the importance of financial accounting information for...

Theimportanceoffinancialaccountinginformationforbusinessmanagement

ErikaBesusparienė,EditaVitunskaitė,RičardasButėnas2018-12-06

Kaunokolegija,UniversityofAppliedSciences

Outline

• Relevanceoftheresearch• Theaimoftheresearch• Theimportanceoffinancialaccountinginformationforbusinessmanagement

• Themethodologyoftheresearch• Theresultsoftheresearch

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Relevanceoftheresearch

• The financial accounting information provides46-50% of effective information data (Ovidia,2013, cited Srivastava, Lognathan, 2016).

• The analysis of financial statement of 100companies of Lithuania revealed that areprepared 50-59% of good quality financialstatements (Authority of Audit, Accounting,Property Valuation and InsolvencyManagement, 2017).

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Theaimoftheresearch

• The aim of the research – to assess thequantity of financial accounting informationused on business management decisions inthe companies of Lithuania.

• Tasks to achieve the set aim:– 1. to analyse the importance of financialaccounting information for business management.

– 2. to investigate the relationship between thedecision of business management and the use offinancial information in Lithuania.4

Theimportanceoffinancialaccounting(1/4)

• Thefinancialaccounting:– isfinancialinformationcollectingandtransformingprocess,– monetarytransactions’classificationandrecordingprocess,– applicationsystemofaccountingrule,– informationpresentedintheannualaccount,– preparationsystemoffinancialstatements,– financialinformationprovisionforauser,– informationaboutthematerialandfinancialstandingofacompany,

– managementaccounting,– informationforbusinessdecisionmaking.

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Theimportanceoffinancialaccounting(2/4)

• Financial accounting information disclose the face ofcompany (Florin, 2014).

• Traditional financial accounting must assure true andfair view of company’s performance (Zambon, DelBello, 2005; Yadav, Kumar, Bhatia, 2014).

• This is necessary for users of financial reporting, asinvestors to reduce the risk (Yadav, Kumar, Bhatia,2014) or “as a management tool for strategicdecision making” (Zambon, Del Bello, 2005).

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Theimportanceoffinancialaccounting (3/4)

• To make rational decisions is important thequality of financial information.

• Financial accounting quality depends onaccounting sustainability.

• “The provision of sustainability accountinginformation to internal users would focus onthe provision of relevant and decision usefulinformation to management” (Lamberton,2005).

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Theimportanceoffinancialaccounting(4/4)

• “Financial planning, economic analysis, costcontrolling, strategic controlling, liabilitiescontrolling, controlling of sales, marketinganalysis and planning, profit managing, cashflow and others” (Látečková, 2014).

• Porter’s five forces which are the bargainingpower of the buyers, entry barriers, rivalry,substitutes and the bargaining power of thesuppliers (Grundy, 2006).

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Themethodologyoftheresearch(1/2)

• Theresearchmethod- aquestionnairesurvey.• Thequestionnaireconsistsoftwoparts.• Thesecondpartformulatesthestatementsevaluatedbythefive-pointLikertscale.

• 38respondentswereinterviewed.• ThesurveywasconductedinJuly-Augustof2018anditwasconductedusinganonlinesurvey.

• ThecalculationsareperformedusingthepackageofstatisticalanalysisSPSS.

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Themethodologyoftheresearch(2/2)

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Researchmodelandhypotheses

Size of Correlation: 0.90 to 1.00 Very high positive correlation; 0.70 to 0.90 Highpositive correlation, 0.50 to 0.70 Moderate positive correlation, 0.30 to 0.50 Lowpositive correlation, 0.00 to 0.30 Negligible correlation.

Theresultsoftheresearch(1/3)

• Howwouldyoudescribethefinancialaccounting?• Inwhichcasesdoyouuseaccountinginformation?• Howmuchfinancialaccountinginformationcanhelpyouaddressthefollowingissues?

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Statement

1(Stronglydisagree)

2(Disagree)

3(Undecided)

4(Agree)

5(StronglyAgree)

TickoneanswerineachrowInformation for business decisionmaking

1 4 7 18 8

Theresultsoftheresearch(2/3)

Financialaccountinginformationcanhelpto

addressthefollowingissues:

Financialaccountingisusedasinformationforbusinessdecision

makingofthebargainingpowerof

thebuyers0.104

ofthebargainingpowerofthesuppliers

0.283

ofentrybarriers 0.400*ofrivalry 0.365*

ofsubstitutes 0.341*

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*.Correlationissignificantatthe0.05level(2-tailed).

Theresultsoftheresearch(3/3)

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*.Correlationissignificantatthe0.05level(2-tailed).**.Correlationissignificantatthe0.01level(2-tailed).

Financialinformationusingfor:

Financialaccountingisusedasinformationforbusinessdecisionmaking

Financialplanning 0.158Economicanalysis 0.428**Costcontrolling 0.152

Strategiccontrolling 0.502**Liabilitiescontrolling 0.631**Controllingofsales 0.461**Marketinganalysis

andplanning0.441**

Profitmanaging 0.341*Cashflowcontrolling 0.262

Conslusion(1/2)• Information of financial accounting is important for its users

in the process of making various decisions.• Literature analysis showed that the importance of financial

accounting information could be revealed through Porter’sfive forces.

• Financial accounting information can be used for buyersmonitoring and debt risk controlling.

• Also, it disclosed the size of resources of main activities orinvesting, finance planning, ensuring cash flow and strategicplanning.

• Sustainable accounting can have a positive impact onbusiness decisions.

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Conslusion(2/2)• The empirical research revealed that Lithuanian companies

mostly use the financial accounting information to makedecisions related to sales (controlling of sales, marketinganalysis and planning, profit management).

• Following Porter’s five forces, Lithuanian companies applyfinancial accounting information for making decisions relatedto entry barriers, rivalry and substitutes.

• It looks strangely, but Lithuanian companies do not tend toapply financial accounting information to financial planning,cost control and cash flow controlling.

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Thankyou!

ErikaBesusparienėerika.besuspariene@go.kauko.lt