The Internal Assessment

Topics: Financial ratio, Financial ratios, Balance sheet Pages: 5 (1224 words) Published: April 17, 2011
The Internal Assessment focuses on identifying and evaluating a firm’s strengths and weaknesses in the functional areas of business, including: management, marketing, finance, production, research and development, computer information systems. There are many subareas inside these functions, such as customer service, warranties, advertising, packaging, and pricing under marketing. The functional business areas differ for different types of organizations, such as hospitals, universities, government agencies and so on. In a hospital, for example, functional areas may include cardiology, hematology, nursing, maintenance, physician support… Functional areas of university can include athletic programs, placement services, housing, academic research, counselling (poradenství)… Specific strengths and weaknesses in the functional areas of business can better determine through these questions. An answer no to any question could indicate a potential weakness. Positive or yes answers suggest (naznačuje) potential strength. The list of questions in functional area management:

1. Does the firm use strategic-management concepts? (mission statements, vision statements, external assessment, internal assessment…) 2. Are company objectives and goals measurable and well communicated? 3. Do managers delegate authority well? (authority – for example I have authority to represent our company in transaction with our suppliers) 4. Is the organization’s structure suitable?

5. And so on.
The list of questions in functional area marketing:
1. Are markets segmented effectively?
2. Has the firm’s market share been increasing?
3. Are present (současné) channels of distribution reliable (spolehlivý) and cost-effective. 4. And so on.
The functional area finance:
The strengths and weaknesses in the area finance can be identified with help of financial analysis. Financial analysis is a method of strategic management. Financial analysis includes financial ratios.

Key financial ratios can be classified into the following five types: 1. Liquidity ratios
2. Leverage ratios
3. Activity ratios
4. Profitability ratios
5. Market value ratios
Financial manager need for calculation of these ratios 3 statements: 1. balance sheet,
2. profit and lost account,
3. cash flow statement.
Balance sheet
Balance sheet includes total assets and total liabilities.
Total assets
1. Non-current assets
a) Intangible (inmaterial) assets licence patents software … b) Tangible (material) assets property machines cars buildings works of art … c) financial assets long-term securities (stocks, obligations) financial shares (interests) in other companies 2. Current assets

a) inventories (stocks) material, raw materials (oil, coal…) finished products (company produces) goods (company buys goods and sells) … b) receivables (claims)
Total liabilities
1. Equity
a) share capital (sum of entrepreneur’s deposits into company) financial deposits material deposits (cars, machines…) b) statutory reserve fund
c) Retained earnings from last years
d) Profit after taxes (current year)
2. Liabilities
a) long-term liabilities (over 1 year) bank credits (loans) long-term payables bonds (obligations) in issue … b) short-term liabilities (to 1 year) bank credits trade payables, employees payables, tax payables … c) short-term financial assets cash, short-term securities (for example short-term obligation) Profit and loss account

Profit and loss account includes:
a) return (revenue) from:
- goods,
- products,
- securities (sell and interests)
- interests (from bank account),
- …
b) Costs for:
- staff costs,
- material costs,
- other costs,
- financial costs (interest form credis…)
- …
1) Liquidity ratios
Liquidity ratios measure a firm’s ability pay (meet) liabilities (obligation). a) current ratio = current assets / short-term liabilities
What is measured: (in Euros)
How many Euros of current assets cover 1 EUR of short-term liabilities b) quick ratio = [current...
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