Financial Decision Making - Alpha Limited
Added on 2020-10-22
12 Pages3915 Words444 Views
Finance
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FINANCIAL DECISIONMAKING
Table of ContentsINTRODUCTION...........................................................................................................................3TASK 1............................................................................................................................................3Functions of accounts and finance department in the organization.......................................3TASK 2............................................................................................................................................7Financial Ratio Analysis.........................................................................................................7CONCLUSION..............................................................................................................................11REFERENCES..............................................................................................................................12
INTRODUCTIONFinancial decision making is the most important decision made by the financial managerof the company. It consists of financing mix of the organization and concerned with allocationand borrowing of funds which are required to make investment decisions. Finance decisionsinvolve two sources from which funds can be raised in which the first one is where a companycan use its own money such as share capital and retained earnings whereas the other way is toborrowing funds from outside the organization which can be in the form of debenture, loan andbonds etc. the objective of financial decision making is to maintain an efficient capital structurethat will be a proper mix of equity and debt to ensure trade off between shareholder's risk andreturn. The report will consist of functions of accounting and finance department within theorganization. Moreover, it will show calculation of ratios in context to their performance alongwith their interpretation in context to Alpha limited company to have a clear understanding ofhow well or bad the company is performing.TASK 1Functions of accounts and finance department in the organizationAccounting and finance play an essential role in the management of any businesses.Companies operate on cash and if cash is not managed properly, company cannot workeffectively. By properly maintaining accounts and finance department of the company, companycan manage flow of money and can direct the business towards the attainment of its goals.Accounting departmentAccounting department in Alpha limited provides accounting services and financialsupport to the company. The accounts' department records accounts payable and receivable,inventory, payroll, fixed assets and all other financial elements (Mitchell, 2017). The accountantof the company reviews the records of each department to determine the financial position of thecompany and any changes that are required to run the organization cost effectively.It manages accounting services and finances of the company and its responsibilities includesbilling clients and customers, paying bills, tracking assets and expenditures etc. The accountingdepartment team need to be a dedicated team of specialists who manages finances of thecompany (Accounting department definition, 2019). The Alpha company ensures fulltransparency in its financial transactions while providing specialized, centralized support to theteams and managers. The functions of accounting department are:
Account payable and Cash disbursements: The Account payable section of the accountdepartment records goods and services which it receives and the payment that it owes such asinventory from a supplier or other expense. Cash flow that goes out of the company is calledcash disbursement and is handled by accounts payable department. It is also responsible forpaying vendors for supplies purchased or any other expenses incurred by the business that aretaxes, utilities etc. The financial control occurs in order to maintain a good separation of duties inthis department. In Alpha limited, one person is responsible for recording accounts payable andthe other one in for signing the checks.Accounts receivable and Cash receipts - The cash flow that comes in the company isknown as cash receipts. The process involves recording the cash payments from customers forthe services and products it provides to the company (Feltz, 2016). Account receivables underaccounting department is responsible for ensuring that the customer receives an invoice for thegoods and services. Financial controls come into action when cash is received and recorded inthe system. In order to maintain the best work, one person takes care of recording cash and otherperson make the deposits at bank.In Alpha limited company, the cash receipts is managed byaccountant with specific knowledge and skills to manage all the accounts receivables adequately.Payroll – The payroll function of accounting department ensures that the company pay toits employee accurately including their bonuses, commission and benefits (Maimunah, 2016). InAlpha limited, the accounts' department records and monitors each employee's time off, vacationand sick days. It sees that the taxes are being paid on time to the government as well as dues oweto union. The department also reimburses employees for expenses and makes payment tovendors. Alpha limited ha employees that are serving the company for many years and it isimportant for the company to take care of their benefits like incentives, bonuses etc and these aremanaged by accounting department via payroll function.Inventory cost management – Company's inventory is the goods that is owned for thepurpose of sale by the company. Inventory is sold within a year therefore accounting departmentof Alpha company watches the cost of inventory over a specific period and uses inventorymanagement system for smooth operations. It compares the cost of inventory against therevenue generated by the company to ensure cost of labor, raw materials and overhead so thatthey do not affect the cash flow of the company negatively. The accounting department tries tofind out the balance between high inventory levels that lead to customer satisfaction but are
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