A Study on Financial Statements Through Ratio Analyis

Topics: Financial ratios, Financial ratio, Balance sheet Pages: 65 (14998 words) Published: April 1, 2013

Financial management as an academic discipline has undergone fundamental changes with respect to its scope and coverage. In the early years of its evolution, it was treated synonymously with the raising of funds. In the current literature pertaining to these growing disciplines, a broader scope, so as to include in addition to procurement of funds efficient use of resources is universally recognized. The academic is thinking with respect to the objectives of financial management and also characterized by a change over the years.

The company is made to know of cash management, inventory management, ratio analysis account receivables management, working capital finance, the customer delight, through proper observations findings, to enhance its strength over the activities of financial management and service, where it is a need.

Financial Management means planning, organizing, directing and controlling the financial activities such as procurement and utilization of funds of the enterprise. It means applying general management principles to financial resources of the enterprise. DEFINITIONS OF THE FINANCIAL MANAGEMENT:

According to Joseph and Massie, “Financial management is the operational activity of a business that is responsible for obtaining and effectively utilizing the funds necessary for efficient operations”.

According to Western and Brigham, “Financial management is an area of financial decision making, harmonizing individual motives and enterprise goals”.

According to H.G.Gathman and H.E.Dougall, “Business finance can be broadly defined as the activity concerned with planning, rising, controlling and administrating of funds used in the business.”

Financial Management has concerned with the efficient use of and important economic resources namely capital funds. The company is made to know of cash. Management, inventory management, receivables management, working capital finance, the customer delight, through proper observations and findings, to enhance its strength over the activities of financial management and services, where it is need.

“Financial Management” has concerned with the managerial decision that results in the acquisitions and financing of long and short- term assets for the company. As such it deals with the situations that require the selection of specific assets, selection of specific liability as well as the problem of size and growth of enterprise.

The analysis of these decisions is based on the expected and inflow and outflow of funds and their effects upon managerial objectives.


The objectives of financial management can be broadly classified into two categories namely 1. Primary objectives
2. Secondary objectives

➢ Profit maximization
➢ Wealth maximization
➢ Maintenance of Adequate management in the company

➢ Profit Maximization:
Earning profits by a corporate is a social obligation. Profit is the only means through which an efficiency of an organization can be measured. Accumulated profits reduce the risk of an enterprise. So maximization of profits naturally becomes an important as objective of financial management. But the companies do earn the profits to pay dividends to share holders, to meet the obligation of creditors, to offer fair amount of wages and salaries to workers by giving quality of products and services to customers.

➢ Wealth Maximization:
The concept of wealth maximization refers to the gradual of value of assets of firm in terms of benefits it can produce. Any financial action can be judged in terms of the benefits it produces less cost of action. So the wealth maximization attained by the company is reflected in the market value of shares this maximize the wealth of shareholders.

➢ Maintenance of adequate Management in the Company:...
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