Finance and Economics: Assessing Key Elements of Corporate Success

This report delves into the critical aspects of business finance and economics, focusing on the factors that drive corporate success. It distinguishes between microeconomic and macroeconomic elements, examining socioeconomic factors that shape a company's competitive environment. The report explains the role of accounting in evaluating business performance and decision-making, differentiating between various types of financial statements and their layouts. It includes an evaluation of XYZ Ltd.'s accounting indicators and emphasizes the importance of management accounting for corporate planning, responsibility, and strategic decision-making. Desklib provides this and many other solved assignments for students.

Business finance and
economics

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
1. Determine whether the key elements influencing corporate success are microeconomic or
macro. Examine the socioeconomic factors that determine a company's competition
environment.................................................................................................................................1
2. Explain the role of accounting in a business and its importance in regards of evaluating and
making decisions.........................................................................................................................3
3. Distinguish between the many types of financial statements and explain the layout and
terms used....................................................................................................................................4
4. The company XYZ Ltd.'s accounting indicators were computed and evaluated....................7
5. Demonstrate why management accounting is important for corporate planning,
responsibility, and decision-making............................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business finance and accounting are regarded as key elements of a business's functioning. It
fundamentally enhances a company's ability to handle a competitive environment and also make
successful decisions (Akan and Tevfik, 2020). Economists assists a firm in evaluating data and
figures that helps in the administration of all corporate financing procedures in addition to
enhance the productivity of the organisation. In the segments of this work, economic divisions,
accounting, and corporation financials are detailed with relevant explanations in accordance with
the elements of organisation, administration, and operational planning.
MAIN BODY
1. Determine whether the key elements influencing corporate success are microeconomic or
macro. Examine the socioeconomic factors that determine a company's competition
environment.
Monetary administration is crucial for all firms since it aims to administer corporate
operations and activities in a manner which links groupings, encourages employee involvement,
and enhances overall network productivity. The key factors of business policy that assist in the
accomplishment of a group's aim are as follows:
 Flexibility refers to the rate during which financial items can be bought and exchanged in
the business. It has to do with the firm's capacity to easily convert stock into cash.
Moreover, because this factor is related to the company's internal operations, it can be
considered a microeconomics component (Anjaningrum, 2020).
 Hyperinflation is described as an increase in the price of goods or services over period.
It's basically a variable that could influence whether the purchasing power of a global
currency rises or drops over term. The macroeconomic nature of this factor stems from
the fact that any change in the value spectrum will ultimately affect the industry's
expendable revenue in aggregate.
 Leveraging is a phrase used to define an investment strategy that involves the use of a
variety of financial instruments and lending money to boost the potential return on assets.
It's also referred to as a proportion of funds used by a business to purchase technology. It
is referred to be a microeconomic word because all decisions related to increasing or

decreasing the company's indebtedness are determined only by the organisation's
management.
The following economic factors have an effect on the competitive industry: In the
business sector, these characteristics are regarded as critical, as they improve a company's
knowledge of how it affects a competitive sector. Local organisations must keep a close watch
on these factors and review those on a frequent level in attempt to prevent any potential problems
in the foreseeable term. Many socioeconomic indicators are listed below:
 Suppliers as it is vital that logistic network activities exhibit a steady degree of
performance, enabling firms to provide finished things to customers without interruption,
in order to stay competitive in the sector. This might allow the company to stay
competitive in the market by providing reliable deliveries with minimal disruptions.
 Usage is one of the most significant aspects in establishing if or not a product or
commodity is required by customers in the industry. Companies can use a variety of
industrial approaches to help them embrace a variety of techniques in a competitive
environment.
 Sector Quantity as it is vital for firms to provide a huge advertising volume because it
allows companies to acquire a wide range of clientele, helping it to earn income in a
competitive environment. A bigger industry size will allow the company to generate
more money and ensure longer run viability in the midst of competition.
Microeconomic factor-
 Monopolistic is when only one corporation is allowed to offer items to the broader
public, the marketplace is said to be monopolistic. There seems to be an unlimited
amount of enterprises in fair competitive economies, but there is only one in monopolistic
marketplaces.
 Oligopoly economies are those in which a few suppliers wield significant political power.
They can be located in a range of industries and all across the globe. Many oligopolistic
economies look to be fair, but they're not. Competition business regulators are
occasionally consulted whenever there is a claim of conspiracy or an adversely impacted
dispute.
Macroeconomic factor-

