Small and Medium-Sized Enterprise Financial Management Goal

The purpose of this paper is to describe the budget process, variances and the major reasons of the variance to make all the financial decisions of the firm properly. This paper would also be helpful to explain that “make” or “Buy” decisions also play a significant role to improve the efficiency of the firm. In addition, the paper would also be useful to clarify that non-financial performance measure may be unsafe for the image of the firm.

The most important step of all in a financial control program is training all of the employees and volunteers on the steps being taken by the organization to

Financial controls are the means by which an organization’s resources are directed, monitored, and measured.

The return on equity ratio measures how well a company is using its owner 's investments to generate after tax profits. Investors like to see a high return on equity since it indicates the company is using the owner 's investments efficiently to generate after tax profits, (Schermehorn, J, et al, 2004). Different industries requires different percentage of return on equity as some industries need to generate high return on the basis that less capital is invested, (Palepu et al. 2010). Return on equity has increased from 3.39% in 2011 to 5.46% in 2012 this is consistent with the growth strategy and cost efficiency strategy. However the strategic cost played a significant part in the lower net income of 2011 for example even though the total equity increased by 4.70% it is not as large as the 68.44% increase in the profit after tax. Return on equity has three parts; operation efficiency, assets used efficiency and equity multiplier.

The next financial method to be utilized during the financial analysis portion of capital expenditure justification is the Profitability Index (PI). Furthermore, the PI value would sustain the acquisition of this specific EMR system due to it being a positive value.

EVA stands for economic value added. EVA is a value based financial performance measure based

Reserve coverage ratio, despite the increase in loss reserves, is decreasing dramatically, from 213% in 2006 to 87% in June 2008, indicating an enormous increase in non-performing assets (NPA). The main reason on increase in NPAs the fact that high percentage (32.9%) of company’s total loans is Real Estate loans. This is the reason that company’s interest income has decreased despite the increase in loans made in 2008. Efficiency ratio is basically an operating expense margin measure, the lower the better. The above 60 percent efficiency ratio, 50 percent generally regarded as optimal, is an indicator of company's deteriorating performance.

EVA helps overcome the goal conflict that exists between the manager and the firm in this situation. Using EVA instead of ROI to reward the division manager would motivate him to accept any investment alternatives that generate a return greater than the company 's 10% cost of capital.

Controlling is the second pace in financial management. At this stage, the financial manager makes sure that every division of the organization tags on the decided plans. In controlling stage, managers will have to study the existing reports and compare them with the previous reports to help them comprehend and establish the division of the organization that is a need of the most attention (Baker and Baker, 2007, p. 6).

1. The cause to the conflict in the rankings is that while the IRR ranking shows a percentage so that you can see what percentage you are making on certain amount, it does not show the size of the project.

The purpose of solving the difficulties and inequities in financial controls activities is to recover the costs to get adequate resources, ensure the equity and fairness and improve the transparency. In order to improve the food control system, four options have been proposed and the option 4 appears to be the

Financial Management Introduction = == == == ==

They identify quantity of materials used and units to be produced. · Financial controls facilitate achieving the organization's profit motive. One method of financial controls is budgets. Budgets allocate resources to important activities and provide supervisors with quantitative standards against which to compare resource consumption. They become control tools by pointing out deviations between the standard and actual consumption.

The purpose of this report is to introduce an overview about SMEs. A critical evaluation and analysis of two small and medium enterprises, Icosium and NotontheHighStreet.com will be presented in this report and also will include the following steps: the business concept and sources of competitive advantage, the current demand and the competitive environment, the growth and development of the business to date, the challenges of managing and running the business, an estimate of the current valuation of the business, the SMEs current growth and development strategy and future recommendation. Furthermore in work will include a conclusion and recommendation.

After subtracting all economic costs from operating profits after taxes EVA reveals the true economic surplus available for further investment. Traditional cash flow analysis can easily disregard companies with negative cash flows because main purpose of traditional cash value metric is to control cash generation. In contrast, the main purpose of EVA is to optimize resource allocation. At difference to accounting measures, EVA highlights the gap in performance, and hence, aligns the interests of managers and shareholders. The link between shareholders value and economic profit of the company becomes more transparent. At difference to traditional accounting measures of corporate profit, EVA fully accounts for the company¡¦s overall capital costs. It includes both, the direct cost of debt capital and the indirect cost of equity capital. The cost of capital is the minimum return required to pay shareholder¡¦s equity . EVA can therefore determine whether or not the business is creating value but it can also indicate how much value is created at different business levels.