Management Accounting and Corporate Value Creation Essay
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Management Accounting and Enterprise Value Creation Essay Part 1
With the continuous upgrading of China's economic structure and the great changes in the domestic and international market environment, sloppy competition has been very difficult to ensure the survival and development of enterprises, to comprehensively improve the level of enterprise management, and the establishment of a new type of financial management system centered on modern management accounting is imminent. To this end, the Ministry of Finance and the State-owned Assets Supervision and Administration Commission of the State-owned enterprises to vigorously implement comprehensive budget management, repeatedly emphasized the management of central enterprises from the crude to intensive, refined transformation, and will be management accounting as the key direction of the future reform and development of accounting, requiring the active adoption of effective measures to strengthen the construction of management accounting-related systems to accelerate the training of management accounting personnel.
At present, there are still many problems in the development and application of management accounting. The cognitive problem is the primary problem affecting the application and development of management accounting, followed by the construction of management accounting. If the cognition is correct, it may accelerate the development of management accounting, and then make positive contributions to the formation of value creation and sustainable competitiveness; otherwise, if the cognition is not in place, it will consciously or unconsciously hinder the development of management accounting theory and practice. In view of this, the author intends to discuss the relationship between management accounting and enterprise value creation from the three aspects of the essential characteristics of management accounting, historical evolution, theory and methodology, in an attempt to reveal the origins of the development of management accounting, the foundation of the problem, and more clearly outline the functions and roles of management accounting in the creation of enterprise value, and ultimately to promote the value of the utility of management accounting.
I. Management Accounting: An Information System for Creating Enterprise Value
With regard to management accounting, Prof. Yu Xuying, a famous accountant in China, pointed out that management accounting is a discipline that helps to improve the economic efficiency of an enterprise (1983), and he located management accounting in the measurement and evaluation of the realization of the enterprise's business objectives. According to Prof. Kaplan, an authority on management accounting in the United States, management accounting is a system for creating enterprise value (2007). Management accounting focuses on decision-making, program implementation, control plan implementation process, is an information system for decision-making and strategy implementation. The two experts have the same meaning of "enterprise economic efficiency" and "enterprise value". The International Federation of Accountants (IFAC) belongs to the Financial and Management Accounting Committee (1988) will be management accounting explained as: in an organization, in order to ensure the rational use of resources and to fulfill the corresponding economic responsibility, the management used to plan, control and evaluation of (financial and operational) information recognition, measurement, reporting, analysis, interpretation and transmission of the process. China's Ministry of Finance Accounting Professional and Technical Qualification Examination Book, the management accounting is defined as: management accounting is the realization of the economic process of forecasting, decision-making, planning, control, responsibility assessment and evaluation of the functions of a branch of accounting, through the modern enterprise business activities generated by the financial and other information processing and reuse, to strengthen the internal management and management of the enterprise, and to achieve the best economic efficiency. Most textbooks at home and abroad define management accounting as: management accounting is a set of information processing system, through financial methods, statistical methods and other related information on business activities to organize and analyze, so that managers at all levels within the enterprise can effectively plan, control and evaluate the economic activities of the entire enterprise and its various units of responsibility, thus helping business leaders to make a variety of specialized decisions. Despite the differences in the descriptions of management accounting by authorities and organizations at home and abroad, the positioning of the essential attributes of management accounting in the following aspects is consistent:
(1) The ultimate purpose of management accounting is to improve economic efficiency, and it can be said that value creation is the mission of management accounting.
(2) Management accounting is an information system. On the information can create value, information economics has been asserted, this paper is intended to further clarify the management accounting through what way, how to create enterprise value.
(3) Decision support, implementation control, evaluation and incentives is the functional positioning of management accounting information system. Enterprise value creation requires managers to achieve through correct decision-making and decision-making implementation, which requires managers to understand the production, business and management processes, management accountants to provide information related to these aspects, to help managers optimize and improve the operation and process ways to achieve the correct decision-making, understanding and control of the business process, to achieve the value of value-added.
Second, the historical evolution: the important factors affecting management accounting
According to the views of most scholars, cost accounting is the predecessor of management accounting, from which the author will be the development of management accounting is divided into four phases, namely: the costing and management stage, the cost of planning and control stage, operational management and financial control stage, Value chain management and strategic control stage.
