Introduction to Financial Management QUESTION 1: Importance of Finance Function in an Enterprise

Financial Management

INTRODUCTION...........................................................................................................................1
QUESTION 1..................................................................................................................................1
a. Importance of finance function in an organization and its relationship with other
departments..................................................................................................................................1
b. Ways in which the finance function is organized in the enterprise and recommendation on
the changes that can be made to perform efficiently...................................................................1
c. Support of information and communication technology to the finance role in the company..2
QUESTION 2..................................................................................................................................2
a. Explaining budgeting and its role in an entity as per woody's opinion...................................2
b. Budgeting approach that best suits to motivate the worker's performance and productivity.. 2
c. Advising about the planning for setting up the system of budgetary control for getting the
best results...................................................................................................................................3
QUESTION 3..................................................................................................................................3
a. Example of ratios for measuring the profitability, efficiency, liquidity and leverage of the
corporate......................................................................................................................................3
b. Utilization of ratio analysis by several stakeholders to gain the insight into the performance
of an enterprise............................................................................................................................3
c. Limitations of ratio analysis.....................................................................................................4
d. Recommendation on non-financial issues that stakeholders should throw attention for
analyzing the performance of the organization...........................................................................4
QUESTION 4..................................................................................................................................4
a. Convergence and divergence points in respect of liquidity and profitability conditions........4
b. Management of working capital- an interest to the management of an entity.........................5
c. Ways for the management of working capital to attain the goals of profitability and liquidity
with recommendations on improvement.....................................................................................5
QUESTION 5..................................................................................................................................5
a. Three methods of capital budgeting to measure the acceptability of the capital investment
project proposed...........................................................................................................................5
b. Recommending methods for making decisions in relation to the capital budget in the
company.......................................................................................................................................6

c. Role of cost of capital and time value of money in making decisions regarding capital
budgeting and evaluation of cost of capital of the enterprise......................................................6
QUESTION 6..................................................................................................................................6
a. Different types of funds and their sources with difference between the sources of funds......6
b. Process of Initial public offer and its benefits for the company to raise long term funds in
the capital market.........................................................................................................................7
c. Challenges faced by the company and ways to overcome them..............................................7
QUESTION 7..................................................................................................................................7
a. Evaluating three main forms of business combination in literature........................................7
b. Methods used for determining the company's value and of the combination enterprise.........8
c. 3 major factors for the success of business combination.........................................................8
QUESTION 8..................................................................................................................................8
a. Discussion of the roles and models of domestic transfer pricing for measuring the
performance effectively...............................................................................................................8
b. Explaining the assistance of balanced scorecard in achieving fair and balanced performance
management system.....................................................................................................................9
QUESTION 9..................................................................................................................................9
a. Several factors that drives an entity into unethical practices to report profits.........................9
b. Various methods in literature that are applied and used by the corporate to report profit at all
cost...............................................................................................................................................9
c. Role of organization's value and compensation management structure in ensuring financial
reporting and ethical behavior...................................................................................................10
QUESTION 10..............................................................................................................................10
a. Evaluating the finance role towards the growth and sustainability of small and medium
enterprises..................................................................................................................................10
b. Several sources of finance in SMEs sector in the country. Influence of the factors of finance
in SMEs.....................................................................................................................................10
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
Financial management is the most crucial function as the managerial activity if the corporate that
deals with planning, controlling and organizing the financial resources. It is process of
allocation, utilization and generating profits from the funds to achieve the organizational goals
effectively and efficiently. The present study states the overall financial management of the
company that includes the ratio analysis, capital budgeting, working capital, business
combination, balanced scorecard and the ethical factors. Furthermore, it describes about the
factors that influence the small and medium enterprises.
QUESTION 1
a. Importance of finance function in an organization and its relationship with other departments.
Finance function plays an important role in an enterprise relating to the acquiring, allocation and
utilization of funds that are vital for meeting the day-to-day operational expenses (Angraini and
et.al., 2019). It acts as the lifeblood for any business because without finance, no organization
can function its operations smoothly. It ensures the efficient running of an entity by facilitating
money.
Finance department is interrelated with other functional units in the work environment through
its establishment role linked with operational function as it facilitate the information in respect of
equipment purchase, raw material purchase, estimating the demand of the product for optimum
production etc. It also enables the marketing department in implementing effective promotional
strategies such as advertising expenses, sales promotion etc.
b. Ways in which the finance function is organized in the enterprise and recommendation on the
changes that can be made to perform efficiently.
The design of finance function starts with the centralization decisions. The responsibility of
decision making is divided by the firm among different officers which include finance,
manufacturing, personnel, marketing and engineering (Barr and McClellan, 2018). For example-
production manager shapes the policy of investment in relation purchasing new plant, marketing
manager facilitate inputs in planning or forecasting, purchase head influence the investment level
in the inventory etc.
Setting up of shared service center, emphasizing on improved functioning of transactional
processes more efficiently. Centralizing the teams of the organization, providing the important
1