Managing Financial Resources and Decisions

Since financial statements are deemed as being neutral, they actually present accurate and clear indication of the objectives of the firm over certain duration. This is to say that the management authority of the enterprise will have the capacity of assessing this information in order to make decisions. These financial decisions will comprise the determination of the firm’s capacity of freeing up any existing resources or just obtaining additional credit (Mancini et al, 2013).

Conversely, the financial statement definitely includes the net worth that is based on the company’s assets and liabilities, expenses, earnings and operating budget. As much as it will be used in making decisions regarding the company’s future panning, expansions and so on, the data and the figures to be portrayed by it are based on the market at that period (Mancini et al, 2013). This means that it has the capacity of changing quickly depending on the market. Because of this, its management authority should not assume that maybe the previous financial data has the clear picture as the existing one.

Nonetheless, decision making is the key step in expanding the firm. This then means that the numbers indicated by the financial statement will ultimately indicate how the firm earns per year in sales. Since the returns from its economic activities may fluctuate, it implies that the financial planners of the company should be in the position of identifying a pattern over years of sales and expenditure figures (Marsh, 2012). For instance, the management authority of the company may decide to come up with a pattern of increased returns when sales are to be made. This is beneficial because it will reveal the potential of the firm which puts the managers in predicting the future trend in the market.

Additionally, since the financial statement will become a continuous analysis of the company’s performance in matter pertaining to its future planning and decision making, it reveals its budgets (Watson & Head, 2010). In other words, the figures shows how much wiggle room the firm has to incur in launching its products, expanding its existing office size or developing some sort of marketing campaigns  (Marsh, 2012). In the process of determining the amount of cash which is available at that time means that the firm will not incur extra other than the budgeted amount.

With respect to the above illustrations, financial statements are to be heavily used in making sound investing decisions. This means that this fundamental analysis will depend on various financial statements for instance income statement, balance sheet and so on for decision making.  This then means that investors will have sufficient time in understanding the history and the current financial health of the company (McLaney, 2011). In return, the fact is that the investors will not be subjected to any accounting information which has been already filtered based on the current condition of the company.

Moreover, reliable accounting information will serve as a practical function of the company. It means that beyond compliance and regulatory hurdles, these statements will aid the managers in creating budgets, understand the perception of the public, and track the company’s efficiency as well as analyzing its performance (McLaney, 2011). This will ultimately boost the development of long-term and short-term strategies. Consequently, since the information contained in the financial statement illustrates all the items contained in the various financial statements, they are the integral part of decision making. This means that as much as decision making is concerned, they will be used in measuring the revenues generated as well as the expenses which were incurred during the accounting period (Gary & Curtis, 2014).

 

                                                Cash budget

                                 For year ending December 31, 2016                                                 

Revenue	118069
Other operating income	5939
Finance income	93
Operating profit	16948
Profit before taxation	16948
Total revenue		9457904
Income tax expenses	3252
Operating expenses	69710
Finance costs	5
Total expenses		73167
Budgeted ending cash balance		9384737

 

 

 

Bibliography

Mancini, D., Vaassen, E. H. J., & Dameri, R. P. (2013). Accounting information systems for decision making. Berlin: Springer.

Marsh, C., (2012). Financial Management for Non-Financial Managers, Kogan Page, London

McLaney, E., (2011). Business Finance, Financial Times, / Prentice Hall

Watson, D., & Head, A., (2010). Corporate Finance Principles and Practice, Financial Times / Prentice Hall

Gary, A.P & Curtis, L.N (2014). Financial Accounting: The Impact on Decision Makers. Cengage Learning Press