SOURCES OF LONG-TERM FINANCE

Explaining the factors that determine demand and supply of houses in the UK during the above period

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Table of Contents
Introduction ............................................................................................................................................ 3 Q1. Sources of Long-term Finance .......................................................................................................... 4 1.1 Introduction .................................................................................................................................. 4 1.2 Sources of Long-term Finance to Microgen .................................................................................. 4 1.2.1 Secured Bank Loan ................................................................................................................. 5 1.2.2 Equity Shares.......................................................................................................................... 6 1.3 Significant Changes in the Financing Policies................................................................................ 7 1.4 Suitable Alternative for Long-term Financing ............................................................................... 7 Q2. Role of Management Accountants................................................................................................... 8 2.1 Introduction .................................................................................................................................. 8 2.2 Role of Management Accountants in Microgen Plc ..................................................................... 9 2.3 Information Sources for Management Accountants .................................................................. 10 2.3.1 Accounting and Audit Department ...................................................................................... 10 2.3.2 Legal and Economic Sources ................................................................................................ 10 2.3.3 Individual Departments ....................................................................................................... 11 2.3.4 External Market ................................................................................................................... 11 2.3.5 Business Processes ............................................................................................................... 12 2.3.6 Management Accounting Information System .................................................................... 12 Q3. Analytical Techniques ..................................................................................................................... 14 3.1 Introduction ................................................................................................................................ 14 3.2 Budgeting .................................................................................................................................... 14 3.3 Critical Evaluation of Budgeting .................................................................................................. 15 3.4 Ratio Analysis as an Alternative Approach ................................................................................. 16 Conclusion ............................................................................................................................................. 18 References ............................................................................................................................................ 19

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Introduction
The analysts always look for meaningful information to take sound decisions in order to achieve short-term goals and long-term objectives of the firm. In this report, Microgen Plc is considered as a case study organisation to explore and analyse sources of finance, role of management accountants, and analytical techniques that company used for planning and controlling its business activities. Microgen plc is a multinational company which provides IT services and solutions in the UK, USA, and Africa. The company has its headquarter in Hampshire, UK. Microgen mainly focuses on two business segments such as Financial Systems and Aptitude Solutions. The company targets several major sectors such as public sector, banking and financial sector, energy sector, transport and logistics, and media. Microgen provides various services and solutions to these sectors including business decision support, record keeping, financial management and reporting, risk management and analysis, risk-based compliance reporting, and performance management system. The purpose of this report is threefold and thus the report is divided into three sections. The first section explores and analyse two major sources of long-term finance that Microgen Plc used to generate long-term finance for its business. In addition, the section also assesses an alternative source of finance that the company can use to generate funds in future. The second part of the report explores the role of management accountants to facilitate decision making process. Furthermore, the section also discusses the information sources available to management accountants in Microgen Plc. Finally, the third section of the report critically evaluates budgeting as an analytical technique that is used by Microgen for planning and controlling its business activities. Moreover, the section also contains discussion on ratio analysis as a suitable alternative analytical technique that Microgen can use in the future.

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Q1. Sources of Long-term Finance

1.1 Introduction
Finance is essential to successfully run any organisation. According to Nickels et al (2002), long-term financing is a borrowed capital that needs to be repaid over a specific time period longer than one year (p. 592). An organisation can decide between different sources of long term finance. Figure 1.1 presents several sources of finance that an organisation can use to generate funds.
Figure 1.1 Sources of Finance

Source: Sofat and Hiro (2010, p. 326)

The decision of selecting the correct source of finance between equity and debt can affect an organisation for a lifetime. Basically, it matters a lot for a company that how soon it can pay back the loan amount in instalments; and secondly whether the company can engage shareholders in management and profit sharing for the purpose of better equity finance (Melicher and Norton, 2010).

