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Importance of Financial Management : Report

   

Added on  2020-01-21

17 Pages5263 Words61 Views
FINANCIAL MANAGEMENT

EXECUTIVE SUMMARYFinancial management refers to the management of organizational financial sources.It is the process of collecting, organizing, managing and controlling the business funds in anadequate manner. It helps to run company's operations without any hazards. Thus, it is clearthat it helps to administrate funds in an appropriate manner and competes effectively.FirstGroup Plc is a UK transport company that provide bus, coaches and rail services to thecitizens. It is medium sized organization that mainly operates in UK, Ireland, Canada andUnited Status. In the present report, the importance of financial management will bediscussed in company's context. Various tool such as budgets and ratio analysis will beanalysed to interpret business performance and ensure optimum allocation of resources.Further, investment appraisal techniques will be discussed to identify most profitableproposal and take strategic investment decisions.

TABLE OF CONTENTSINTRODUCTION......................................................................................................................1TASK 1......................................................................................................................................1AC 1.1 Obtaining financial data and assess its validity........................................................1AC 1.4 Review and questions financial data.........................................................................2Task 2.........................................................................................................................................3AC 1.2, 1.3 Ratio Analysis of FirstGroup and comparative analysis ...................................3TASK 3......................................................................................................................................5AC 2.1 Approaches to prepare budget with the legal requirement and accountingconventions............................................................................................................................5TASK 4......................................................................................................................................6AC 2.2 Analyse the budget outcomes against organizational objectives..............................6TASK 5......................................................................................................................................8AC 3.1 Identify criteria to judge investment proposals.........................................................8AC 3.2 Analysing the proposal viability...............................................................................9AC 3.3 Strength and weaknesses on the proposals.............................................................10AC 3.4 Evaluate the impact of proposals on the strategic objectives..................................10CONCLUSION........................................................................................................................11REFERENCES.........................................................................................................................11

INTRODUCTIONFinancial management is the process of managing organization’s funds in an efficientand effective manner. It becomes necessary for every business to collect and manage fundsappropriately. Thus, Certified Financial Officer plays a very important role in managingfunds of the organization. It refers to accomplishing functions such as financial planning,procuring and collecting the financial resources of the enterprises. Moreover, it helps tomaintain effective administration of funds owned by the companies. This in turn will enablethe company to remove the operating hazards and run successfully. It estimates capitalrequirements and fulfil organizational needs through determining an appropriate capitalstructure. Thus, firms can collect funds at lower cost. Furthermore, it helps to take effectivecapital investment decisions through investment appraisal techniques. The main objective offinancial management is about maximizing business profits and shareholder's wealth. Thus, itbecomes clear that it provides huge assistance to manage cash flows, minimise financial costand improve business performance. Hence, organization can compete effectively and survivefor a long term period. In this report, financial management will be discussing in context toFirstGroup organization. It is a medium sized UK transport company having headquartered inAberdeen, Scotland. It provides bus, coach and rail services in UK, Ireland, Canada and US. TASK 1AC 1.1 Obtaining financial data and assess its validityFinancial data can be obtained from various internal as well as external sources. Everyorganization prepare financial statements provide detailed information about company'saffairs. This statements are available within the organization such as income statement,balance sheet, statement of retained earnings, cash flow and fund flow statements, statementof changes in the financial position and others (Brigham and Daves, 2012). However,economic reports, trade journals and published government reports are outside informationsources. FirstGroup Company prepares their income statement to know its operational results.The statement summarizes all the incurred expenses and generated incomes during aspecified time period. The aim of preparing this statement is to determine business profits andlosses. Surplus of revenues over the payments will indicate business loss while highpayments will raise loss to company. However, Balance sheet is a summarized statement ofFirstGroup assets and liabilities helps to determine financial status of the organization(Kreder, 2015). It provides information regarding liquidity, solvency, efficiency and business1

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