Business Accounting and Financial Information

Question: Discuss about the Business Accounting and Financial Information. Answer: Introduction Accounting is considered as the measurement that helps in communicating and processing the financial information regarding the economic entities. According to Garrison, Noreen and Brewer (2012), accounting is known as the language of business that helps to measure the results of the economic activities of a firm and it also conveys the particular information to several users like creditors, investors, regulators and management. Therefore, it can be said that accounting is an important practice for any business. In addition to this, it can be noted that the accounting helps to operate the business and also to run it in a profitable way. The strong financial position of a firm is dependent on the calculation of an accountant. Here a firm that is enlisted in the stock exchange of the country has been selected in order to discuss the way by which the financial information meets the requirement of various non-management external users of the particular firm. In this report, the company Te sco Plc has been selected in order to analyze whether the financial information found in the annual report of the firm meets the needs of five different non-management external users. Moreover, the qualitative features that make the information of the financial reports useful to the users have also been discussed (Hoggett 2012). Company Background The company Tesco Plc is a public limited company, enlisted in the London Stock Exchange as TSCO. This company belongs to the retail sector that was founded about 98 years ago that is the year 1919 in London, England by the founder Jack Cohen. Therefore, it can be said that Tesco Plc is a British multinational grocery and a general merchandise retailer. This particular firm is considered as the third largest retailer across the world on the basis of profit measurement. Tesco Plc is even counted as the second largest retailer across the world on the basis of the measurement of the revenue. The particular firm has around 6814 stores across 12 countries including Europe, Asia, Hungary, Ireland, Thailand and Malaysia (Tesco plc. 2016). As per the year 2015, there are more than 500,000 employees within the organization across the world. The main products of the company Tesco Plc include the supermarket, superstore and hypermarket. Usage of the Financial Information by Non-management External Users In this report, it has been discussed that whether the financial information meets the requirement of five different non-management external users or not. The non-management external users are defined as those stakeholders who are not familiar with the management of the firm. For the particular company Tesco Plc, the five different non-management external users of accounting information include investors, creditors, members of Non Profit organizations, government of the country and the research scholars (Horngren, Harrison and Oliver 2012). Creditors For the company Tesco Plc, the creditors implies the suppliers of services and products on credit, the banks, the lenders of money generally who want to know about the financial position of the particular company. This is concerned with granting credit and/ or providing loans to the concerned organization (Warren, Reeve and Duchac 2012). The creditors of the organization Tesco Plc requires accounting information regarding quick assets, current assets and the current liabilities that are available from the financial statements of the organization like the balance sheet, comprehensive equity statement, cash flow statement and income statement. Investors For the organization Tesco Plc, the investors intend to invest a lot of money in a firm in order to know the financial condition of the organization. The investors invest in the organization in order to earn a higher amount of return (Fields 2011). Therefore, it is a common factor that the investors will investigate about the financial position of the organization before investing. For this, proper analysis of the financial condition of the firm is an essential factor, as strong financial condition of the firm Tesco Plc indicates that the company will be able to manufacture and produce more, and this will increase the total sales volume of the company. With the increase in the sales volume, the profitability of the firm also increases and this indicates that the firm will provide higher amount or return or higher rate of return to its investors through percentage of dividend (Penman 2011). The investors thus require accounting information that will guide them to evaluate t he performance of the past and also to predict the future prospects of the firm that is Tesco Plc. Members of Non Profit Organization The non-profit organizations include the hospitals, schools, clubs, colleges and many more (Libby, Libby and Short 2011). All these non-profit organizations need to gather the accounting information regarding the company Tesco Plc in order to gather knowledge regarding the methods by which the contributed funds of the organization are utilized. This particular information helps the non-profit organizations to make decisions about the future support from the particular company Tesco Plc. Government The government of a country intends to keep detailed information regarding the sales and revenues of a company and the percentage of earnings from selling. The main objective behind this is to earn a certain amount of taxation from the volume of sales or from the part of income or from the profit percentage of the organization (Feldmann and Rupert 2012). Therefore, in case of the organization Tesco Plc, the government of the country U.K. keeps a strict eye on the sales, revenue, earnings and profit percentage of the organization with the aim to charge a higher amount of taxation and also to earn a higher amount from the particular firm. Thus, it can be said that the non-management sector like the government of the country also requires the financial information regarding an organization for running the country and for maintaining a stable economic condition within the country. For instance, the income tax returns of the organization are calculated based on the financial r eports of the particular firm. Therefore, it can be said that the income tax is calculated based on the information gathered by the government of the country from the accounting information of the firm. Research Scholars The research scholars perform the analysis of the financial statements of the firm in order to understand the financial position of the organization in the present competitive market (Pride, Hughes and Kapoor 2012). Similarly, the research scholars also analyze the financial statements of the organization Tesco Plc in order to determine and understand its financial situation and its financial strength. The accounting information provided in the annual report of the company Tesco Plc helps the research scholars to make a study regarding the financial