1.2 Sources of Long-term Finance to Microgen

It is identified from the annual report of Microgen Plc that it has used two significant sources of long term finance. The first is securing a bank loan for ten years on groups freehold property in fleet since November 2005 continues to November 2015 at 3.3% fixed rate of interest. The second source is equity shares, which is reported 11% increase in profit in 2011
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as compared to the previous year. It is also found that Microgen relies more on equity sources in generating finance. The current debt to equity ratio of the Microgen is less than 30% which indicates conformist financing and low risk (Needles and Powers, 2007).
1.2.1 Secured Bank Loan

In financial terms, secured loan represents borrowing money from the bank where the borrower guarantees some asset such as property as security or collateral (Graham and Smart, 2011). Over the past ten years, many public and private companies prefer to obtain secured bank loans to generate funds for their businesses. The state bank of each country plays a vital role in providing long-term loans to companies that poses no big risks. In addition, the advances in commercial banks operations made it effortless for organisations to secure longterm loans. It is not difficult for Microgen to secure a bank loan as the company has stronger position due to continuous annual increase in profits and assets over the years (Microgen Annual Report, 2011). The total comprehensive income for the company in 2011 was 6,741,000 whereas the total assets of the company are amounted for 81,319,000 (ibid). This shows that company bears no major risk for the lender. The major advantage of securing a bank loan is that the borrower gets lower or fixed interest rate which enables the borrower to save money in contrast to traditional loans (Smart and Megginson, 2008). In addition, it is an easy and quick way for borrowing funds by putting up assets as collateral. Brigham and Houston (2009) assert that securing a bank loan provides financial freedom once the debts are repaid because then the lender has no additional claim for money or assets. Moreover, securing a loan for longer period allows immediate investments as small periodic instalments are not burdened on the company. In spite of the different advantages of securing a bank loan, it is also subject to several disadvantages. As the lender typically decides the loan terms including the amount of instalments per month, so the value of asset as collateral could be under or over estimated on the basis of risk associated with the assets. As a result the company has to pay high interest rate for a long period of time (Brigham and Houston, 2009). Although it could be modified later on but it depends on the contract terms and conditions, so care must be taken in securing a loan from a reputable lender or bank that has a good track record. Another disadvantage is that the rejection of the loan will show up on a companys credit report (ibid).
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In fact, there are several things to consider when a company attempts to obtain a secured loan. Microgen Plc had secured a loan by a fixed charge over the groups freehold property in fleet. It is an appropriate decision of the company as it has good financial position and can easily pay for a secured loan.
1.2.2 Equity Shares

Most of the public and private companies enjoy higher returns through equities depending on the type. Microgen Plc commonly uses equity shares as another source of long-term finance and those who buy these shares are called equity shareholders. The equity shareholders could be the employees or outsiders. They are the companys owners and allowed to contribute to management and decisions. The Earning per Share (EPS) of the Microgen group in 2011 was reported 8.40 which increased 19% from the last year. In addition, an 11% increase in profit for 2011 attributable to equity shareholders is also reported in the consolidated annual accounts of the group. Moreover, a 5.12% increase in the figure of Return on Equity (ROE) ratio attracts more stakeholders purchase shares of the company. Microgen prefers equity shares as a source of finance on the basis of its key advantages. The major advantage of equity shares is that it is a risk free source of generating finance. This means that a firm can raise finance permanently, during its lifetime, on an unsecured basis without putting its assets as collateral (Pride et al, 2011). Another big advantage is that the firm does not need to pay periodic instalments and interest to lenders so this money can be invested in other projects. Gitman and McDaniel (2008) assert that using equity shares, the company is also not bound to pay fixed dividends to the shareholders; in fact, the dividend payout ratio is based on the profits per year. Sometimes, shareholders can contribute to business with innovative ideas and valuable skills and experience. In contrast, Dlabay and Burrow (2007) argue that generating long-term finance using equity shares can be an expensive option and requires a long time to look for permanent investors as they like to invest in organisations paying high dividends. Another disadvantage is that in issuing additional shares, a company must follow Preemptive Right of the shareholders which refers to offering those additional shares to the existing shareholders before going to the open market. Microgen as a public listed company should not only consider equity shares for long-term financing, because this will restrict the company to issue other securities such as preference shares, debentures, etc. (Pride et al, 2011).
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1.3 Significant Changes in the Financing Policies

In the last five years, Microgen has made few significant changes in the financing policies. For example, five years ago Microgens leasing policy was limited to machinery; but now the company is involved in several non-cancellable operating lease contracts for office buildings with favourable conditions and renewal rights (Microgen Annual Report, 2011, p. 70). The main reasons of acquiring buildings on lease were: longer payment terms, no a large initial outlay, tax and accounting benefits, more purchase options, and gross lease benefits where landlord bears insurance, taxes, and maintenance expenses.