(1) costing and management stage (late 19th century and early 20th century). After the Industrial Revolution, machines replaced manpower, large machine factory production replaced individual workshops, enterprise ownership and management is highly centralized. This stage of the capitalist according to their own habits and experience in business management, based on the maintenance and expansion of capitalist profit management objectives, the formation of accurate calculation of product costs as the basis for the control and management of various costs of the cost accounting method system.
(2) cost planning and control stage (early 20th century a 1950s). After the second industrial revolution, the expanding scale of enterprise production, the need for professional management, ownership and operation began to separate, enterprise accounting breakthrough in a single after the accounting pattern, through the adoption of the implementation of the business process of ex ante planning and control of the technical methods, to better promote the realization of business objectives. A series of cost control techniques and methods came into being 'to determine the quota for the purpose of time and action research techniques, differential wage system and specialized functional management to solve the efficiency of production and operation, so that the main body of accounting from the entire enterprise to extend to the organization of the responsibility of the internal unit, the accounting discipline system has formed two branches of financial accounting and management accounting.
(3) management and financial control stage (1950s-1980s). After World War II, fierce international and domestic competition, capital profitability decline, in this new situation, relying solely on the improvement of production efficiency and rationalization of internal business operations is far from being able to meet the requirements of the objective economic environment, economic forecasting and decision-making work has been attached importance to the quantitative and quantitative profitability analysis, comprehensive budgeting, and other methods of financial management and control can be better for the enterprise to improve the economic efficiency of the service.
(4) value chain and strategic control stage (1980s a now). 1980s, high-tech boom, the world economy from industrialization to information technology, enterprise value creation by relying on investment in physical assets into relying on the development and use of intangible assets, business management and financial control more and more to show its limitations and inadaptability! 'Management accounting needs to introduce strategic concepts' to realize value creation through the recognition, measurement and management of customer value and shareholder value drivers.
From the development of the history can be seen, management accounting is with the changes in the economic environment and the needs of enterprise management performance for the gradual deepening and broadening. The objects of management accounting accounting and control are cost, profit and strategic enterprise value. The following aspects in the development of management accounting are its important relevant factors:
First, the goal of business management. The theory and methods of management accounting depend on the target orientation of business management, which is the tool and means to realize the target and create enterprise value. The goal of business management is to change with the changing environment, the target positioning is different, the theory and method of management accounting is different. It can also be said that management accounting has goal-oriented attributes.
Second, the organizational structure. Management accounting information system plays a role in the process of enterprise value creation, through the organization's internal responsibility units, business processes and operational activities of recording, measurement, analysis and control to help achieve value added.
Third, the drivers of enterprise value. In terms of the concept of value, although there are multiple forms of expression (such as economic value added, return on capital, profit, etc.), they are expressed in the form of financial indicators, then the issue of value creation is to improve the level of financial performance (Yu Zengbiao, 2004). Unlike traditional financial management, management accounting provides approaches and methods for value creation that focus on the drivers of corporate value creation' including cost drivers, profit drivers, and behavioral drivers. Management accounting is committed to clearly describing the relationship between value and drivers, and is the most effective integration tool for integrating corporate strategy, operations, and finance. It can be said that 'management accounting not only measures value' but also centers on value creation.
III. Management Accounting Theory and Methods
Regarding the development of management accounting theory and practice, it is generally referred to as the traditional management accounting stage before the 1950s and the modern management accounting stage after the 1950s. In the traditional management accounting stage, the main content of management accounting includes cost management and budget control, focusing on the implementation of the established decision-making program and the implementation of business plans, with "accounting control" as the core functional characteristics, through the implementation of the program and the implementation of the plan "control" behavior, to promote and promote the implementation of the plan. Through the "control" behavior of program implementation and plan execution, it achieves the purpose of promoting and improving enterprise efficiency. Since the 1950s, the modern management science theory for the development of management accounting laid the foundation for the cost of habit classification, distinguish between the organization invested in fixed and flexible resources, the formation process of profit is divided into contribution to the creation and preservation of two phases, revealing the profitability of the product and business risk, and then form a decision support system for the business plan. 1980s later With the social and economic form of the industrial economy stepping into the information economy, management accounting information has developed to deepen internally and expand externally (Yu Xuying, 1999), based on the introduction of "information economics" and "agency theory", management accounting is mainly centered on how the information economy and the agency theory can be used for the management of the company and the management of the company. Based on the introduction of "information economics" and "agency theory", management accounting mainly focuses on how to provide relevant information for the optimization of the enterprise "value chain" and value appreciation.
