Finance Report: Finance for Strategic Managers - Analysis

This report provides a comprehensive analysis of financial information and its application in strategic management. It begins with an introduction highlighting the importance of finance for managers and the use of various financial techniques. The main body of the report is divided into four activities. Activity 1 explores the significance of financial information in business, discusses associated risks, and summarizes its role in decision-making. Activity 2 focuses on the interpretation of financial statements, using Tesco plc as an example, and includes a detailed analysis of profitability and liquidity ratios. Activity 3 differentiates between long and short-term financial requirements, comparing various funding sources. Finally, Activity 4 applies strategic financial strategies to investment projects. The report concludes by summarizing the key findings and providing references.

Finance for Strategic Managers

Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Activity 1......................................................................................................................................3
Activity 2......................................................................................................................................5
Activity 3....................................................................................................................................14
Activity 4....................................................................................................................................16
CONCLUSION..............................................................................................................................19
REFERENCES..............................................................................................................................20

INTRODUCTION
Finance is one of the key aspects for managers in order to take corrective action. In order
to take appropriate decision, there are a range of techniques and methods such as ratio analysis,
finance statement analysis and many more (Al-Qudah, Obeidat and Shrouf, 2020). Basically, in
each type of company finance is main component that needs to be considered by managers. The
project report is based on a family firm that in which a new member has joined and want to gain
key information about financial skills so that resources can be used in most effective manner.
The report is divided in four activities in which first activity contains detailed information about
importance of financial data; second activity is based on analysis of financial statement of a
company as an example. The third activity is related to analysis of long and short term finance
for business. In the end part of report, appropriate strategies are applied on investment projects.
MAIN BODY
Activity 1
1. Why financial information is needed in business.
Financial information is offered by help of various kinds of statements such as income
statement, cash flow and balance sheet. This financial information is too crucial for
managers in order to take corrective decisions. Herein below, importance of financial
information is mentioned in such manner that is as follows:
 Financial information is useful in order to assess financial health of companies.
 These kinds of information can be used as a basis for making long term decisions such as
by help of available information about risk and return companies can make larger
investments (Templar, Hofmann and Findlay, 2020).

 Financial information is relevant because they provide substantial details about a
corporate accounting stability. Financial information helps businesses to make good
choices as they illustrate the parts of the business have the greatest ROI (return on
investment).
 The financial information is essential for businesses to understand the areas in which
there is need of improvements.
So these are some key importance of financial information and in the context of above
mentioned family business, they have to understand these role. If they will be aware of
these importance of financial information than it will be feasible for them to better
utilization of available financial resources.
2. Business risks related to financial decisions.
In every business activity, risk is inevitable, and effective risk management is an
important part of operating a profitable corporation. The management of a business has
various degrees of control in relation to risk. Any risks can be handled directly by help of
proper management. In the context of finance, there are different kinds of risks which
have a huge impact on efficiency of existence of companies. These kinds of risks evolve
in companies due to wrong financial decisions. Some common financial risks are
mentioned underneath:
 Market risk- Market risk includes the negative shift in circumstances of
environment in which a firm is operating. One illustration of competition risk is
the growing tendency of customers to buy online. This element of business risk
has provided conventional retail firms with greatest obstacles (Appuhami, 2019).
Businesses that have been capable of making the requisite changes to support an
online retail population have functioned and seen considerable sales increases,
whereas businesses that have been slow to react or rendered weak decisions in
their responding to the evolving market have dropped by the huge manner. In the
context of above family firm this types of risk can occur if they invest in a project
and market condition fluctuate due to any pandemic or natural disaster.

 Credit risk- By expanding credit to consumers, credit risk for companies
may incur. It may also apply to the credit risk of the firm itself with suppliers. A
corporation takes a financial risk when it offers its consumers with purchasing
financing, owing to the likelihood that a consumer may fail on compensation. A
business must maintain its own credit commitments by maintaining that it still has
enough cash flows to pay its due debt on time. Otherwise, vendors could either
avoid giving loans to the firm or even entirely avoid doing business with the
organization. For instance if above family firm sell goods on credit to customers
and if their clients fail to make payment than they may face this risk.
3. Summary of the financial information for business decisions.
Financial data plays a vital role in making it easier for organizations to keep track of all
their financial performance. It is the mechanism in which firm’s document and disclose
the bits of financial information that go in and out of their corporate processes, allowing
all corporate managers and external investors and analysts to consider the performance of
the enterprise and make more informed choices. The financial information helps in
business decision in such manner:
 It gives stakeholders with a framework for evaluating the financial stability of
securities-issuing firms and comparing them (Lowe and Maijanen, 2019).
 It allows creditors to determine enterprises' solvency, liquidity, and
creditworthiness.
 It lets organizations make choices on how to distribute scarce capital, along with
its cousin, strategic accounting.
Apart from these functions, financial information contributes in making such types of
decisions like:
 Investing decisions- Traders and investors use financial information to draw
judgments on a company's viability and financial health. It helps them to set
trading objectives to evaluate whether or not the market price is at reasonably
priced. Shareholders do not have knowledge of the past, present, and future

financial stability of equities and bonds but by help of financial information it
becomes feasible to conduct various kinds of analysis.
 Lending decisions- When investing a sum of money, an investor just needs to
know how much liability is associated and it can be derived by analyzing the
financial information of the business. When this level of risk is defined, by
financial information, the lender also become able to identify just how much to
lend and at what lending rates.
Activity 2
In this section of project report, financial statements of Tesco plc have been used as an example.
1. Purpose, structure and content of published accounts.
In companies, mainly three types of accounts are published which are income statement,
balance sheet and cash flow statement. Each of them particular purpose and structure
which is explained below in such manner:
Purpose of income statement: The primary aim of an income statement is to provide
investors with information of the company's performance and financial operations, as
well as offering comprehensive insights into the company's internal assessments between
different companies and industries.
Purpose of balance sheet- The purpose of the balance sheet is to disclose a company's
financial condition from a certain point in time (Gupta and Gupta, 2019). As well as the
sum spent in the company (equity), the declaration indicates what an individual has
(assets) or how much it owes (liabilities). When the balance sheets are clustered together
for a few consecutive years, this detail is more important, so that patterns in the multiple
items listed can be seen.
Purpose of cash flow statement- The primary objective of the cash flow statement is to
provide details on cash flows, cash payments and the net financial difference arising from
a corporation's operating, investing and financing operations over the year.

Structure:
Structure of income statement-
Structure of balance sheet:

Structure of cash flow statement:

Content of financial statements:
Income statement- The income statement comprises of sales (money earned from the selling of
goods and services, also recognized as the 'top line' before costs are phased out) and expenses,
together with the associated net profits or deficit due to receiving operations over a period of
time.
Balance sheet- Much of the substance of the balance sheet of a company is listed into one of 3
categories: assets, liabilities, and equity of the owner (Hammer, 2019). Such balance sheets also
have a "notes" section containing related material that does not come into any of the
aforementioned definitions of accounting.

Cash flow- There are 3 sections of the cash flow statement: operating, spending, and financing
operations. It is also possible to report non-cash operations.
2. Interpretation of financial information.
Interpretation: On the basis of above income statement of company, this can be stated
that net income is of 1206 GBP million in year 2018 that increased and became of 1322
GBP million. The rationale behind this increased performance is because of higher
revenues and lower expenses.

Balance sheet:

Interpretation: The above balance sheet indicates value of assets and liabilities during
year 2018-19. In year 2018, total assets were of 44862 GBP million which increased till
49047 GBP million. On the other hands, value of liabilities decreased in year 2019.
Cash flow statement: