Why Financial Information Is Required Finance Essay - Free Essay Example

Sample details Pages: 8 Words: 2430 Downloads: 7 Date added: 2017/06/26 Category Finance Essay Type Argumentative essay Did you like this example? One of the most important factors in decision making process is information from various sources. Financial Information play a vital role in the process of decision making and help management to make a perfect strategic business plan for the organization to achieve its goal. However, most financial informant comes from the financial statement of the company which includes Income Statement, Retain Earnings, Balance Sheet and Cash follow Statement of a particular period of time. Don’t waste time! Our writers will create an original "Why Financial Information Is Required Finance Essay" essay for you Create order Financial Ratio Analysis are use to compare within or against competitor performance. In addition, Governance in private and public sector is differ in structure of the corporation, by rules and regulation, accountability of the board as well as the decision process also vary between private and government owned public limited organization. 2. Task 1: You are a senior manager in small but growing company; prepare a briefing paper for decision making for the board of management Why Financial Information is required in Formulating Business Strategy? Financial information is very important for making Business strategy for the organization. Financial information generally includes financial statement and reports for a particular period of time in numeric value. Financial Statement consist Income Statement, Balance Sheets, Retain Earnings as well as cash follow. Financial Information helps investors and creditors of the company to evaluate the companys performance over time (Smith et. al., 1988). However, the information management get from Financial Statement is vital for whole companys business strategy and particularly it helps marketing department to formulate a Strategic Marketing plan for the organization. It gives the information about how a product is gardening present in relation to its cost, than management can decide to enhance marketing effort and promotion budget for that particular product. On the other hand if that product is no longer making enough money than management can decide to cut off the promotion budge t for that product because of its non-viability (Morden, 1993). In addition, from financial Information management of the company who makes the overall business plan for the company can know the overall financial situation of the company. Balance Sheet of the financial statement provides the companys total Assets and Liabilities and Equity information. Financial information also provides operating results of the organization such as total revenue and expenditure and profit and loss for a particular time (Smith et. al., 1988). Also, financial information provide the cash follow statement of the organization which help management to understand that weather company has enough money to pay its expenses and assets purchase for the operation of the organization (Elliot, 2008). The Major issue involved in Business Strategy. Business Strategy of the organization is the method to achieve its final Goal. Generally Business Strategy is a long-term planning, mostly 3-5 years or sometimes even longer than that. There are any issue involved in Business Strategy as it is the means of success of the organization. Business Strategy can be considered as three stages. They are, Strategic Analysis, here company find out the companies Strength, Weakness, Opportunity and Threats (SWOT Analysis), Strategic formulation, here the choose is made what to do, and Implementation of the Strategy means bring the strategy into action (Wit and Meyer, 1998). However, to implement the business strategy in action management face communication problem as well as organizational structure could be another problem. Strategy may need change in the way of working of the employees of the organization but workface could resist to change and become de motivated thus decrease the workforce efficiency of the organization (Morden, 1993). In addition, another main issue of business strategy is resource issue. For example, raise investment for new factor for business expansion or meet demands. Business Strategy also concerned with on what product or service to assign the major resources. In addition, business strategy also concern with business activities such as what where to made for competitive advantage (Johnson and Scholes, 1999). However, another common problem arise in business strategy is conflict among the department within the organization to allocate the funds. However, to make a business strategy for a Small Organization management face many problem such as access to skilled staff, government rules and regulation, fair environment for competition in market, and access to finance (Johnson and Scholes, 1999). . Therefore, to implement the strategy successfully company must adopt perfect management process or structure to bring the needed change. The key financial information required when strategic decision are made. One of the most important factors in decision making in business is quality information for the business external and internal environment or performance. Most of this information comes from the accounting information system and financial statements of the company. Financial statement provides realistic business performance or condition of the organization to the management to make strategic decision in the business process (Smith et. al., 1988). However, key financial