Question

You are trying to gain an understanding of How manager use Financial Reports to run their business.

Interview a manager or an owner of a business

How does the manager use Financial Numbers, Statements or Reports to run their business? How does the manager know they are succeeding or making money? What indicates to a manager that their is a problem,

for example sales are not meeting their budget plan?

WHAT are the reports called and WHAT type of information is included on those reports, Sales, Inventory, Expenses, what are the key number that helps the business succeed.

Answer 1

How does the manager know they are succeeding or making money?

• When the net profit is increasing. Manager can identify the increase in net profit by comparing Income Statement of one period with the Income Statement of another Period. When cash inflow exceed the cash outflow,Manager get this information from cash flow statement. Customer are making payment on time, manager can get this information from Accounts Receivable Report or Debtors Ageing Report.

What indicates to a manager that their is a problem.

• When the net profit is decreasing and cash flow of the business is also decreasing or not in enough to meet all the monthly business expenses .Actual sales are not meeting their budget sales plan and when the actual expenses exceed budget expenses.Customer are not making payment on time, manager can get this information from Accounts Receivable Report or Debtors Ageing Report

WHAT are the reports called and WHAT type of information is included on those reports

• Income Statement - Prepared to find profit or loss for specified period,which are generally yearly ,quarterly, every six month's . which reflect revenue and sales minus all the business expenses of a specified period.
• Cash Flow- It indiacte all the cash generated by a business in a specified period,which are generally yearly ,quarterly, every six month's or monthly . it consist of Cash flows from operating activities, Cash flows from investing activities, Cash flows from financing activities.
• Budgeting Statement- It Consist of estimated and predefined sales and expense for a specified period, it help in monitoring performance by comparing actual the sale or expenses with budeted the sale or expenses.
• Accounts Receivable Report or Debtors Ageing Report- Consist of the number of days in which customer pays off thier debts.

How does the manager use Financial Numbers, Statements or Reports to run their business?

• Manager use Financial Numbers, Statements or Reports to run their business by analysing and Comaparing reports like Income Statement, Cash Flow Statement  ,Budgeting Statement , Balance Sheet and Debtors Ageing Report etc to find out important and useful information to make decisions and judgments.