1.4 Suitable Alternative for Long-term Financing

Until now, Microgen has not issued debentures for generating long-term finance. Therefore, the author recommends the company to utilise the benefits of debentures by issuing them to the debenture holders. A debenture is a loan document which clarifies a debt and acknowledge it; or in the words of Kakani (2007) debentures are large secured or unsecured loans, split into standard, small sized instruments, to enable companies to raise finance from multiple investors (p. 442). The major advantage of issuing debentures is that the money generated through them will become the part of the Microgens capital structure rather than turning into the part of its share capital. In addition, it is less a costly option as compared to equity shares. Unlike shareholders, debenture holders are not the owners of the company but they finance company for a particular period of time in return of fixed or variable interest. In financial terms, generating long-term finance through debentures can be risky in two ways: (1) paying interest amounts at a predetermined rate within the predetermined time; and (2) returning the original loan amount during companys lifetime (Brigham and Houston, 2009). In considering the debenture option, Microgen Plc can mitigate the impact of these two risks as the group is well stabilized and has a stronger financial position at present. Also, Microgen can issue debentures on a secured basis as the company has adequate and valuable assets that can be offered as collateral to debenture holders.

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Q2. Role of Management Accountants

2.1 Introduction
The key purpose of management accounting in the organisation is to facilitate decision making process by gathering, presenting, interpreting, and passing information to authorities for developing, managing, and evaluating company strategies (Crosson and Needles, 2010). Interestingly, in any organisation no single individual performs the duties of management accountant; in fact the functions and responsibilities are typically divided among costs accountants, tax accountants, financial accountants, and internal auditors. However, it is essential for the management accountants to have the abilities and skills to develop and utilise good management accounting. Managerial accounting is different from financial accounting. The managerial accounting is primarily used for internal use whereas financial accounting statements are prepared for external parties to illustrate the financial health of the organisation as a whole (Warren et al, 2011). The reports prepared by management accountants are based on costs, budget, and performance which do not follow any widely accepted accounting standards but on the contrary, financial accountants follow basic accounting principles while preparing accounts and reports. Table 1.1 illustrates fundamental differences between management accounting and financial accounting, gathered from multiple sources.
Table 1.1: Difference between management and financial accounting Management Accounting Optional in most of the companies No general principle/standard Forward looking approach Subject estimates Provides specific information Provides detailed information Financial Accounting Essential in all organisations Follows GAAP or other universal standards Backward looking approach Focus on information reliability Provides general purpose information Provides summarised information

Sources: Crosson and Needles (2010); Needles et al (2010); Warren et al (2011)

The current job adverts in business media show that management accountants play a critical role in any organisation. In reality, management accountants perform a range of activities to prepare, devise, and evaluate financial information to ensure firms financial security,
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stability, profitability and future growth (Reed Management Accountant Jobs, 2012). For this purpose, they handle all necessary financial concerns and develop a management information system to combine business management skills with accounting skills in order to inform authorities for making management and strategic decision (ibid). In addition, the role of a chartered management accountant is to protect the company from potential financial and management problems and devise policies to meet new challenges. This is usually achieved by adopting new methods for managing accounting and management disciplines, and also by reducing production and operational costs.

2.2 Role of Management Accountants in Microgen Plc

The role of management accountants in Microgen Plc is more critical as the company is involved in developing accounting-based computer programs such as Accounting Sub Ledger, Microgen Accounting Hub, and Telco Finance and Performance Management system (Microgen Products, 2012). In reality, the role of management accountants in Microgen is twofold: (1) carrying out the responsibilities of management accountants within the organisation; and (2) providing assistance to programmers to develop accounting-based programs (Microgen Press Release, 2009). In carrying out responsibilities within the organisation, management accountants in Microgen perform various typical tasks including making periodic financial statements, cash flows, budgets, generating long-term finance, negotiating loans, and communicating with other functional managers regarding accounting and finance matters/decisions. In addition, they are accountable to examine and analyse the performance of financial systems and provide suggestions to improve current accounting and management practices long-term planning and forecasts. Furthermore, they interpret and communicate financial data to non-financial managers and preferably to Microgens board in a timely manner prior to each meeting (Microgen Annual Report, 2011) so that strategic decisions regarding risk management, change management, corporate governance procedures, and internal controls can be taken effectively. The non-executive directors of Microgen are experienced and skilled who know how to use managerial accounts in implementing accounting and management changes (ibid). On the other hand, management accountants play a critical role in providing assistance to programmers to develop accounting-based programs. For this purpose, the Microgen Plc has very professional, experienced, and skilled team of chartered accountants (Reuters.com,
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2012) who is always actively involved in management accounting activities. Due to the efforts of management accountants, Microgen recently launches a system namely Microgen Accounting Hub which integrates finance and risk data (Jackson, 2012). This software facilitates banks and other institutions to manage their finance, risk, and liquidity while processing hundreds of millions of transactions per hour. Microgen also uses this application to manage its internal information system.

