Financial Decision Making: Importance, Tasks, Ratios and Interpretation

FINANCIAL
DECISION MAKING

Contents
FINANCIAL DECISION MAKING..................................................................................................1
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Elaboration of the concept...........................................................................................................3
TASK 2............................................................................................................................................6
A. Calculation of ratios:...............................................................................................................6
B. Ratios and their Interpretation.................................................................................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
Financial decision making is a very crucial aspect as it helps in making decisions according
to its funds (Andarsari and Ningtyas, 2019). There could be no business sans consistent cash
flow. It's the most significant measurement in company, and it's utilised both domestically and
outside. It is the responsibility of the accountancy and financial division to guarantee that
perhaps the firm's funds are appropriately handled and maintained to enable every one of the
firm s commercial operations. Regular monitoring of revenue and expenses, maintaining
adherence with laws and regulations, and delivering quantifiable fiscal statistics to shareholders,
managers, and the authorities are all essential to a corporation's performance.
TASK 1
Elaboration of the concept
If one wishes to uphold the business viable, they must preserve precise and up-to-date fiscal
statements. Here are some causes why a micro or med-sized company needs an accountancy and
financial division, and also what respective tasks are.
 Accounting could likewise assist a corporation in keeping its staff on their toes. Regularly
reconciling financial records and conduct financial statement. Dishonest behaviour would
be detected earlier on, before it has a significant consequence on the firm (Blue, O’Brien
and Makar, 2018).
 It assists in the decision-making processes. To know and understand to such types of
queries, the business would have to examine the information, notably financial
information. Accountancy could assist you prevent making typical company mistakes
like:
Wasting resources
Insufficient funds
Plateauing
 Could use actual data to examine alternative plans- Before implementing any big
adjustments, the firm most likely conducted a vulnerability analysis for the smaller
corporation. It would be possible to determine if accepting such risk is advantageous to
the business.

 Aids in the evaluation of company productivity- The fiscal documents provide an
insight of the corporation's operational and economical condition. As a consequence, they
assist the organisation in gaining a greater understanding of its financial. If one maintains
clear and up-to-date documents in relation to monitoring expenditures, operating income,
and anticipated indebtedness, one could contrast existing information with historical
financial statements and change the budgeting depending on such analysis (Cardoso, de
Oliveira Leite and de Aquino, 2018).
 It backs up the assumptions made on the taxation refund- Smaller company taxation
submitting is feared by several company entrepreneurs, especially ones who don't know
where to start. Given these, it's evident that accountancy is essential to any company. The
initial stage in completing a taxation refund is collecting monetary documents. If the firm
does not have the appropriate documents (like income accounts), it will be unable to
complete the taxation refund.
 Accountancy maintains the organisation accountable- A modest firm operator
understands the need of showing instead of discussing. This is handled by accountancy
and the financial division. Personal stockholders are held responsible for the performance
of the firm. Accountancy documents offer insight into the firm's growth and expansion
(Commerford, Hatfield and Houston, 2018).
 It assists in the production of prospective budgeting and anticipation- The
accountancy and finances division is critical for preparing and implementing prospective
estimations depending on monetary recording data.
 It Makes Processing Fiscal Reports Simpler- The fiscal report of each firm should be
filed with the Certificate of Incorporation. Businesses which are publicly traded must
submit both immediate and intermediate taxation reports with the Income Taxation
Agency. Accountancy is required in all of those circumstances.
Recommendations
 Personal involvement and redundancies would have accessibility to a central data center
which could be accessed from every location.
 Allow customers to exploit benefit of the business by offering to acquire additional
supplies or engage in new technology if the accounts section is strong (Eichelberger,
Mattioli and Foxhoven, 2017).