 Fiscal Policy as it is used by governments to adjust spending and taxation levels in order
to maintain control of something which affect the economic growth. A fiscal authority
can manage a nation's amount of money in circulation using this strategy, which is
comparable to monetary and fiscal management. Both of these strategies can be used to
assist a nation accomplish its financial growth in a range of methods.
 The control of the amount of currency flowing in the business, and also the routes by
which additional wealth is provided, is referred to as monetary policy. A money authority
can impact macroeconomic features such as growing pricing, expenditure, industrial
growth, and widespread accessibility by controlling the money base.
2. Explain the role of accounting in a business and its importance in regards of evaluating and
making decisions
Accountancy is the conduct of maintaining records of the money transactions that occur as
a result of a company's accounting activity (Briones, 2019). Accounting is being employed to
record all of a specific investing season's monetary operations. This has a tremendous bearing on
the company's core important assessments and decision-making.
Functions of Accounting-
 Budgeting: Accounting is essential for assessing all financial data and assisting the
accountable individual in making strategies. This allows finance personnel to calculate
cash flow in accordance with accounting statements (Crick and Crick, 2020).
 Accounting helps in the development of financial statements that play a crucial function
in communicating financial information and facts to both internal and external users.
 Accounting assists in keeping a tight check on the overall functioning of the business and
assuring a higher level of functionality. As a consequence, the organization's efficacy and
production will improve, allowing it to make the most of those resources.
 Accounting plays a critical role in collecting revenue data that will later support in
recovering financial pieces of facts and developing paperwork that will support the
company's administration in making relevant financial decisions.
 Legal and Executive Norms is one of the most important aspects in assuring that
legislation and organisational frameworks are implemented is accounting. This includes a
number of standards that define a set of rules for preparing financial forecasts.
The Importance of Accounting in Reporting and Decisions

 Understanding financing as budgeting management is considered critical for a
corporation because it requires taking selections based on income and accounting data. In
this scenario, accounting is critical because it is utilised to assemble all fiscal information
and determine all budgetary choices.
 Reducing Discrepancies as accounting may help a corporation make future estimates that
can contribute to the administration of an emergency situation. It's also feasible to adopt
important decisions regarding how to mitigate the risk (Fyke, Feldner and May, 2016).
 Effective Planning as accounting is a method that focuses on ensuring that all of a firm's
financial operations run smoothly. As a consequence, accounting supports a company's
ability to plan successfully in order to achieve its objectives. This will likewise help with
effective analysis and choosing excellent preparatory choices.
 Qualified advice as accounting is an important activity which supports managers and
practitioners in offering skilled opinion on major financial issues. As a corollary,
accounting figures assist experts in offering reliable technical advice.
3. Distinguish between the many types of financial statements and explain the layout and terms
used
Financial statements are a structured detailed track that includes all of a company's financial
activities in such a way that it helps in demonstrating the company's genuine and fair financial
status. Because the financial statements of a company include all of the cash flow, earnings,
expenses, and obligations, they assist in communicating this information to investors. All of the
financial activities mentioned below, and also related layouts, appear to be documented and
analysed using principally 3 financial summaries:
 The balance sheet is one of the most significant financial documents because it displays
all of the company's assets, liabilities, and investment in a straightforward and
comprehensive way. It precisely depicts the company's financial position including its
present state, including all figures. The balance sheet is commonly used by economists,
analysts, and business experts to determine the company's multiple indicators and analyse
its liquid assets by employing a variety of approaches (Grashuis and Su, 2019). The 2
main components of a balance sheet are assets and liabilities, as shown below:
Assets can be defined as a commodity having monetary value that an individual or persons
holds in order to generate higher returns. This can be both monetary and non-monetary.

