successful business plan requires first and foremost the formation of an appropriate strategy. Through the implementation of a suitable strategy, the company is able to obtain its own industry niche and gain an understanding of its customers (Porter 1985). Whichever strategy is adopted it must be adequately integrated within the firms goals and missions to achieve a competitive advantage (Parker and Helms 1992).

Purpose – The purpose of this paper is to provide a review of the origins of strategic management accounting and to assess the extent of adoption and “success” of strategic management accounting (SMA). Design/methodology/approach – Empirical papers which have directly researched SMA and prior review papers of the adoption and implementation of SMA or SMA techniques are reviewed. As well as assessing the extent of adoption of SMA and the reasons underlying an apparent low adoption

In addition, it does not assist to make big decision such as acquire new company or launch new product or shut down any business unit. On the other hand, strategic management accounting (SMA) is external focused, gives long term view and forward looking which assist any company’s management to decide big strategy like whether a company should go for market or product development, or acquire new business unit etc. According to pioneer writer of SMA Simmond (1981) SMA gives importance on information that relates to external factors to the firm along with non financial information and internally generated information.

Strategic Management—Advancing the role of the management accountant as a strategic partner in the organization.

Strategic management accounting (SMA) is considered as potential area of development for many years which would enhance the future of management account’s contribution in competitive success of business. SMA is first coined by Symonds in1981

Financial analysis is done by using financial statements of a company to analyze its financial position and performance, and to assess its future financial performance. It thus shows how items in the company’s financial statements relate to its financial performance objectives. (Principles of Accounting, Needles et al, 12th Addition)

Strategy: The unifying theme that gives coherence and direction to the decisions of an organization Strategic Management: Consisting of the analysis, decisions, and actions an organization undertakes in order to create and sustain competitive advantages. Or, the Strategic Management Process is: The full set of commitments, decisions, and actions required for a firm to create value and earn aboveaverage returns. (Hitt, Hoskinson, & Ireland, 2004, p. 4)

Furthermore many other researchers and authors recognize the importance of Strategic Management Accounting in the modern Era of time. e.g. (jones1988;