Finance, Accounting And Banking>>
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In order to increase profits of a new offering, there is need of improving the variables that ultimately determines the level of profit obtained from the business. In business, the financial success cannot directly or indirectly increase profits of a business without consideration of specific strategies. The strategies chosen can either raise the sales volume as well as reduce cost which in return will result to an increased profits.
Based on accounting principles, Haleys strategy of aggressive advertisement is the best way of increasing the profitability of the new offering. It is because an increase in the advertisement cost will raise the sales volume without any change in price as new customers found will increase the sales volume.
Based on full disclosure principle of accounting Haleys strategy is the best as compared to Dans strategy. Under this principle, the business is needed to disclose every information in notes associated with the statement concerning the function of the business. In addition, any other crucial information that may influence the understanding of financial statement of a business is also disclosed (Schipper, 2003). Haleys strategy of aggressive advertisement would also disclose every information concerning the offering during advertisement that would in turn influence the mind of the customers to acquire the new video game.
The strategy is as well reinforced by the conservative principle. In accounting, it is recording of assets, revenues, liabilities and expenses only when the company is sure when they will occur. Conservatism principle directs accountants to decide on the alternative that will lead to less asset amount which in turns makes the accountants to anticipate losses (Mohrman, a1996).Increased advertisement will prevent future losses as there will be no change in prices.
Matching principle of accounting which requires the company to utilize the accrual basis of accounting also supports Haleys strategy. The principle needs that the expenses be matched with revenues (Weygandt, Kimmel, KIESO Elias, 2010). Because future benefits of advertisement cannot be measured, the accountant charges the ads used in advertisement. An increase in advertisement cost results in an increase in the volume of sales which leads to increased profits.
In conclusion, the accounting principles should be put into consideration for the proper functioning of strategies so as to increase profitability of the offering.
Weygandt, J. J., Kimmel, P. D., KIESO, D., Elias, R. Z. (2010). Accounting principles.Issues in Accounting Education,25(1), 179-180.
Mohrman, M. B. (1996). The use of fixed GAAP provisions in debt contracts.Accounting Horizons,10(3), 78.
Schipper, K. (2003). Principles-based accounting standards.Accounting horizons,17(1), 61-72.
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