Advantages And Disadvantages Of Financial Management

Working capital is of major importance to a business because it controls the current day-to-day operations including payment of salaries, wages, inventory, raw materials, other business expenses, purchase of stocks, buildings, land, fixed assets, etc.

There are three principal reasons for imposing a capital rationing constraint. First, the management may feel that market conditions are temporarily adverse. The second reason is a manpower shortage, that is, a shortage of qualified managers to direct new projects. The final reason involves intangible considerations. Whether or not this is a rational move depends upon the extent of the rationing. If it is minor and non-continuing,

Working capital can be defined as the way we measure how much liquidity a business has. It can be calculated by deducting the current liabilities from their current assets. It's of vital importance for large and small businesses to have cash accessible as this will reflect their credit worthiness and their capacity to meet their liabilities. However, this is not the only or most accurate measurement of their ability to pay their debt (Boundless Open textbook, n.d.).

1(a) Financial System is a complex yet connected system that consist of financial intermediaries, financial institutions and financial assets.

Mainly, the challenge facing the banking integration results from the significant difference that exists in banking regulation across ASEAN countries. Furthermore, a broad diversity between ASEAN countries in terms of their banking performances.

…How an increase or decrease in business risk alters the cost of capital, the optimal capital structure, and future budgeting decisions, and…

Using a minimum-cash balance approach is a safe way for a business to make sure that it always has a cash balance in reserve. It guarantees that the business will always have a certain amount of cash asset to fall back on. This is a very limiting and unrealistic approach to managing a business' working capital though. Cash is just one component of working capital. A business could be flush with cash but have liabilities that exceed that balance and have a negative working capital balance. A good business needs to think beyond a mental cash framework and think broader to include other ramifications to the overall profitability and balance sheet stability.

Asset Management includes the relating of expenses, opportunities and dangers against the coveted execution of advantages, to accomplish the authoritative goals. This fitting force should be considered over diverse time spans.

I am going to start my analysis with the first approach - Full Revenue Recognition. The main point is to discuss the advantages and some disadvantages of this approach for an entity. The only thing I would like to pinpoint in advance is the fact that the majority of advantages of one approach can be considered as disadvantages of another approach and vice versa. This point is specifically related to full revenue recognition and deferral of revenue approaches.

When most people are studying different companies, they will often look at wide variety of financial information. This is because the data that is provided will help them to determine if the company is a good long term buy. Recently, Facebook has been attracting a lot of interest based upon their IPO and the analysts' views that the firm can provide 5 year earnings growth of 27.19%. To fully understand what is taking place, there will be focus on the firm's business activities, vulnerabilities, financial performance and stock price. Together, the different areas will highlight the underlying strengths and weaknesses of the company. ("Facebook," 2012)

Improving working capital position, a company is able to compare from year to year any increase in revenue; increase in production due to a decrease in variable or fixed costs, increase in sales due to a new sales workforce and any increase in liabilities; new short term creditors, a higher accounts payable account due to the need to purchase new materials. A company can improve its working capital by trying to keep a healthy balance between the two accounts, cutting costs, and analyzing its current short-term debt in terms of how to decrease it or find alternative ways to avoid it such as restructuring production procedures. (Schroeder, el. 2014)

Sometimes it is inevitable that a company with a healthy business can go from stable and successful to insolvent due to a one off event. There is always a possibility for a company to face with insolvency especially when the company does not have the adequate cash flow to meet demands such as payroll and paying invoices. Hence, it is important to take steps to protect the company against it. One way a company can prevent itself from being insolvent is to carry out a ‘Corporate Voluntary Arrangement’ (hereinafter referred to as CVA).

FINANCE= ensures the business has the necessary financial resources to achieve its goals and objectives.

Finance/credit is the most critical component in any business process. Any industrial sector cannot work to its full capacity without adequate flow of funds. The SME sector is working with low capacity utilization, which, however, has now improved from 33.34% to around 52% percent. Still these

More than half of the small business enterprises in the world are stifled because of poor financing and other associated problems. The challenges in financial part for small business enterprises are they may not have enough sources of funds but its accessibility. According to Harper.M (1984), he believes that the capital shortage problem in the small firm sector is partly one, which stems for the uneconomic deployment of available resources by the owner-managers. This financial problem occur due to the inhibiting funds accessibility are the stringent condition which was set by financial institution, lack of adequate collateral and credit information and also cost of accessing