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Introduction to Finance For Strategic Managers
Management of financial resources plays a crucial role in accomplishing the business objectives of organization. Strategic financial management involves a defined series of steps that includes setting of business goals, identifying resources, analysis of data and finally, making the decisions (Banerjee, 2015).
In this project report, there is a discussion regarding the financial aspect of Debenhams which is one of the leading retailing companies of UK. The report gives focus on the comparison between short and long term finance for business as well as on the importance of management of cash flows and other financial statements.
An assessment of the reason for which financial information is needed in business
Financial information works as the heart of business. Financial information plays a very important role in making financial planning and decision. Financial information is mainly collected from various financial accounting statements. Financial statement like balance sheet helps in giving the exact picture of assets and liabilities which is important for the organization (Smit and Trigeorgis, 2012). It helps in identifying the exact financial position of business which results in making the final judgement regarding business expansion. Profit and loss account gives information regarding the wages that are paid out of the business and expenses that occur in the firm. On the basis of financial information which is collected from the profit and loss account, Debenhams can identify the efficiency and performance of business. Through the information taken from profit and loss account or income statement, investors can evaluate the company's past performance and can assess the uncertainty of future cash flow (Ball, Jayaraman and Shivakumar, 2012). Financial information is needed to find out or to maintain the record of success of business. The financial information is collected from the financial ratio which helps in analysing the actual performance of company as compared with its financial objectives (Wheelen and Hunger, 2011). With the help of financial information, Debenhams can measure or examine the quality and position of business which helps in making assumptions for more successful business in the future. By collecting the financial information, true and fair presentation of business efficiency can be examined.
Identification of business risks related to financial decisions
Risk related to a financial decisions refer to the possibility of a loss or default ion the organization. Risk is one of the major factors which creates problem in front of company while making the financial decision. There are various risk factors which affect the financial and business decision of Dagenham. They are as followed-
Macroeconomic condition of market – Market condition affects the revenue of company in case of fluctuation or a slowdown in the market.
Uncertainty of investment- There are high risk related to the uncertainty of firm's return over its assets (Beck, Levine and Loayza, 2000). For example, the firm may or may not receive the expected return for the capital.
Credit Risk:- This risk is associated with the borrowing of the business going into default. Investors may loss their principal and interest if any creditors refuses to pay the borrowed money due to any reason (Jõeveer, 2013).
Liquidity Risk- This risk arises when the asset or the commodity can not be easily traded in the market. There can be loss in the assets liquidity or funding of the liquidity (Brealey, 2012). These risk arise when asset cannot be sold in the market due to any market risk and and when the asset does not meet the demand in the market, respectively.
Market Risk- There are greater risk related to the market like, falling prices of the stock of the company, high interest rates prevailing in the market, fluctuations in the foreign exchange rate and rise in the price of the commodity like oil, gas and etc (Banerjee, 2015).