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Financial Perspectives In The Current Climate Finance Essay

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Date added: 17-06-26

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The means of financial is the planning, organizing, directing and controlling, so it must applying general principles to financial resources of the company.

The decisions in investment contain fixed assets investment, it called as capital budgeting.

The current assets in investment also one of decisions in investment, so it called as working capital decisions.

The decisions in financial, it related to the raising of finance from difference resources which will depend on type of source, period of financing, cost of financing and the returns.

The decisions in dividend, the finance manager is the one must take decision on net profit distribution. The net profits are separated into two:

Dividend to the shareholders = Dividend and the rate will be decided.

Retained profits = amount of retained profits will be confirm depend on the expansion and variety of plans of the company. Objectives of financial

The financial is basically worried with earnings, allocation and control of financial resources. The objectives will be:

To make sure regular and enough supply of funds.

To make sure enough returns to the shareholders, it depend on the earning capacity, market price and potential of the shareholders.

To make sure safety on investment, example, every fund supposed to invest in safety business so that can get enough return.

To plan good capital structure, there must be good and fair arrangement of capital so that a balance is maintained between debit and fairness capital.

To make sure it's advantageous funds, like the funds should use in maximum level in low cost.

Functions of Financial

Funds investment:

A decision have to make from finance manager for keeping funds into money making ventures, so that it is safety on investment and regular returns.

Cash management:

A decisions need to make from finance manager to cash management section. The most important thing is the cash, the cash doing many purposes like paying worker salaries, electricity bill, water bill, rent, wages, creditors, maintenance of stock, buying of new materials, etc.

Financial controls:

Plan, obtain and use the funds it's not only job for finance manager but he also need to control in finances by doing control in cost and profit, financial prediction, ratio analysis, etc.

Choices of funds source:

For extra funds to be obtain, so the company got choices like

Issue of shares.

Loans from banks and financial agent.

Estimate of capital requirement:

The finance manager has to make prediction of capital requirement in the company, it depend on estimated costs and profits, future programmers and policies. So that, it will increase earning capacity of the company.

Purpose of capital composition:

After estimate process has be done, the capital structure need to decide. This involves in debit analysis for short-term and long-term. It will depend to the quantity of capital in the company and extra funds which have to be raised from outside parties.

How the reduced quality product would affect the company financially

Effects for finance:

Internal effects





Failure analysis


Low grade


Human error

Production problem

External effects


Redoing services


Customer not satisfy

Reduce of sales

Environmental cost

All this internal effects and external effects is the major thing that will affect the company finance.

The financial analysis in the shoe manufacturing operation

Financial Analysis Solved With Business Intelligence System

This is Business Intelligence (BI) software allows the company to store their databases in this system and it also easy for employees, management and company partners to work fast.

This software can store up to 2 terabyte of data.

This system save a lot of costs and improve company operation system.

BI Software has capable to do reporting, analyzing and monitoring, so it allows the users to make better decisions every day.

Analyze data to the journal entry:

Users require the ability to observe revenue and cost to journal entries.

This allows users to identify suspect items.

Electronically distribute financial reports in securely:

It be protected to make sure users can only access financial data for which they have privileges.

Deliver accurate financial data in Microsoft Excel format:

Provide static financial reports in Excel data, plus got extra features like interactive by providing access to all of the underlying data.

Financial data to detect material problem in few second.

Financial analysis has so many areas to analysis, the areas is:

Balance Sheet Analysis

This is one of the basic reports of corporate accounting. The Balance sheets are created multiple times during the close cycle to prove exactness before the final report is released to shareholders, government agencies and the public. Business Intelligence enables to combine of the balance sheet to more rapidly than Enterprise Resource Planning (ERP) system, it for saving time to close. The most fundamental level of reporting is the automated combine system in balance sheet and the electronic sharing of the report is so safety for all authorities.

Sample Report Balance Sheet

Profit and Loss /Income Statement Analysis

The revenue and costs is the main component of Securities and Exchange Commission (SEC) filings and is also a helpful tool for understanding the strength of a business. Officer like Executives and managers are keep observe to the profit and loss actual versus budgets and forecasts to make sure their business is running well. It automatically generated profit and loss reports let managers to see current revenue, costs, and profitability, time over time and business unit comparisons, and actual to plan. Business intelligence also create more accurate quarterly and annually performance analysis, it allows to show complete revenue and cost components, and enables more advanced margin and contribution assessment.

