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Importance Of Accounting In Decision Making

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1.1 Background of the study
Every business has two primary objectives that are profitability and solvency. Profitability represents the ability of a business to make profit, while solvency represents the ability of a business to pay its debts as they come due. Besides that, accounting measures, financial information and economic information needed for decision making of a company. Thus, through these will allow the management of the company to make accurate judgments and decisions. The Income Statement shows the profitability or operating results of a business, while the balance sheet shows the solvency or financial position of a business.
The use of financial reporting is the main aspect in decision making of a company. It is intended to provide …show more content…

Through accounting ratios, it will be easy to know the true financial position and financial soundness of a business concern. Accounting ratios form the basis of fundamental analysis. Through ratios analysis, we shall able to identify trends, good and bad, and adjust your business practices accordingly. It also can see how your ratios stack up against other businesses, both in and out of your industry. Also, the company use accounting ratio analysis to learn more about a company 's current financial health as well as its potential.
This research is to study the role of accounting ratios in decision making of a business. Decision making is the important element in management activity of all kinds of enterprise such as profit oriented, non-profit oriented and public institutions. However, this research is carried out in profit oriented enterprise where decisions are made based on different aspects which the use of accounting ratios should have a greater …show more content…

1.4.2 What is the function of different types of accounting ratios to management in their decision making process?
1.4.3 Are there any obstacles that might affect the proper use of accounting ratio in decision making?
1.4.4 Do you agree with the fact that ratio analysis facilitates proper understanding of information contained in financial statements?
1.5 Scope of the study
This study will discuss about the use of accounting ratios in decision making of a company such as current ratio of a company is 2 : 1; to repay current liabilities, there should be twice current assets. This means that the company has sufficient current assets to pay its current liabilities. More importantly, the accounting ratios make relationships in the business more understandable compared to financial statements. They are useful indicators of a company 's performance and financial situation. Then, the study will make a great emphasis on analysis of financial reports of Dutch Lady Milk Industries Berhad using accounting ratios. This financial report is made of all balance sheets, income statements that from 2009 to 2013 and the last 5 years period.
1.6 Significance of the

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