Financial Decision Making - Alpha Ltd
Added on -2021-02-21
| 11 pages| 3730 words| 20 views
Trusted by 2+ million users,
1000+ happy students everyday
Showing pages 1 to 4 of 11 pages
FINANCIAL DECISIONMAKING
Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1Role of finance and accounting in the company.........................................................................1TASK 2............................................................................................................................................5Calculations of ratios of Alpha Ltd.............................................................................................5CONCLUSION................................................................................................................................8REFERENCES................................................................................................................................9
INTRODUCTIONThe term financial decision may be defined as all the decisions which are taken by thefinance manager relating to all the finance issues in the business. This decision major deals withtwo aspects of finance that is from where to raise the funds of the business either company's ownfunds or by borrowed funds like loan, debenture and many more other factors (Carvalho, Meierand Wang, 2016). The present report will discuss about the company Alpha Ltd. This companywas established in the year 1954 and is based in United Kingdom which deals in themanufacturing sector. The report will outline the role that the finance and accounting plays in thesuccess of the company. Further the report will calculate some accounting ratios which will helpthe company in interpreting its position and performance.TASK 1Role of finance and accounting in the companyMeaning of financeThe term finance basically means money. In business the finance is considered a specificfield which deal the allocation and distribution of finance among all the departments of thebusiness. The finance is distributed among all the departments so that the business can runsuccessfully and efficiently. Finance is called the lifeline or the blood of the business. This is sobecause of the reason that without money nothing can happen in the business and not evenoutside the business. In every area of business whether be it marketing, production, research anddevelopment and many other areas money is required and without it nothing can happen. It is very essential for the company to optimally use and allocate the finance. This isbecause of the reason that it is very essential to manage the finance because the company cannotrun without the use of money and if the money is not properly managed then it will lead thecompany to suffer loss. Role of financethe finance plays a very important and crucial role in the managing and running of the business.The role of finance is discussed in the following points-Financial planning- the word planning refers to deciding in advance what work is to be done,who will do it, how it will be done, in what time it will be accomplished (Petersen, Kushwahaand Kumar, 2015). On the other hand the term finance is referred to as the money involved in thebusiness. The finance or money is the blood or the life line of the business. As the human cannot1
live without heart and blood similarly the business also cannot run without the money. For everysmall thing the business requires money (Frydman and Camerer, 2016). So there must be properplanning as to from where to raise funds, how they will be raised, in what way the funds will beused etc. All these aspects must be considered before starting a business or before raising themoney. Meeting operational expenses- if a company is running business the it is obvious that it willhave to incur some or the other expenses for the running of the business. In short duration thereare many expenses which are incurred by the company like salaries and wages, purchasing rawmaterial, interest payments, paying bills like electricity, telephone charges and many otherexpenses. All these expenses are paid by way of paying money. For maintaining proper cashflow it is necessary for the company to pre analyze all the expenses which may occur in thecourse of running the business. Dealing with business cycle- the business cycle refers to as the phase in the life cycle of thebusiness which the company has to undergo once in the whole time period of the businessjourney (Brown-Liburd, Issa and Lombardi, 2015). These phases are growth, boom, depression,recession and the renewal phase. The business once a while has to go through each of this phase.The business do well in the growth and the boom period but in case of recession, depression, andthe renewal phase the business needs a lot of money to face the time frame of recession,depression and the boom because in these phases the business does not earn much money but hasto incur all the expenses. So here the finance plays a major role. Expansion of business- this is yet another important activity where the finance plays a majorrole. If a person is running business then it is obvious that it will not run that business on thesame scale. Obviously it will grow and develop if it wants to earn profits. For this the businesshas to adopt to the different methods of expansion such as either launching new product or theservice, going for diversification, merging with similar firms, acquiring some new firms andmany other expansion options. But for adopting any one of the option the firm has to involve alot of money. But as this expansion is of much importance so the business must plan this behoreonly. Risk management- risk refers to the some uncertainties which may happen in the near future ormay not happen (Ruff and Fehr, 2014). Risk is the situation due to which the company maysuffer huge losses or even failure. There can be many risk relating to the money like for example2
Found this document preview useful?
You are reading a preview
Upload your documents to download
or
Become a Desklib member to get accesss
Paid Plans
Free Plan
Single Unlock
Monthly Plan
Yearly Plan