Respond to at two comments by commenting on their example of management not fulfilling its responsibilities. Pose a question to spark discussion regarding what could have been handled differently.
Financial management is something that must be understood in all aspects of activities that enable a company or gain or obtain capital growth. Also, to allocate their resources efficiently, to maximize the potential income as well as monitor results through accounting documents. A comprehensive financial management plan contains a clear outline of assets, debits and current or future profit potential of the business is required in management. In order for any business to be successful they must take time to make a plan to ensure the success of a company. managers need to understand the characteristics and importance of financial markets because markets have a low value. A financial market that is considered risky has a negative value in the company. Being a risky is bad because it means uncertainty in the financial markets. however, an efficient market can also be risky, companies should be cautious, when second guessing or not feeling confident in market pricing. Cash flow is higher in importance then sales because it increases in assets, as well as liabilities in a company/ business. Increase in cash flow needs to happen in order to grow a business. If a manager or owner does not fulfill their responsibilities in the business with finances they could potentially lose their business. In my career at the campground if you as a manager do not fulfill responsibilities such as paying the bills such as electric bills, or perhaps not fix things broken on the property it could turn guest away, leaving less income making the company go under. Since I have been with the company this year I have incorporated what I have learned and the company has grown. A way that I did this is that the company system being used was dos I had discussed with the trustees to update the system to be more efficient, the trustees agreed and that was a positive management plan, thus growing the company.
Management must understand cash flows, time, risk, and opportunity costs. Assessing these factors helps to assess business and personal investment opportunities. Understanding these factors will help to ensure financial growth with a company (Hickman, Byrd, & McPherson, 2013).
Managers need to understand the characteristics and importance of risk and efficiency because there can be a lot of uncertainty in the market. With market efficiency prices can quickly adjust to new information. Prices in an efficient market are a good indicator of the value of an asset. Risk is when the value is negative to the risk (Hickman et al., 2013). Managers need to understand these characteristics because to avoid making bad financial decisions for the company.
Cash flow is more important than sales because it is a better indicator of the amount of funds a company has and is a good indicator of the amount the company has to pay its bills and other debts (Hickman et al., 2013).
If management does not fulfill their responsibilities related to finance the company could go out of business. An example I have doesn't actually have to do with a financial manager but was a problem we had in my department I work in. We have birthday fund that we all contributed to every month and a record was kept of funds received and used. During every month there was birthdays we would have a little celebration would use the money to buy a cake, ice cream and birthday cards. One of the managers was in charge of collecting money and purchasing the birthday items each month. She did not manage this fund correctly and started using the money for her own personal reasons. As a result we stopped collecting the birthday funds and she was eventually let go from the company.
Respond to at least two comments who have each selected a different statement, and share any additional ways a manager might use that type of statement to drive financial decisions in a corporation.
After reviewing the video as such as the first discussion I will choose what I know. At my job, I only see cash flow as I do the end of day reports the other ones are done by the book keeper so I do not have much experience with it. A manager would use this statement to drive financial analysis because this statement shows the investing and financial activities over a certain amount of time of all inflows and outflows. In the text, it states "financial statements are important because they are the primary tools with which the firm communicates with its varied stakeholders." (2.2) management looks at the overall operating activities to make sure it is running properly and generating cash flow. If cash flow is good and the company is running smoothly then a company can repay debts which in turn can draw attention to investors. Net income is influenced by cash flow that is generated by the operating activities. The cash flows help reduce debt which can help a company develop more products to expand and, also paying the dividends. The cash flows are driven by revenue and lower the overhead, therefore helping a company run efficiently. This is important to managers because cash flow runs the other financial reports without cash flow there are no numbers to run the other reports or the company, this is why cash flow is important for a company to run efficiently.
A manager can utilize an income statement as a business management tool. This tool provides the leader to use three essential elements, which could help lead to effective decision making for the organization. The first tool in which the statement projects, is the clear visual which provides in depth analysis on how the business performed during a specific duration of time. For example, on the heading of the income statement, the time period is always specified. For example, the heading may read, "The Fiscal year Ended June 30, 2016") It is imperative for leader's to review this information weekly, or quarterly. The second tool can be utilized for current or future planning. A leader can strategically determine how a major business decision, significantly impact the organizations earnings. The practice of reviewing the sales, provides the leader with clarity of the organizations performance. A manager can review the income statement and determine where the revenue was disbursed. If there is an area in the organization that is not mindful of its outgoing expenditures, the leader will be able to better regulate the overall budget. The leader has the ability to watch for positive or negative trends within the organization. This statement does not show itemized expenditures or cash receipts. However this tool will provide particular attention to the organizations bottom line, and its credit worthiness to a banker lender, or creditor. Ultimately an income statement allows the business leader to determine exactly how much an organization has earned. (Sangl, 2009)