Advance Finance For Decision Making In The Business

• Return on investments: It is directly impacting profitability of business. Profitability can be measured in numerous ways but ROI is very simplest method. It can be replicated as amount of benefit which has been gained or loosed by undertaking various activities.
• Opportunity cost: It can be referred when choice has been taken and other opportunity has been lost in context of other. While making important decisions, proper justification should be prepared about money and resources (Bai and Sarkis, 2017).
• Brand impact: While taking decisions, origination of amount of advertisement and for selling at what specific prices should be charge must be justified.
• Effect on resources: When profit has been calculated, it should be able to consider whole effect on human resources, production, accounting, information technology and sales.

1.2 Significance of financial factors in business decision making

The objective of every business is to make money as it is termed to know perfect measure of profitability. There is presence of various financial factors which helps in business decision making with its significance such as:

• Return on invested capital: It is replicated as most fundamental formula for finance as it is helpful for measuring level of efficiency from business perspective. There should presence of independent analysis for framing decision in effective manner. It is for purpose of net operating income which will exclude aggregate of owned taxes and dividends which are paid for invested capital.
• Net profit: It is considered as very important factor for every business whether it is small or big. It is used for justifying financial performance of business in its industry or market and also for framing new strategies.
• Cash flow: In this scenario, various business gets bankrupt due to absence of cash flow. It should be plugged up as everything is dealt on basis of long term credit as accounts receivable.

1.3 Features of business risk that affect financial and business decisions

Business risk can be referred as possibility of all inadequate margin and losses as well because of uncertainties and events which are raised unexpectedly. In the context of features it can be elaborated in two categories:

• Arises due to uncertainty
• Essential part of every business

Arises due to uncertainty: The business is not able to have specific control on future activities because of uncertainty on basis of future. There is presence of alterations in demand, government and policies etc as these all can be termed as example of uncertainty which will be creating risk for business because of future events are not known in advance (Factors influencing business decision making, 2018).

An essential part of every business: Each business is termed as one or other type of risk. It could not be avoided by any business, it can be minimised but not eliminated.

1.4 Financial priories which should be considered for taking decisions regarding finance

Financial priories for taking decision making regarding finance are classified in 4 categories such as:

• Financing: It is very essential for every business for taking decisions of long term perspective. It is directly related for maintaining inflow of capital in very constant manner as savings of margin will be not allowed for continuing operations for longer aspect with appropriate support of liquidity.
• Dividend policy: It is directly concerned with earning of organization which will be paid to shareholders. It is mandatory to identify earnings which are generated and reinvested in organization for improvising operations and they will be distributed among all shareholders (Clemens and Tiongson, 2017).
• Investments: There is requirement for having specific market study in place and it should have objectives in clear aspect which should be met by organizations. The demand, technology, equipment, available human resources and financing methods should be studied very properly.
• Asset management: For meeting obligations in adequate manner it is considered as very important aspect. The existing assets should be managed in very efficient aspect as management of current asset should be prioritize before fixed asset management.

Section 2

2.1 Comparison of accrual and cash flow approaches to accounting and financial reporting and its implications

Implications: In business decision making it has huge implications such as useful for framing budget, amount of money to be specified in business.  It creates ability for tracking income and expenses in both methods. It will be termed as very limited for information available related to finance while taking business decisions.

2.1.2 Structure of final accounts and application for business decision making

The profit which is earned or loss which has been incurred has to ascertain it during specific year and along with this financial position of this specific business is also determined. Accordingly, it includes:

2.2 Interpreting Financial information of Marks and Spencer

• Income statement
• Balance sheet 
• Statement of changes in equity  

2.3 Comparison between capital and revenue expenditure

2.4 Calculating ratios with specific illustrations

2.5 Key requirements for a public limited company

• It is referred as very complicated process as it should met various considerations such as there should be minimum share capital of £50000 of which nominal value of one single quarter. In the same series all share premium should be fully paid up (Pruna, Polukarov and Jennings, 2018).
• It can be also replicated that minimum share capital should be paid up for specific PLC is £12500 if any organization will be meeting its minimum requirement of share capital then there will be absence of share premium.
• Minimum number of 2 directors
• Qualified company secretary
• Company name should end with PLC
• Organization should apply for trading certificate before commencement of trading.
• General meeting and Annual general meeting

Section 3

3.1 Differentiating between business ethics, governance and accounting ethics as controls on business accountability

The main difference between ethics and corporate governance is that ethics are the analytical and morally adequate set norms that an organization attempt to stand by, while corporate governance processes are means by which organization is bound to remain as ethical as possible while still making a profit. Business ethics is also known as corporate ethics as it is mandatory to follow all aspects of business conduct and is appropriate behavior of the organization to everyone in entire organizations. While accounting ethics is basically a field of practical ethics and is part of the organization ethics, the study of manner, etiquette and morale values and judgement as they apply to accounting.  It is very important to follow the all two ethics and corporate governance in order to make a good industrial relation in an organization.

