This is a research, which focuses on the role of accounting information in Investment decision making. Accounting information plays an important role in today’s business world and it helps to make better business decisions. Accounting information helps both the external and internal stakeholders by providing them with valuable financial information. The fluctuation in the market is very high and so accounting information provides the organization with the ability to make decisions based on the current facts. Accounting information will help to forecast the upcoming trends in the market that in turn will help in identifying the viable investment options. The whole accounting information about the organization is not needed for the analysis of the data in the market. The accounting information is divided into factors and sub factors. The investors will have to determine the importance of the information, which will help them to make investment decisions. This study will help to identify the importance of various factors and sub factors in accounting. These factors will facilitate to identify the trends that will have to be followed and make accurate decisions in the market.
The literature study explores the theoretical background of the research subject matter. The study focuses on the effectiveness of accounting information for making any relevant decision during the investment process. According to Baker and Haslem (2015), economic information is one of the most necessary aspects of the accounting field. The accounting information is based on the data obtained by applying some of the specific instruments, methods, and procedures. These methods are much fruitful in processing the economic data. Management is even much responsible towards maintaining the essential role in managing human activities. This section of the study would explore the underlying conceptual analysis of accounting information that has the significant impact on the investment decision-making process.
Business investors play the most significant role in managing the business activities. They invest the required capital amount on business or venture to receive the profitable amount in return. It is notable that the companies need to invest a significant amount of money received from the investors in the capital markets (Christensen et al., 2016). These investors buy “shares” or the “part ownership” and participate in the business functionalities. In case of joint venture, it is necessary to gather the adequate ideas about the accounting process within the company before investing any capital amount. The maintenance of transparency during the investment process helps in minimizing the probable mistakes or errors in the business accounting process. The investors ensure the requirement of the business and predict the future benefits (Graham, Harvey, & Puri, 2015). Accordingly, they invest a suitable capital amount and expect to extract the profitability after accomplishing the business objectives.
The fundamental analysis of the business is completely depending on the relevant balance sheet, cash flow statement, and income statement. According to Collier (2015), the accounting information system helps in transforming the collecting data into information and distributing to the users. It is notable that the enumeration of the evaluation criteria is the greater utility for those who set the standards in terms of the quality management aspect. The analysis of the entire documents is necessary for preparing the financial reporting. The investors should concentrate on the strengths and weakness of the company to survive in this competitive environment. Making the quality use of the structured financial report would help in developing the strategic ideas that can be beneficial enough increasing the sales ratio (Carraher & Van Auken, 2013). The quality of information determines the probable influencing factors that can create obstacles while making any economic decision. Carraher Van Auken (2013) implied that accounting systems depend on the operational activities and economic events associated with the organisational functions. The individual investors may differ to each other in terms of investing the capital amount on business. In such scenario, it is quite necessary to gather the information regarding the financial budget. the decisions would be based on the accounting information derived from the entire auditing report. Furthermore, it is noticed that the accounting information provides the general ideas about the nature of the stock market and price value. The financial statement provides a profit forecast to the investors to predict the future possibilities. The accounting information provides the basic data that are required for making any relevant decisions within the organisation. The performance of the economic system is completely aligned with the decision quality by eliminating the possible errors (Wang, 2014). Accounting information has been following some of the basic characteristics that are mentioned below:
Therefore, it is noticeable that the accounting process has the remarkable influence on the decision-making process within the business. The accounting information is based on the data obtained by applying some of the specific instruments, methods, and procedures (Brochet, Jagolinzer & Riedl, 2013). In fact, it can be implied that the accounting information plays the crucial role in substantiating the necessary decisions based on the business requirements.
An individual investor develops the fruitful and adequate knowledge about the resources of the company while studying, comparing or analyzing the common stocks. It is notable that the individual investors may differ to each other in terms of investing the capital amount on business. In such scenario, it is quite necessary to gather the information regarding the financial budget. The financial statement provides a profit forecast to the investors to predict the future possibilities. Moreover, when the investors are aware of the resource capabilities of the company by observing the financial data, it would be easier to make any relevant decision. The logical reasoning ad tactful information develops the ideas about the business capabilities. Carraher Van Auken (2013) stated that the financial literacy is generally concentrating on the complete information with proper logical justification. Moreover, the investors can easily understand the appropriate timing to invest on a stock market (Christensen et al., 2016). Hence, it can be specified that the financial literacy has been creating the higher influence on the decision-making process of the investors.
