Susan,
Good points, Susan, in fact as you reference, shared financial information among stakeholders can lead to a more feasible pathway to tapping the resources that may be available outside of an organization's daily operations. It works hand-in-hand.
Jay Hollowell
I agree with the statement. To understand a company’s financial position and financial sources, I would look at the Income Statement to understand what percentage of financial resources is derived from sales and controlling expenses. Also, a good profit margin is a sign of good current and future financial health. Secondly, I would look at the Balance Sheet to review how the company’s assets and liabilities align. I would examine how much short-term and long-term debt the company is committed to paying. Additionally, I want to ensure that what is being financed is balanced with the proper term repayment of the debt. Finally, since cash is king, I want to understand the company’s cash flow statement to see how much cash is available to meet short term obligations or opportunities that may become present in the marketplace in terms of new product development or potential acquisitions. Sound financial management addresses all these areas
Donald,
Well put! I too examine financial ratios (debt ratio, quick ratio, equity ratio, etc.) as a valid indicator of financial performance. And as you also mentioned, the cash flow is crucial since it directly relates to how well an organization can pay its short-term debts. Thanks!
Jay Hollowell
I would like to ask a question, should a lease debt that was fraudulently signed and in current litigation be booked on the financials to be calculated in to the ratios?
I agree, Financial management is concerned with making decisions regarding the size and composition of assets, the level and structure of financing policy dividends.
That is contemplating the elements necessary to achieve profit maximization or wealth maximization
Luis,
Good points! I would say too that financial management, as an element of decision-making, also affects planning, control, budgeting and even daily cash flow analysis.
Jay Hollowell
