FINANCE

Managing Financial Resources and Decisions

Managing Financial Resources and Decisions

Introduction

Financial analysis serves as the lifeblood for any organization. The financial ratios and analysis indicate the overall feasibility and performance of the firm. Moreover, different types of format are used in the preparation of financial statements. It depends upon the nature of the business and the standard format use in the industry. Financial Ratios are use for internal and external comparison. They are used to compare the performance of the company in the recent years as well the performance against other companies in the same industry. This paper discusses the main financial statements and the appropriate formats of financial statements for different types of business. The company selected for the purpose of financial and ratio analysis is Royal Bank of Scotland.

Financial Statements

The financial statements provide information about the financial position, financial health and operations of the company. It indicates the proficiency of the management in utilising the assets of the firm for the purpose of generating revenue. The Balance sheet of the company represents the financial health of the company, as on the specific date. It includes assets of the company, liabilities, and capital that is the participation of the owners or shareholders. It also reflects the liquidity position of the company that is the ability of the company to fulfil its short term debt obligations (Walton, pp. 279-310).

The other type of financial statement is the income statement which presents information about the development of the company, and measure the operation of the same through the generation of profits or income. The main components of this statement are the revenues, costs and expenses, through which it determines the company's ability to generate cash flows and measure the effectiveness with which the assets have been utilised. Similarly, they are analysed by the management and broad of directors for making crucial decisions about the company's future prospects. Regardless of format adopted by the company, according to the rules of IFRS, it is mandatory for the company to state it earnings per share on the face of the income statement (Wild, pp. 416-450).

The third important type of financial statement is the Cash Flow Statement which provides information on the capability of the firm to generate cash flows from operations, investing and financing activities, which enables the analyst to analyse a company's ability to pay its commitments: salaries, payables of suppliers, creditors and dividends to their owners (Helfert, pp. 35-62).

Overview of the Company

Royal aBank aof aScotland ais aa aglobal abank awith aoperations ain a50 acountries. aRBS ais aprimarily aa abusiness abank, aand ais adominated aby aits aglobal abanking aand amarkets adivision, awhich ahas ahistorically agenerated aabout a40% aof aprofits. aIn a2009, aRBS aformed aa anoncore adivision, aholding aabout a10% aof aassets, awhich alargely awill abe arun aoff aby a2013. aThe afirm agenerates amore athan a65% aof aits aprofits ain athe aUnited aKingdom, aand aowns aUlster aBank ain aIreland aand aCitizens aBank ain athe aUnited aStates ...