Importance of Cost/Managment Accounting for Stakeholders of Mncs
The following essay explains the importance of cost accounting for stakeholders of Multinational Companies, particularly the shareholders & the customers.
Who are the stakeholders of an organization? according to (Freeman 1984) stakeholder is “any group or individual who can affect or is affected by the achievement of the firm’s objectives” going by this definition stakeholders of a company would include lenders, creditors, customers, shareholders, government, media, political groups, local charities etc. The main focus of this essay will be on shareholders and customers. A company cannot plan a strategy on to just focus on increasing shareholder value or just focus on customers, neither one leads to the other automatically. Customers want best product for the cheapest price, while shareholders look for value of their investment and the income that is derived from their holding of shares.
Shareholder value or customer value cannot be measured simply by numbers; Earnings per share, Return on investments or other ratios are not sufficient which is why financial accounting is not enough.
(Langfield): Management Accounting provides managers with essential information for the effective and efficient use of financial and non-financial resources in creating value for shareholders and customers. Focus of management accounting is to effectively achieve shareholder value or customer value with the least possible consumption of the company’s resources. Highlight of modern cost accounting is how costs can be analysed in different ways to meet different information needs of the organisation in its decision making. Identification and tracking of individual costs helps managers in forecasting profits & setting product prices which are key elements in creation and enhancement of both customer and shareholder value. Cost accounting also focuses on what drives value, which costs and which activities have a positive or negative effect in the creation of value for
Who are the stakeholders of an organization? according to (Freeman 1984) stakeholder is “any group or individual who can affect or is affected by the achievement of the firm’s objectives” going by this definition stakeholders of a company would include lenders, creditors, customers, shareholders, government, media, political groups, local charities etc. The main focus of this essay will be on shareholders and customers. A company cannot plan a strategy on to just focus on increasing shareholder value or just focus on customers, neither one leads to the other automatically. Customers want best product for the cheapest price, while shareholders look for value of their investment and the income that is derived from their holding of shares.
Shareholder value or customer value cannot be measured simply by numbers; Earnings per share, Return on investments or other ratios are not sufficient which is why financial accounting is not enough.
(Langfield): Management Accounting provides managers with essential information for the effective and efficient use of financial and non-financial resources in creating value for shareholders and customers. Focus of management accounting is to effectively achieve shareholder value or customer value with the least possible consumption of the company’s resources. Highlight of modern cost accounting is how costs can be analysed in different ways to meet different information needs of the organisation in its decision making. Identification and tracking of individual costs helps managers in forecasting profits & setting product prices which are key elements in creation and enhancement of both customer and shareholder value. Cost accounting also focuses on what drives value, which costs and which activities have a positive or negative effect in the creation of value for
Bibliography: 1. Bellis-Jones Hill Group, customer case:’DHL-customer profitability in action’ (www.bellisjoneshill.com). 2. CIMA Official Terminology 2005 edition; CIMA publishing. 3. Chutchian-Ferranti, Joyce: Activity based Costing, Journal: Computerworld; (AUT database). 4. Cleland, Alan S :Balancing customer and shareholder value; Financial Executive 1987(AUT database) 5. Colin Drury :Management Accounting for Business (4th edition;) pages 162,163,164 & 202. 6. Criag Deegan/Grant Samkin: New Zealand Financial Accounting 5E pg 47 7. DHL Annual Report; 2007, 2010. (www.dhl.com) 8. Horngren, Datar, Foster, Rajan, Ittner, Wynder, Maguire, Tan: Cost Accounting (1st Australian edition.) 9. Kim Langfield-Smith, Helen Thorne, Ronald Hilton: Management Accounting 5E, pages 6, 7.