information includes companys profitability, liquidity, leverage, activity, economic ratio. The entire ratio comes from the balance sheet of the organization. Liquidity ratio analysis gives the information about the companys ability to pay its current liabilities. Liquidity ratio 1:1 is perfect for the organization, if it less than that management can take measure how to solve this problem. Also, profitability ratio gives the information about the return on Investment Company making for the shareholder of the orga nization. In addition, Economic ration provide the measure about the revenue in terms of expense of the organization. If expense is greater or unexpected than management can take measure to identify the problem ((Elliot et. al., 2008). Financial Information helps companys management to compare present situation to previous situation as well as compare against competitor performance in same time of period. Financial information let management to see the business growth or loss. Also it lets management know the market position in terms of consumer spending on the companys product. From financial data company can forecast the future demand of the service or product of the company and stock more efficiently to decrease inventory cost. Financial information also help management to decided where the demand of a particular product in which time of the year. It also helps management to decide the price change of the product increase or decrease (Smith et. al., 1988). 3. Task 2: Choose a large Organization to research and obtain its latest published financial information covering the last three years. Prepare a report which contains Why the published financial information is structured in that way? The chosen company is Apple Corporation and its Financial Statement given in Appendix 1 Financial Information is very important in modern economic development; organization needs to prepare the financial statement that is accepted by the professional standard and firms industry practice. Generally company published financial report at the end of quarter or year. However, Financial statement includes the financial information of the company provides all necessary financial information (Higgins, 2007). GAAP (Generally Accepted Accounting Principles) and IFRS (International Financial Reporting Standards) oblige to every organization to publish financial statement in that structured way that are fair and inclusive. Structure of the financial information data is essential because its accepted by the professional standard and helps the potential user (international or own country) to understand organizational picture easily (Smith et. al., 1988).y. The main Stakeholder who will use the published information and for what purpose The user of financial information is following below (Higgins, 2007): Managers: They are the most common and day to day decision maker. They need to know financial information to know the how things are going financially and present financial status of the company to make decision. Owner or Share holder of the organization: Owners always want to know that their business is making profit or not. Actually, they want to know all types of financial situation to make decision about their investment. Investors: Investor maybe present or potential, in order to make decision about their investment they need to know financial information about the company. Creditors: Another kind of user (bank or investment firm) of the financial information, they always want o know the risk involved to their credit. Tax inspector needs the financial information in order to calculate taxes payable. An explanation of where both long-term and short-term finance has been raised and used Short Term Finance has been raised and used: The short-term finance of the Apple Corporation has been raised from Account Payable, Accrued Expenses, Current Income Taxes Payable, Other current liabilities as well as unearned revenues. However, total short term investment of the Apple Corporation is $18,201 million (Appendix) Long Term Finance has been raised and used: The long term finance has been raised from Common stock, Retained earnings and comprehensive income and used in Plant and equipment, long term investment, inventory account receivable etc (Appendix) Calculation of the Key financial ratios, including cash follow analysis and a comment on the findings. There are various types of financial ratio such as profitability, liquidity, capital structure, stock market ratio. Key Ratio Analysis from the information in Appendix: 1. Net Profit margin for the year 2012: Net Profit/Sales * 100 = 41733 / 156508 * 100 = 26.66% Net profit margin for the year 2012 is 26.66% is not satisfactory enough. 2. Current Ratio for the 2012: Current Assets / Current Liabilities = 57,653/38,542 = 1.5x Current ratio for the year 2012 is 1.5x which is safe. 3. Total assets Turnover: Cost of Goods Sold / Total Assets =87,846 / 176,064 = 0.49x Total assets turnover for the year 2012 is 0.49 which is not good. 4. Current assets Turnover: Cost of Goods Sold / Current Assets = 87,846 / 57,653 =1.5x Current asstes turnover for the year 2012 is 1.5 which is good. Cash follow is the number appears in the cash follow statement by operating activities. Cash follow is the sum of the companys net income. There are three m ain category of cash follow. (Cash follow from operating, investing as well as financing activities) (Wood, 2008). An explanation of the different methods that could be used for appraising capital projects and the strength of each Different investment appraisal technique has been used by the companies. There is no single