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Finance for Strategic Managers

Essay by   •  October 23, 2016  •  Term Paper  •  6,814 Words (28 Pages)  •  687 Views

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Executive Summary

The report aims at illustrating the role of finance in making financial decision. Finance is considered as the blood for an organization. This is why managers of the organization need to address the financial issues strategically. Identification of these issues at the right time paves the way for organizational success. The paper, therefore, at first assess the importance of financial information in forming business strategy. Besides, the objectives and contents of published accounts are discussed that can help managers in making financial decision for the business. Then a comparison is made between the long term and short term financial requirements in order to evaluate the needs of financial resources that can be invested strategically. Finally, the roles and duties of the owners and managers under variety of ownership structures have been assessed for measuring the overall financial performance of the organization that will lead to the most effective way for the strategic managers so that they can support proper financial decision making.


Table of Contents

Executive Summary        

Introduction        

Task 1        

1.1 An assessment of why financial information is needed in business.        

1.2 An identification of the business risks related to financial decisions.        

1.3 A summary of the financial information needed to make strategic business decisions.        

Task 2        

2.1 An explanation of the purpose, structure and content of published accounts.        

2.2 Interpretation of the financial information in these accounts.        

2.3 A calculation of the financial ratios from the accounts and an explanation of how they support strategic decision making.        

Task 3        

3.1 An explanation which clearly distinguishes between long and short-term financial requirements for businesses.        

3.2 A table comparing the sources of long and short term finance for businesses.        

3.3 An examination of cash flow management techniques and an assessment of why the management of cash flow is so important.        

Task 4        

4.1 Illustration of different business ownership structures and evaluation of the corporate governance, legal and regulatory requirements of these as well as comparison of the roles and accountability of owners and managers in making decisions.        

4.2 An evaluation of methods for appraising strategic capital or investment projects.        

Conclusion        

References        


Introduction

The life blood for every organization is none other than Finance. No organization can even survive without finance. Therefore managing finance properly is the most crucial task for the strategic managers so that they can take effective financial decision. The reason behind taking effective decision is that it largely impacts the financial ability of the organization that can either give success or make it a failure one. But the decision making process is also affected by several factors and aspects. Requirements of different sorts of financial information, evaluation of business risks etc. dictates the role of financial information to develop business strategy that will support the decision making process (Fifield and Power, 2011). Besides, proper evaluation of financial statements is necessary as they provide the basis for strategic decision making purposes. Moreover, the analysis of the liquid and fixed financial resources as well as the assessment of the different ownership structures is also essential for measuring the overall financial performance of the organization. When the managers can effectively and efficiently evaluate all these prospects, they ensure making strategic financial decision making.[pic 4]

Task 1

1.1 An assessment of why financial information is needed in business.

Information is the heart of every business organization. It is the core requirement of business entities to support the decision making process. Without the proper information, no business can project their acceptability and measure the success. Information requirement of a business can be present in many forms. But the most crucial sort of information required for business entity is the financial information. It is already known to everyone that finance is the lifeblood that passes from the body of the organization. (Sagner, 2002) Therefore, in order to run the organization, finance and financial information is must. Running the business requires financial information like the amount of money to be raised, the expenses of raising the capital, what amount of investment can be made, how much revenue is targeted etc. All of this information plays the crucial role to set the base for operating the business.  And business organizations can prepare various financial statements to generate, analyze and use this information. Different financial statements provide numerous information that the managers can use strategically on the basis of their requirements. For example, cash flow statements provide financial information that is required to carry out daily cash activities. Balance sheet provides financial information that is required to learn the financial position of the organization at a particular date so that organization can determine whether to invest more or control the expenses (Fifield and Power, 2011). And these two crucial extremes like investments and expenses are the major denominator of the paying system that supports the managers to make the financial decision effectively. It helps the managers to evaluate the financial decision and prepare various financial reports, manage various business risks, set financial target, begin with a new project etc. Moreover, financial information is required for every stakeholders of the business organization to serve their needs and purpose.

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