2.3 Information Sources for Management Accountants

In order to provide meaningful data for sound decision making, management accountants need to acquire essential financial and non-financial information from a range of sources. The managerial accountants normally obtain data from experts, economists, departments, external market, and individual business processes. Each organisation and sector has specific information requirements. The needs of the software industry are comparatively different from other industries in terms of accounting, business process, sales, procurement, and software development. But each industry including software industry requires linking all business processes with each other and translating into financial and non-financial information in the form of reports. Dekleva (2005) asserts that managerial accountants translate all non-financial information into financial metrics and link with each other for traditional Return on Investment (ROI) calculations. The managerial accountants in Microgen acquire information from various sources which are described in following subsections.
2.3.1 Accounting and Audit Department

The major and primary source of financial information that is available to the management accountants in Microgen is the audit and accounting department. This department is expected to supply all necessary information to managerial accountants for sound decision making. Usually, the data and information they obtained from accounting department are: the periodic financial statements and other reports on auditing, cash flows, budgets, software costs and sales, expenditures, short and long term loans etc. (Microgen Annual Report, 2011).
2.3.2 Legal and Economic Sources

Legal and economic sources are also vital in the software industry in the UK. Outsourcing is the key economic aspect in the software industry and thus management accountants in Microgen always keep an eye on the outsourcing activities to ensure that company is not
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overpaying for such activities. In addition, obtaining information on overheads, utilities, and fixed and variable costs are inherent sources of information for managerial accountants. The management accountants in Microgen obtain economic information for multiple purposes such as reduce costs, improve quality, foster innovation, and conserve capital. Furthermore, they pursue non-financial information on legal and economic aspects of open source software as it is essential for software development (Feller, 2005) and helps the authorities to cope with legal requirements.
2.3.3 Individual Departments

The management accountants in Microgen constantly collect and review financial and nonfinancial information about individual departments so that they can determine the costs of these departments and also to make sure that resources are properly utilised while carrying out entire business activities. In addition, they seek for information regarding budgeting process which is vital for management accounting. In Microgen, accounting, sales, compliance (or outsourcing), and software development departments provide basic and ancillary information to management accountants (Microgen Press Release, 2009). For example, sales departments information mainly helps management accountants to conduct various analyses such as gross profit analysis, segmental analysis, CVP analysis, determining the breakeven point, budgeting process, and setting benchmarks for comparative analysis. These analyses allow authorities to decide companys overall performance in the current business environment in the software industry.
2.3.4 External Market

Analysing external markets also provides significant information to management accountants in forecasting sales and determining the competitive position of the firm. Several external sources such as government regulations, number of competitors, availability of economic resources, demand and supply statistics, and other kinds of external documents give inherent information to management accountants in Microgen. This information is then used to analyse and evaluate companys capability to compete in the software market (Microgen Press Release, 2009).

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2.3.5 Business Processes

The software development process of Microgen is also one of the valuable sources of information for management accountants. In this regard, they are always well-aware of the Software Development Life Cycle (SDLC) which consists of initiation, planning and analysis, design, implementation, integration, stabilisation, deployment, and maintenance and support. This information is essential for management accountants when deciding on making modifications in companys overall operations. Also, this information is used as input when it is required to reduce costs and lowering expenses to improve the overall level of profitability. In order to manage companys core business processes, Microgen uses its own created Aptitude Business Process Management application which enables management accountants to know about defined business processes, workflows and implemented Business Process Diagram (BPD) (Microgen BPM, 2012).
Figure 1.2: Microgens Business Process Management

2.3.6 Management Accounting Information System

The implementation of Management Accounting Information System (MAIS) in Microgen provides timely information to management accountants. The company uses its own developed software i.e. Accounting Hub for this purpose as it fits all the requirements of the
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company. Microgens Accounting Hub is presented in figure 1.3 which illustrates the sharing of financial and non-financial information between all the departments.

Figure 1.3: Microgen Accounting Hub

Source: Microgen Products (2012)

It is clear in the above diagram that finance accurate data is collected by the management accountants from various sources in Microgen. Using above application the management accountants in Microgen align finance and risk data, address regulatory reporting requirements i.e. Basel III, calculate customer profitability and cost allocation, calculate funds transfer pricing, and then implement multi-GAAP accounting (Microgen Products, 2012).

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Q3. Analytical Techniques

3.1 Introduction
The financial analysis can be performed by considering the financial statements of any organisation. There are several methods can be found to analyse financial statements. By using these methods or techniques, the financial analysts can collect and use financial information for making important decisions. Some common analytical techniques are budgeting, ratio analysis, benchmarking, substantive analysis, and common sizing approach. In the software industry, each organisation use budgeting technique for individual project tasks which enable analyst to estimate cost and revenue on a granular level. In this section of the report, budgeting technique is critically discussed and evaluated as one of the key analytical techniques used by Microgen for planning and controlling the projects for developing software for clients.

3.2 Budgeting
A budget can be simply defined as a comprehensive and coordinated plan, expressed in financial terms, for the operations and resources of an enterprise for some specific period in the future (Khan and Jain, 2007, p. 82). This means that budgeting as financial plans allow analysts to effectively plan organisational operations and resources to roughly estimate costs and revenues over a particular time period e.g. month, quarter, year and so on. In the literature of accounting and finance, budgeting refers as responsibility accounting. Here the term responsibility accounting means a well-defined accounting system where revenues and costs are analysed and evaluated on the basis of individual responsibilities of the managers so that their performance can be observed in financial terms (Lucey, 1996). In Microgen, budgets are used by the management in two ways: financial use and operational use (Microgen Press Release, 2009). Financially, the budgeting is meaningful for financial forecast, cost control, cash flow management, and capital expenditures. On the other hand, the operational use of budgeting is to set objectives, communication plans, resource planning, performance appraisal, and corporate direction. In addition, budgeting process is completed in Microgen in two phases: budgetary planning and budgetary control (Microgen Press Release, 2009). At the commencement of the software development project, a budget is the part of the planning process and helps the management
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in setting goals and targets of the project. But during the closing phases of the development project, the budget in Microgen acts like a control device to evaluate performance against anticipations. Figure 1.4 and 1.5 demonstrate the role of budget in planning process and as a control device.

Figure 1.4: Role of a budget in planning process

Figure 1.5: Budget as a control device

Source: Rasmussen and Eichorn (2000, p. 6)

Source: Lalli (2003, p. 7)

3.3 Critical Evaluation of Budgeting

Budgeting is a useful technique if it is properly utilised and administered. The major benefit of budgeting is that it helps the management to translate strategic plans into actions (Lalli, 2003). Beside, budgets provide an excellent framework of allocating and managing the financial and non-financial resources within the organisation. Lucey (1996) asserts that budgeting promotes forward looking approach which exhibits an overall picture of the project or organisations direction. In addition, it helps different departments to coordinate and communicate with each other while monitoring and controlling the costs of overall operations. A proper and well administered budget saves managements time so that the attention can be directed to the greatest areas of concern. In the software industry, budgets are modified slightly as the nature of the development process for every application is almost similar (Rasmussen and Eichorn, 2000). In fact, the budget is an early warning device which highlights the areas where suitable corrective actions are required to improve the overall process.

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Apart from the direct benefits of budgeting, it has some indirect benefits as well. For example, the involvement of employees while making budgets can result in greater fiscal benefits but care must be taken not to overemphasize on such activities because it may hinder the success of budget. Budgeting promotes necessary investigations about underlying operations and procedures in developing software package; this may lead to reduce costs and bring greater efficacy in operations (Rasmussen and Eichorn, 2000). The budgeting practice does not come without disadvantages and any of its dysfunctional aspects may hinder the achievement of Microgens strategic objectives. The major issue emerges when budgets are applied rigidly by the management and employees are demotivated due to lack of participation (Lucey, 1996). Another vital problem is that ongoing maintenance is extremely important for managing budgets because missing week or even one day can affect the whole budget plan. In addition, budgets promote rivalry and may result in unfairness perception (Lalli, 2003). Rasmussen and Eichorn (2000) assert that budgets also cause departmental conflicts due to lack of resource provision and then blaming each other if targets are not timely achieved. It is far more important for Microgen to use this technique in the best possible way to gain benefit from it while designing different types of software packages. This is the reason that Microgen is using budgeting as a primary analytical technique for planning, monitoring, and controlling project activities. However, the company is also utilising the benefits of other techniques for financial analysis. In fact, Microgen is also involved in developing software packages that are based on the latest techniques (e.g. benchmarking) of financial analysis. Microgen Aptitude and Microgen Accounting Hub are the examples of such applications.

