FINANCIAL MANAGEMENT

Financial Management

Financial Management

Introduction

The primary goal of every corporation is to maximize shareholder wealth, primarily through cash dividends and share value appreciation. To this end, the role of the financial manager is to act in accord with this premise (Poonam 1999). Under his/her auspices, the financial manager must determine which factors affect the company's stock price, and which choices will add value to the company, all the while ensuring that the company doesn't run out of the cash necessary for continued, day-to-day operations and planned growth strategies.

Cash Flow

Cash flow forecasting--projecting cash flows in the short term (up to one year)--is an important financial management tool. If it is not done effectively and regularly, companies can lose substantial amounts of cash, as well as opportunity costs. If it's so important, why can't forecast be done well? Good question. First, every situation is different: Companies of similar size can have substantially different cash flows in terms of transaction size, the frequencies or timing and the method or location where the cash flow occurs. In other words, forecasting cash flows must be tailored, a process that can be time-consuming (Mischitelli, 1990).

Another factor is the corporate climate. Experience shows with large amounts of excess cash and virtually no short-term debt place less importance on cash forecasting than those with substantial short-term borrowing activities. This makes sense, that borrow have a finite amount of short-term reserves their short-term credit capacity while those with short-term investments do not really see such limits (Egerton, Thomas Christopher, 1995).

Profit and Loss 

The GPM's indexes showed above of the years 2009 and 2010, indicate already established a well procedure in its trading, due to the similarity of the ratios between both years, which means a strong constitution of the company. companyhas been performing this ratio above seven percent; therefore it is evident that the company has a good control of its turnovers. This ratio indicates company has an effective control over its expenses and possessions, such as rents and premises, which means a good managing over sales and overheads. Also the sales increase in the last years which shows a good performance of the company (Arnstein, 1948) .

Balance Sheet

Balance sheet is an integral part of the financial reports of a company. It is the snap shot of the state of affairs of the company at the end of its fiscal period. However, it does not necessarily reflect the true value of the company. Financial reports give a true and fair view of the company as the audit standard for financial reporting. Discrepancies arise because of the cost of accounting accuracy, the different valuation method, and financial reporting principles (Ansari, 1979). In the following paragraphs, I will further analyze the discrepancy and its causes. Balance sheet Net assets have increased by £1,093 million to £12,995 million. Non-current assets increased by £8,144 million, after charging depreciation and amortisation of £1,189 million. Group capital expenditure was £4.7 billion. UK capital expenditure was £2.6 ...