We can describe the development trajectory of management accounting as a process of gradually building and improving the management accounting framework system based on management accounting practices and based on organizational management objectives. The way of profit realization is an important factor in determining management accounting techniques and methods. From the perspective of target profit and its realization, in the context of the producer market, the key to enterprise management is to improve labor efficiency, the standard cost system is a good solution to this problem, in which the main points of the standard cost control include:
First, the internal structure of the enterprise according to the nature of the work and the main body of the responsibility for the division of the organization unit, so that the management and control of the object is clear;
The second is to develop a standard "daily workload" for each organization unit, and the standard "daily workload" for each organization unit, and the standard "daily workload" for each organization unit. unit to develop a standard "daily workload" in order to clarify the plan objectives;
Third, the implementation of the target process of accounting and control, to ensure that the implementation of the plan on the basis of the provision of information to support management decisions;
Fourth, the completion of the goal of the evaluation of the situation and rewards and penalties, with the aid of incentives to make the control in place, and then the target The goal is to achieve. Other management accounting methods (such as full budget management, balanced scorecard performance evaluation, etc.) also have such characteristics.
From the theoretical basis, management accounting is with the development of production and management needs and the emergence and development of the management theory of innovation and development of management accounting methods to lay the foundation for the theory of economics, organizational behavior theory, mechanism design theory, etc. for the formation of management accounting methods and improve the guiding role of the theory of management control, the theory of contract for the construction of the content system of management accounting. The construction of management accounting content system provides framework support. Specifically, through the means of budgeting and decomposition,
management accounting specifies the functions and responsibilities of the various contracts (resources) defined by the strategic objectives of the enterprise. Responsibility accounting further breaks down these functions and responsibilities into executable contracts for specific agents, forming a performance mechanism and ensuring performance effectiveness through performance evaluation, rewards and penalties (Lin Wanxiang, 2008).
Four: Implications: Development and Application of Management Accounting
Based on the above analysis, this paper has the following implications for the development and application of management accounting:
1. Corporate management objectives, organizational structure, and internal and external environments have ****-born interactions with management accounting methods. Management accounting is closely dependent on the enterprise organizational structure (responsible unit) and the environment it faces 'to trace the roots of the enterprise management objectives as a guide, to determine the formation of a technical method system appropriate to it' thus, the future development of management accounting should be from the determination of business objectives and management priorities, on the basis of which to explore the control techniques and methods that are appropriate to it and methods, in order to effectively apply to complete the goal realization, and thus the ultimate task of value creation.
2. Based on the concept of systematic control to standardize the working procedures and standards of management accounting. The role of management accounting is reflected in the whole process of organizational management. First of all, management accounting involved in the decision-making process of the organization, the main work is based on the management's decision-making goals to collect and collate effective data and information, choose scientific methods to measure and analyze the decision-making options, by weighing the pros and cons (cost and benefit analysis, etc.) to determine the organizational goals and the optimal program; Secondly, through the establishment of the responsibility of the accounting system, the decomposition of the implementation of the organizational goals and in the implementation of the process of accounting and control, recording and measuring the progress and results of the implementation of the goals. Measurement of the progress and results of the implementation of the objectives; again, the implementation of the objectives and results of the analysis and feedback, on the one hand, as a basis for performance evaluation and assessment, on the other hand, in the analysis and evaluation of the results of the implementation of the objectives on the basis of the results of the new planning program to predict the effect of the next round of decision-making to provide a basis.
3. Based on the organizational hierarchy to build management accounting content system. At present, the popularity of the practical application of management accounting in enterprises is low, which is caused by a variety of reasons, among which, the weak connection between the relevant theories of management accounting and the actual operation of enterprises is one of the reasons for its unsatisfactory application. According to the logic that an enterprise is a hierarchical and structured organization, it is possible to simplify an enterprise into three levels: top, middle, and bottom, and then build a hierarchical management accounting content system that is compatible with it, including the provision of strategic control information for the top level of the company, the provision of operational control information for the middle level of the company, and the provision of operational control information for the grassroots units. This is also in line with the United States Harvard University Professor Anthony on the management control functions and boundaries of the definition of the elm.
