Management Accounting is beneficial for banking operation. Comments with example.
Posted by Ripon Abu Hasnat on Tuesday, February 2, 2016 | 0 comments
The management accounting function of a bank in conjunction, need to apply competitive bank management skills in order to remain competitive in their industry and maximize profits that may enhance competitiveness to adapting to analyzing bank performance and establishing profitability and risks; managing interest rate risks; managing the cost of funds, bank capital and liquidity; managing credit given to customers and managing the investment portfolio.
Banks are benefited by using the management accounting information to improve towards achieving the organizational goal and objectives; and to control over its expenditure. It is effective in minimizing cost, enhancing profitability, curtails overhead cost and recovers non-performing loans, and beef-up shareholders fund.
Banks can enjoy several advantages that usually coincide with the ability to improve operations and overall profitability. Some are-
1. Reduce expenses: Management accounting can help lower the operational expenses that conduct to analysis on cost of capital.
2. Managing cash flow: It can analyze and measures the effective liquidity requirement as well as careful analysis of necessary and unnecessary cash expenditures.
3. Management decisions: It usually provides a quantitative analysis for various decision opportunities.
4. Increase financial returns: Management accounting increase financial returns by analyzing financial forecasts on cost of capital and pricing of their assets and liabilities.
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