Financial Management Essay

This essay examines the significance of financial management in influencing shareholder decisions. It analyzes the benefits and drawbacks of financial management, focusing on its impact on financing, investment, and dividend decisions. The essay emphasizes the need for accurate and reliable financial information to empower shareholders in making informed investment choices.

Financial Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK...............................................................................................................................................3
Critical evaluation financial management which shareholder implicate in decision making 3
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Financial management play significant roles in the organisation which use to planning,
organisation, monitoring and controlling to financial resources that helps to improve operation
performance. It is useful to represent the financial position to public that helps to take decision
related to investment and increase profits of the company (Jin,2016).
Present report based on Evaluation of financial management which is used by
shareholders to take decision in investment money.
TASK
Critical evaluation financial management which shareholder implicate in decision making
Financial management- It is the tool of planning, organising and controlling the finance
resources which helps to achieve goals and objective of the company. Manager of the company
compare financial statement with other company or previous year statement which use to
increase synergy, efficiency, increase profitability, growth of the company. Finance manager use
financial information to prepare financial statement like profit and loss account, balance sheet
and equity shareholders statement that provide information to take decision making.
Advantages-
 Finance manager of the company set goals and objective with the help of financial
management that leads to sustainable growth of the company.
 Company can effective utilise the resources that use to providing goods and services at
the lower cost which helps to build image in the market.
 Financial management use to prepare financial statement like Balance sheet, equity
shareholder statement that provide financial position to shareholders and customers that
helps to take decision making regarding investment (Finkler, Smith and Calabrese, 2018).
 Financial manager uses as financial planning of the company like require capital,
determine capital structure for formulate policies that leads increase profitability and
growth of the company.
 Financial manager can prepare effective policies and strategies by comparing financial
statement which helps to accomplish goals and objective of the company.
Disadvantage-

 Financial management is complex process because it requires numerous expertise and
procedure for collecting finance information so sometime it hard to understand to all
managers.
 It is time consuming process because manager frequently monitor to market trends for
changing decisions and needs to improve financial position of the company.
Implication of Financial management for decision from a shareholder perspective-
Finance manager prepare financial statement such as profit and loss account, balance
sheet, cash flow statement and equity shareholder statement that help to represent the
performance and financial position of the company. it is important which provide necessary
information to all shareholders, customers, investors and employees which used to take decision
such as dividend decision, investment decision and financing decision. Financial report must
emphasis on accuracy, reliability and relevance of information that need to build image in the
market. financial management is strong which leads to build reputation in the market ultimately
that helps to increase profitability and growth of the company.
Financing decision-
The crucial decision taken by the financing manager which are relating to borrowing
funds and allocating funds required for investment decision. Company can take financing
decision using own money like equity, retain earning and borrowed money like debt amount etc
which is essential to accomplish the goals and objectives of the company. Income statement
include operating receivable and operating expenses. when shareholder take financing decision
then they considered these points such as cost, risk, level of control and cash flow of the
company (Karadag, 2015). Shareholders such as employees, customers can take accurate
decision related to investment money within the company. If net profit high then customers and
shareholder rely upon the company and make investment that are essential for growth of the
company. Such factors impact on financing decision -
Market condition - company issue equity share in the boom period and debt use in
depression period.
Cash flow position- strong and weak cash flow represent the confidence and discourage
the investors decision.
Advantages- manager able to prepare optimum capital structure which helps to achieve
financial goals like profit maximisation.

Disadvantage- Always Company not able to predict market movements that impact on
shareholder decision making.
Investment decision-
It is also called capital budgeting decision because it analysis the assets and liabilities
when they made investment. It plays significant role to taking decision by shareholders of the
company because it represents the clear position of the company. Shareholder invest money
when they identify and analysis that company have sufficient assets to meet out its long-term
obligation and short-term obligation. If company have no sufficient liquidity and assets to meet
out its obligation then shareholder is not invested their money and creditors are not providing
borrowing fund because it shows the solvency position of the company. In investment decision
these factors affect-
Profits- shareholder analysis the profit that represent the rate of return of the company.
cash flow venture- Company regular monitor cash flow within the venture that helps to
sustain growth of the company.
Advantageous -company can maximise the goals and objective related to wealth
maximisation.
Disadvantage- If company have huge debt that time company doesn't take investment
decision because they have to pay liabilities.
Dividend decision -
It is most useful for shareholders like customers, investors, employees and financial
institution because it shows the movements in owners’ equity. It is also known as statement of
retained earnings (McKinney, 2015). It provides dividend yield so company not able to provide
attractive dividend then shareholders are not invested fund in company. This statement allows to
analysis the financial statements factors which impact on statement of changing equity. When
company take dividend decision these factors affected-
Earning- Net profit or net loss impact on equity shareholders because if company has
huge net loss then they are not interested to invest money.
Balancing dividend- Company try to balance out dividend per share that impact on this
decision.
Advantage- Dividend decision can use to determine attractive dividend rate that helps to
increase shareholder value.

Disadvantage - If dividend rate id low then company not able to invest their money that
crest the difficult situation. (Zietlow and et.al., 2018).
CONCLUSION
Above report summarised that Financial management is essential to all companies which
use to take investment decision, financial planning and dividend. Financial manager prepares
financial statement like income statement, balance sheet and equity shareholder statement which
provide financial information to shareholders and investor that helps to take decision related to
investment money. It is important to take decision to effective utilisation of resources that helps
to achieve goals and objective of the company.

REFERENCES
Books and journals
Finkler, S. A., Smith, D. L. and Calabrese, T. D., 2018. Financial management for public, health,
and not-for-profit organizations. CQ Press.
Jin, J., 2016. Essays on multinational financial managment(Doctoral dissertation, Rutgers
University-Graduate School-Newark).
Karadag, H., 2015. Financial management challenges in small and medium-sized enterprises: A
strategic management approach. EMAJ: Emerging Markets Journal. 5(1). pp.26-40.
McKinney, J. B., 2015. Effective financial management in public and nonprofit agencies. ABC-
CLIO.
Zietlow, J. and et.al., 2018. Financial management for nonprofit organizations: policies and
practices. John Wiley & Sons.
Online
What are Financial Statements. 2017. [Online]. Available through: <.https://accounting-
simplified.com/financial/statements/types.html>.
What is the importance of Financial Management. 2019. [Online]. Available through:
<https://www.lsbf.org.uk/blog/news/importance-of-financial-management/117410>.