Review Of Related Literature Ian.docx

Review of Related Literature

According to Stacy Klinger and Laura Roberts, “Financial management goes far beyond providing and approving reports. The board and staff should also be assessing and considering how to improve financial performance, monitoring cash flows and ensuring proper checks and balances are in place.” Financial management is a practice that stretches beyond the board that it is also applied by the staff. Financial management practices grow old and other applications are no longer compatible in future practices. We need to keep improving financial practices to boost financial performance. Good financial portfolios rely on financial performance. Improvement of financial performance is always needed. Simply the efficiency and effectivity plays a critical role in financial performance. Financial Managers regulates the inflow and outflow of money in the business. Money revolves in the entire business we need to either maintain balances or increase our balances. Truly it goes beyond providing and approving reports, especially that money is involve here.

According to Business Finance, “finance relates to other nonfinance areas in the business.” This means that financial management practices grows beyond the four walls of the finance workroom. All of the areas in a business is interrelated and connected to finance. Financial management is applied to all areas of the business. When it comes to the area of marketing, financial management practices is applied when a product is feasible or not. Data being collated by the Accounting department are used to project sales and future outcomes. Data created by both Finance and accounting department are used in projections and fluctuations. Financial management practices are also applied in the information systems, where they are in charge of

where the data will be stored and delivered to the three sectors of the business namely; the staff, middle management, and the top management. The three sectors of the business needs different kinds of information.

According to Joel Thompson, “Financial accounting became important to the securities markets in America in the late 1840’s.” Financial accounting is a term has long been used and has been essential to not only in securities markets but also in modern businesses. This is essential to businesses where this is the key application in protecting yourself from market manipulators. The modern market can be easily manipulated in favor of the biased competitor. With a manipulated market your investments might face loses. With the help of financial accounting you will be able to assess your situation on the market on what to invest on and the turnover of that investment. Investing increases efficiency and effectivity, this. With Financial Accounting, it can protect your investments and position in the market. Financial Accounting is to be considered a financial management practices. Financial accounting also creates data that helps projections.

According to Delia Sumrall and Rose Sebastianelli of University of Scranton, “The sales orientations of decision makers are inherently a part of the firm’s market orientation”. Market orientation is a key practice of financial management because when the business is market oriented, they will be able to project current and future needs of the consumers. The market is a very complex place where factors making the market change in a matter of time. From trends, capacity, scarcity of goods, and competition. Trend is a key component of the market where this is where the wants of the consumers rely on . A simple want of the consumer changes overtime. Capacity and scarcity of goods, The capacity is a crucial component of the market where this

questions if they can deliver the promised goods over time. Scarcity impacts on the capability to produce the goods. The difference of scarcity and capacity is that capacity is the allocation of the goods while the scarcity is the capability to produce the goods. Competition plays as the medium of substitute and complementary goods to consumers. This impacts sales on how strong the substitute goods are in the market. Sales is the source of financial wealth of the business.

“Precautionary saving is considered one of the important motives to save, particularly for the most important motives to save, particularly the young ones”. Precautionary saving is the kind of savings that is ready for any possible uncertainties that a business might face. From this article, it shows that this is essential to businesses and households, the difference here is the impact of profit and investments. Businesses tend to incur losses at certain times and there are investments that have been examined for months, this will then serve as hindrance to saving because, it holds your capacity to save now than putting your money somewhere else. Precautionary saving is essential in order for the business to somehow recover faster from an uncertain event. Households also do Precautionary savings, this keeps them constant with their consumption even there are uncertain problems they happen to face. This at somehow helps the market as it helps the consumer to stay constant with their consumption.

According to Eugene Fama, and Kenneth French, “There is a strong presumption in economics that, in a competitive environment, profitability is mean reverting.” This statement means that with zero change profitability will go back to zero and there will be a time that profitability can be predicted. In economics there are multiple factors that affect production, cost changes over time. Profitability shrinks due to the time value of money, the worth of one peso

today has no longer have the same value in the future. Trend setting, the market is a place to transact and as consumers change their wants and there are wants that turn into needs and that someday the consumer will no longer need. Trend is a very flexible factor of the economy and profitability. With the proper practices of financial management, the shrinkage of the value of profitability will be avoided if there is room for improvement in the practices. If there is an improvement in the profitability there is also improvement in financial performance. Since profitability is mean reversing, we are able to apply Profitability forecasting, where there will be a point where we can predict profit.

According to Douglas Montgomery and William Woodall, “Improving quality has become an important business strategy for many organizations including, manufacturers, distributers, transportation companies, financial services organizations, healthcare providers and governmental agencies” The application of the six sigma are the techniques and tools for improvement in the process. Quality has been the symbol of a good company, and Financial management practices uses the six sigma to improve more of their products and services. From the enhanced quality of materials to the friendly effective customer service this has been the stand of companies. And with quality on their side, they were able to make a strong brand that then produces great financial performance.

According to Siemens, their road to profitable growth is by the implementation of four point programme: Customer Loyalty and Satisfaction, Flexible and optimized processes with emphasis on quality, value enhancement through profitable growth, and competent and motivated employees. The four-point program has put Siemens to the edge of their game and slowly reducing

their debts. With Customer loyalty and satisfaction, this means you were able to connect with your customers and they were able to invest trust in your product or services. Customers have been so essential to the financial process of the business. Flexible and optimized process with emphasis on quality, you were able to establish that trust with your clients by your continuously improving process and quality products. The emphasis of flexibility here is that every product is made efficiently and the process is ready to adapt to any sudden improvements and changes.

According to Lawrence Schall and Gary Sundem, “The use of sophisticated capital budgeting methods leads to lower security market risk assessments, given similar underlying environments.” By means of sophisticated capital budgeting methods, may lead to lower market risks, but when it comes to Larger firms they use more sophisticated capital budgeting methods. Capital budgeting means that this is the proper allocation of investments. The bigger the Capital budget, the better use of sophisticated methods in order for you to protect yourself from market risks. Not always that investments pay off, so we need to use theses methods in order for you to sustain your current state.

According to Lehmann, McAlister and Staelin “Marketing almost by definition, is an applied field of inquiry. Moreover, it is boundary spanning in that it interfaces with almost every aspect of the firm.” Marketing is a practice in the business, Financial Management practices is connected and are working together with Marketing practices. These two are key essentials to the company as it holds grounds fro the business. This study holds a connection with consumers and informs the business of what the consumers wants. Financial management holds the balance for the entire flow of the business as it regulates every movement of the company while Markeitng

practices expands the inflow of possible consumers that would be acquiring the product you are offering to the market.

According to Volodymyr Babich, “ Financial and Operational decisions of the firm are studied and taught separately.” Financial management practices decision making on whether ba new budget is to be released, the handling of leverage, product release. All of the examples given are decided by the Financial Managers. The priorities of the Financial Managers is to maximize stockholder’s wealth and the regulation of the budget in the business. Decision making can be crucial to a Financial manager because it will reflect on the business. Learning it’s practices should be taken seriously and applied with caution.