Management accounting is described as, "Management accounting is the process of identification, measurement, accumulation, analysis, preparation, interpretation, and communication of financial information used by management to plan, evaluate, and control within an organization and to assure appropriate use of and accountability for its resources." (MAP, p. 58) This basically means that managerial accounting, when used correctly should yield in a more efficient company, maximizing the utilization of its employees, equipment, and materials.
Some of the reports that managers use to maximize the output of the company may be for example the Efficiency ratios, which include the Net Income ratio and the Return on Assets ratio. Managers can also use Liquidity ratios, Profitability ratios, and Leverage ratios as well. These different ratios can give management a snap shot view of what is going on at the current moment. In addition, the ratios can be adjusted to look into the future and help see what the possible outcome can be without really having to implement any changes. This is a great tool in assisting companies to forecast what they want to do in effort to move into their desired direction. Again, these are just tools and the implementation of changes must be monitored adequately to insure the desired outcome. In essence these ratios cannot work alone. In order for these ratios to be drawn, the use of the balance sheet and income statement are also needed and... [continues]
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