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Year 2013/14 Diploma in Business Studies [Accounting] Year 2 ABMC3084 Information for Control and Decision Making

Tutor Tutorial Group Date of Submission Group member

Mr Hui Feng Huey Group 15 25 November 2013 Chua Kai Seng [12WBD01631] Heng Yi Ting [12WBD06874] Ng May Kuen [12WBD04953] Pharm Mee Pin [12WBD07228] Soh Yee Ying [12WBD02915] Tee Shi Jie [12WBD07252] 2,418 words

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KOLEJ UNIVERSITI TUNKU ABDUL RAHMAN FACULTY OF ACCOUNTING, FINANCE AND BUSINESS

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DIPLOMA IN BUSINESS STUDIES (ACCOUNTING)

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Assignment Question Question 1: You are required to conduct a research on the requirements of information by companies that are necessary to achieve the companies objectives. Your research paper Must include the followings: Explanation on the differences between quantitative and qualitative information. Explanation on the differences between financial and non- financial information. Give a real example of financial and non- financial information relevant to the following 2 Public Listed Companies: a) Public Bank Berhad b) Airasia Berhad (Note: You are required to briefly explain the companys background and nature of business) (Total: 25 marks)

Quantitative information Quantitative information is the information that involves a measurement of any kind which can be expressed and evaluated numerically. It can be involved in financial data and non-financial data, for example selling price of the company products and duration of manufacturing a product. There are specific rules for keeping track of this information, but the main point to remember is that any value recorded directly from a tool is considered quantitative data. It should always be recorded immediately, along with its description and the units of measure, and care must be taken to use the proper precision. Quantitative methods provide information which is easy to analyze statistically and fairly reliable. The quantitative information can be represented in graphs, histograms or tables.

Examples of Quantitative Observations John spends $300 dollars in a month for petty cash and this is the fourth time in two weeks John has worked for overtime. Both of these observations consist of numerical data so they are quantitative. Qualitative information Qualitative information is a form of research or data collections that gathers information about qualities which are not in numerically form but can be observed. It includes such descriptions as color as well as observations about texture changes and anything else that is actually an opinion. This is often more subjective since data is usually analyze by humans that can add their own emoticons and beliefs that causing final decision can be affected. So, few aspects such as employee morale or customer satisfaction should be considered in decision making. Qualitative methods are ways of collecting data which are concerned with describing meaning, rather than with drawing statistical inferences. They provide a more in depth and rich description.

Example of Qualitative Observations Quantitative observations should not be confused with qualitative observations, or those pertaining to quality. John seems like working hard on the paper work, but he is actually in distracted condition.

This observation is not quantitative; it refers to the quality of John's performance, so it is qualitative.

Explanation between Financial and Non-Financial Information Financial information is basically information data of a financial nature or anything that is in monetary valuation that can be assigned or discussed and it is in an objective manner. In Business, financial information includes the figures and measurement in a financial report, which is a formal document outlining recent or expected financial performance. For individuals, financial information is the figures in household budget and other personal financial documents. Non- financial information on the other hand refers to social accounting, corporate social responsibility reporting, environmental reporting, sustainability reporting, and service

performance reporting or integrated reporting. In short, it means information that falls outside the scope of mainstream financial statement. It is the general data or other information not associated with money or financial transactions. As a manager or business owner, people must understand clearly both types of information and the impact of each holds on the business. For management, financial information is used to evaluate company performance by comparing net income of earlier years with the current ratio, for example detailed financial statement. The non-financial information is used to check company performance by analysing the number of defects from the manufacturing process or the sales quantity of the business for that particular month. In the Marketing sector which the company depends on them to lead the company product for future sales opportunities. The financial information refers to the sales figure of the industry and the product whereas the non-financial information can be the taste and preferences of the consumers or the buyer demographics. For a business to have progression and for the employee to work towards, goal setting is needed. In fact, goal setting also includes both the financial and non-financial information. The financial information needed for set goal may include the increasing of the sales dollars for a particular product line or reducing the expenses of unnecessary spending. While the nonfinancial information may include increasing the number of new employees or reducing the number of overtime hours.

(a) Public Bank Berhad is an institution which provides banking and other financial services in Malaysia and internationally. The Founder and Chairman of Public Bank Berhad is Tan Sri Dato' Sri Dr. Teh Hong Piow. Public Bank commenced the business on 6 August 1966 and was listed on the Kuala Lumpur Stock Exchange (KLSE) on 6 April 1967. Public Bank Group provides a comprehensive range of financial products and services covering amongst others which are personal banking, commercial banking, Islamic banking, investment banking and etc. Besides, the Public Bank Group is with a total of 377 branches and over 17,600 of employees which caters to the financial needs of over 8 million customers in Malaysia. However, Public Bank Group's overseas operations today include 122 branches in the world.