The financial accounting data includes thee valid economic information that is guiding the investors to select the right direction. The accessibility to the accounting information is necessary to the investor because they can presume the future probabilities in using the capital resources. However, the decisions would be based on the accounting information derived from the entire auditing report. Furthermore, it is noticed that the accounting information provides the general ideas about the nature of the stock market and price value. While making the relevant decision, the investors should concentrate on the strengths and weakness of the company to survive in this competitive environment. Brochet, Jagolinzer and Riedl (2013) implied that Making the quality use of the structured financial report would help in developing the strategic ideas that can be beneficial enough increasing the sales ratio. On the contrary, the inadequate information of the entire accounting system may lead to the business failures. The investors are much concerned about their profitable returns after investing on the business (Christensen et al., 2016). Hence, following a structured and scheduled accounting system would help in securing the information regarding the capital investments.
Research methodology depicts the various designs, approaches and research methods. The methodology will determine the result of the study and that is why it can be considered to be one of the most significant part of the study. In this current field of study, justification for selecting all the methods for the study has been justified. The pros and cons of each of the techniques have been discussed thoroughly in this section. According to Mackey & Gass, (2015), the methodology of research consist of predetermined assumptions which are used to conduct the research. The methodology of research should be accurate and precise which can be used in studies of similar type.
The philosophy of research consists of the source and nature of knowledge. The creation of knowledge can seem to be intense but in reality, there are four types of philosophies. They are post positivism, realism, positivism and interpretivism. The hidden acts in the study are revealed with the help of positivism and it is the current philosophy of research (Taylor, Bogdan & DeVault, 2015). Positivism is a philosophy, which will help to improve the scope of observation of the research.
In this research, the implication of the hypothesis is great as it aids to differentiate between the inductive and deductive research. The validity of the various assumptions can be tested by the deductive approaches and on the other hand, inductive approach is used to formulate new generalizations and theories. The hypothesis is the beginning of the deductive approach while the inductive approach is used for the implementation of the research question (Flick, 2015). Therefore, for the current field of study the deductive approach is the most appropriate one and that it has been selected. In this study, the aim of the assignment is to validate the existing theories so deductive approach is the best suited approach for the research.
Secondary Data collection- The secondary analysis of the data will consist of the thematic analysis and qualitative analysis of the data that has been collected from the secondary sources. The research will analyze various journals and research papers based on the role of accounting information in investor decision making (Silverman, 2016). The thematic analysis will analyze the impact of accounting in decision making of the investors in the market by reviewing various relevant and by creating themes.
The analysis of the data for the qualitative analysis has to be done by identifying the common patterns in the interview answers. The conclusion from the prevailing studies will have to be linked with the analysis of the data. The analysis of the data has been done by linking it with the goals and objectives of the study (Panneerselvam, 2014). This study will only consist of the thematic analysis of the data so the secondary from the various journals and articles will be sued by creating a theme for themselves.
Data can diminish uncertainty and complexity of activities, empower races, featuring the possibilities and limits of option arrangements. A data framework should help basic leadership process some time recently, by setting up the choice, amid, by mimicking the choice choices and after, by conveying the choice taken to the entertainers, including control of its execution. The best execution administration framework is one that is as near continuous as could be allowed. This reverberates with the ideas of accessibility and power, that occasions that are effortlessly recollected or gotten to are seen to have higher probabilities and subsequently are of higher significance, and that the succession in which data is introduced will influence how each snippet of data is utilized (Millo, Barman & Hall, 2016). The utilization of constant information goes some way or another to concentrating directors on the most pertinent data, as long as the specific situation and history of the information is additionally fused. Aside from checking, regulating and directing, chiefs are firmly associated with vital basic leadership. Choices must be made about the future heading of an organization, its capital speculations and divestments, lines of business, monetary structure and interests in the exercises of different substances. Vital choices are accepted as open doors emerge or conditions unfurl. In these choices, money related bookkeeping has an essential capacity. By and by, a great part of the tallying important to executives is embraced in money related terms, as monetary figures regularly give the main accessible formal arrangement and record of exercises attempted (Christensen, Nikolaev & WITTENBERG?MOERMAN, 2016). Recognizing what occurred in the past and which is the present position, speaks to fundamental foundation for any choice requiring thought and in bookkeeping, making the past deterministic is the capacity of chose monetary numbers. Monetary bookkeeping data are utilized to build up the budgetary position, the progressions in money related position, the execution and dangers of an organization. They encourage recording and assessment which happens in units of cash. Different research considers propose to clarify hierarchical practices by subjective measurements identified with chiefs, as their profiles. Understanding and clarifying the nature and degree of utilization of bookkeeping by the administrator will profit by a changing perception point of the scientist: set up of looking at a bookkeeping article and its unique situation, it would be more applicable and fitting to watch a client and distinguish his observation about this question and the setting in which it works. Bookkeeping is, truth be told, an apparatus deciphered by on-screen characters with various portrayals and systems of reference. Disclosing directors conduct identified with bookkeeping, essentially includes the portrayal and comprehension of their training. Besides, bookkeeping can’t be separated from the portrayals of various included gatherings. Bouwens, (2017) contends that a structure of examination that constitutes a typical references and portrayals framework. In this way, what is accounted demonstrates the vision and the feeling that individuals from the organization have about authoritative reality.
