Financial Health Essay Assignment Paper
Financial Health Essay Assignment Paper
INTRODUCTION
Since business organizations are considered risky, the management has a crucial role in assessing their overall future financial health before it is reflected in their annual financial statements. By doing this, they are able to prepare themselves for whatever action taken before making monetary and time expenditures in a way that may negatively affect it future growth for an organization that is sound financially is considered healthy and liquid.
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ESSAY
First, any successful firm should set both long term and short term goals, strategies and operating procedures that will enable it to be able to compete more effectively in the market whether locally or internationally. For instance, a multinational organization standardizes, adapts or creates a different product to meet the market while a local company competes mainly through attractiveness of its packages and its marketing strategies (Koller 2005). In addition to this, an effective use of company assets such as replacement of old machinery with faster and updated ones is expected to positively improve its operations. These are some of the issues a management looks for when initially investigating the company’s position in the market.
Secondly, a firm that has an operational advantage, a lot has to be done In terms of market assessment to ensure that the market is dynamic enough to meet a rise in production so that there is an increase in future sales and returns. A market heavily supplied forces our firm to either lower its prices or reduce its production (Heyne 2002). A look into this encourages the firm to predict times when the sales are higher and when they dip low so as to ensure flexibility in production. This will also help it whenever it makes investment so as to either expand, merge or sale a part of its assets in order to meet market imperfections. Electronics companies such as Sony and Samsung are perfect examples here when they struggle against risk competing against other companies those sale similar products but at a lower price. A sound response to such competitors would influence their ability to stay in the market as they attract funds essential for future expansion strategies.
Any great organization goes into business with a profit making mind which in turn influences various important financial elements. The level of profitability has a strong influence on the firm’s ability to access credit which is essential for its growth. It also affects the value of its share in the stock market in a way that attracts or discourages investors (Pereiro 2002). The management therefore should compare the firms past financial records as upward sustainability in profit making is indirectly a sign that the firm has trend of better performance in future.Financial Health Assignment Paper
Moreover, a company that’s able to see higher sales in consecutive business cycles increases the shareholders equities due to a substantial increase in total assets the management must therefore come up with a way of future financial statement projections in order to be able to estimate future financial needs and how to access sources such as banks, the stock exchange markets through public offers and insurance companies. Companies with sound financial policies have a bargaining power with them when it comes to securing future investment funds while those whose records are shy face a bleak future as competition heightens (Pereiro 2002).
The above measures however are not usually available to investors when they want to buy into a company. They therefore rely on financial analysis to be able to predict a company’s future. Managers come in handy by computing financial ratios such as liquidity ratios and profitability ratios that will be used to analyze an organizations future performance (Lewellen 2004). These kind of information is then filed and published of quarterly and semi annually basis as required by law.
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