Sample Report Income Statement

Cash Flow Analysis

This is one of the standard components of certain Securities and Exchange Commission (SEC) filings that summarize the operating activity of a business and its ability to generate cash.

Professionals like executives and accounting expert depending on cash flow if they want make decisions in financing, operating and investing. Normal financial systems are not capable to handle large amounts of transaction-level of data, it will take several hours to complete cash flow reports and cannot give out these reports automatically. The Business intelligence provides automatic, close to real-time generation and provide of the cash flow statement. Business intelligence analysis including foreign currency exposure, payables schedules, and cash flow predictions to make sure investments in short-term and long-term instruments are aligned with cash requirements.

Sample Report Cash Flow Analysis

Accounts Receivable and Accounts Payable Analysis

The Company has Accounts Receivable (A/R) and Accounts Payable (A/P) to handle operating cash flow. Standards A/R and A/P reports includes the value of accounts that are 30, 60, or 90 days overdue, monitoring distribution of receivables across customers, and reviewing payment trends for vendors across periods. More complicated analysis includes predicting potential bad debts, forecasting cash outlays, and tracking invoices and journal entries to the corresponding accounting representative. The A/P and A/R functions are benefitting thing.

Sample Report Accounts Payable and Accounts Receivable Analysis

Financial Budgeting and Forecasting

The executives and managers continually revisit forecasts as actual are reported to find out how their business is performing relative to plan. Forecast reports allow detailed analysis by budget owners at every level of the organization and set the stage for determining sources of revenue and spending priorities. From simple reporting on actual performance versus budget to more difficult "what if" scenario creation and predictive modeling, organizations use business intelligence to make fact-based business plans and better monitor performance.

Business Unit: North America

Quarter: Q1 2007

Business Unit Owner: Amanda Phillips


Actual QTD

QTD Budget ($)

QTD Budget Variance($)


Product License

$ 65,236,584

$ 78,523,698

$ (13,287,114)


$ 56,325,874

$ 51,232,156

$ 5,093,718


$ 2,154,885

$ 7,654,896

$ (5,500,011)


$ 123,717,343

$ 137,410,750

$ (13,693,407)



$ 53,663,095

$ 52,610,878

$ (1,052,218)


$ 33,639,034

$ 34,325,545

$ 686,511

Fixed Allocations

$ 5,026,205

$ 5,128,780

$ 102,576

Sales and Marketing

$ 19,238,306

$ 19,630,925

$ 392,618


$ 325,432

$ 451,023

$ 125,592


$ 111,892,071

$ 112,147,150

$ 255,079


$ 11,825,272

$ 25,263,600

$ (13,438,328)

Sample Report Financial Budgeting and Forecasting

Risk Management

In credit risk, agreement risk, currency risk, cheating risk, and audit risk all are becoming increasingly key components of risk that should be controlled by corporations and government agencies. Credit risk management, by combining data from publicly available sources with corporate customer and sales data, focuses on the purpose of credit ratings, credit risk exposure in a particular country or industry, or the impact of increased customer defaults. Currency risk analysis involves valuation of exchange rate. Cheating risk analysis, through the use of statistical data, can uncover the activity linked to the fake events. Business intelligence, by enabling the use of data and statistical techniques for risk detection and management, can get wider worker populations to help mitigate the various forms of corporate risk.

The Clothing Company








% Credit Line Available

Deposits and Other Assets

Payment History

Ocean Airline


$ 575,138

$ 57,892


$ 8,503,990


Global Industries


$ 651,822

$ 324,587


$ 9,637,840


The Clothing Company


$ 452,846

$ 325,698


$ 6,695,781


Financial Instruments


$ 373,053

$ 372,154


$ 5,515,962




$ 360,991

$ 123


$ 5,337,613


Great Motors


$ 369,115

$ 89,654


$ 5,457,734


Light Food


$ 261,363

$ 154,789


$ 3,864,513


Eyeshapers Inc.


$ 172,513

$ 65,218


$ 2,550,777


Internet Solutions LLC


$ 153,339

$ 125,698


$ 2,267,270


University of Vienna


$ 173,818

$ 154,898


$ 2,570,073


Sample Report Credit Risk Assessment

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