4. The application of information technology and the integration with behavioral science are two aspects that should be emphasized in the application and development of management accounting. The complex and changing economic environment of the new century makes the decision-making and management problems of enterprises more and more complex, on the one hand, accounting as a growing information system, inseparable from the support of information technology. On the other hand, accounting problems are ultimately human behavioral problems, and economic interests drive human behavior, which in turn affects the objects and results of accounting control. Behavioral issues and the support of information technology should be an important element of the composition of the management accounting system.
Management Accounting and Enterprise Value Creation Essay Part 2Abstract: The goal of modern enterprise financial management is to maximize the value of the enterprise, so the enterprise financial activities are also around this goal. The article further clarifies the important position of financial management in enterprise management by briefly analyzing the intrinsic connection between financial management and enterprise value creation.
Keywords: enterprise value economic value added financial management
From the perspective of financial management, enterprise value is the present value of the enterprise's future cash flows, generating future cash inflows is its main feature, the cash flows generated using . Certain discounting methods discounted to the current value, that is, the enterprise value. The reason why the maximization of enterprise value as the goal of financial management, is because it has the advantages of these aspects compared with other goals: consider the time of compensation, consider the relationship between risk and compensation, to overcome the short-term behavior of the enterprise and so on.
First, financial strategy: the positioning of enterprise value creation
Maximizing enterprise value is to create maximum wealth for the company's shareholders, but also the fundamental purpose of financial management, can be measured by the indicator of economic value added EVA, EVA = (return on net assets - weighted average cost of capital) * total capital. From this formula, it can be seen that improving the rate of return on assets or reducing the weighted average cost of capital can increase the economic value added, thus increasing the value of the enterprise, the financial strategy refers to the overall competitive strategy to adapt to the company to raise the necessary capital, and the effective management and use of these capital within the organization's strategy. Financial strategy and corporate strategy is inseparable, financial strategy can be divided into: expansion, robust, defensive financial strategy, different financial strategy to form a different capital structure, the weighted average cost of capital is also different, and ultimately produce economic value added is not the same.
Second, the comprehensive budget management: enterprise value creation platform
Budget management is the majority of enterprises at home and abroad, a management model commonly used, the comprehensive budget, including the business budget, capital budgets and financial budgets, the comprehensive budget management to become a platform for enterprise value management, because it is a way to minimize the management cost Comprehensive budget management has become a platform for enterprise value management because it is a way with the lowest management cost, and also because it is a management mode that coordinates the interests of all parties most directly, and even more so because it is a kind of business management mechanism based on strategy, and it is highly integrated with the enterprise value management. This people-oriented, clear relationship between responsibility and rights of the management model, greatly mobilized the responsible departments, specific responsibility for the creativity and enthusiasm, and further optimize the allocation of resources, and ultimately for the realization of the strategic objectives of the enterprise to lay a solid foundation.
The traditional point of view that budget management is only budgeting, implementation and assessment of the formation of the largest data and forms of the combination, the function of the traditional plan is no different, and now the more authoritative point of view that the budget management is the enterprise's internal decision-making objectives of the economic activities of the resource allocation planning and optimization and control of the implementation of the internal planning activities and processes. It is a quantitative form of performance plans, reflecting a certain period of business activities of the indicators and resource allocation, it is the specificity of business decision-making, but also to control the basis of business activities. After making decisions to maximize the value of management objectives, the top management of the enterprise will usually manage the process of realizing its value through the budget, in order to manage the budget of each business and make its results consistent with the goal of maximizing the value of the enterprise.