method of appraisal technique. This is a mechanism help the management for decision making in organization. The main two method of Appraisal Technique is discussing below (Elliott et. al., 2008): Accounting Rate of Return: This is calculated by dividing the average annual profits by the average investment cost (Baker and Wallage 2000). Internal Rate of Return: This is an alternative method to decide capital investment decision. It represents the true interest rate that earn on investment over time (Baker and Wallage, 2008). Capitals Appraisal Technique led to efficiency and increase the profitability of the capital invest. An indication of the weaknesses of published financial information. Financial Information (ratio) is sometimes using to compare business performance with another company but it may not represent equal value. Different accounting method use in companies can distort comparison. Also, financial ratio does not have any range which present good or bad ranking. In addition, it is possible to calculate same ratio by using different method. Another vital weakness of the financial information of the organization does not give the productivity and skills of the workforce in the organization (Higgins, 2007). 4. Task 3: Choose two organizations one from private and one from not in the private sector and prepare a report; Compare the difference in corporate governance, legal and regulatory requirements between the organizations. Corporate Governance is the method by which companies is directed and controlled. The Broad of director is the main responsible person in corporate governance and selected by the Shareholder of the corporation. There are many differences between Private and not private sector Companies in Corporate Governance. For the private limited company we have selected New Look Private Limited and for non-private company owe have selected Transport for London (government owned). They are following below (Bozeman and Pandey, 2004). 1. Difference in Organization Structure: The main difference is the Organization Structure of the companies. New Look use outsider/insider model but on the other hand Transport for London (TFL) is statutory authority or state owned enterprise (Clark and Stewart, 1998)). 2. Regulation: New Look Regulated by Corporation Act and regulated but on the other hand TFL regulated by Commonwealth Corporation Act or State Owned Corporation Ace 1992, Statutory legislation and regulator and regulated (Nutt, 200). 3. Objective and Agents: New Look main interest is to make profit for Shareholder but TFL main interest is Public good (Bozeman and Pandey, 2004). 4. Independence: New Look board is legally responsible but TFL responsible is diffused (Nutt, 2006). 5. Authority: New Look authority is Board but in TFL main authority is Department Board of Govt (Bozeman and Pandey, 2004). Compare and contrasts the accountability for and roles of manages in making business decision. Accountability and Responsibility In private sector (New Look) Corporate Governance Board is responsible to shareholder for their action but on the other hand in Public Sector (TFL) board accountability is spread. In the private sector decision made by the management is generally forced by the market situation but on the other hand public sector management forced by the political situation. It is like one is about business and another is about Government (Bozeman and Pandey, 2004). However, different environment force different decision taken by the management in both sector. Nutt (2006) found that decision making in Private sector manager are more analysis based and on the other hand in public sector are more bargaining based. Also, private sector decision made by manager is more opportunity based but in public sector is more problem based. 5. Conclusion: Accounting Information system provide the necessary accounting information needed to get the overall situation of organization. It reflects the total financial strength and weakness of the organization. Although, the financial information does not include workforce, external environment but it is acceptable to everyone to Measure Companys performance over the year. Governance in corporation varies from private to public limited as well as the decision making process of the manager. 6. References: Bozeman, B. Pandey, S. K. 2004, Public Management Decision Making: Effects of Decision Content. Public Administration Review 64: 553-565. Baker, P. Wallage: The Future of Financial Reporting in Europe: Its Role in corporate Governance, The International Journal of Accounting, Vol. 35, No. 2, 2000. Clarke, M. and Stewart, J. 1998, Community governance, community leadership and the new local government, York Publishing Services, York. De Wit, B; Meyer, R (1998) strategy, process, content context, 2nd Edition; ITP, Londo Elliott, Barry and Elliot, Jamies (2008) Financial Accounting and Reporting, 12th edn, Prentice Hall J.L. Smith, R.M. Keith, W.L. Stephens: Financial Accounting, McGraw Hill Book Company, New York, 1988. Johnson, G:Scholes., K. (1999)Exploring Corporate Strategy, 5th Edition, FT Prentice Hall, London. Higgins, R. (2007) Analysis for Financial Management McGraw Hill Education (ISE Editon) Horngren, Charles and Sundern, Garry (200 8) Introduction to Management Accounting, 14th edn, Prentice Hall   Morden, T (1993) Business Strategy and planning, McGraw-Hill, London Nutt, P. C. 2006, Comparing Public and Private Sector Decision-Making Practices. J Public Adm Res Theory 16: 289-318. Wood, Frank and Sangster, Alan (2008) Business Accounting 1 , 11th edn, Prentice Hall

Disjunction versus Communion in Raymond Carvers Short...