3.2 Assessing the role of the finance director/chief financial officer as a guardian of business ethics

Finance director and CFO are the two pillars of the organization. They both act as a guardian of business ethics. It is said that the children copy their parents same the Finance director ans CFO act in an organization. They are like guardian.  In recent year the role of CFO changed, earlier they used to manage all thee financial records of the company but now they are not only managing accounts of the company but also act as a guardian ion business ethics. A finance director is, first and foremost, a full board member and subject to the duties and responsibilities that fall on board members.

3.3 Analysing the key concepts and principles of corporate governance that may impact on business decisions

It is a system by which organizations are directed and controlled. Board of directors are liable for their organizations. The partners or shareholders plays in important role in corporate governance as they call directors and auditors to satisfy themselves that relevant governance structure is in place (Gökgöz and Atmaca, 2017). Corporate governance includes the process through which an organizations objective are set and can be followed in the context of the social, regulatory and market environment. It includes all the procedures, policies, practices etc. following are the principles of corporate governance-

1- the corporate strategies are approved by the board that are intended to build sustainable long – term value. Corporate governance overseas the CEO and senior management in operating business.

3.4 Key national and international financial reporting standards that are relevant to business decision

International finance reporting standards are the predefined norms or set standards for the accounting transactions. IFRS issued by the international accounting standard boards (IASB).IFRS are made to know that how accountant is going to prepare the accounting transaction. They are a sort of language which can be understand by the company to company or country to country.

Decision making should be depend upon elite quality of a source appropriate for guiding organizations towards achieving long-term goals and objectives. And these IFRS are the quality standard which enhance the accounting performance and hence help in achieving goals and objectives of organizations of the business firms (Cesaratto, 2017).

Section 4

4.1 Comparison between long term financing and working capital

4.2 Comparison between sources of long term and working capital finance

4.3 Access of working capital is critical for business continuity

If there is absence of enough working capital for covering its obligations then financial insolvency will lead to outcome as legal troubles, asset liquidation and potential bankruptcy (Sources of Short-Term and Long-Term Financing for Working Capital, 2018). It is mandatory for every organization for having sufficient management of working capital. If there is presence of access working capital then it signifies that organization is not able to utilise its current assets toward liabilities. If it is effective form then it will be boosting its earnings along with covering financial obligations and it will be essential step for business to continue its operations.

4.4 Techniques required for managing cash flows with its impact on business decisions

There is presence of various techniques for managing cash flow because it will be directly impacting business decisions in very effective manner. In the same series break even point should be determined because to know level of profit as it will impact cash flow for reaching profit. Cash flow management should be focusses but not on margin. There should be proper maintenance of cash reserves and along with this cash flow worksheet should be applicable. In the same context, receivables should be collected as soon as possible because it will be delegating task. In the last, it should be able to use technology for benefits such as cash flow spreadsheet in Dropbox or One Drive so it can be accessed from anywhere with proper security. If cash flows remains positive then specific business will survive and projected future cash flow will be directly based on past series and financial data will be on sound purpose (Visinescu, Jones and Sidorova, 2017).

4.5 Methods for making capital/investment decisions with examples

• Net present value: It can be replicated by difference between present value of cash outflow and inflow of specific period. It is applicable for capital budgeting for analysing profitability of predicted investment or any specific project.
• Payback period: It is replicated as straight forward decision regarding capital budgeting, investment. It specifies amount of time which is taken by project to recover its initial cost.
• Internal rate of return: It is represented as discount rate which is making NPV of project as 0. It can be simplified as expected rate of return will be earned for project or investment (Zhao and van Wijnbergen, 2017).

 4.6 Merits and demerits of Off balance sheet financing

• Risk: It does not include any item of balance sheet due to absence of asset and liability as well. In context of liability, business has to repay money to external party. The item of off sheet balance sheet is not indicated as liability so it will be possessing as risk to organization. The business will be transforming product in to non liability by extracting renewable lease rather than loan which has to pay off or it should be transferring risk to individual entity (Johnson and Garvin, 2017).
• Capacity of borrowing: if business has taken loan then it will raise debt burden. While using off balance sheet, there will be obtaining of funds by business which are required and it will not affect debt burden as well.