Besides, Public Bank Group also earned recognition and trust for its strong and sustained financial performance and prudent management. In 2012, it was honoured with 36 awards, with many best bank awards and excellence in corporate governance by national and international publications. From above information from researching, it can be categorized as non-financial information which is essential and significant in decision making. For example, we can know that the company is stable and can be invest in long-term since it has a huge business scale with the many number of employee or labour force and branches throughout the oversea and also received a lot of achievement. In addition, its total assets are RM274.62 billion as at the year end of 2012. Thus, it becomes third largest banking group in Malaysia and ranked number six by asset size in Southeast Asia. Furthermore, it is also the largest non-government-linked corporation in Malaysia with a market capitalisation of RM57.52 billion as at the year end of 2012. From the five-year group financial summary 2012, the operating profit of the bank had increased from RM3,948 million in year 2008 to RM5,368 million in year 2005.1 From the financial information above the investor can clearly see the performance of the company and the ability of them in managing their working capital and liability.

b)

AirAsia Berhad is Asias aero plane largest low-fare, no frills airline and also be a

pioneer of low cost travel in Asia. AirAsia Berhad began when Tune Air Sdn. Bhd., which founded in 2001 by Dato' Sri Dr. Tony Fernandes, Dato' Pahamin Ab. Rajab, Dato' Kamarudin Meranun and Dato' Aziz Bakar by bought over the loss-making, debt-riddled AirAsia from HI COM Holdings Berhad for a token sum of RM1. In January 2002, AirAsia has soared in the last nine years to cover 65 destinations in 18 countries. Besides, nowadays, Air Asia Berhad already had employing more than 8,000 staff and with a market capitalisation of just over RM7.06 billion. Furthermore, it is the only Truly ASEAN airline which already serving the region's 600 million population from 10 hubs in three countries which are Malaysia, Thailand and Indonesia. In addition, Air Asia made a decision in December 2004, to convert the existing fleet of ageing Boeing B737s with the higher capacity yet more fuel-efficient, reliable and cost-efficient Airbus

http://www.bursamalaysia.com/market/listed-companies/company-anno

A320s. It is also developing the use of technology by beginning the online booking. This was the first airline in Asia to go ticketless and allowing guests to pay for their bookings by credit card over the phone. From the non - financial information above, public can see how strong this company can be. They start the business with an advance technology and upgraded their aircraft to A380 and etc. This shows that the company has high capital in the investment by importing the advance technology. This will make the public have more confident in this company when making the investment decision. However, the financial information of Air Asia Berhad also plays an important role in decision making. For example, the revenue of the year end 2012 is RM 4,946 million and compare with the year end 2011 which was RM4, 495 million, there was an increase in revenue about RM 451 million. Besides, the profit before tax of year 2012 was RM2, 004 million while in the year end 2011 was RM 777 million; it increased RM 1,227 million from the year 2011 to 2012. The total assets in the company in the year end 2012 was RM 16,745 million and RM 13,906 million in year 2011, the total asset also increased RM 2,839 million from 2011 to 2012.2 With the financial information above, it shows that the company has good performance and nonliquidity problems. It reassures the investor who already invested. Therefore, the company will get enough capital and make the decision on how to maximize the welfare of the shareholder and profit of the company. In conclusion, the financial information and non-financial information was interrelated during the decision making. Without any of these, the users of information could not make an accurate decision to achieve their goal. Users need to consider the financial information first and then last consider the non-financial information. It is because the non-financial information always supports the financial information, to make the user more confident when making decision.

http://www.airasia.com/iwov-resources/my/common/pdf/AirAsia/IR/annual-report-2012.pdf

Question 2: In a research study of The behavioural aspect of Budgeting, published in the November 2010 Asian Financial Journal, it was reported inter alia the following comment by a financial controller of an automobile company with regard to the practice of participation in the setting of budgets in his company: We bring in the managers of budget centres, we tell them that we want their full and frank opinion, but most of them just sit there and nod their heads. We know theyre not coming out with exactly how they feel. I guess budgets scare them. You are required to suggest: a) Reasons why managers may be reluctant to participate fully in setting budgets. b) The ways on how to encourage the managers to participate in setting budgets, and c) Unwanted side effects which may arise from the imposition of budgets by senior management. (Total: 25 marks) (a) Managers may be reluctant to participate fully in setting budget for a few reasons. Firstly, managers may think that they do not truly participate in setting the budget if they cannot make much influence on the budget. This is because a belief by managers that their suggestion and ideas most probably may not be adopted by their senior management. Thus, they may consider that the budgeting process as one of the senior managers securing formal acceptance of previously determined target level. Besides that, the degree to which individuals have control over their own destiny will always influence the desire for participation. Since most of the managers believe that they cannot significantly influence the result of the budget, this may cause them to be reluctant to participate fully in setting budgets. Furthermore, a main reason for managers to be reluctant to participate fully in setting budgets is because the adoption of top-down mandated approach to budgeting by some organization. Budgets that set using this approach will start with senior management establishing parameters under which the budget is to be prepared. The lower level managers have limited input in setting the budget and the overall goals of the organization. The senior managements call the shots, and lower level managers are essentially reduced to do the basic budget calculations

