Decision making techniques
A CIMA case study

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Page 1: Introduction

Cima 17 Cima Image 1A business aims to generate value for its owners, customers and other stakeholders. It must decide how to combine valuable resources – typically buildings and equipment, materials, people and knowledge – in such a way that the value of the output exceeds the costs of the input.

As resources flow into or out of a business, information flows too. Much of this information leaves a footprint in the form of financial data as the activities along a business’ value chain result in financial outcomes. These are reported in financial statements including the cash flow and income statements as well as the formal balance sheet. Traditional accounting is concerned with reporting on a business in financial terms about its past performance.

Management accountants

Management accountants go beyond this to prepare both financial and non financial information to support the business. They combine the relevant expertise of a traditional professionally qualified accountant with an understanding of the drivers of cost, risk and value in a business. This enables them to provide analysis and insights which are used to improve future performance.

Cima 17 Cima Image 5CIMA, the Chartered Institute of Management Accountants, is the world’s leading professional body of management accountants. CIMA trained management accountants help to lead the process of strategy formation in a business. Strategy is the plan for achieving objectives. However, strategy only points the way. Many decisions – large and small – must be made. Management is all about decision making and management accountants play a vital role in providing the crucial evidence that helps managers to make the right decisions.

Detecting, monitoring and evaluating risk is a very important element of this process. Management accountants use their accounting know-how to factor risk into decisions to help senior managers make realistic plans. The effectiveness of this depends on good communication. Even the best information has little value if not received by the right staff in the right format at the right time.

Chartered Institute of Management Accountants | Decision making techniques