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A Descriptive Bibliography Of Shakespeare s A Midsummer...

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Reflection for Management Under Uncertainty- myassignmenthelp

Question: Discuss about theReflection for Management Under Uncertainty. Answer: Introduction In the subject, management under uncertainty, we were given the project of writing an annotated bibliography on a specific subject. We were given the assignment of creating an annotated bibliography of twenty pages. It was a group project and we were given the task of making annotated bibliography of different topics in the assignment. All the group members were given different sections of the assignment and they have to complete it at the assigned time. In addition, the team members also needed to make decisions regarding the roles assigned to different team members, how the team will communicate and complete the assignment. We also need to decide how disputes or conflicts can be resolved during the team progress. As stated above, there were five members in the group (Williams, Wooliams Spiro, 2012). All the team members were given different task and they have the opportunity to choose different topics according to their preference. However, we also decided that in order to maintai n the quality of the assignment and assure that the project is completed properly; we need to conduct regular team meetings. The group members can get feedback on their work and resolve any issue arisen during the completion of the assignment. According to the personal perception, this decision was beneficial and assisted us in making the best assignment. Analysis While developing the group assignment, we made several decisions regarding the assignment. We decided that the people should communicate regularly for the successful accomplishment of the project. While conducting the project, it was realized that there were some conflicts related to the content of the annotated bibliography. Although there was harmony between the team members, one of the team members was not satisfied with the work of another team member. It created issues between both of them. The team member performing the task was assured that his way of approaching the task was proper; however, another member was of the viewpoint that the problem should be addressed differently. We realized that the group would not be able to function properly if both the members will fight in such a manner. Therefore, it is important to intervene and take decisions to resolve the issue between different members. We analyzed the problem and understood that although the perspective of both the te am members was different, both the perspective were justified and correct (Bolton, 2014). Therefore, the second team member should be asked to back off and let the other team member do all the work. According to the personal perception, this decision was correct as it resolved the conflict and prevented other issues to be created in the near future. The functional group decision-making theory is an appropriate theory for the decision-making in a team. This theory emphasizes on a practical approach toward the decision-making so that effective decisions can be taken. The teams or the groups should try to create equilibrium between the job responsibilities as well as relationships between different members. A team can work effectively if different team members are able to maintain a harmonious relationship. Factors such as apology or friendship are important in maintaining a harmonious relationship. There are four basic functions in an effective decision-making, namely, problem analysis, goal setting, identity alternatives and evaluation and selection (Handler, Handler Gill, 2011). The problem analysis is the first function in an effective decision making and the group member looks at the likely causes of a problem. The group members must figure out what is the real problem in an organization and what are the symptoms of the probl em. Another phase in problem solving is goal setting in which the group members identifies what can be the possible solution for a problem. The group members identify what are the potential solutions for a particular problem. In this phase, the group members come up with as many solutions as possible; however, they stick with one solution. In the next phase, the team members identify the different alternatives. The team members find as many solutions as possible in this phase. Brainstorming is conducted to find the best solution; therefore, it is best to find the best possible solutions for the organization. The last phase of his model is evaluation and selection phase. In this phase, the team members of the organization evaluated each alternative and pick the best solution for the organization (Dainton Zelley, 2014). It can be critiqued that the current team undertook effective decision making process. The current decision making process aligned with the functional group decision-making theory. The group analyzed the problem of the conflict between two group members and found that