consistent with directives. As a result, managers may view the budget as a dictatorial standard and not willing to participate fully in the budget process. Other than that, a poor management or superior relationships is also another reason which causes managers to be reluctant to participate in the budget process. A bad superior relationship may be an obstacle for managers to cooperate and participate fully in setting the budget and the companys goal. Last but not least, the reason why managers may be reluctant to participate in setting budget is due to the lack of understanding of the budget process or a belief by managers that they will be engaging in a process that will be used in a recriminatory manner by their superior. (b) There are several ways to encourage the managers to participate in setting budgets. Firstly, the company should have an open meeting which involves all levels of managers from different units in setting the budget as they have the best knowledge and better understanding on their own specific areas of operation. Besides, a company should appoint a person whom is knowledgeable and an unbiased person to conduct the meeting. Secondly, senior manager should be more open minded in order to encourage managers to participate in setting budgets. If senior managers are willing accept new ideas and critics from junior managers, junior managers are willing to set the budgets and take the task seriously. Furthermore, senior managers should also explain the reasons why they reject the junior managers works. This may avoid any misunderstanding between senior managers and junior managers. Senior managers should be knowledgeable enough and is responsible to let junior managers understand the budget process, what are their task, what should they do and which type of information they need to guide the junior managers. In addition, junior managers also have the responsibility to understand what the senior managers said. They should ask immediately if they dont understand, if junior managers know what they are doing, their performance will be better as they can provide facts and figures while they are setting the budgets. Last but not least, a good relationship between senior managers and junior managers also encourage junior managers to participate in setting budgets. When senior management sees improvements in how the warring managers are working together, they should praise them for it both privately and publicly. This will motivate the managers to work hard as they will feel that they could also make an influence on the budget.

(c)

The senior management might reject the budget prepared by the budgetees and the

proposal of project has to be revalued and adjustments needed to be done on the budget spending throughout the project. This will take some times and may lead to wastage of human resources. Besides, this also encourages the budgetees to present falsified and manipulated information to the senior management. They have the intention to cheat and consider the unjust methods of performance evaluation so that the senior management will agree and approve their budget planned. Subsequently the senior management will also increase suspicion and mistrust towards the work group and so this results in undermining the whole budgeting process effortlessly. In fact, managers use budget system despite the budget system is undermined or not instead of considering the inadequacies of the budget system itself as a factor. Certainly the objective of managers is to achieve the budget at all costs even if this results in actions that are not in the best interests of the organization. Furthermore, in a result of non acceptance of budgets, creation of anti management cohesive work groups in the firm might be triggered. This is because they are supposed to be authoritarian over their project. The imposition of budgets by superior may cause issues like bad relationship between staffs from different level of management. Under these circumstances, organizational atmosphere may become one of competition and conflict rather than one of the corporation and conciliation. This consequently reduced the work group's efficiency so as to protect themselves against what they consider to be increasingly stringent targets.

References
1. http://www.securities.com/Public/company-profile/MY/Public_Bank_Berhad_en_1662810.html 2. http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?ticker=PBK:MK 3. http://www.pbebank.com/corporate/ 4. http://www.studymode.com/essays/Air-Asia-Company-Analysis-1552965.html 5. http://in.reuters.com/finance/stocks/companyProfile?symbol=AIRA.KL 6. http://www.airasia.com/my/en/about-us/ir-about-airasia.page 7. http://www.airasia.com/iwov-resources/my/common/pdf/AirAsia/IR/annual-report-2012.pdf 8. http://www.bursamalaysia.com/market/listed-companies/company-anno 9. http://international.cengage.com/emea/drury_6e/student/stdman/pdf/StudentCost15.pdf 10. http://highered.mcgraw-hill.com/sites/dl/free/0074711717/57451/Budgeting_Ch09.pdf 11. http://www.principlesofaccounting.com/chapter21/chapter21.html 12. http://www.discoverysurveys.com/articles/itw-099.html 13. http://www.ask.com/question/what-is-qualitative-and-quantitative-information 14. http://www.ehow.com/facts_6795838_meaning-quantitative observation_.html#ixzz2kRlECuAM

Marking Scheme
Question 1 Marks Maximum marks Definition, Knowledge of Costing Concepts and Relevant Principles Application of knowledge to the subject matter 18 9 Maximum marks 9 Question 2

20

10

10

Creative/ Analytical thinking

12

Total marks

50

25

25

Final marks: Question 1 + Question2