Liabilities as it is the amount that an individual, a corporation, or the state owes to another
organisation. Every one of the items in this category put a fiscal responsibility on the company to
reimburse the parties it owes funds to.
 An income statement is a financial summary that illustrates a company's profits and
deficits over a period of time. It's a vital declaration because it includes all of a company's
earnings and expenses related to its business operations. The technique used in an income
statement is to deduct all expenses from the sum of the firm's revenues, both
operating and non-operating. It's used in accounting as well as commercial funding. The
primary objective of such financial accounts is to aid the company's executives and
shareholders in determining key decisions about how to create money, whether by
increasing sales or lowering costs (Özataç and Gökmenoglu, 2017). The income
statement is laid out as follows:

Earnings as it relates to the total amount of items and services that a company has supplied to
customers in a sequence to generate a profit.
Expenditures as this is amongst the most essential aspects because it includes all of the costs
related with creating and marketing goods to customers.
Profitability is one of the most important factors in this statement. It's the profit that's left
over after deducting the sales price from the total amount received from customers and deducting
the expense of items.
Shortfall as this statement relates to the excess of expenses incurred by a company as a
consequence of its inability to earn a profit.
 A cash flow account is a fiscal report that displays how a firm's revenue moves
throughout its business operations. It includes all funds received and exited from the
business as an outcome of its operations. The prime objective of preparing a cash flow
analysis for a company is to assist in the administration of the company's money position

including its ability to generate sufficient revenues to cover any existing obligations. The
complete cash flow overview is based on the foundation of 3 key components: operating,
investing, and financial activities. Furthermore, there are two methods for creating it:
directly and indirectly.
The funds created by the company’s everyday business are referred to as cash from operating
activities. In a summary, it's the revenue generated by the selling of products and services.
Cash from investing activities includes all revenue financings and investing in the company's
holdings. Payments for the purchase and sale of real estate and indebtedness, and also events
related to mergers and acquisitions, can be included.
Cash from finance activities includes all processes that include money inflows from creditors
and borrowers, as well as money paid to investors.
4. The company XYZ Ltd.'s accounting indicators were computed and evaluated
Current Ratio
Formula: Current Assets / Current Liabilities
Calculation
2019
= (520.00/ 190.00)
= 2.73:1.00
2020
= (690.00/295.00)

= 2.33: 1.00
Interpretation: The business is highly capable of repaying off its commitments effectively
in the year 2019, but this is lesser apparent in the year 2020, showing that the company's
capability has deteriorated over the year.
Earnings Per Share:
Formula: Net Income – Dividend Paid / Number of shares outstanding
Calculation
2019
= 240.00 / 800.00
= 0.30
2020
= 35.00/800.00
= 0.04
Interpretation: The EPS estimate for 2019 shows how the company earned greater worth
than in 2020 that is conveyed to different financing information users.
Return on ordinary shareholder's fund
Formula: Net Income / Shareholders Fund
Calculation
2019
= 167/675+450/2 *100
= 29.68%
2020
=12/675+645/2 *100
= 1.89%
Interpretation: In 2019, the return on equity shareholder investment was especially
significant, at 23.03 percentage, indicating that the company's efficiency was excellent in
contrast to 2020, which had a return of just 1.86 percentage.
Return on Capital Employed
Formula: EBIT / Total Assets – Total Current Liabilities
Calculation
2019