3.4 Ratio Analysis as an Alternative Approach

Financial ratio or Accounting ratio are different terms that can be used interchangeably for ratio. A ratio can be expressed as a proportion or sometimes it uses as a percentage for example 20% of sales. Analysts use ratio analysis to analyse and compare financial statements to measure the performance of the company as a whole. Also, they use ratio analysis to determine to what extent a business is financially sound. By definition the term accounting ratio or financial ratio indicates a significant relationship exists between figures shown in a balance sheet and profit and loss account in a budgetary control system or

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any other part of the accounting management which illustrates little knowledge about the business (Periasamy, 2009, p. 42). Ratio analysis is a valuable technique that Microgen can primarily use for analysing and evaluating performance, liquidity, profitability, operating efficiency, and financial strength of the firm (Downes and Goodman, 2003). Therefore, the analysts in Microgen can determine companys financial position by looking at fewer numbers rather than going through the whole financial statements. Basically, ratio analysis is the way to inform management and stakeholders about the financial soundness of the organisation. In addition, ratio analysis helps management to identify profitable and unprofitable activities through trend analysis (analysing single organisation over a particular period) (Porter and Norton, 2012). Thus, the management can pay more attention to unprofitable activities to improve efficiency and control. Similarly, the ratio analysis is helpful in removing all kinds of inefficiencies and provides essential information to management to take corrective and timely decisions (Murthy and Gurusamy, 2009). Microgen should be aware of several considerations when using ratio analysis for comparison purpose (Porter and Norton, 2012). The first thing to keep in mind the changes occurred in the accounting policies during the certain period of time. Secondly, take into account the differences between the accounting policies of Microgen and industry norms when comparing Microgen with other organisations in the same industry. Thirdly, it is also important to consider which accounting methods are used by Microgen and other organisations as different accounting methods may affect the figures to some extent. Finally, the analyst must consider variations in ratio formulae. Despite the usefulness of ratio analysis, Microgen should be aware of its limitations while using it to analyse and compare financial statements for measuring the performance of the company as a whole. The biggest limitation of the ratio analysis is that it greatly relies on quantitative data and ignores the qualitative aspect which may affect the accuracy of the data. Murthy and Gurusamy (2009) argue that ratio analysis is inadequate to analyse financial statements which are themselves subject to several limitations; in fact, it is a technique to measure the performance of the organisation as a whole. Another important limitation mentioned by Porter and Norton (2012) who claimed that the role of ratio analysis in comparing two companies is contradictory because not all companies use same accounting methods for preparing financial statements. Thus, forecasting future often becomes difficult.
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The scope of ratio analysis is limited when comparisons are made between different types of industries. For example, if software industry is compared with any other type of industry which adopts different accounting methods, then the decisions cannot be taken on the grounds of ratio analysis.

Conclusion
The decision of choosing a reliable source of finance between equity and debt is very important for the existence of the company. In fact, it matters a lot for a service-based organisation to determine how soon it can repay loan amount. It is found from the discussion in the first section (see Q1) that Microgen has two significant sources of long-term finance such as secure bank loan and equity shares. The critical evaluation of both sources reveals that they are appropriate for Microgen as the company is financially sound due to continuous annual increase in profits and assets over the years; and this is the reason that Microgen can also consider the option of issuing debentures for generating long-term finance in the future. It is concluded from the discussion in section two (see Q2) that the role of management accountants in Microgen is more critical to achieve the aims and objectives of the company. Their twofold role includes (1) carrying out core responsibilities of management accountants for the organisation; and (2) providing assistance to programmers and analysts to develop financial and management based applications. The companys own Management Accounting Information System helps management accountants to obtain information from various sources from within and outside the organisation. It is also found that Microgen is currently using budgeting technique in the best possible way to gain advantage from it while designing different types of software packages. It is also concluded from the critical evaluation of budgeting technique that in the software industry budgets are modified slightly, as the nature of the development process for each software is almost similar. This is the reason that budgeting technique is appropriate for Microgen. Besides, the company is also using the benefits of other techniques i.e. benchmarking for financial analysis. But on the other hand, ratio analysis option is also available to Microgen for analysing and evaluating its performance, liquidity, profitability, operating efficiency, and financial strength.

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