Managing Financial Resources and Decision - Essay Example

MANAGING FINANCIAL RESOURCES AND DECISION STUDENT’S NAME: INSTITUTION: INSTRUCTOR’S NAME: DATE: Internal Sources of Finance Profits retained; a business can increase the rate of finance by retaining profits. These profits will be used for investments. Control of credit; when there is credit control of the business it will lead to the appropriate use of finance; it is done through ensuring that credits outside the business are obtained. Reducing inventories; when the business reduces inventory by developing a budget that meets the available resources, it will be able to have enough finance in the future. External Sources of Finance Ordinary shares; companies can have finance through raising shares by the sale of their stock. Their business will, therefore, accrue some finance when it sells its stock in the form of shares (Alfrey et al, 2013). The issue of rights; this is a strategy whereby the business can issue rights for the purchase of new shares by the shareholders. The business will, therefore, generate finance from the shareholders who will buy those shares. Bank overdraft; when a business maintains a negative amount of balance in their bank, it will be an advantage because it can generate substantial profits while remaining bankrupt. This has proved to be a long term source of business finance (Williams, 2013). . Most suitable sources of finance for my business Retained profits, this is the most appropriate source of finance in my business because, from the financial analysis and the records, there are profits that are generated annually and, therefore, the business has been retaining its profits. This is considered most suitable because the business will not have to borrow or apply for loans to cater for its liabilities. Another source of finance is controlling credit, it is a convenient source of finance from the business because there will be no overuse of resources and this will be obtained through implementing a budgetary control tool. Key aspects of financial planning A financial plan is a tool that helps a business or organization to achieve their goals because it is the process of having the knowledge on how to manage your money so that one will not run short in the future. Before embarking on a financial plan, there are some key aspects that one needs to consider; The current situation of finance; this is a key aspect when it comes to planning because one needs to analyze the current situation on their financial position. It is important because it will enable the business to determine their present and future financial position (Kapucu et al, 2013). The future vision of the financial situation; a business should consider setting future visions regarding their projected financial situation. This is important because it enables the business to set strategies that will lead to implementation and achievement of this future vision. Therefore, before planning on the finance department, the business must ensure they have future projections of the finance. The business has to measure the goals by assessing the resources available and how will they use the resources to achieve the goals (Zsambok & Klein, 2014).  The plans for achieving the vision regarding the future financial situation; this is an aspect in financial planning that allows the business to set a strategy on how to achieve the set vision. This will involve making decisions that will impact the end results of the implementation process. The business has to ensure the specification of the time period from which they will be able to achieve their vision (Rothaermel, 2013). Determining the internal and external environment of the business; the business should determine the level of internal and external environment. The purpose of doing so is to be able to consider issues that may affect the financial plan both internally and externally. Internal analysis measures the factors that are in the business that could affect the implementation process of the financial planning. External analysis measures issues that are outside the business environment so as to determine the effects that may impact on the financial situation (Wild et al, 2014). Types of financial information required in the decision making process Cash flow analysis; this is an analysis that shows all the cash inflows and outflows of the business. When there are analyses showing the cash flow it will be easier in the decisions making process because it will enable the managers to come up with appropriate decisions. The cash flow analysis is also important because it displays how the business uses their finances. Mission statement; the decision making process requires the mission statement which will help them to make a decision that aligns with the mission statement of the business. Therefore, before making financial plans and decisions, the mission statement is the key driver towards determining the factors of success (Ford & Leonidou, 2013). Analysis information; this information shows all the analysis conducted in the external and internal environment of the business. It is important to consider this analysis so as to determine whether the decisions made will be impacted by the resulting findings from the analysis (Harrison, 2013). It also provides the resource analysis, which will be used in decision making whereby the decision maker will determine whether the decision made will be met by the available resource. SWOT analysis is also the information needed by the decision maker to help him come up with appropriate strategies that will reduce the realized weaknesses and threats. Formulation of strategy; the decision maker needs the strategies that have been formulated by the business. These strategies will guide him in making decisions that are in line, and they also provide a basis for planning for the implementation process. Strategies arise from the objectives of the business and, therefore, are important when considered during making decisions. Financial records of the business; financial records indicate the financial position of the business at a particular period, they contain a balance sheet and the income statement. These records are important because they help the decision maker to find a way of making decisions on improving the status of the financial position (Philippon & Reshef, 2013). Profitability ratios; these are ratios that indicate the ability of the business to cater for its liabilities. They show the deviations in finance, operations which be corrected by making appropriate decisions (Haites, 2013).  They also measure the amounts of profits while considering the amount of sales. The decision maker should set profitability ratio goals which will help the business to ensure they meet these goals. References Alfrey, J., Nfa, J. A., & Putnam, T. (2013). The industrial heritage: managing resources and uses. Routledge. Williams, C. (2013). Principles of management. South-Western/Cengage Learning. Rothaermel, F. T. (2013). Strategic Management: Concepts. McGraw-Hill Irwin. Kapucu, N., & Garayev, V. (2013). Designing, managing, and sustaining functionally collaborative emergency management networks. The American Review of Public Administration, 43(3), 312-330. Zsambok, C. E., & Klein, G. (Eds.). (2014). Naturalistic decision making. Psychology Press. Ford, D., & Leonidou, L. C. (2013). Research developments in international marketing. Perspectives on International Marketing-Re-Issued (RLE International Business), 29, 3. Philippon, T., & Reshef, A. (2013). An international look at the growth of modern finance. The Journal of Economic Perspectives, 27(2), 73-96. Haites, E. F. (Ed.). (2013). International climate finance. Routledge. Wild, J., Wild, K. L., & Han, J. C. (2014). International business. Pearson Education Limited. Harrison, A. (2013). Business environment in a global context. Oxford University Press. Read More