III. Internal control and risk management: the guarantee of enterprise value creation
Internal control is the policies and procedures designed and implemented by management and other personnel in order to provide reasonable assurance of the reliability of financial reporting, the efficiency and effectiveness of operations, and compliance with laws and regulations, and is a process used in strategy development throughout the all levels and units of the enterprise, and are designed to identify events affecting the organization and to manage risks within the organization's risk appetite to provide reasonable assurance that various objectives are achieved. Control activities ensure that management's directives are carried out and include authorization and approval, segregation of duties, proper documentation and record keeping, physical control over assets and records, independent inspection and evaluation. Proper supervision must also be exercised over the entire process of risk management and internal control, which is corrected through supervisory activities. Risk management and internal control is a kind of management concept and culture, which is an inevitable choice to improve the decision-making mechanism. Through the clarification of control points, supervision methods and risk management measures in the business process, it provides institutional constraints for enterprises to prevent strategic risks, operational risks, financial risks and regulatory risks, and is a fundamental safeguard for enterprises to reduce and eliminate unfavorable matters affecting the financial reports, ensure that shareholders' rights and interests are not infringed upon, and achieve value The fundamental guarantee to maximize the value of the company's financial reporting.
Four, cost management: the foundation of enterprise value creation
One of the strategies to achieve competitive advantage is to realize the cost leadership, the cost of the enterprise's products, including the cost of the product development and design process, including the cost of the product production process, including the cost of the sales and consumption process. Cost management is an important part of enterprise value management, and its main purpose is to establish a cost profitability model for the enterprise through the basic cost information to identify effective products, effective customers and effective competitive areas, so as to make the comparative analysis of the revenue and cost of each business become more matching and more scientific, and also to make the comparison between the return on the investment of the enterprise as a whole and the weighted cost of capital more valuable, and ultimately to realize competitive strategies such as cost leadership. To realize these purposes of cost management, it is difficult to rely on traditional cost management concepts and methods, target cost method, job cost management and variance analysis, become an ideal choice to strengthen enterprise cost management, which is based on the analysis of business processes, according to the cost drivers to distinguish between value-added and non-value-added operations, according to the analysis of the business link of the resources consumed and the value of the analysis, through the improvement of the current enterprise cost accounting system, to determine the cost of different operations, and to determine the cost of different operations. It is based on the analysis of business processes, differentiating between value-added and non-value-added operations according to their drivers, analyzing the resources and values consumed according to the business processes, and improving the current costing system of the enterprise to determine the costs of different operations and business processes, providing fundamental support for the enterprise's business decision-making, process improvement, cost control, performance measurement and value management.
V. Performance Evaluation: Measurement of Enterprise Value Creation Results
How to evaluate the results of enterprise value management, the evaluation process is actually a re-examination of the enterprise strategy and management process. Traditional performance evaluation focuses on financial aspects, while strategy-based performance evaluation emphasizes the extent of value added to the company's value, which takes into account both short-term financial results, but also focuses on the cultivation of long-term competitive advantages. Therefore, strategic performance evaluation is not a matter-of-fact approach, but uses a value management-oriented evaluation system. At present, the performance evaluation system of the world's leading enterprises can be roughly divided into three categories:
(1) Evaluation system based on the traditional financial management indicators, now mostly using budget management,
(2) EVA as a representative of the evaluation system,
(3) balanced scorecard as a representative of the performance evaluation system. Each of these three systems has its own strengths, and if they can complement each other's strengths, it is the best result for perfecting enterprise performance management.
In the enterprise's compensation system on the use of EVA, through the dynamic observation of the index, the analysis of the degree of contribution to the creation of enterprise value; in the enterprise's day-to-day performance evaluation of the balanced scorecard, and the balanced scorecard in the financial indicators are mainly used in the EVA; and the budget emphasizes EVA as a starting point for the implementation of the performance management of the process of control and overall control of corporate performance. Ultimately, the establishment of the creation of enterprise value maximization as the core, budget management as a performance control platform, balancing corporate finance, customers, internal management and learning and growth of the four factors of the integrated performance management system.
In a sense, enterprise value should include economic value and social value, can only estimate the economic value, calculate the social value of the research method to be in-depth, but this goal is undoubtedly more scientific. The goal of maximizing enterprise value is not only to consider the interests of the owners of the enterprise, but also to take into account the interests of other related parties, the maximization of enterprise value should be the goal of financial management and even the production and operation of the enterprise.
References:
1. Research on Economic Value Added and Enterprise Value Management
2. Review of Research on Enterprise Value Management Models
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