The way in which supervisors utilize bookkeeping data is flawed, in light of the fact that there are a couple of learns about the data they really utilize contrasted and those they may abuse. Lobby built up a review in light of three thoughts regarding the reason of utilizing bookkeeping data at administrative level. To begin with, they are for the chief a decent approach to create learning of the workplace instead of a particular contribution to basic leadership situations (Elmassri, Harris & Carter, 2016). From this viewpoint, we consider that bookkeeping data’s assistance administrators get ready for future exercises and choices. Second, given that they speak to just a piece of an entire, it is fundamental that their qualities and shortcomings to be considered in connection to different wellsprings of data, and not in detachment. Third, directors collaborate basically in view of verbal types of correspondence, which decides the contribution of bookkeeping data similarly.
|
S&P/ASX 20 Index (1 September 2017) |
|||
|
Code |
2014 |
2015 |
2016 |
|
AMP |
17.50 |
12.20 |
15.10 |
|
ANZ |
12.5 |
10.9 |
16.1 |
|
BXB |
26.9 |
23.9 |
26.1 |
|
CSL |
22.9 |
20.2 |
28.2 |
|
IAG |
11.7 |
18.2 |
23.6 |
|
NAB |
15.4 |
12.4 |
12.7 |
|
RIO |
13.9 |
20.7 |
11.1 |
|
TLS |
16.6 |
16.4 |
16.6 |
|
WES |
29.3 |
19.3 |
16.3 |
|
WOW |
15.7 |
14.4 |
36.2 |
|
Code |
Company |
Sector |
Market Cap |
Weight(%) |
2014 |
2015 |
2016 |
|
AMP |
AMP Limited |
Financials |
14,884,200,000 |
1.66 |
17.50 |
12.20 |
15.10 |
|
ANZ |
Australia And New Zealand Banking Group Limited |
Financials |
86,360,000,000 |
9.64 |
12.5 |
10.9 |
16.1 |
|
BXB |
Brambles Limited |
Industrials |
14,798,000,000 |
1.65 |
26.9 |
23.9 |
26.1 |
|
CSL |
CSL Limited |
Health Care |
58,152,800,000 |
6.49 |
22.9 |
20.2 |
28.2 |
|
IAG |
Insurance Australia Group Limited |
Financials |
15,175,800,000 |
1.69 |
11.7 |
18.2 |
23.6 |
|
NAB |
National Australia Bank Limited |
Financials |
81,101,100,000 |
9.05 |
15.4 |
12.4 |
12.7 |
|
RIO |
RIO Tinto Limited |
Materials |
28,777,200,000 |
3.21 |
13.9 |
20.7 |
11.1 |
|
TLS |
Telstra Corporation Limited |
Telecommunication Services |
43,648,400,000 |
4.87 |
16.6 |
16.4 |
16.6 |
|
WES |
Wesfarmers Limited |
Consumer Staples |
48,324,300,000 |
5.39 |
29.3 |
19.3 |
16.3 |
|
WOW |
Woolworths Limited |
Consumer Staples |
33,654,800,000 |
3.76 |
15.7 |
14.4 |
36.2 |
From the above analysis, it can be inferred that all the companies have a positive price to earnings ratio for the last three years. The variances are also on the lower side. The higher this ratio, the higher will be the expectation of the stakeholders. In addition to this, it can be inferred that if the companies failed to meet the expectation of the stakeholders then, the share prices of the companies will go down.
