Summary
The importance of Finance in any company is undeniable, as it aims to optimize and multiply money. For this reason, it is essential that every company, regardless of its size, has timely, useful, clear, relevant and concise information to make the best decisions.
Based on the information you have, you will be able to forecast the future and we will be able to visualize where we will lead our company, so a lot of attention and capacity are required to do so.
Summary
There is no denying the importance of finance in any business, which aims to optimize and achieve the multiplication of money. Therefore, it is critical that every business, regardless of size, for timely, useful, clear, relevant and concise information to make the best decisions.
Based on information in its possession, it will predict the future and we can visualize where to take you to our company, so they require a lot of attention and capacity to do so.
Introduction
This essay is aimed at reflecting on the importance that finances play in any company. It is a wide and dynamic field that directly affects the life of every person and organization.
Our mission as managers or executives is fundamentally decision-making, and this must be done based on the adjusted knowledge of the business reality, the present and the potential of the company, therefore it is necessary that the information they provide is taken as a basis. among other reports, the financial statements.
Finance and financial analysis
Finance "is a branch of economics that is generally devoted to the study of money. And it is particularly related to transactions and money management. "
Financial analysis acquires its true relevance when making decisions.
Financial analysis is an integral part of the strategic planning process of the company; It is a continuous process for the allocation of resources that allow the achievement of strategic objectives.
The financial function in Strategic Planning:
- It must establish the risks associated with the different planning scenarios to obtain coherent and assumable plans. It must provide financial coverage for those plans without compromising the future viability of the business, generating the value that shareholders or owners demand and generating profitability. It must demonstrate a mentality. and fair degree of risk so as not to stop business initiatives. You must maintain a fair degree of conservatism so that all the values to be taken into account in the decision are aligned.
A Strategic Plan is the formal expression of the strategy
Financial Analysis can be defined as the set of techniques used to diagnose the situation and perspectives of the company. The fundamental purpose of financial analysis is to be able to make appropriate decisions in the field of the company.
These techniques are mainly based on the information contained in the financial statements and are intended to carry out a diagnosis of the company that allows conclusions to be drawn on the progress of the business and its future evolution.
The financial analysis must provide us with information on the following three fundamental aspects:
First of all, profitability, that is, the results, their quality, composition, evolution and trend. Of the number of results, what really matters is not its absolute value, large or not. What interests us to anticipate the horizon that the company faces is its quality and composition, that is, whether they come from the company's core business or if, on the contrary, they have been generated in financial or extraordinary actions; their evolution, that is, if they present a stable and consistent trajectory; and its trend, that is, if it can be anticipated if they will foreseeably maintain the current level, increase it or if, on the contrary, they will decrease.
Secondly, the short-term financial situation, that is, liquidity, or the ability to meet short-term debts and commitments, the size and composition of the working capital, its turnover, the maturity period of the company and the generation of treasury in operating activities.
Third, the long-term financial situation, that is, the solvency, or the ability to service long-term debts, the investment structure, the sources of financing; the capacity, structure and convenience of the debt; the estimation of results in future periods.
conclusion
Financial analysis should provide insights that reduce the scope of the guesswork, and therefore the doubts that you plan when it comes to deciding. With the analysis, large masses of data are transformed into selective information, helping decisions to be made in a systematic and rational way, minimizing the risk of errors.
Financial analysis is not only relevant for those who carry out financial responsibility in the company. Its usefulness extends to all those agents interested in the company, its current situation and its foreseeable evolution.
Any investment project should always be evaluated regardless of its magnitude and size or importance. Therefore it is necessary to carry out a detailed and detailed analysis of the project. If a company faces an investment plan, it means that it will have to make a significant financial outlay and it will compromise the economic and financial future for a reasonable period of time until the results of the project are seen.
Bibliography
- Lawrence J. Gitman (2007), Principles of Financial Management, 10th 1st Edition, Editorial Pearson Addison Wesley DUMRAUF, Guillermo (2010) Corporate Finance, a Latin American Approach, 2nd edition, Alfa Omega, Mexico.ROBERT C. Merton, Finance, First edition, Pearson Education publishing house, EITEMAN Stonehill, The finance of multinational companies, fifth edition, Editorial Addison Wesley Iberoamericana Dumrauf, Guillermo (2010) Corporate Finance, a Latin American approach, 2nd edition, Alfa omega, Mexico. Page 123.
