Business finance
Activities such as managing and raising funds by businesses are normally the concern of major managers, who need to use ‘financial forecasting’ in order to create a long-term plan for the business. Short-term budgets are then made to meet the aims of the business. When a business decides to grow and expand, it might rely on bank loans, cash reserves, or an increase in sales. Managers might also decide to raise long-term capital such as debt or equity (stock). The value of the company's stock is always a major concern, and managers have to think about whether the business should pay dividends or to reinvest profits (put it into a bank account). Other aims for financial managers include managing accounts and maintaining the optimum level of inventories. Financial managers also need to consider the benefits of analysing economies of scale, mergers, and the ability of businesses to work with each other.
Users of financial information There are quite a number of different stakeholders in an organisation have an interest in the business and how it is performing. As a result many stakeholders give close attention to financial information the company might decide to provide or publish.
Owners need to know how the business performs in order to make important decisions. The owners will need to pay staff, bills and other expenses; they also need to make a profit as an investment from the business.
Managers will have compared results from previous years with current performance of the business using statistics. They will also compare the number of sales and the budget of the business is in line with appropriate statistics. They will then make decisions using this information which will affect the way on how the business operates.
Employees/Trade Unions would use financial information to see the performance of the firm and decide if their positions are safe or if there is an opportunity to ask for an increase in their wages.
Suppliers will normally be organisations which give business the products they need in order for them to work. They will be interested to see if the business is able meet its demands and is able pay its suppliers.
Banks are eager to know the financial information published by the business as they will give them an idea into how capable the organisation is at paying back bank loans they might have currently with the creditor.
The government is concerned with a business’ financial information as it is the job of the Inland Revenue to tax the organisation’s profits. This will allow them to tax the company correctly.