The key role of finance in any business is to manage money; whether it be raising capital through share capital and bank loans, raising credit (short-term capital), or handling the costs of the business. Without finance, a business would not function, as quoted by (Griffin, 2015); ‘Money is the lifeblood of a business and finance is the nerve center’.
Key activities of the finance department:
Firstly, one of the key activities of the finance department is to maintain a check on the costs/outgoings of the business. This is important because if the business spends too much, it may have to dip into its capital – money invested into the business to start it in the first place – or it may have to take out bank loans, in order to finance the
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This is very important because a business needs to know exactly where and when all of its money has been spent at any given time in order to be able to reduce the costs for the future. For example, for the year ending 2014 Arcadia Group generated £316.8 million revenue and finished up with £143.1 million pre-tax profit. (Limited, 2014) The decisions made by the accountants in the finance department leading up to and after the publication of these figures is essential to the financial success of the Arcadia Group (Topshop, Top man, Wallis, etc). Without constant reviews and ‘informed judgements and decisions’ (Weetman, 2006) by the accountants in finance, the Arcadia Group would start to make a loss and possibly, eventually go bankrupt. By evaluating the figures and reaching conclusions on them, the Arcadia Group will be better able to maximize the profits for the company.
Key tools and ideas that are critical to finance:
One of the key ideas behind the finance function is the question; ‘Is the business making a profit?’ This is because without making a profit, a business would not continue to exist. For example, in 2013 Ford made $8.6 billion in pre- tax profits, but in 2014 Ford made $6.3 billion, so there was a drop of $2.3 billion (Ford,
Financial Management is an important aspect of how a business operates efficiently. The way that the finances are controlled can determine how successful the company is. The finances of a business allows for the growth of the company. The five practices of financial management: capital structure decision, investment appraisal techniques, dividend policy, working capital management and financial performance assessment are critical when assessing a company. The performance of a company plays a key role on how successful the company is on meeting goals. There are different strategies and tools that a company can implement and if they are used to effectively the company can meet their goals. If a company has good finances, a good
The finance function and its relation to other decision-making areas in the firm; the study of theory and techniques in acquisition and allocation of financial resources from an internal management perspective.
A. Corporate finance is important to all managers because it helps identify the goals of the company. These goals are:
The purpose of a finance department is to assist the business in achieving profit levels. This can be achieved by;
* Business use finance to study every decision they make from investing in a product to market short term or long term, and if the ROI is worth-while or not. Firms must also use this study when recruiting vendors, sub-contractors, and even fresh new employees all of these are investments that need to have a positive ROI in the eyes of the company.
Finance- Finance is credit that is use for a huge purchase it is a loan from a bank when funds are needed to purchase a home, car, or business. The finance purpose allocates assets including investing and managing of resources.
Even though financial management "is a broader concept than accounting", the idea of financial management is more than just accounting for where money is spent, it is based on the analyzation of organization's economic
A key role financial organisation plays for the duration of both planning and development stages, is to produce and relay information to management, shareholders, and stakeholders showing in monetary values the economic stability of business resources (Noll and Zimbalist, 1997). These responsibilities can be categorised as: overseeing financial risk, protecting the integrity of company finances, motivating managers to establish competitive value, attracting money into company projects, future proof planning and controlling performance improvement (Bonham and Langdon,
Finance, understanding how it affects the smallest business to the largest organization, is the origin to financial success in businesses. According to Gitman (2006), finance is the art and science of managing money. Virtually every individual business and large organization, Be the organization for profit or non-profit, depends on the rates at which these entities earn, or raise money, and the rate at which they spend or invest these earned monies. Understanding these financial processes will enable the financial manager, or even the non-financial managers to more effectively interact with financial personnel, processes, and procedures.
Being an effective manager for any company involves making the right decisions in terms of operations but also involves having the financial intelligence to read a financial report to determine areas of improvement for a company. Being able to decipher a company’s financial statement helps a manager understand the company’s profitability; this statement covers a few key areas which are dissected further in order to visually see where monies are being used. By understanding the income statement, balance sheet, and cash flow statements managers are able to make informed decisions regarding how the company needs to operate in the future, aligning goals in order to be successful. By reviewing revenues, expenses, and profit for a period of time, managers can see where the profit and loss is. By staying informed of the assets,
1. Define the terms finance and financial management, and identify the major sub-areas of finance. Finance is the way in which money is used and handled; especially, the way in which large amounts of money are used and handled by governments and companies (Merriam-Webster, 2014). Financial Management is the planning, directing, monitoring, organizing, and controlling of the monetary resources of an organization (Businessdictionary, 2014). The major sub-areas of finance are: investments—involves methods and techniques for making decisions about what kinds of securities to own; financial management—deals with a firm’s decisions in acquiring and using the cash that is received from investors or from
The finance department functions include keeping records of financial activity for example the sales made by the business and providing managers with information that they can use in decision making for example cost of making products. For McDonalds the finance department would have to keep track of how many sales they make per day and what kind of meal or burger makes the most money. For Chester Zoo the finance department would have to do the same which is keeping records of how many sales they make per day and how much profit they make.
Financial Management is a critical aspect of any business in order to achieve a sustainable and efficient cash flow. It is essential in maintaining the link between a business’s future financial goals (profit maximization) and the resources that it has in order to achieve its objectives. Businesses demand certain common goals that increase a bussiness's all around achievement, Some of which involve; growth amongst assests, An increase in efficiency in all areas of the business whether it be management or not. And the ability to meet short term and long term debts. Finacial management undertakes the responsibility to implement and acheive these goals for the business using a range of strategies shaped to meet the needs of the business and
== = Every organization, irrespective of its size or ownership pattern, has to manage its finances. The overall objectives of an organization cannot be achieved in the absence of financial management. Many organizations fail in their objectives because of financial mismanagement and this failure rate is quite high among the small business enterprises.