the conflict arose due to the unnecessary intervention of different team members. In this regard, it can be evaluated that the team members need to resolve the issue by taking proper intervention steps. The team members understood the perspectives of different team members and tried to analyze the perspective of different parties. After thorough evaluation, it was critiqued that the intervention of another team member is creating issues in the work of other team members. Although the other team members were not having any problem with the first team member, they were also not happy with his attitude. Critical Discussion The decision-making is a complex process. There are several aspects to a decision and each aspect yields a different result. Although there are several alternatives to a successful decision, the selection of the right decision in important. In an effective and proper decision-making, the interest of all the stakeholders should be considered. There are several frameworks to analyze the efficacy of a decision. The eight-step decision making process is the best model for decision making. According to this model, there are eight steps in effective decision making. In the first step, the problem is defined. The problem definition is the most important part in effective decision-making, such as definition of root causes, identifying ant stakeholders issues and organization boundaries. In the second step, requirements are identified for an acceptable solution. Any acceptable solution to the problem should meet a certain criteria. The requirements to the solution must define what the solutio n may do. In the third step, the organization must establish goals for the intent of decision-making (Littlejohn Foss, 2009). The goals of the organization must be stated properly. In the fourth step, alternatives are identified for the organization. The alternatives should be able to change the initial condition of the situation into the desired condition. The different alternatives should be able to meet the initial requirements and goals. In the fifth step, a criterion should be defined to measure how each alternative is performing to achieve goals. The criterion should be able to complete, operational and precise in its judgment. It is important that the criterion has an input from the decision-maker and it should be able to accurately judge different alternatives. In the next step, the decision-maker selects the best-fit decision-making tool. The selected tool must be able to address the problem accurately. The selection of the tool is also dependent upon the complexity of the problem and the experience of the team. In the seventh step, the selected tool is judged according to the criteria. The alternatives can be judged according to the quantitative, qualitative methods or their combination. In the last step, the decision is evaluated against a problem statement (McKee, Kemp Spence, 2012). The solution is validated to ensure that it solves the problem identified. The original problem is identified in accordance to the goals and requirements. The decision of stop making people intervene in the work of others was effective in enhancing the overall productivity of the organization. The current decision was effective in improving the overall efficiency of the team members. The decision is evaluated in the eight step framework and it is deduced that the decision was effective in increasing the productivity of the organization. Recommendations It can be recommended that the effective decision-making is essential in the growth and progress of a team. It is important that a team has specific structure and format for the decision making. The decision-making framework will benefit the team players in taking good decisions. It is also important for the progress of the team or the organization. It is recommended that the team should ask for the participation of all the ream members in a decision. The process of brainstorming will effectively assist the team in gathering new ideas and innovative techniques for problem-solving. The organization should also identify the underlying or root cause of the problem so that the solutions can effectively address the issue. In the present case, all the team members actively participated in the decision making process. However, in order to pick the best solution for the problem, it is important that all the solution or the approaches should be judged according to the criteria. References McKee, A., Kemp, T., Spence, G. (2012). Management: A Focus on Leaders. Pearson Higher Education AU. Williams, K., Wooliams, M., Spiro, J. (2012). Reflective Writing. Palgrave Macmillan. Bolton, G. (2014). Reflective Practice: Writing and Professional Development. SAGE. Handler, C.E., Handler, C., Gill, D. (2011). English and Reflective Writing Skills in Medicine: A Guide for Medical Students and Doctors. Radcliffe Publishing. Dainton, M., Zelley, E.D. (2014). Applying Communication Theory for Professional Life: A Practical Introduction. SAGE Publications. Littlejohn, S.W., Foss, K.A. (2009). Encyclopedia of Communication Theory. SAGE