situation of the firm into financial operations of the specified organization. Qualitative Characteristics of the Financial Report The store of Tesco Plc is authentically trying to improve its performance. The evidence regarding this progress has been found, as the consumers feel better by overall shopping in Tesco. The spontaneous work for servicing its consumers, the vital importance provided by Tesco Plc to the local community and relatively the lower prices of the products of the organization along with well stocked shelves and enough staffs make a great difference of the particular company with other firms of the similar sector (Epstein and Lee 2012). The mission of the firm is to become the champion for the consumers and to help each one who shops from the firm. The firm Tesco Plc makes the life of the people easier and also makes the way of living easier for every consumer. It has been found that at the end of the year 2015, the numbers of colleagues of the organization Tesco Plc increased to 517,802. The total numbers of shops opened across the world are 7,817. It has been found that over 80 million shop ping trips take place within the organization in each week. It has been noted that 685,000 numbers of children came to know about the particular organization and its food through Eat Happy Project of the firm. The particular organization intends to protect all its customers from adulteration and fraudulence activities. Thus, Tesco Plc protects and strengthens its financial position such that the management can maintain the flexibility of investment for better shopping trip for its consumers. The company has started reviewing all its costs related to the business from the last October, so that the additional costs of the firm can be reduced (Bragg 2013). The company even took significant decision regarding not to pay final dividend for the financial year 2014/15. In addition to this, the company focuses on capital spending. Thus it can be said that Tesco Plc is committed to the financial discipline and has intended to reduce capital expenditure. The company provides pension to all its colleagues. This also indicates the financial strength of the firm. Tesco Plc has undertaken a detailed review of the property portfolio that has lead to decrease in the rent bill of the firm. The particular organization has completed a swap on asset with the company British Land in order to regain the sole ownership of about 21 superstores. The proportion of owned stores of the firm increased due to its own estate. Moreover, the firm Tesco Plc intended to rebuild transparency and trust among the customers. The new code of conduct of the business helps to provide training program in order to help the colleague to follow key policies (Braun and Tietz 2013). The restoring of trust also includes individual action and culture. The business model of the firm indicates that Tesco Plc is a successful company as the first priority of the firm is its customers that influence the financial information of the organization. Nowadays, the aim of the company is to regain its focus on serving customers. The primary highlights of the organization include customers for providing best possible offer, to provide products that serve best value to its customers and lastly, the firm work acros s various channels in order to deliver the products in the most convenient way. All these affect the financial position of the firm in a positive direction. The strategy of reinvestment, various channels, huge numbers of customers and various products puts positive effect on the financial statements of the firm (Bragg 2011). The key performance indicators include building of trusted partnerships, recommendation of colleagues regarding the company to be a great place of work and the recommendation of the customers to visit the stores again (Carlon 2012). All these help to boost up the financial statements of the firm. It has been founded that the growth sales of the company Tesco Plc has decreased by 1.3 % along with deliver profit by 57.5 %. Moreover, the operating cash flow also indicates that its improvement has decreased by 59.6 %. It has been found that the particular firm Tesco Plc has made a loss from joint venture, tax and interest. This movement was mainly driven by a loss from partnership with China Resources Enterprise Ltd. Even the joint venture of the U.K. property also made lower profits. The environmental and social review of the firm also attracts various investors to invest in. Thus, the financial position of the firm will also get strengthened. The support of the customers, suppliers and the operations of the business also strengthen the financial position of the firm. The emission of green house gases has also decreased with the passage of time (Duska, Duska and Ragatz 2011). Thus, it also puts positive impact on the financial position of the firm, as by reducing emission of green house gases, the company represents that it is performing well and thinking for both the environment and the society. Weaknesses in the Information Provided The Group Chief Executive of the firm Tesco Plc mentioned in the annual report of the firm that the particular faced various challenges for last few years. The management of the firm is also confident about their operations and ensured that the company will be able to perform an unbeatable job in future for its customers as the best days are lie ahead. However, the negativity or the weakness in this information is that the management did not mentioned any probable date or period from when the company will become financially strong or will retain its previous position (Epstein and Lee 2011). In addition to this, the company decided not to pay final dividend for the financial year 2014/15 but the reason behind this is not provided. Thus it can also be considered as weakness for the firm in the field of providing information. Conclusion Therefore, it can be concluded that the business accounting is an important element for every organization. The accounting is also termed as the language of any business. Thus, it is also termed as business accounting. In the company Tesco Plc, the accounting is closely related with the business operations and regulations. It keeps records of the performance of the business and the analysis might help both the management and non-management. The accounting or the financial information is mandatory for understanding the financial position of the company for both the management and non-management persons. The financial information of the company is useful for all the five non-management external users of accounting information that is government, members of non-profit organization, research scholars, investors and creditors. The qualitative characteristics also indicate that the information of the financial reports is useful to the users for making decision. Recommendations Thus, it can be concluded the company should put importance or should put focus on the present weaknesses of the firm. 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