The goal of management of the financial resources of the company is maximizing the profit which can be analysed by calculating the gross margin or net profit margin ratios. Another goal of managing resources is to minimize the cost by reducing the company's expenses.
a) Balance sheet: Purpose of balance sheet or the statement of finance includes revealing the financial position of the company at a particular time period. The balance sheet purpose is representing what is owned by the company that is its assets and what the company owes that its liabilities.
b) Income Statement: Purpose of statement of income is representing the loss or profit generated by a company at the period of reporting. The purpose of the statement of income is also showing operating profit, gross profit. This statement shows how net income is obtained from deducting the tax from EBT.
c) Cash flow statement: Purpose of the statement of cash flow is providing information or data about organisation’s gross payments and gross receipts for a particular time period. The purpose of this statement is to represent all the flow of cash from the operating activities, financing activities and investing activities of the business.
The distinction between the financing decision and the investment decisions of the company is discussed below:
The decisions related to finance revolves around ways for paying for expenses and investment. On the other hand, the decisions related to investment of the company revolve around ways for allocating the company’s capital for maximizing the value of organisation. The decision related to investment involves company’s capital investment in fixed or current assets. On the other hand, the decision related to finance of an organisation includes finding the funding source needed for doing investment in business. Decisions related to financing are in connection with debts of companies such as debentures and bonds. In case of financial decisions the return% of the companies are fixed prior and there is no or lesser risk involved. Whereas, the decisions related to investments are linked with preferential shares and equity shares. The risk involved in decisions related to investments is higher and also profitable at the same time. The return from investing decision is higher as compared to decision of financing.
a) Cost of capital: The capital cost of the company is referred to cost opportunity for making particular investment. The return rate of the cost of capital needs persuading investors for making the provided investment.
b) Capital structure: The structure of capital of company’s way of financing overall growth and operations with the help of various funding sources.
c) Working capital: The working capital of an organisation is the distinguished between the current liabilities such as accounts payable of the company and current assets such as accounts receivables, cash of the company.
The relationship among return and risk includes measuring the impact of decrease or increase in return risk of investment. In the relationship which is direct between return and risk, if there is higher risk, there will be higher return. In case of negative relationship between return and risk, if there is higher risk that there will be lower return.
According to Chan et al. (2018), the changes in communication while making discussion of budgeting with the investors is based on highlighting the plan implication related to finance. This also includes defining the requirements of resources for achieving the goals. As investors are familiar with the company’s budget as compared to the management of the lower level, the investors can criticize the budget of the company by implying conditions for additional consumptions. The budget is being foreseen by the management of lower level rather than investors for studying the trends and for developing strategies necessary by the organisation.
(i)AGL Energy Limited
b) Identify three financial documents all companies must record and store.
(i) Statement of finance
(ii) Statement of cash flow
(iii) Statement of finance
c) Which team members are responsible for financial reporting?
(i)Financial Manager: is the head of the finance committee of company.
(ii)Financial Assistant: Financial manager is assisted and guided by the financial assistance.
(iii)Admin/Cash Assistant: This member assists and guides the admin manager.
The recording of the statement of cash flow is important in the process of making decisions. The flow of cash recording is important as it provides essential information or data of disbursements and income of the company. According to Guo et al. (2017), monitoring of flow of cash helps in paying attention to the financial patterns of the company. It includes paying attention to the operating activities, financing activities and investing activities of the company.
a) A new issue of common stocks- It is the stock introduced in the market for the first time. This term does not follow the general issued stock rather the initial public offerings including debt and equity.
c) Extend accounts payable- The extended accounts payable is shown by the company for increasing the supplier's credit for lowering the cut-off.
d) Long-term bank loan- The base of a loan provided to the company for an extended time period of one year. The purpose of this is to enable company for purchasing the assets for repayment.
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