Introduction
Decision making is the fundamental aspect that a company has to embrace in its daily endeavors. This is because of the fact that the decisions made are the ones that will determine the position of a company in the market share (Higson, 2003). Directors, being the main administrators of the company are required by the law to exercise strict duties of care and good faith so as to safeguard the companies’ interests and those of the members. To enable him achieve this, he is required to have a good knowledge of the company so as to understand what amendments need to be made and how to make them (Schaltegger, 2000).Each and every decision made by the director must be for the common good of the company and not otherwise.
Decision Usefulness Concept and True and Fair View
When making decisions to boost the growth of a company, the following process should be followed; first the company needs to identify the goals that need to be achieved, the goals may be short term, medium term or long term depending on the target of the company (McLaney, 2005). Next, the company should identify the decisions that need to be made in order to achieve the set goals. Third, the problems or challenges that is likely to be encountered when implementing the decisions should be identified. A list of alternatives that will be employed should be identified for implementation just in case the former don’t work. Finally after comparing the various alternatives, the company should choose the most practical models, apply them and observe their impact on stimulating the growth of the company.
Accounting is the most sensitive part of the company, since it is the determining factor of the financial position of the company. It is also the financial reports that will attract and maintain the investors into a company (Roderic, 2004). It is therefore important for this information to be known to equity investors, creditors and lenders so that they can make decisions on their capacity to provide capital to the company. The company law requires that a proper analysis of these reports be made which should ensure that the information reflected in these books is a true copy of how the company is working. The accounting report should be clear so as to be easily interpreted and understood by the prospective readers.
In giving out the information concerning a company’s performance, the shareholders should be given the first priority and then the creditors and other lenders (Scott, 2009). This is because; compared to the other lenders, the share holders are the legal owners of the company. Any decision on the methods of expanding the company is always based on the majority rule (Ahmed, 2004). The company board is responsible to communicate to the shareholders concerning the details of the next meetings, where major decisions and suggestions are made and implemented by the majority.
Financial reports are the mirrors that reflect whether the decisions that were recently made are working for the good of the company or not. With this reports, the management is able to set new targets and review on the administration model of the company. For proper and exact results, the company needs to have different financial reports of individual department so that they can know the specific area that needs to be checked (Pizzey, 1989). It has sometimes been assumed that, when a company does not display a progressive report, the major decisions need to be made. However, when the individual departments are assessed, then the company is able to know where exactly the problem emerges.
The concept of true and fair view relates to the faithful representation of the financial report. There is at times an attempt by the companies’ to misrepresent their financial report so as to suppress the shortfalls of the company (Henry, 1996). This is done with the aim of attracting more investors and maintaining the ones that exist. There is always a general trend where the investors will shy off from non performing companies and invest in those that they are assured of a good return on their shares. This is the main reason that makes the companies who have not recorded a positive growth to misrepresent their financial reports so as not to loose their potential investors (Fanning, 2004).True and fair representation in itself is not a qualitative characteristic instead it is the results that come from the application of this concept that are viewed qualitative.
A company should always aspire to win the confidence of its investors, which can only be achieved by reflecting sincerity on the financial reports (Alexander, 2004). A company that may be found giving wrong information in regard to the operation of the company may be liable to face serious consequences in accordance to the companies act. To a void such inconveniences the company can always ensure that appropriate predictions of the economic trend are made and the correct measures undertaken to secure its position.
Conclusion
Just like any other business, a company is liable to face some challenges during its operations. The trend may be positive or negative. It is also not always easy to predict the future changes in the market and the company should therefore be ready for all manner of changes. In all situations, it has to make a positive move to ensure that the negatives it experiences do not reoccur and continue applying the measures that will maintain its share in the competitive market.
References
- Ahmed R. (2004): Accounting Theory: Cengage Learning EMEA pp. 33-36
- Alexander D. (2004): Financial reporting: Cengage Learning EMEA pp. 42-45
- Fanning D. (2004): Company accounts: Cengage Learning EMEA pp. 14-17
- Henry R. (1996): Readings in True and Fair: Taylor & Francis pp. 22-25
- Higson A. (2003): Corporate financial reporting: SAGE pp. 11-13
- McLaney J. (2005): Business Finance; Financial Times: Prentice Hall pp. 17-19
- Pizzey A. (1989): Cost and Management Accounting: SAGE publications pp. 34-36
- Roderick D. (2004): Unshackling Accountants: Institute of Economic Affairs pp. 24-29
- Schaltegger S. (2000): Contemporary Environmental Accounting: Greenleaf Publishing pp. 33-36
- Scott W. (2009): Financial Accounting Theory; Pearson: Prentice Hall pp. 21-24