Assignment for Financial Accounting

1. PESTEL-ANALYSIS
ASSIGNMENT
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2. Index
 What Is Accounting
 What is PESTEL Analyse
 What are the factors in PESTEL Analyse
 How to affect these factors for the Business
 Outcomes from PESTEL Analyse
What Is Accounting

3. Accounting, or accountancy, is the measurement, processing and communication of financial information
about economic entities. Accounting, which has been called the “language of business” measures the results of
an organization’s economic activities and conveys this information to a variety of users
including investors, creditors, management, and regulators Practitioners of accounting are known as accountants.
The terms accounting and financial reporting are often used as synonyms
Accounting can be divided into several fields including
 Financial Accounting
 Management Accounting
 Auditing
 Tax Accounting
Financial Accounting
This is the information that is used by managers, shareholders, banks, creditors, the government, the public, etc…
to make decisions involving the organization and its operations. Shareholders want information about what their
investment is worth and whether they should buy or sell shares, bankers and other creditors want to know whether
the organization has an ability to pay back money lent, managers want to know how the company is doing
compared to other companies. This type of information would be very difficult to extract if every company used
a different system for recording their financial position. Financial accounting information is subject to a set of
ground rules that dictate how the information is reported and this ensures uniformity.
Management Accounting
In order for the managers of a company to make the best decisions for a company they need to have specific
information prepared. They use this information for three main management functions: planning, implementation
and control. Financial information is used to set budgets, analyze different options on a cost basis, modify plans
as the need arises, and control and monitor the work that is being done.
As you can see, accounting is a multifaceted system involving different people with different needs and after
analyzing the various uses and applications of accounting information the American Accounting Association has
come up with this definition: “the process of identifying, measuring, and communicating economic information
to permit informed judgments and decisions by users of the information
What Is PESTEL Analyse

4. Businesses are also influenced by the environment that they’re in and all the situational factors that determine
circumstances from day to day. It is because of this, that businesses need to keep a check and constantly analyze
the environment within which they run their trade and within which the market lays.
A detailed analysis of the macro-environment or the environment as a whole is called PESTLE analysis, which
precisely means a bird’s eye view of the PESTLE analysis business conduct. The PESTLE analysis ascertains
for the managers and the strategy builders as to where their market currently stands and where it will head off in
the future.
PESTLE analysis consists of components that influence the business environment and each letter in the acronym
denotes a set of factors that directly or indirectly affect every industry. The letters denote the following things:
The Factors In PESTEL Analyse
 P – Political Factors
 E – Economic Factors
 S – Social Factors
 T – Technological Factors
 E – Environmental Factors
 L – Legal Factor

5. Political factors Economic factors
 Government stability and likely changes
 Bureaucracy
 Corruption level
 Tax policy (rates and incentives)
 Freedom of press
 Regulation/de-regulation
 Trade control
 Import restrictions (quality and quantity)
 Tariffs
 Competition regulation
 Government involvement in trade unions and
agreements
 Environmental Law

 Growth rates
 Inflation rate
 Interest rates
 Exchange rates
 Unemployment trends
 Labor costs
 Stage of business cycle
 Credit availability
 Trade flows and patterns
 Level of consumers’ disposable income
 Monetary policies
 Fiscal policies
Socio-cultural factors Technological factors
 Health consciousness
 Education level
 Attitudes toward imported goods and services
 Attitudes toward work, leisure, career and
retirementAttitudes toward product quality and
customer service
 Attitudes toward saving and investing
 Emphasis on safety
 Lifestyles
 Buying habits

 Basic infrastructure level
 Rate of technological change
 Spending on research & development
 Technology incentives
 Legislation regarding technology
 Technology level in your industry
 Communication infrastructure
 Access to newest technology
 Internet infrastructure and penetration
Environmental Legal
 Weather
 Climate change
 Laws regulating environment pollution
 Air and water pollution
 Recycling
 Anti-trust law
 Discrimination law
 Copyright, patents / Intellectual property law
 Consumer protection and e-commerce
 Employment law

6. How to affect these factors for the Business
Political Factors
This takes into account the level of government intervention in the economy. Political factors are important as
businesses need political stability to operate or they will fail to achieve the desired level of profitability. Apart
from the stability, the political factors also taken into account include government policies, tax laws, labour
regulations and trade policies.
Economic Factors
Economical factors facing businesses have a direct impact on their profitability and therefore, are important when
they analyse PESTEL. These factors include inflation rate, exchange rate, interest rate and disposable income
available to end consumers. The economic factors can be further categorized into micro-economic and macro-
economic factors. The micro-economic factors are related to how the consumers in the society spend their
disposable income while the macro-economic factors are more concerned with the overall demand-and-supply
conditions in the economy.
Social Factors
The social environment in which a business operates also has a profound impact on its operation. The social
factors include the cultural influences and beliefs of the target audience. For example, a product or an
advertisement may be deemed offensive in a particular culture while it would be perfectly normal in another
culture. This will also include age demographics, education, likes, interests and opinions of the society.
Technological Factors
 Waste management
 Attitudes toward “green” or ecological products

 Health and safety law
 Data Protection

7. Technological factors are one of the most important PESTEL factors. Today, companies allocate considerable
resources towards Research and Development to stay ahead in the game and not lose ground to their competitors.
Technological factors are not only of significance in the production of goods and services but also in their
distribution. These factors help businesses explore new ways of communicating, engaging and interacting with
their target audience.
Environmental Factors
Environmental factors are essential to analyse PESTEL and may be deemed a relatively new addition to the
macro-economic analytical tools. However, they have gained significance owing to the rising concern regarding
the environment among the masses. Consumers today prefer to buy products from businesses whose products
and services are environment-friendly and who are socially responsible.
Legal Factors
Legal factors are also deemed an important part of the whole macro-economic scenario and focus on issues like
product safety, consumer rights and laws, equal opportunities, and health and safety. For companies to operate
successfully, they should not only know but also abide by the rules and regulations of the country they are
operating in.
Outcomes from PESTEL Analyse

8. PESTEL analysis is a simple and effective tool used in situation analysis to identify the key external (macro
environment level) forces that might affect an organization. These forces can create both opportunities and threats
for an organization. Therefore, the aim of doing PESTEL is to:
 find out the current external factors affecting an organization;
 identify the external factors that may change in the future;
 to exploit the changes (opportunities) or defend against them (threats) better than competitors would do.
Identifying opportunities and threats
Gathering information is just a first important step in doing PEST analysis. Once it is done, the information
has to be evaluated. There are many factors changing in the external environment but not all of them are
affecting or might affect an organization. Therefore, it is essential to identify which PEST factors represent
the opportunities or threats for an organization and list only those factors in PEST analysis. This allows
focusing on the most important changes that might have an impact on the company.
 The outcome of PEST is an understanding of the overall picture surrounding the company.