Then again, the aftereffects of an investigation led by Anderson demonstrate that monetary examination of money related bookkeeping data’s is an imperative device to help choices. Despite the level at which it happens, monetary basic leadership process requires an exhaustive investigation of generation process contributions, to gauge the important from every arrangement independently, to be acquainted with the entire market conjuncture, to plan assignments in conjunction with the assets and prerequisites, an imminent pondering the organization when all is said in done (Li, Sougiannis & Wang, 2017). Bookkeeping, a key source s monetary position and execution, can help directors to create learning about the association in a few ways. It makes obvious those occasions that are not discernible by day by day exercises of a pioneer and gives a quantitative review of his work. Bookkeeping data can uncover issues that are ignored amid ordinary exercises and can give a free control over operations to help directors staying alert. Along these lines, we consider that through bookkeeping data are made accessible imperative angles about the organization, which enables the supervisor to decide the importance and essentialness of the considerable number of operations (Puhakka, 2017).
Conclusion
Thus, from the above analysis of the data it can be concluded that accounting information has played an important role in the decision-making for investors. The manager in each of the organization have to make important decision and these accounting data can guide them to make the appropriate choice. There are lots of decisions that are complexed and complicated so accounting information is needed to analyze all the possibilities in the market. Moreover, the accounting information in the reflection of the performance of the organization in the market so it is necessary to check the financials of all the organizations before investing in them. Thus, the study can be concluded by saying that in order to maintain their sustainability in the market the investor will have to make sure that they are making use of the accounting information before making investment decisions.
Reference
Baker, H. K., & Haslem, J. A. (2015). Information needs of individual investors.
Bouwens, J. (2017). Understanding investment decisions: the role of cost accounting.
Brochet, F., Jagolinzer, A. D., & Riedl, E. J. (2013). Mandatory IFRS adoption and financial statement comparability. Contemporary Accounting Research, 30(4), 1373-1400.
Carraher, S., & Van Auken, H. (2013). The use of financial statements for decision making by small firms. Journal of Small Business & Entrepreneurship, 26(3), 323-336.
Carraher, S., & Van Auken, H. (2013). The use of financial statements for decision making by small firms. Journal of Small Business & Entrepreneurship, 26(3), 323-336.
Christensen, H. B., Nikolaev, V. V., & WITTENBERG?MOERMAN, R. E. G. I. N. A. (2016). Accounting information in financial contracting: The incomplete contract theory perspective. Journal of accounting research, 54(2), 397-435.
Christensen, H. B., Nikolaev, V. V., & WITTENBERG?MOERMAN, R. E. G. I. N. A. (2016). Accounting information in financial contracting: The incomplete contract theory perspective. Journal of accounting research, 54(2), 397-435.
Collier, P. M. (2015). Accounting for managers: Interpreting accounting information for decision making. John Wiley & Sons.
Elmassri, M. M., Harris, E. P., & Carter, D. B. (2016). Accounting for strategic investment decision-making under extreme uncertainty. The British Accounting Review, 48(2), 151-168.
Flick, U. (2015). Introducing research methodology: A beginner’s guide to doing a research project. Sage.
Graham, J. R., Harvey, C. R., & Puri, M. (2015). Capital allocation and delegation of decision-making authority within firms. Journal of Financial Economics, 115(3), 449-470.
Li, S., Sougiannis, T., & Wang, I. (2017). Mandatory IFRS Adoption and the Usefulness of Accounting Information in Predicting Future Earnings and Cash Flows.
Mackey, A., & Gass, S. M. (2015). Second language research: Methodology and design. Routledge.
Millo, Y., Barman, E., & Hall, M. (2016). Accounting measurement tools and their impact on managerial decision making. economic sociology_the european electronic newsletter, 17(2), 17-23.
Panneerselvam, R. (2014). Research methodology. PHI Learning Pvt. Ltd..
Puhakka, H. (2017). The role of accounting in making sense of post-acquisition integration. Scandinavian Journal of Management, 33(1), 12-22.
Silverman, D. (Ed.). (2016). Qualitative research. Sage.
Taylor, S. J., Bogdan, R., & DeVault, M. (2015). Introduction to qualitative research methods: A guidebook and resource. John Wiley & Sons.
Wang, C. (2014). Accounting standards harmonization and financial statement comparability: Evidence from transnational information transfer. Journal of Accounting Research, 52(4), 955-992.
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download