Business Rationalization Process

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How does rationalisation impact the size of a firm?

It can increase or decrease the size of the firm

Why is rationalisation valued by corporate entities?

It helps reduce expenses and boost revenues

What is rationalisation in a business context?

A process of restructuring to improve operational effectiveness

What does a rationalisation process aim to achieve?

Boost sales, save costs, and improve the bottom line

What is the primary purpose of rationalisation in a corporation?

To decrease waste in terms of labour, time, and resources and to streamline operations for the benefit of a corporation

What type of business transactions are taken into account in Financial Accounting?

Only those expressed in monetary terms

What nature of transactions are captured and recorded under the system of financial accounting?

Transactions that have already taken place in the past

What type of transactions are out of the preview of financial accounting?

Transactions of paramount importance that cannot be expressed in monetary terms

Study Notes

Rationalisation in a Business Context

  • Rationalisation is the process of reorganising a company's operations to increase efficiency and reduce costs.
  • It aims to achieve a more streamlined and efficient business, often resulting in a reduction in the size of the firm.
  • Corporate entities value rationalisation as it helps to eliminate unnecessary costs, improve productivity, and enhance competitiveness.

Financial Accounting

  • Financial accounting involves the recording and reporting of business transactions that are monetary in nature.
  • The system captures and records transactions that are financial, such as sales, purchases, and payments.
  • Non-monetary transactions, such as executive decisions or management restructuring, are outside the scope of financial accounting.

Learn about the process of restructuring and improving operational effectiveness in a business through rationalization. Understand the strategic and structural adjustments involved in rationalization to boost sales and save costs.

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