Session 2020-23

Project Idea Submission

The use of accounting as a management tool for decision

making.

Submitted to: Submitted by:

DR. KANISHKA GUPTA
ARYAN SACHDEVA [20021021341]
AYUSH GARG [20021021347]
DAKSH SHARMA [20021021355]
DHARAM R. GIRDHAR [20021021363]
DHRUV CHHABRA [20021021545]
Accounting is known as the discipline devised to classify and record the monetary activities in a
firm. This discipline is believed to have developed over the centuries and in the contemporary
world, accounting has become indispensable for almost every firm. Accounting is performed
with an objective of recording every useful piece of information which can be later
communicated to administration, investors, etc. The use of accounting information is incredible,
from administrative point of view to the animal spirit of the economy; the information which can
be communicated in financial reports by means of accounting is paramount yet delicate due to its
standardized and sophisticated nature.
The Objective of this study revolves around the importance of accounting in decision making to
the firm. To reflect the same, the team is committed to cite examples and perform analysis of 5
humongous firms. Out of 5 companies, 3 failed and 2 succeeded in different periods.
The attempt would be en-routed to observe the turbulences in these organization through the lens
of Accounting methodologies and how could they play role in decision making.

S. No. Organization Emphasized Time frame CEO (during that period)

1. Lehman Brothers 2002-2008 Richard S. Fuld Jr.
2. Vodafone Idea 1999-present Ravinder Takkar (since 2019)
3. Tata Motors 1998-2005, and during COVID Ratan Tata (Chairman in 1998)
4. Infosys 1999 Narayan Murthy
5. Yes Bank 2014-2020 Ravneet Gill

We’ll focus on the following aspects:

Lehman brothers – Lehman brothers were known as the major players in the banking and financial
services. In the initial years the company use to sell dry-goods and soon grew into cotton and other
industry. during the crisis of 2007-2008 in the USA, the company huge and unimaginable loses of about
$10 billion only due to the sub-prime mortgage scheme in USA.

The Lehman brothers were overleveraged. They borrowed money in order to invest in mortgage-backed
securities (MBS) along with other investments.

Vodafone idea – Vodafone is a multi-national company based in Britain. The mergers of Vodafone and
Aditya Birla’s Idea group was announced in 2017 when Jio came in the market and both company wasn’t
able to cope up with the competition and suffered huge losses. Vi provides services including Mobile
payments, enterprise offerings and entertainment, accessible via both digital channels as well as on-
ground touch points, centers across the country.

If the AGR liability were lowered to its self-assessed value, then Vodafone Idea could potentially save Rs
58 billion in cash flows annually. Even at the lower assessed amount, the company would remain FCF
negative.
Tata motors - Tata Motors Limited is an Indian multi-national automotive manufacturing company that
produces passenger cars, trucks, vans, coaches, buses etc. Tata launched the Indica in 1998, a fully
indigenous Indian passenger car tailor-made to suit Indian consumer needs. The success of indica played
an important role in the growth of Tata.

Tata Motors created a success story during the most challenging period (Covid-19 pandemic) of Indian
automotive history with a growth of 2.63%, when the industry as a whole fell 34%.

Infosys - Infosys Limited is an Indian multi-national information technology company that provides
business consulting, IT and outsourcing services. Infosys provides software development, maintenance,
and independent validation services to companies in finance, insurance, manufacturing sectors. The
share price surged to ₹8,100 (equivalent to ₹28,000 or US$390 in 2019) by 1999 making it the costliest
share on the market at the time. The company has the most revenues been recorded after Tata
Consultancy Services.

The Infosys growth can be witnessed since it started trading in India from 1993. It was possible because
the business has the ability to increase the per capita income.

Yes Bank - Yes Bank Limited is an Indian private sector bank headquartered in Mumbai, India. It offers
wide range of banking and financial products for corporate and retail customers through retail banking
and asset management services. The financial position of Yes Bank has undergone a steady decline over
the last few years because of its inability to raise capital to address potential loan losses and resultant
downgrades. The bank was also facing regular outflow of liquidity, means that the bank was witnessing
withdrawal of deposits from its customers. The share price of the bank has declined at a large rate over
few years.

The RBI has taken charge of Yes Bank in an effort to save them from further crisis. With its shares down
by nearly 85%, Yes Bank was ousted from Sensex and Nifty. RBI has also capped the withdrawal limit at
Rs50,000.

METHODOLOGY:
The study will revolve around the importance of accounting tools for the management of an
organization for the very purpose of decision making. The methodology is reflected in the tools and
techniques on which we’ll be relying upon; essentially driven by the objectives of the study.

Objectives of the study:

 The main objective of the study is to validate that accounting information is inevitable in
decision making.
 To identify the quantitative aspects of decision making.
 To perform analysis of the firms using their financial statements.

 To validate the implicit yet indispensable role of efficient accounting techniques in success of
the companies which helped steering through the turbulent times.
 To apply

To achieve these objectives of study, we would utilize following tools and methods.

1. Data collection method:

Our group members will use the secondary data to describe, examine, and interpret the usage
of accounting as a management tool for decision-making in various giant companies.
Our team selected 5 companies, out of which 3 companies failed and 2 companies succeeded in
their journey.
A study of annual reports of these companies will be undertaken to develop a better
understanding of them. Moreover, we will use authentic and trusted websites to collect the
data since this data is practically free of cost and is readily available.
2. Analysis of financial statements:
1. We will be emphasizing the analysis of financial statements and the study of the
companies based on Cost and management accounting utilizing the following tools:
Financial statements – it includes income statement, balance sheet, trading, and profit
& loss a/c, cash flow statement. Based on these statements we will summarise the
causes of companys’ failure and successes.
2. Financial ratios – we will try to compare the companies based on ratio analysis and the
gap between the ideal ratio and the actual ratio. We will be looking for Liquidity,
Solvency, Activity/ Turnover Ratio, and Profitability ratio.
 NOTE: Graphs will also be used when required.

3. Forecasting: Forecasting is a very broad accounting practice which includes various

accounting forecasting techniques ad can be classified into; short term and long-term basis;
quantitative and qualitative basis. The raw data can be taken from various websites based on
which forecasting methods can be applied such as straight-line method, moving average
method, regression, Delphi method. We will use the ARIMA model, Regression analysis,
Correlation, and panel data to forecast.

4. Management Accounting: This is the branch of the accounting which we have recently
studied. Hence, we can use managerial accounting tools like budgeting, variances, Marginal
costing and many more. This tool can be used in production planning, error rates, logistics,
market segmentation.
5. Inventory Management: It assists in taking decisions primarily in manufacturing firms.
With an effective inventory management system in place, the business can significantly reduce
its various costs like warehousing cost, inventory carrying cost, ordering cost etc. Various
inventory management tools which can be used are Just in time method, MRP model, EQL
model, Minimum safety stock etc.