Section 5

5.1 Financial implications of various business ownership structures

There is the presence of two business structures which are termed as:

• Sole proprietorship
• Partnership

Sole proprietorship: There is absence of separation with limited liability from legal basis. If there is presence of any obligation then one should be personally liable which are rising from operations of any specific business.

Partnership: In many ways it is similar to sole proprietorship but here is presence of contract with working with one or more partners. It should produce financial statement which should be according to size and type of partnership. The return of tax must include slips of every partner which will be allocating income to every one.

5.2 Corporate governance, legal and regulatory environment of different structures

Corporation are termed as legal persons in context of laws and regulations of specific jurisdiction. It does not posses any legal distinction between owner and business. It should be registers with GST/HST and payroll taxes should be registered for having employees. In context of partnership, company and business are termed as separate entity. If there is any loss then individual is no\t liable for that. Along with all forms, it should be also registered with GST/HST or payroll taxes. Capital can be borrowed by banks and other lenders must be able to lend to one person or to its partners on collective basis (Utama and et.al., 2018).

5.3 Comparison of stakeholders interest of owners and managers

The stakeholders interest of owners and managers varies from each other, as owner find the sources of funds such as bank loan, shares capital, equity and many more but on its contrary managers performs allocation of funds in such manner that it should be effectively utilised with appropriate return. In simple words it can be termed that owners find sources of fund but managers allocate that fund in its department. In the same series both have one specific and mutual goal is to earn profit with brand image.

5.4 Significance of return on capital employed for long term perspective of sustainability of businesses

It essential measures financial health of organization than ROE as it will be considering debt contribution while reflecting return of organization. The success of business in context of generating profit on capital which is invested on long term perspective. It should be higher than investment which is prepared via debt and shareholders equity in long run for sustainability of business. 

5.5 Importance of EPS

It is net loss or profit which is accruing for equity holders as per outstanding share. It is termed as very popular measure of company's performance and factor for valuing share. The purpose of earning is specific amount over equity where claim will be by equity holders. As it provides estimate of amount that how much is for per share has been earned if they buy in specific organization (Utama and et.al., 2018).

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CONCLUSION

From the above study, it can be concluded that Finance plays a very important role in making decisions in the context of profit and creating a brand image. It is shown that EPS is termed as a very important measure for financial position and stability as well.

You may also like: Financial Information for Business Decisions

REFERENCES

• Bai, C. and Sarkis, J., 2017. Improving green flexibility through advanced manufacturing technology investment: Modeling the decision process. International Journal of Production Economics. 188. pp.86-104.
• Cesaratto, S., 2017. Initial and final finance in the monetary circuit and the theory of effective demand. Metroeconomica. 68(2). pp.228-258.
• Clemens, M. A. and Tiongson, E. R., 2017. Split decisions: Household finance when a policy discontinuity allocates overseas work. Review of Economics and Statistics. 99(3). pp.531-543.
• Gökgöz, F. and Atmaca, M. E., 2017. An Optimal Asset Allocation in Electricity Generation Market for the Policy Makers and Stakeholders. In Handbook of Research on Managerial Solutions in Non-Profit Organizations (pp. 448-482). IGI Global.
• Johnson, J. E. and Garvin, W. S., 2017. Advanced practice nurses: Developing a business plan for an independent ambulatory clinical practice. Nursing Economics. 35(3). p.126.
• Khrennikova, P., 2017. Modeling behavior of decision makers with the aid of algebra of qubit creation–annihilation operators. Journal of Mathematical Psychology. 78. pp.76-85.
• Pruna, R. T., Polukarov, M. and Jennings, N. R., 2018. Avoiding regret in an agent-based asset pricing model. Finance Research Letters. 24. pp.273-277.
• Utama, W. P. and et.al., 2018. Making international expansion decision for construction enterprises with multiple criteria: a literature review approach. International Journal of Construction Management. 18(3). pp.221-231.
• Visinescu, L. L., Jones, M. C. and Sidorova, A., 2017. Improving decision quality: the role of business intelligence. Journal of Computer Information Systems. 57(1). pp.58-66.
• Zhao, L. and van Wijnbergen, S., 2017. Decision-making in incomplete markets with ambiguity—a case study of a gas field acquisition. Quantitative Finance. 17(11). pp.1759-1782.

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