Question

What are ratios, budgeted financial statements and cash management in a business? Why are they so important to the success of a business? What can happen if these things are not done properly?

Answer 1

Q: What are ratios, budgeted financial statements and cash management in a business? Why are they so important to the success of a business? What can happen if these things are not done properly?

Business Ratio

The ratio is the tool to express the relation between two items of the financial Statement of the Business. That helps to analyze the profitability, liquidity, solvency, and efficiency of the Business. It helps to compare the year on year performance of the company that helps us to predicate the trend for the Business. The ratio is an important tool for the investor to invest money, bankers to lend money and owner to analyze the company's strength and future outcome.

Budgeted Financial Statement

The budget is the estimated amount of Revenue and Expense for the future based on previous year information and knowledge. Financial Statement is a formal statement of the business which tells us about the activities, business information, relation with other parties, it is a legal document that's is audited from time to time. Together we understand that's with the Budget Preparation, the company prepares the summary for Business Income and Balance Sheet. It helps to understand the Objective and target for the Business as well as what the company wants to achieve.

Cash Management

Cash Management is the process of controlling, managing, using the cash for the Business. Cash Management is a very important tool for managing Financial Transactions of the Business. For cash management company needs to check cash flow(Inflow and Outflow) in the business from various sources and how much the company needs to maintain for liquidity. After understanding the cash management, the company able to do prepare the credit policy for the business.

Importance of Ratio budgeted financial statements and cash management in a business

Ratio in Business	Budgeted Financial	Cash Management
It helps to understand business Financial Performance. Analyzing the capacity of the Busienss. Planning for Future. Analysis of Business Performance. Manage Risk & Return of Business.	Planning for Business Income. Set Target for the Business. Financial Predictions. Setting standard for Business Activity. Management of Assets and Liabilities.	Effective Utilisation of Cash Reduce the cost of Per Transaction. Safety from insolvency. it helps in Preparing Credit Policy. Understanding Company Cash Flow

Outcomes to not managing, Ratio, Budgeted Financial Statements and Cash Management in a Business

These three of them are equally important for the financial strength and success of the business. We can't substitute it with other instruments. So it's better than the company should do a careful analysis of this all instrument in Business. It's important for the success of the Business. If the business doesn't address it carefully it will affect the business directly. Let's discuss the outcomes of the instrument if not managed by the company properly.

• Business Ratio is an important tool to express the relation of two items of financial statement, not managing it, and not understanding carefully can lead to future risks and liabilities for the business.
• Budgeted Financial Statement helps us to set the standard for the Financial Statement, if we don't manage it then we are unable to perform the business major activity as well growth of the business
• Cash Management is a critical instrument for every business, not managing cash properly may lead to loss of both liquidity and profitability for the business.

All the very Best