Introduction to Financial Analysis

Introduction and Objective of Finance Department

• The finance department ensures the adequate and timely provision of funds for the business's operations. It is also
the department's role to ensure the company pays its debtors and suppliers on time. The department also coordinates
the monitoring of income and expenditures.

• Our finance department is the unit of a business responsible for obtaining and handling any monies on behalf of the
organization. The department controls the income and expenditure in addition to ensuring effective business running
with minimum disruptions. Besides the traditional roles of handling the payroll, income and expenses, finance
department responsibilities also include economic analysis to improve key business strategies.

• Our finance department's activities can have a tremendous impact on the company and its general performance.
Besides supervising the inflows and outflows of money, a finance department has other roles, such as:
 Provide information to management:

• The finance department team provides critical information to the company's leadership for effective management.
The department provides insights and feasibility reports that inform management's judgments that are pertinent to
the company's needs. For example, when launching a new product in the market, the finance department's
responsibilities may include supporting its management with financial advice, relaying a funding plan, and
developing fallback measures.

 Manage equity

• The finance department must efficiently manage the company's equity. A finance department realizes a company's
assets investment and optimization through calculated business strategies to maximize profits. The company's
management uses finance information to understand and recommend the company improve specific projects and
measure the ongoing projects' success rate. The department provides the company with periodic reports that show
the awareness of business investment opportunities.
 Cash flow management

• The finance department ensures the adequate and timely provision of funds for the business's operations. It
is also the department's role to ensure the company pays its debtors and suppliers on time. The department
also coordinates the monitoring of income and expenditures.

 Risk management

• The department identifies, appraises, and outlines risk mitigation measures for the organization. It
establishes risk control programs capable of predicting business ventures' future performance to avoid
exposing the enterprise to losses. For example, providing forecasting reports showing all the possibilities of
a recession or inflation that might affect industry activities.
 Tax management

• Finance officers handle tax remittance reports and employee payroll issues. By resolving all taxation issues
of concern, the finance unit creates an enabling environment for government agencies to collect their due
and avoid employees' complaints.

 Accounting

• Daily account record keeping is a finance department function that entails reconciling a company's
financial registers to make suitable business decisions. Through bookkeeping and income statement
preparations, the unit supports the management in filing requisite financial data that's useful in managing
funds
 Examining financial statements and reporting

• By analysing a company's financial statements, the finance department evaluates economic trends, identifies its future
investment, and cultivates long-term business plans. It uses and synthesizes financial analysis information to assist in
business decision making.

 Budget preparations and forecasting

• The finance department plans and implements the company's financial year budget. The department also conducts
research and collects data that assists in the organization's temporary and permanent financial forecast. The information is
essential in planning and providing informed decisions critical to expansion, such as staff training and asset procurement.

 System management

• The finance department plays a significant part in acquiring, updating, and maintaining the latest operations systems to
improve efficiency. A systems change may include automation of various functions or digitalization of some
organization's systems.
• The goals for a finance department can include strategic budgeting, cost containment, cash flow management,
debt servicing, tax planning and accurate record keeping.

• The objectives are:

1. Profit Maximization Objective

2. Wealth Maximisation Objective

3. Objective of Profit Maximization Pools.

• Finance departments are an integral part of an organization, providing the fuel to keep it moving forward. By
communicating, managing money wisely and staying informed about available opportunities, finance
departments can ensure a steady flow of funds into the organization.

 Coordinate With Other Departments

 Procure Funds from Appropriate Sources

 Pay Off Debts

 Ensure Trust Through Transparency

 Non-Profit Board of Directors Responsibilities

 Staffing

 Planning/Evaluation
 Public Relations

 Primary Responsibilities for Finance Staff

 General Accounting

 Budget Formulation and Analysis

 Audit and Risk Management

 Budget Creation and Management

 Income

 Inventories
Structure of Finance Department
 
Analysis of Financial Statements with the help of various Ratios, Capital Structure, Balance Sheet- actual or
projected, etc.
Sources and Application of Funds

• Through bank:

 Business loan

 Bank guarantees

 Cash credit

 Overdraft

 Term loan

 Secure loan
 • Management of Payables and Receivable

• Management of payables and receivables is done by the head of the organization.

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• Budgeting and Budgetary Control

• Budgeting is done according to the expenses and income.

 • Working Capital Management of Company

• Working capital management of the company is according to the expenses and

income that is according to the orders of the products.

• Impact of Budget on Company

• The impact of budget on company as of the payables and receivables.