Financial Management: Implications of Different Resources, Impact on Financial Statements, Budget Analysis, Investment Appraisal, Financial Ratios, and Interpretation of Financial Statements
Added on -2019-09-22
This article discusses the implications of different resources, impact on financial statements, budget analysis, investment appraisal, financial ratios, and interpretation of financial statements in Financial Management. It covers topics such as equity financing, debt financing, stock prices, attracting new investors, investment in share, investment in expansion of product line, investment appraisal techniques, current ratio, acid test ratio, return on capital employed, gross profit margin, net profit margin, and more.
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1.2Assess the implication of different resourcesThere are different sources of funds which are used in the company for investment such as equityfinancing, debt financing, hybrid financing and others. The sources have different implications according to the type of fund. The resources are chosen on the basis of the type of business, nature, the capacity of taking the risk, manager's perception and others. The implication of various sources is explained below:1.Equity: The equity financing is mainly suited for large organisation and projects with long-term duration. The equity capital is invested in the company for the long term which is understood by the shareholders because equity investment is a long term plan. So the equity investment is suitable for long-term investment in the organisation. There is no fixed repayment of liability such as repayment of interest, capital repayment and others so it can beavail as a fixed asset for the company which can be used for long-term projects.However the control of management is diluted by equity investment over the various significant aspects due to which it impacts on the power of management for decision making (Zheng et al., 2013). The equity can be the best possible source of finance when the total control of the affairs of management and decision making is given away by the organisation. 2.Debt:
The debt financing can be used by the company to fulfil the long and short term needs of the company. The debt financing can be afforded by the company who is having satisfied liquidity and cash flow (De et al., 2012). The long run debt financing is chosen on the basis of the rate of interest of debt as to whether the rate of interest if costlier or cheaper.2.4Evaluate the impact of finance on financial statement The finance impacts on the financial statement of the company in various ways. The common aspects are explained below:1.Impact on stock prices:The stock prices show the financial position of the companies which are listed on stock exchanges and their primary source of finance for equity which is used by the listed companies. The financial position of the company reflects in the eyes of the potential investors and potential consumers by the stock price. The financial statement is closely looked by the investors in order to take investment decision than in that case the financial statement must meet the expectation of shareholders. The results of the quarter and annual are examined with the great anticipation because the various parties who have to take into account the financial position of the company at the particular period of time. The stock prices are decided by the sentiments of the market. The supply and demand of stock depend on the financial statement of the company. 2.Financial decision making:
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