Using your organization or any company/ organization of your choice as a case study, you are required to critically evaluate the sources of financial information available to managers.
With the ramified economic changes and complex busienss structure, management of company should implement strategic financial manager. In this report, new business taken is Cosmos Café and restaurant in Netherland. This company is incorporated to offer best quality coffee products to clients.
The people in Netherland are more inclined towards best quality of coffee products. It is evaluated that Cosmos Café and restaurant will offer high quality of coffee and other beverage products to clients in Australia. Nonetheless, the main focus of company would be to use advanced cyber computing enterprises resources planning methods
It is analysed that in order to run the business effectively management needs to implement proper strategies and effective business functioning. It is observed that there are several statements which could be used by managers and stakeholders to make effective decision making such as balance sheet, cash flow statements, budget analysis and other financial statements. In order to communicate imperative information with the internal and external stakeholders, company record all of its financial details through the accounting practice and reporting standards (Duchin and Sosyura, 2014).
There are several stakeholders of Cosmos Café and restaurant such as Chief financial officer, management, promoters, employees, owner and who take imperative decisions for the betterment of organization. These stakeholders are the key persons who are very important decisions.
Chief financial officer- It is the main person who takes all the financial decisions. CFO of company uses financial statements, inventory documents and other details to plan the strategies. For instance, by evaluating the profit and loss account, CFO of company could assess the financial performance and set business (Laeven and Valencia, 2013).
Management- It is observed that by evaluating the assets and liabilities, the management of Cosmos Café and restaurant could implement strategies and new business plan as per the assessed resources. It will help management to determine whether Cosmos Café and restaurant is having adequate resources to run the business effectively.
Promoters- It will help the owners of Cosmos Café and restaurant to determine whether Cosmos Café and restaurant is having adequate return on capital employed from the business (Gitman, Juchau and Flanagan, 2015).
Employees- The employees of Cosmos Café and restaurant will evaluate the books and other statements to determine whether they are performing up to the mark.
These external stakeholders of Cosmos Café and restaurant could such as government, tax authority, investors, customers and regulatory authority. These stakeholders will use this key imperative information to make who imperative decisions.
Creditors- These persons provides capital to company. It is observed that creditors use creditworthiness statement of company to increase the overall effectiveness of the business.
Suppliers and vendors- It is observed that suppliers need to check the inventory management documents to evaluate the business functioning of organization (Ehrhardt and Brigham, 2016).
Strategic decision making is based on the long term strategic planning and proper assessment program. It will assess the valuable internal and external factors of business which will help Cosmos Café and restaurant to avoid possible problems and issues in determined approach. It is observed that the source of financial information helps management to make effective decision making. It provides clear about the fluctuation and trend of business in determined approach. For instance, if Cosmos Café and restaurant wants to expand the business then management could use financial information such as balance sheet, profit and loss account and cash flow statement to set the busienss trend in future. It will help in determining in which Sector Company could make improvement. In Netherland, Cosmos Café and restaurant could focus on increasing the quality of products and services in market. Nonetheless, it is also found that people in Netherland are less interested in considering the price while buying a good coffee from the market. In addition to this, management could also reduce the unnecessary cost of its coffee products by reducing the amount blockage in the raw material. This could be done by using proper inventory management book. This will help Cosmos Café and restaurant to achieve its determined goals and objective in easy and determined approach. The financial book of account helps in assessing the financial position of company and implement proper strategic plan to increase the overall outcomes of the business (Laeven and Valencia, 2013).
