Maritime Management and Leadership

Questions: Assess how financial systems and the financial function in your organisation interact and relate to other functions within the organisation. Describe the financial framework and its components, including the systems of accounting, controls and financial statements used. Using financial statements or a set of accounts, perform an analysis of the information that would support organisational decision-making. 1. Assess the relationship(s) between a financial system/function and other systems/function in an organisation. 2. Describe the systems of accounts and financial statements used to control a financial system. 3.Analyse financial information contained in a set of accounts or financial statements. Answers: (1). It is important to understand the fact that finance plays major role in any organization. It ensures steady flow of funds for making planned expenditure in delivering of products as well as services (Zhang 2012). The sale of products as well as services generates necessary funds in making required profits for business. It ensures activity undertaken by other departments without any kind of proper consideration and may have detrimental effect at the same time. For example, sales team decides in offering extended credits as well as discounts for increasing sales. This will affect cash flow as well as finance for cash collection for business organization. Purchasing activities may decide for paying suppliers on quicker form as well as placing bulk orders. It avails discounts and sufficient funds for availing in an immediate form. It dedicates effective relationship with suppliers in the most appropriate way (Whittington and Delaney 2011). Financial situation of company indulges in activities by various finance departments. In the present situation, it faces issues in funds shortage in response financial activities. Sales team mostly takes care of prospective customers as well as attracting discounts and extended credits (Weygandt, Kimmel and Kieso 2012). Shortage of funds mostly affects marketing as well as reduces income. It prioritizes planned projects that affect overall strategy of business organization. It requires two-way dependence for observing in the near future. It is essential to avoid problem by conducting effective communication between finance as well as other departments in an overall manner. Figure: Finance Function in different departments In Geotech, it is revealed that recent economic recession results in dropping of sales as well as sales turnover. It widely affects cash flow operations in the business organization. Directors like Finance Directors needed to conduct meeting for discussion on strategy for meeting the issues as far as possible (Scott 2012). It was required in maintaining operating profits at previous levels especially in case of dropping of turnover. Therefore, more funds require for increased sales as well as marketing in higher margins products. Marketing strategy should be revamped in meeting the new situation. Net Product Innovation section avails in modifications of deadlines as well as prioritizing current activities as and when required. Hence, financial situation of a particular company affects the functioning of entire departments (Peterson Drake and Fabozzi 2012). (2). There are three important systems of accounts as well as statements used for controlling over financial system like: P L Account Companies produce annual profits and losses accounting that indicates total profit or loss made during specified time (Nelson 2012). Most of the companies engage in producing monthly profit and loss statements as well. There are various entries in statement and brief descriptions as follows: Total Sales as well as Revenue Turnover Valuation of assets in and achieved for specified time for future analysis purpose. Direct cost as well as variable costs - Direct costs are those costs that vary largely with sales as achieved in particular period. It includes cost of raw materials, production cost as well as transportation cost and wages for the same (Needles and Powers 2012). Gross Profit equal Total Sales from deducting direct cost. Indirect costs or fixed costs are those costs that do not vary with sales like administration expenses as well as other overheads like travel, depreciation and rent. Operating Profit equals Gross Profit and deducts from indirect costs. It is measured from profits as earned by company in and through trading activities (Marsh 2012). Retained Earnings- In case of limited company, amount of post-tax profits distributed in and among stakeholders as dividends. Balance Sheet Balance Sheet is a summarized form of assets as well as liabilities of business organization. These can be further classified as long-term assets as well as short-term assets. Long-term assets like plant and machinery as well as furniture and fixtures (Marsh 2012). As far as long-term liabilities are concerned, it includes owners funds like retained profits as well as shareholders capital. In case short-term liabilities, it includes creditors as well as short-term loans that is payable for a period less than 12 months. Total assets should be equal to total liabilities in balance sheet. Assets Liabilities Fixed Assets Plant Machinery Furniture Fixture Owners Funds Share Capital Retained Profits Current Assets Cash Debtors Stock Accounts Receivable Long-term Loans Current Liabilities Creditors Bills Payables Short-term loans Data can be presented by using formulas like: Fixed Assets+ Current Assets- Current Liabilities = Owners Funds + Long-term loans Cash Flow analysis The report displays total quantity of money future in as well as leaving out for specified period. It has opening as well as closing balance. Most of the organization prepares cash flow forecast for predicting the expected cash flows for specified time (Mann and Atkins 2012). It helps in understanding whether it has the capacity in paying bills as and when due. In case of shortage of funds, company requires in alteration of purchasing plans as well as other related planned activities. 1st Month 2nd Month 3rd Month Opening Balance 0 87800 103600 Income Sales 5000 7000 Shareholders Investment 1,50,000 Loan 15000 Expenditure Rent 3000 - - Wages 2000 2000 2500 Utilities 200 200 200 Equipment 55000 - 2000 Raw Materials 2000 2000 2000 Closing Balance 87800 103600 103900 Table: Performa of Cash Flow Analysis (3). It is essential in analysing information as presented in the financial statements, as it will help organization in: Assessing real performance in and against budgets Prioritizing activities as well as reallocating funds at the same time Identifying areas of strength and weakness Gross Profit Margin- Organization should keep high gross margin as it indicates more money for covering overheads as well as investing in future growth (Madura 2012). Operating Profit margin- Organization should have higher operating profit margin as it indulges in more money for paying loan interests. It pays for dividends to the shareholders in the most appropriate way. Return on Capital Employed- It mainly displays total amount of profits for money invested in the business by potential investors (Liu, Wang and Yang 2012). It helps in comparing between different companies as well as industries by potential investors and gauging risks for investment purpose. Healthy ROCE makes company attractive especially by the potential investors. High ROCE is because improved profit margin on goods as well as proficient utilization of existing resources. Current ratio- It should be greater than one that displays company has sufficient funds for paying debtors. Acid-Test ratio- This particular ratio excludes current assets that can be easily converted to money. Gearing Ratio- This particular ratio displays relationship connecting shareholders money and other source. Elevated gearing implies more cash from external source as invest in risky business (Lee 2012). Reference List Aamer, M. (2013).Microsoft Dynamics AX 2012 Financial Management. Packt Publishing. Balla, D. (2012).CLEP financial accounting. Piscataway, NJ.: Research Education Association. Bekaert, G. and Hodrick, R. (2012).International financial management. Boston: Pearson. Bragg, S. and Bragg, S. (2012).The essential controller. Hoboken, N.J.: J. Wiley Sons. Collinson, D. (2011).Leadership. 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