Solved: Assignment on Finance for Strategic Managers

Added on - 03 Dec 2019

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Finance for Strategic Managers1
Table of ContentsTASK 1............................................................................................................................................31.1 Assessment of why financial information is needed in business...........................................31.2 Business risks related to financial decisions..........................................................................41.3 Summary of the financial information needed to make strategic business decisions............5TASK 2............................................................................................................................................52.1 Explanation of the purpose, structure and content of published accounts............................52.2 Interpretation of the financial information in these accounts................................................72.3 Calculation of the financial ratios and their support strategic decision making...................8TASK 3............................................................................................................................................93.1 Explanation which clearly distinguishes between long and short-term financialrequirements for businesses.........................................................................................................93.2 Table comparing the sources of long and short term finance for businesses.......................103.3 Examination of cash flow management techniques and its importance..............................11TASK 4..........................................................................................................................................114.1 Different business ownership structures and Roles and accountability of owners andmanagers in decision making.....................................................................................................114.2 Evaluation of methods for appraising strategic capital or investment projects...................12CONCLUSION.............................................................................................................................13REFERENCES.............................................................................................................................142
INTRODUCTIONStrategic decision making is an integral part of business that allows managers to developthe strategies in a line with company's mission, vision as well as long and short term objectives.However, information from internal and external environment play lead to an optimal decision.For the view point of organization's success, finance is the most importance resources and itsmanagement is required to gain profitable results (Barnes, 2006). The managers surely neededfinancial information to make viable decision for business. The report herewith is designed torepresent the importance of financial information in business and in strategic business decisionsmaking. In this regard, a leading company of UK retail market namely “Home retail group Plc”is taken into account.The aforesaid entity deals with home and general merchandise within UK and has capturesignificant market share (Home Retail Group, 2015). The company has earned total sales of£5.7bn in the year 2014. This study presents the calculation of financial ratios for Home retailgroup Plc for the year 2014 and 2013 and shows how it supports strategic decision making.Furthermore, the long and short term financial sources are compared on the basis of strategicdecision making. Along with this cash flow management techniques and its importance isshowcased in this report while explaining the application of investment appraising or capitalbudgeting techniques.TASK 11.1 Assessment of why financial information is needed in businessFinancial information is a significant part of business that help business in going throughthe financial position. The major aim of using financial information is to identify financialefficiency of corporate entity as well as to make viable decisions. Financial information isneeded to develop the strategies in accord to the financial goals. This include: amount of salesfor a particular period as well as the information of purchase of raw material. These allinformation is needed to design future courses of actions (Bull, 2007). Information in regard tothe purchase of assets is important to identify the cash outflows. In other words, financialinformation is known as the heart of business management. To an extent, it can be said that it isdifficult to run a business without having proper information of financial resources. The major3
source of financial information are accounting reports and financial statements. The aforesaidinformation pertaining to financial resources is helpful to managers in evaluating financialcondition as well as operating performance of a corporate entity. It has been witnessed thatfinancial information is needed by business to prepare annual reports (Murphy, 2001). Theseannual reports are prepared on the basis of financial information for entire years or a specifiedtime period (Ryan, 2009). These statements or annual reports are used by the internal andexternal stakeholders. The accurate information leads to significant improvements in themanagement of business. However, the major role of financial information is in decision-making.1.2 Business risks related to financial decisionsThe organization makes strategic decision on the basis of varied information pertaining tointernal and external environment however, there is a specific risk associated with the financialdecisions. The foremost business risk is associated with the company at the time when not singledebt is taken. Further, there are major kinds of risk such as strategic, compliance, financial, andoperational are involved with the business. An effective management of risk is involved toimprove the efficiency of company. The points below represent the various kinds of riskinvolved in business:Market risk: The market in which company operates its business generally carries riskthat affects the operations of company. The uncertain demand from marketplace is theforemost risk involved with financial decisions (Srinivasan, 2012). The new and updatedtrends which take place in the market also contains risk for business. In addition to that,market risk includes inflation, fluctuation in market trend and recession.Compliance risk: The compliance risk is significantly associated with laws andregulations of government in the operating region. Compliance risk occurs just becauseof changes held in legal policies that are associated with customer relationshipmanagement, health and safety, taxation, trade policies and so on (Barnes, 2006).Whenever the policies change, it puts both negative and positive impacts of business.Operational risk: Operational risk is associated with financial decision making, however,this is associated with the internal system of enterprise. The operational risk has4
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