The financial management is accompanied with the raising funds from the market and deployment of the same in the busienss. The cost of the coffee products and foods are highly based on the cost of capital of company and deployment of the same. It is observed that this financial management will reduce the cost of the capita and reduce the chances of business destruction. If Cosmos Café and restaurant does not have proper financial management then it will eventually increase the overall cost of its products in market. The main linkage between financial management and its contribution towards achievement of set goals is based on the associated business cost and use of financial sources. If proper financial sources are not used then management of company could not estimate the future data for the business expansion plan. In addition to this, management could also use financial management process to determine whether company is having appropriate return on capital employed process. There are several sources of finance such as issue of share capital debt funding and applying for the loans. The financial management will also help company to determine the possible methods to reduce the cost of production and increasing the efficiency of the business. The ultimate set objective and goals of company is highly increasing the overall sales and profit. If the coffee products offered in the market are high in quality and less in cost then it will increase the overall sales and profit in determined approach. This could be done by using proper financial management technique. Therefore, it is considered that with the use of financial management company could increase the efficiency of the business (Vogel, 2014).
Financial management is the main important point which is considered by the company to decrease the cost of the business and increase the efficiency of the business. There are several tools and models which are used by company while implementing financial management such as capital budgeting, ratio analysis, bottom up analysis and other methods. These methods are used to evaluate the best possible sources of finance available to company and deploying the capital in the business. In simple words it could be inferred that financial management is the process of efficient and effective management of funds in such a manner as to achieve and accomplish the set objectives and goals (Gitman, Juchau and Flanagan, 2015).
Cosmos Café and restaurant needs to follow the following financial management model to increase the efficiency of its financial performance.
Financial stability- The management of Cosmos Company needs to evaluate whether there is adequate funds available for the effective business functioning or not.
Minimizing the tax burden- It will increase the busienss outcomes and also reduces the tax burden in determined approach. Company needs to implement proper taxation planning process to increase the business efficiency.
Positive cash inflow- The business of Cosmos Company should reflects the positive Net present value. It is observed that Cosmos Company should have inflow of cash more than the cash outflow form the business (Weygandt, Kimmel and Kieso, 2015).
Growth, Wealth and Stability- The growth of the Cosmos Company should be more than 10% each year. In addition to this, in order to expand the busienss of restaurant it should consistently invest at least Euro 3 million (Vogel, 2014).
Cosmos organization is following Capital budgeting theory while selecting the particular investment project. It helps management of Cosmos Company to increase the overall return on capital employed. For instance, if two projects require same amount of initial investment then with the help of capital budgeting technique, management would select the project which gives higher Net present value in the busienss.
The key concept of the financial management of Cosmos Company is based on the deployment and sources of finance regardless of its products and services sale in market. Company uses proper accounting and financial policy to increase the business efficiency in determined approach. It helps management to develop an understanding of the role of financial planning within the business operations.
Conclusion
Now in the end, it could be inferred that financial management is very crucial for the effective business functioning of organization. If a company uses strong financial management then it will increase the outcomes of the business
References
Brigham, E.F. and Ehrhardt, M.C., 2013. Financial management: Theory & practice. Cengage Learning.
Duchin, R. and Sosyura, D., 2014. Safer ratios, riskier portfolios: Banks? response to government aid. Journal of Financial Economics, 113(1), pp.1-28.
Ehrhardt, M .C. and Brigham, E.F., 2016. Corporate finance: A focused approach. Cengage learning.
Garrett, J., Hoitash, R. and Prawitt, D.F., 2014. Trust and financial reporting quality. Journal of Accounting Research, 52(5), pp.1087-1125.
Gitman, L.J., Juchau, R. and Flanagan, J., 2015. Principles of managerial finance. Pearson Higher Education AU.
Kundakchyan, R.M. and Zulfakarova, L.F., 2014. Current issues of optimal capital structure based on forecasting financial performance of the company. Life Science Journal, 11(6s), pp.368-371.
Laeven, L. and Valencia, F., 2013. The real effects of financial sector interventions during crises. Journal of money, credit and Banking, 45(1), pp.147-177.
Laudon, K.C. and Traver, C.G., 2013. E-commerce. Pearson.
Vogel, H.L., 2014. Entertainment industry economics: A guide for financial analysis. Cambridge University Press.
Weygandt, J.J., Kimmel, P.D. and Kieso, D.E., 2015. Financial & Managerial Accounting. John Wiley & Son
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