FINANCIAL ANALYSIS OF A BUSINESS

Financial Analysis of a business



Financial Analysis of a Business

Introduction

Financial analysis is an integral part of the decision making process. Analyzing the financial stability of the hotel is greatly important to determine as to how effectively is the hotel operating. Financial performance refers to the evaluation of the financial situation of an organization, person or a project. Several methods of financial analysis exist; however, ratio analysis is considered the most efficient in determining the financial position and performance of an organization (Adams, 2006).

The budgeting is key to financial management. This tool will help to plan, develop and use budgets effectively in organization. A firm understanding of the principles of development budgets can assist in strong financial management. If use this tool along with others, as indicated, will increase the capacity of the organization when it comes to direct their financial effectiveness. It also increases its survival skills along the process of forecasting and planning (Abernethy and Brownell, 1999).

One of the main functions of budgeting is planning, which involves a detailed plan of the company. This feature is designed to coordinate action to achieve the goals of the company. In this case, the implementation of the functions of planning budgets allows you to create any quantitative goals of the company - performance targets, assess the degree of achievement of targets based on the plan - the factor analysis, to conduct a preliminary analysis of the activities and future financial position. With estimates of the centres of responsibility and the extent to which these targets set standards for the analysis to achieve the objectives of the company as a whole and, accordingly, the effect of motivating employees to the extent to which the objectives of the company.

Flexible Budget

Flexible budget - the budget, semi-variable costs that are recalculated to reflect actual changes in sales volume (production) products. A flexible budget is developed on the basis of the company's budget and determines the match between revenues and expenditures of the company, based on the actual circumstances. In cases of changes in the level of output, the analysis of variable costs by comparing actual costs of production and cost data, calculated on the basis of planning standards and real output. Analysis of budget implementation is closely linked with the monitoring of its execution. Many of the Treasurers have been using the Budget Variance analysis tool effectively to monitor the Budgets. Apart from the existing facility to monitor and track the budgets, it also enhances to enable to track budgeted expenses.

Benefits of the Budget Process

The budget process tends to reflect in a quantitative way, through the budget, the goals set by the company short-term by establishing appropriate programs, without losing sight of the long term, since this condition the plans allowing achievement of the ultimate goal, which is, oriented the management of the company. The budgets provide a means of communication plans throughout the organization, providing the foundation that will evaluate the performance of individual segments, or areas ...