Financial concepts



Introduction

Handling of money and its proper utilization has been the most important part of any organization either that is on large scale or on small scale. If the organization is not capable for tracking its money than one can say for sure that the organization might end up in winding up its operations. The most important part in terms of financial aspects for any organization is there financial statement s, its financial ratios, management of its working capital i.e. managing its current assets and liabilities and last but not the least, managing the flow of money with respect to the concept of time value of money. When talking about the industry of environmental goods and services, one can say that for handling financial matters in such an industry requires the inclusion of all the above discussed financial characteristics in order to get a more fruitful and appropriate result that is desired by the industry.

Discussion

Financial Statements

Financial statements are said to be those written records that are in quantitative in nature and outlines the financial activities or position of any particular business, any entity or an individual. It is now a must do requirement for every firm to maintain its financial statements that generally follows the rules Generally Accepted Accounting Principles (GAAP). These financial statements give a very brief and clear view for both the reader and the entity regarding the financial information of that particular organization or entity so that it could help in making quick and useful decisions that could benefit the company, entity or an individual. There are mainly four financial statements that are commonly used in every organization that are balance sheet, income statement, statement of changes in owner's equity and cash flow statements (investopedia, 2012). Balance sheet provides a quick and concise view regarding the assets (fixed and current), liabilities (fixed and current) and retained earnings (owner's equity) of a company. Income statement on the other hand provides a detail on how much income has been generated so far while bearing expenses. This helps the company in identifying that what expenses are exceeding from their normal range and how it will effect on the companies income. The statement of retained earning is responsible for showing the amount left for the owners of the company that is influenced by the income and dividends but is shown on the balance sheet. The cash flow statement helps in tracking all the cash that is either earned by the firm or that is expensed by it in three different categories i.e. operating, investing and financing activities.

Financial Ratios

A firm can analyze its financial position more accurately by the usage of financial ratios. These financial ratios help in indicating firm's performance and identify its actual financial situation. Most of the ratios can be easily calculated from the information provided within the financial statements of the company. Financial ratios can help in analysing the trend within the firm and also can help in evaluating the firm's performance over the years as ...