Managing Financial Resources

Topics: Generally Accepted Accounting Principles, Financial ratios, Financial ratio Pages: 10 (3022 words) Published: May 24, 2012
Managing financial resources

Table of Contents

1. Introduction
2. Past Financial Performance of Elim Limited
A. Purpose of this Analysis
B. The Importance of Standards
C. Descriptions of Past Performance
3. Implications of Elim’s Past Performance
4. Information Needs & Its Importance
D. List of Decisions
E. Information Needs of Different Parties
5. Analysis of Different Strategies
F. Cost Control
G. New Product Development
H. Growth by Acquisition
6. Recommendation
7. Conclusion

1. Introduction
We all know that a successful company must have a strong financial performance. In 2008, Elim Limited has reported the first loss in its history. In this report, we would like to investigate the reasons behind. We would also want to figure out ways of improving its financial performance.

This paper begins with a brief explanation of the purpose of this analysis, followed by a description of Elim’s past performance and its implications. We then identify the information needs of different users and outline a list of decisions that are needed to be made. In the core part of this paper, we are going to investigate three proposed methods that are said to be able to improve the financial performance of Elim. Based on our findings, our final recommendations and conclusion would be to move one step forward – to enter the giant market of China.

2. Past Financial Performance of Elim Limited
Purpose of this Analysis
The main purpose for analyzing the financial performance of Elim is to figure out ways for improvement and a better business. This can be achieved by analyzing its financial statements for the past financial year.

We all know that financial statements are of great importance to a company. Valuable information of a company can be communicated to various stakeholders using these financial statements. These stakeholders can be shareholders, creditors, employees, the government, or just an ordinary citizen who may be potential shareholders, creditors or customers. Different stakeholders will have different areas of interest and the purpose of the financial statements is to provide objective information about a company to assist their decision making.

If Elim can well articulate and prepare its financial statements, it serves at least three advantages. First, the financial position of Elim can become more transparent, thus attracting more people to buy stocks from the company. Second, with clearer information, loan applications can be facilitated. Creditors will find it less risky to lend money to the company. Hence the interest charged can be lower. Finally, financial statements give some clues on whether the business is operating efficiently. This would be useful for managers to make business decisions.

The Importance of Standards
Typical financial statements include the balance sheet, the income statement and the statement of cash flows. In this session, we would like to use the first two financial statements to assess the financial performance of Elim in the year ended 2008. It is worth noting, however, that different types of businesses may present their financial statements in different formats.

For example, a sole proprietorship, a partnership or a private company may not need to follow any rules, formats or regulations in their statements. In the case of sole proprietorship and partnership, there will not be ‘Capital Stock’ in the equity section of balance sheet because no stocks are traded for these types of business. A limited company and a listed corporation, on the other hand, have to make sure that their financial statements are in compliance with the company law of the respective country. The Generally Accepted Accounting Principles (GAAP) is usually followed when these companies have to prepare financial statements.

If a company is unincorporated, it may not prepare its financial statements in a...
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