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Essay sample - Strategic Management Accounting
Finance & Accounting
Pages 12 (3012 words)
Strategic Management Accounting Part A This section of the study aims at discussing the measures like return on investment (ROI) and economic value added (EVA) for measuring the financial performance of the organisation. An analysis would be done to discuss whether the managers focus are towards short-term gains or not, and if they do so what measures can be taken to overcome such issue…
Success can be measured by ensuring that the output is as per the desired estimation from the pre-decided input and effort (Rathore, 2009; Siddiqui, 2006). In such situation, responsibility accounting signifies classifying the financial information that is related to the areas associated with the organisational activity. After considering these financial aspects the responsibilities are allocated for controlling different areas of operations. These areas are also known as responsibility centres. There are various types of responsibility centres, such as cost centre, profit centre, revenue centre, and investment centre (Rao, 2007). The financial performance in the organisation are measured and monitored by the managers by considering the relative measures of profitability. ROI is also a relative measure of financial performance that can be utilised for comparison with the other investments. It also assists in providing a summary of the post return on the capital employed. The concept of ROI is based on the yield or benefit that investors reap on investments (Megginson and Smart, 2008). ROI = (Revenue – Investment) / Investment * 100 (Jupri, n. ...
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