Finance for Strategic Managers

Finance for Strategic
Managers

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1. Sources of financial data....................................................................................................1
2. Need for financial data and designing of strategy for business..........................................2
3. Risks associated with financial business decisions............................................................2
4. Methods used for appraising capital expenditure projects for business.............................3
TASK 2............................................................................................................................................4
1. Interpretation of financial statements.................................................................................4
2. Ratio analysis for Samsung Plc..........................................................................................5
TASK 3............................................................................................................................................6
1. Creative accounting techniques..........................................................................................6
2. Limitations of ratios...........................................................................................................7
3. Significance of cash flow management..............................................................................7
TASK 4............................................................................................................................................7
1. Report having assessment of capital investment techniques..............................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Finance plays crucial role in the business to effectively carry out operational tasks in the
best possible way. Present report deals with preparation of financial reports of Samsung Plc and
carrying out ratios to be provided to Chamber of Commerce by Pietro who is engaged in home
wares business and is a member of the committee. Report also highlights importance of cash
flow management in capital investing techniques. Moreover, various sources of financial data is
provided along with need of the same to business. Capital investment techniques are described
and NPV is calculated for piece of machinery. Moreover, limitation of financial ratios are also
explained and risks associated with business is also listed in the report.
TASK 1
1. Sources of financial data
Financial information is quite relevant to company so that it may be able to take strategic
business decisions in effective way. This contains various sources of financial data which help
management to assess the same and take enhanced decision for the betterment of organisation.
Among these, Income statement and balance sheet and cash flow statement are categorised as
main financial data from which company can easily analyse performance and as such,
management can implement well-structured strategies in order to improve upon activities so that
objectives can be achieved in the best possible way.
Income statement
It is quite useful source for management to take strategic decision. Income statement
provides expenditures incurred and income earned for a particular period (Way, 2018). This
clarifies business in order to make well-structured strategies so that more revenue may be
garnered. Moreover, tasks should be achieved by initiating control over expenses. Thus,
management takes better business decisions.
Balance sheet
It is another useful source of financial data as it provides business clarity about how
assets and liabilities prevails at the end of accounting period. Balance sheet is also known as
statement of financial position as it provides summary of income and expenditures at the end of
year.
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Cash flow statement
Cash flow statement is another source of financial data which particularly imparts cash
position of business entity. It includes various activities such as operating, investing and
financing activities. This help management to assess liquidity position of firm and analyse
whether sufficient working capital is there or not.
2. Need for financial data and designing of strategy for business
There is immense need of financial data in the business so that strategies can be made and
implemented in the best possible way. This is quite important for organisation as without
financial data, management may not be able to analyse shortcomings prevailing in the company.
This implies that financial data has importance to management so that necessary improvements
may be accomplished in the best possible way (Ginter, Duncan and Swayne, 2018). Balance
sheet is quite relevant as it imparts financial health of organisation for a particular accounting
period. There is need for preparing balance sheet so that if assets are less in quantity then
liabilities, then business is required to implement corrective action. This will help organisation to
formulate strategy by restricting use of liabilities and more usage of assets. Thus, solvency
position can be enhanced in a better way.
Income statement is also needed in business so that income and expenditures can be
effectively analysed in the best possible way. Operating results will be provided to management
such as sales made, expenses incurred, profit made or loss incurred. This help managers to
effectively analysed operating results and as such, enhanced decisions can be taken to provide
stockholders' maximum benefit. Apart from this, cash flow statement imparts organisation to
assess cash position in effectual way. Working capital is required in order to accomplish daily
operational tasks. Management evaluates need of extra working capital by initiating strategies to
have effective current assets in order to pay short-term liabilities. Thus, financial data help
company to formulate strategies in effectual manner (Falkheimer and et.al, 2017).
3. Risks associated with financial business decisions
There are several risks which are associated with making business decisions. In relation
to this, financial risk and business risk are major affecting business decisions. Financial risk is
associated with company's ability to produce profit so that it may be able to pay-off debts within
stipulated time. This is required in order to meet liabilities in effective way and decreasing
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