About
Finance Planning: Introduction to Financial Management.
In this Lecture, you will be able to, Explain the importance of financial management, Describe the inter-relation among financial decisions, Explain the functional areas of modern financial management, Discuss the organization of the finance functions, Describe the objectives of financial management.

Featured Post

Meaning of Business Finance - business activity which is concerned with the acquisition and conservation of capital funds in meeting financial needs and overall objectives of business enterprises...

Read Article
finance-lesson-financial-statement-basics

Financial Statement Basic

A tutorial on the basics of financial statements: the balance sheet, statement of cash flows, and income statement...

business-finance-an-overview

Business Finance- An Overview

In this animation introduces the learner to the concepts of business finance, financial management...

finance-and-its-importance

Finance and its Importance

The significance of finance for business finance, capital required and classification of the same as fixed capital, working capital, sources...

Good Reasons to Invest While You Still Can

It’s not the question about how much you have or what experience you have. If you want to enjoy your life to the fullest, then you must have something to support it. And we all know that working alone won’t cut. We need additional source of income to ensure that we’ll get to enjoy everything that life has to offer.

STOP! This will Change Your Mind!

What better way of doing this than investing? If you feel skeptical about this proposition or perhaps thinking that it is not for you… then I encourage you to read the entire post. You’ll definitely have a change of heart after learning the reasons below.

Reason number 1. It’s for Your Freedom

One thing that people get wrong about investment is thinking that it’s about getting rich. While it is one of the objectives of doing such, the real purpose of it is more about having financial freedom. At the same time, being able to have the ability to support yourself and your family without income.

Because the hard reality is, your body will used up all its energy at some point in time.

The question left is, would you like to be forced to stop working before you are financially ready or would you rather have the option to stop when you want? These are questions that can be answered when you invest.

Reason number 2. It is Free Money People

Working for a company that is offering 401k gives great chance that they’re offering some sort of employer match too. Meaning to say, they’ll be matching the contributions you made for a certain point.

To give you a quick example, typically, employer match can be 100 percent of first 3 percent of salary contributed. Meaning to say, if you have contributed 3 percent of your salary to 401k every paycheck, your employer is required to match the same contribution you have made. This is on top of the monthly salary you are making.

If you’d analyze it, this is free money and you can instantly double up your retirement savings.

Reason number 3. It’s Okay to Fail

Countless of people are afraid to invest. This is true whether it is about retail, buy & sell, trade cryptocurrency on http://vipsignals.trade and whatnot. It feels as if it’s a big and complex project wherein you have to fork out huge sum of money. Not to mention, the amount of energy and time to be invested to get you where you wanted to be.

In reality, yes, you’d have to do this. But this is only for the first few years of your investment. Once it gained traction, the returns you get is 2x or 3x as much as the initial investment you made.

Income Statement : A Report of the Net Profit Yield and More

Not a few have ventured into running a business enterprise without fully comprehending the importance of financial reports as tools for managing business finances. Often times, they perceive financial statements as mere reportorial requirements for taxation purposes or for getting a loan application approval.

One should stop to think that if such reports are important to tax bureaus and to lending institutions, then it is all the more important for entrepreneurs to fully comprehend what financial reports convey. Financial reports, such as the Income Statement, the Balance Sheet and the Cash Flow Statement serve as guides on how to effectively manage the financial conditions of a business.

If for financial management purposes, requiring the preparation of monthly reports is a best practice to consider.

What Does the Income Statement Convey?

The Income Statement may seem easy to comprehend as it merely summarizes the total cash revenues generated and the total operating expenses incurred for a certain period. First off, an Income Statement always covers a specific period, for a month at the least, for a quarter or semi-annual period or for a year.

The Income or Revenue is at first stated as Gross Income or Gross Revenue, which means the sum of all cash received as evidenced by official sales receipts issued during the period covered. The Gross Revenue will then be adjusted by deducting any Unearned Income and the the total Direct Costs, to arrive at the Gross Profit. Unearned Income is revenue already received but recognizable as income only on some future period.

In a simple trading firm, Direct Costs usually relate to the Cost of Goods or Merchandise Sold for the period. The Gross Profit therefore represents the markup yield.

The next goal is to determine the Net Profit, which is achieved by deducting the Total Operating Expenses from the Gross Profit, including non-cash items like depreciation and interest expense amortizations. The bottom line figure after the Net Profit is the Net Profit After Tax, being the actual amount that will increase a business entity’s Net Worth.

In cases where the Total Operating Expenses is greater than the Gross Profit, then a Net Loss was incurred. This calls for a deeper examination of the composition of the Total Revenues reported, and for an analysis of the proper matching of all costs and operating expenses deducted from the Gross Revenue.

Some expenses may have been overstated because part of expense values are applicable as deductions for the next periodic report. In other cases, Net Loss is incurred by failing to consider the overall overhead costs it would take to sell the goods.

Actually there are several other information that can be revealed by correlating Income Statement values with those presented in the Balance Sheet and the Cash Flow Statement.

Importance Of Financial Management In Every Business

Finance is vital in almost every business decision. From planning, budgeting, and cash flow procedures to the financial framework and even in the management of costs and risks associated with the business.

Finance plays an essential role in every business entity even in the government sector. Employers use their financial data every day to make decisions. Finance is essential to assess the present standing of a business and where it is headed in the future. Companies are not able to function well without proper financial analysis.

Handling Inevitable Risks

Managing a business enterprise can be risky. An entrepreneur has worries with regards to the trend of interest rates, fluctuations in currency, fluctuations in product prices, and threats of non-payment due to various reasons. Financial records keep an eye on these aspects and provide records an overview of the business as a whole.

Finance management assesses the risks of worldwide trading markets, determines the credit rating of buyers, evaluates loan terms from loan providers and offers an analysis of the challenges in many aspects of business finances.

Tactical Planning and Cost Management

Financial planning is essential in every business. Planning helps you determine the goals of your business and the costs needed to get there. Business plans help you form the structure for employing staff, financial spending, raising capital, marketing plans and additional bonuses for administration.

Equity or Loan?

Following strategic plan creation, the finance department follows the ways of funding business functions. Would it be preferable to raise equity capital from shareholders or get financial loans from financial institutions? In most cases, financial analysis can give a better view of the best direction to go.

For businesses in New Zealand considering to take out additional funds through lending, Need Money Now offers easy and quick loans in New Zealand. Check them out.

Cost Control and Profit Planning

It’s no surprise that the foundation of your business is to make profits. Therefore, finance plays an important part to find strategies to boost earnings. This may relate to discovering the level of profitability of products, eliminating losers, and endorsing the winners. Business finance can help determine strategic approaches as to how to better production or discover affordable raw materials.

Small and medium-sized business owners are regularly going over their financial statements to realize finances and unforeseen costs. This is called exception financial management. If every aspect of the business is consistent with the profit plan, there will be lesser problems to encounter. However, financial managers would still look closely at the financial flow to correct and avoid deviations.

Cash Flow Management

It is the task of the finance department to ensure the company has plenty of liquidity to compensate its suppliers as well as their employees promptly. In the event that cash gets limited, the finance department will make preparations to work with the company’s line of credit in banks.

On the other hand, having excessive funds that are idle in the company’s bank account is not benefitting the company’s return on investment. Thus, after financial analysis, finance people will find ways to invest cash to produce better returns.

Inspirational Quote about Finance: "Making money is a hobby that will complement any other hobbies you have, beautifully."