Verified Document

Financial Measures And Management Practices New Business Essay

¶ … Financial Measures and Management Practices New business leaders, aspiring entrepreneurs and even experienced professionals are all confronted with a bewildering array of financial measures that are commonly used to reflect how well companies are performing. Moreover, there are a number of management tools that are available that can be used to evaluate these financial measures provided that the practitioner understands what they mean and how they can be used. To this end, this paper provides a review of the relevant juried and scholarly literature concerning various financial measures and management practices, followed by a summary of the research and important findings in the conclusion.

Review and Discussion

How do stock prices and dividends reflect the value of the firm?

Although they are not infallible of course, stock prices provide a general reflection of the fundamental value of a firm that includes the present discounted value of future firm earnings (Carlstrom, Fuerst & Ioannidou, 2002). By contrast, the payment of stock dividends reflects value in a firm because these "represent distributions paid out by the company to stockholders based on the outstanding shares (issued shares less treasury shares)" (Siegel & Shim, 2001, p. 152).

What does a statement of cash flows tell us about the short- and long-term prospects of the firm?

While cash flows are continuous and "the action never stops," statements of cash flow provide a periodic "snapshot" of how much money is being spent and where it is going. In this regard, Siciliano (2003) reports that, "There is a continuous flow of action captured in the company's income statement and its statement of cash flow. Accountants provide an income statement and statement of cash flow adding up the changes that happened during the month-long activity, and a balance sheet that shows where everything was on the last day of the month" (p. 19).

How does an outside review use a statement of cash flows and other financial statements to assess the viability of the firm?

Because all investors are not equally informed concerning a firm's financial viability, cash flows and other financial statements provide a means of ensuring the fiscal health of the firm (Carlstrom et al., 2002). Among other financial indicators, financial analysts frequently include the following in their assessment...

Current cost (this is the amount of cash or equivalent that would have to be paid if the same or an equivalent asset were acquired currently);
2. Current market value;

3. Net realizable value; and,

4. Present value of future cash flows (Powers, 1999, p. 231).

Why is cost accounting so important to the success of the firm?

This term means "The gathering and processing of cost information for external reporting and internal decision-making" (Shafritz, 1998, p. 549). This definition, though, was not always accurate because cost accounting was originally focused strictly on formulating calculations of financial performance for external reporting purposes; however, increasingly, businesses are using cost accounting for identifying and measuring costs for internal decision-making purposes as well (Shafritz, 1998).

What are the various methods of cost accounting and how are they used?

A wide range of cost-capturing methods are used in cost accounting, including some subjective and intangible costs that remain controversial. For instance, according to Shafritz, "The new perspective emphasizes costs beyond those that have been traditionally captured within the cost accounting system. In addition to traditional cost information, there is recognition of long- and short-run costs that may be more broadly defined as psychic costs and social costs" (p. 549)..

How does an operating budget work to discipline a firm's management?

Corporate managers can become profligate in their practices if they are not constrained by placing realistic limits on their expenditures and operating costs (Siegel & Shim, 2001).

What are the elements of a budget?

According to Siegel and Shim (2001), "A comprehensive budget is a formal statement of management's expectations regarding sales, expenses, volume, and other financial transactions of an organization for the coming period. Simply put, a budget is a set of projected financial statements" (p. 60).

How are budgets constructed?

The budget construction process will be unique for every firm, and will range from the extremely casual such as a sole proprietor "ball-parking" budget needs to the extremely sophisticated that require ongoing input from all cost departments (pers. obs.).

What is…

Sources used in this document:
References

Carlstrom, C.T., Fuerst, T.S. & Ioannidou, V.P. (2002). Stock prices and output growth: an examination of the credit channel. Federal Reserve Bank of Cleveland. Economic Commentary, 1.

Hoskin, K. W & Macve, R.H. (2000). Knowing more as knowing less? Alternative histories of cost and management accounting in the U.S. And the U.K. The Accounting Historians

Journal, 27(1), 91-93.

Keong, C.K. (1997, February). Management & accounting -- an essential perspective.
Cite this Document:
Copy Bibliography Citation

Related Documents

Financial Resource Management Reaching a Financial Decision
Words: 2362 Length: 8 Document Type: Essay

Financial Resource Management Reaching a financial decision regarding heath care services All forms of industries deemed financial management as expressive in origin till the 1960's. Its basic and sole role was to ensure financing for completing the business's operatives and functions. The department for business planning or marketing would project a net total for meeting the services and meeting daily demands; managers would calculate the assets required to complete a given project

Business Proposal in Ghana Giam's
Words: 5365 Length: 20 Document Type: Business Proposal

2% of the population is younger than 14; 58.2% is aged between 15 and 64 and 3.6% is over the age of 65. This affect Giam's in a positive way as most of the population is properly aged to work The median age of the population is 20.2 years, with 19.9 years for men and 20.4 years for women The birth rate is of 29.85 births per 1000 individuals The death rate is

Strategic Management Practices and Bahamian
Words: 5122 Length: 13 Document Type: Literature Review

Culture is no small force; it shapes individuals and impacts tremendously on politics (McCartney, 2004). Nations are made up of people, who, from the moment of their birth, are deeply and profoundly shaped by the cultures and customs from whence they came (McCartney, 2004). Because history and culture are two such inseparable animals, it's worthwhile to take a brief look at the history of the Bahamas. Brief History Many history scholars believe

Unethical Management Practices Have on
Words: 2890 Length: 10 Document Type: Thesis

These benefit the local company as well as the entire region. Leverage financial and other investments in the community. Because nonprofit organizations mobilize vast reserves of goodwill, corporate investment in the community can have tremendous reach in building a better corporate profile and in strengthening public support of the private sector. (Kanaga, 1998) The work of Nae and Grigore (nd) entitled: "An Overview of European Multinational Corporations" the social and political

Human Capital Management the New
Words: 3142 Length: 12 Document Type: Thesis

The second phase would include using these metrics in order to gather the appropriate results. Finally, the third phase implies interpreting those results and using them to gain a competitive strategic advantage on the market. The phase dealing with the development of qualitative and quantitative metrics brings about some of the usual challenges in terms of measuring things: what metrics best reflect the performance of a certain activity? In the

Link Between Recruitment and Selection Practices and Business Success...
Words: 4946 Length: 15 Document Type: Research Paper

Recruitment and Selection Techniques contribute to the Success of an Organization Recruitment is a form of business contest and it is fiercely competitive. Organizations have to be strategic in order to attract and retain top talent to positions in the company. Competition between companies have become even more fierce and companies are doing all that they can to get the best talent for their organizations. Hence, it is important to

Sign Up for Unlimited Study Help

Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.

Get Started Now