=240/650+925 *100
= 30.48%
2020
=35/925+995 *100
= 3.65%
Interpretation: As per the research of this ratio, the company's ROCE remained
extraordinarily considerable in the year 2019 and significantly fell in the year 2020. The 2019
ratio implies that the company is operating efficiently and in adequate numbers (Park and Song,
2020).
Operating Profit Margin:
Formula: Operating Profit / Net Sales * 100
Calculation
2019 = (240.00 / 2500.00) * 100.00
= 9.60%
2020 = (35.00/2750.00) * 100.00
= 1.270%
Interpretation: The operating revenue ratios for 2019 show that the company has been well-
managed and is less vulnerable than in prior years. In 2020, the ratio is notably reduced, showing
that perhaps the company is sensitive to financial risks.
5. Demonstrate why management accounting is important for corporate planning, responsibility,
and decision-making
Management accounting is a method or technique for compiling financial reports depending
on business operations that is designed to aid managers in making immediate and longer
run decisions. It actually helps a firm organize, analyse, evaluate, and share information more
effectively. It aids company managers in controlling business operational activities and,
eventually, formulating decisions. It assists in the most effective administration of a firm's
activities in order to maintain and even increase production and revenue (Shi, Sun and Zhang,
2018). This will aid the company's relevant individuals in formulating decisions about various
options. Amongst some of the advantages of management accounting forecasting are the
accompanying:

 Management accountant is in responsibility of taking decisions for the whole company,
from the bottom tier employees to the top tier managers. As a consequence, it plays a
critical function in assuring that all business parties are on the identical track.
 Management accountant facilitates the presentation of vital and useful information to all
stakeholders. As a consequence, it helps in the most effective supply of financial
information possible.
 Improved efficiency is an important aspect of management accounting is that it aids the
company in increasing profits by developing efficient and suitable methods that, in turn,
enhance the company's efficiency.
 Management Accounting can help a corporation choose marketing techniques for a
product. Whether or not the technology is expected to be sustained will impact the
product marketing strategy. Moreover, because management accounting is not restricted
by any regulations, managers have the ability to select which areas of the company need
to be examined and researched prior rules are developed.
 Management accounting is an important characteristic that assists in the production of
assessments for the tasks at sight. This can help the management organize, finance, and
conduct in-depth research in a variety of critical areas. As a consequence, it contributes to
the most efficient synchronization of business processes (Wei, Song and Wang, 2017).
CONCLUSION
As the above study shows, the use of numerous financial categories is critical for any
business. It helps a firm manage its activities more efficiently and effectively. Whenever a
company uses excellent financial management and accounting procedures, it can increase its
longer run success. Furthermore, it is obvious that ratio assessment plays an important role in
precisely representing a company's financial position.

REFERENCES
Books and journals
Akan, M. and Tevfik, A.T., 2020. Fundamentals of finance. In Fundamentals of Finance. De
Gruyter.
Anjaningrum, W.D., 2020, October. Efektivitas Digital Marketing dan Networks Dalam
Mendongkrak Kinerja Pemasaran UKM Di Masa Pandemi Covid-19. In SENABISMA:
Prosiding Seminar Nasional Bisnis dan Manajemen (Vol. 5, pp. 50-61).
Briones, C.L.T., 2019. Digital Marketing as a Communication Tool in Emerging Businesses. In
Handbook of Research on Digital Marketing Innovations in Social Entrepreneurship
and Solidarity Economics (pp. 353-366). IGI Global.
Crick, J.M. and Crick, D., 2020. Coopetition and COVID-19: Collaborative business-to-business
marketing strategies in a pandemic crisis. Industrial Marketing Management, 88,
pp.206-213.
Fyke, J.P., Feldner, S.B. and May, S.K., 2016. Discourses about righting the business←→
society relationship. Business and Society Review, 121(2), pp.217-245.
Grashuis, J. and Su, Y., 2019. A review of the empirical literature on farmer cooperatives:
Performance, ownership and governance, finance, and member attitude. Annals of
Public and Cooperative Economics. 90(1). pp.77-102.
Özataç, N. and Gökmenoglu, K. K. eds., 2017. New Challenges in Banking and Finance: 2nd
International Conference on Banking and Finance Perspectives. Springer.
Park, G. and Song, M., 2020. Predicting performances in business processes using deep neural
networks. Decision Support Systems, 129, p.113191.
Shi, G., Sun, J. and Zhang, L., 2018. Product market competition and earnings management: A
firm‐level analysis. Journal of Business Finance & Accounting. 45(5-6). pp.604-624.
Wei, Z., Song, X. and Wang, D., 2017. Manufacturing flexibility, business model design, and
firm performance. International Journal of Production Economics, 193, pp.87-97.