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Need for financial statement analysis in a computer hardware industry

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  1. Introduction
  2. Scope of financial management
  3. Importance of financial management
  4. Functions of finance
  5. Sources of finance
  6. Specialised financial institutions or development banks
  7. Understanding financial ratio analysis
  8. Objectives of analysis of financial statements
  9. A study on valuation ratios
  10. Problems of financial statement analysis
  11. Conclusion
  12. Bibliography

Financial management, as an integral part of overall management is not totally an independent area. It draws heavily on related disciplines and fields of study such as economics, accounting, marketing, production and quantitative methods.

The scope of finance function was treated by the traditional approach in the narrow sense of procurement of funds by corporate enterprises to meet their financial needs. Thus defined, the field of study dealing with finance was treated as encompassing three inter-related aspects of raising and administering resources from outside:

- Institutional arrangement in the form of financial institutions that the funds are raised from the capital market and their procedural aspects.
- The financial instruments through which the funds re raised from the capital market and their procedural aspects.
- Legal and accounting relationship between a firm and its sources of funds.

The traditional approach to the scope of finance functions evolved during the 1920s and 1930s and dominated academic thinking during 40s and through the early 50s. But, it suffered from serious drawbacks.

Firstly, it focused on financing problems of corporate enterprises. To that extent, the scope was confined only to a segment of the industrial enterprises, as non-corporate organizations lay outside its scope.

Secondly, the traditional treatment was found to have a lacuna to the extent that the focus was on long term financing. Its natural implication was that the issues involved in working capital management were not in the purview of the finance function.

Last but not the least, the traditional treatment was outside looking in approach, that is, from the view point of suppliers of funds such as investors, investment bankers an so on. No consideration was given to the view point of those who had take internal finance decisions that is insider looking out was completely ignored. Hence the traditional approach has now been discarded.

[...] Thus, in the modern sense of the term, financial management can be broken down into three major decisions as a solution to the three major problems relating to the financial operation of a firm. They are: The investment decision The financing decision The dividend policy decision IMPORTANCE OF FINANCIAL MANAGEMENT: Financial management determines the nature and the size of the activities and the operations of the business. It arranges to meet out the financial obligations of a business as and when they arise, increase its credit worthiness, protects the business against financial crises and avoids all stress and strains on the finance of an enterprise. [...]

[...] In our country there are two major sources of term lending: Specialised Financial Institutions or Development Banks The need for establishing financial institutions was felt in many countries immediately after the Second World War in order to re-establish there were shattered economies. These specialized financial institutions are also called Development Banks because they provide not only finances but also help in promotion of new enterprises. These institutions have to play a very significant role in the industrial development of our country for the following reasons: Absence of organized capital markets Lack of entrepreneurial talent Low capital formation Shyness of capital, that is, people prefer to invest only in traditional areas and reluctant to take risk in new ventures Inadequacy of financial facilities to meet huge requirements of funds for industrial development, and Planned economic development to achieve the socio-economic objectives At present, there are four important financial institutions at the national level, i.e., Industrial Finance Corporation of India (IFCI), Industrial Development Bank of India (IDBI), Industrial Credit and Investment Corporation of India (IRCI) now called Industrial Investment Bank of India Ltd. [...]

[...] Key Features Preventive maintenance once in a quarter Corrective and remedial maintenance services Virus checks/cleaning and preventive measures by using your legal software Regular checking of power supplies Standby arrangements (optional) Specialist deputation for Server hardware and serious network problem Software Support Brief Scope of work To provide support services on office automation packages such as Windows, Word Processor, Spread Sheet, E-Mail, and Operating System To install, configure and trouble shoot software and support operational problems. Key features Provide instant support on all office automation software Software build on new systems added to the network Provide informal training to users Identify common problems and suggest corrective action Administrative Support Job allocation and coordination with vendors Warranty tracking Assistance in site preparation for installation Coordination with vendor for new installation Software library maintenance Software issues and receipts Software registration, License validation, renewal coordination Manuals / books and document library maintenance Preventive Maintenance coordination Support Plan Our service plan broadly covers Locations covered with install base Manpower options with profile of persons Backup Support at office Escalation process Backup Support At Office Introduction The level of support as projected is not possible until otherwise sufficient support from office is not made available. [...]

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