Question

Detail the impact of financial statement analysis, inventory management, and investment in new projects.

Answer 1

Finance is the life blood of a company. It is essential that the finance manager keeps a record of all financial transactions that have taken place in the company. These records of financial transactions are known as financial statements. Some of the financial statements are profit and loss account, balance sheet etc. The finance managers of a company uses tools like ratio analysis and comparative analysis to find out more information about the finances of the firm. This helps in analysing the financial data of the company and taking future decisions. The finances of the company are used for carrying out the operations of the firm, for giving dividends to shareholders and also for investment purposes. Financial statement analysis helps the finance manager to take required measures and steps.

Inventory management deals with the raw materials, finished goods, work in progress, stock etc. In the production process, the use of raw materials is a major part of the business. The inventory has to be managed properly as the whole production process depends on it. There are different ways by which the inventory can be managed. Some of them are ABC Analysis, VED Analysis, EOQ analysis, JIT analysis. The use of these techniques will help to keep proper track of the inventory and the production manager can then take adequate measures to managevtge inventory as per the demand of the end product.

Investment in new projects is a crucial decision for the company. Before a company invests in a new project, tge finance manager should ensure that the project is a profitable one. In order to do this capital budgeting techniques can be used like calculating npv, irr, profitability index etc. A large amount of money is invested in new projects. So investment in new projects is a crucial decision.