Business Finance and Economics: Determinants of Business Performance, Role of Accounting, Financial Statements, Management Accounting

Business finance and
economics

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
1) The external and internal determinants of business performance...........................................3
2) The role and importance of accounting..................................................................................4
3) Distinguish between the major financial statements...............................................................5
4. calculation of financial ratio for XYZ Plc for the years ended march 31 2019 and 2020......7
5) Management accounting and its importance..........................................................................8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business finance plays a vital role for the company as it means that funds availed by the
owners of the company in order to meet their organisational goals and requirements that may
involves obtaining finance to buy assets and to deal with any uncertainty related to cash which
has been faced by the firm. With the help of study related to business finance and economic the
company is able to understand and analyse corporate financing and economic both together and
make investment related decisions which helps them to achieve their goals in the business world.
The present report will be based on economic factors that determine the competitive business
environment and provides details on roles and importance of financing reporting and accounting
in terms of planning and decision making. In addition, the report will calculate ratios for the
company named as XYZ plc.
1) The external and internal determinants of business performance
As we all know that there are various types of factors that can influence the business
performance and also impact the culture of the firm. While setting goals and doing business
operations companies have to focus on these controllable and uncontrollable aspects.
Factors such as political, economic, customers and competitors of the firm are macroeconomic
while on the other hand employees, processes, systems and finances and organisational culture
are internal factors.
(external, macro) politics and Economy- if the economy is not properly maintained, the
business may not be able to survive in the world. Due to changing policies related to tax and
interest rates, the customers will not be able to spend more on luxury products, sports items and
gifts. This can influence the performance of businesses and also buying behaviour of clients.
However, company can’t control this macro factor but understand it properly which can help
them to know about opportunities and threats.
(internal) Staff members and managers- as we all know that employees are the main part
of the internal environment of business. It is essential for the company to provide facilities and
enhance job satisfaction of employees. Any new change in system and process can create
resistance among staff members which can influence their performance. Managers have to be
good at managing lower level of staff members, it is their duty to look after the needs of staff and

focus on internal environment. if there is a conflict between employees then it may hinder the
performance of business and can wreck a good organisation.
(External, micro) Competitors- unless the company have unique products or service, they
will have to deal with strategies used by their competitors. Nowadays, in the same industry there
are lots of new players in the markets who are providing varieties of offers and discount and
selling products at affordable price which can attract more customers. It is a threat for the
company which can influence the buying behaviour of customers. Competition in the market can
break the company’s performance or it can motivate to use effective strategies.
(internal) Resources and money- even in a stable and great economy, lack of money and
resources can determine whether the organisation is performing well or not. If the resources and
money of the firm are too limited, it can impact the performance of employees, number of staff
the firm can hire, tools and equipment’s quality etc. on the other side, if the company have lots of
saving and enough balance in the accounts with full of cash availability, they can have a lot more
flexibility to expand their business in the competitive world and grow effectively even in
economic downturn.
(External, micro) Organisational culture- internal culture consists of priorities, needs,
attitudes, behaviours and values that staff members live by. If the company have positive and
healthy culture it can create a strong relationship between employees and managers and build
teamwork and collaboration (Seo and Lee, 2019). The staff members of the firm infer the value
of firm based on the type of staff company recruit, promote and select. A negative culture can
hinder the performance of business and also create negative impact on teamwork.
2) The role and importance of accounting
In business context, accounting plays an important role as it helps the business to achieve
goals. If accounting is properly maintained, then the business can run smoothly its operations.
Financial information- With the help of accounting, the managers can track expenses
done by firm and income earned. It helps them to provide detailed information about company’s
financial health and position (Rikhardsson and Yigitbasioglu, 2018). The accounting can provide
investors about the financial information which can be utilized in making informed and
important business related decisions. by having proper accounting in the books, the managers
ensure statutory compliance.