Stage 4 - Cost and profitability

Question 1

What are the questions Financial management deals with (No need to remember all, very important tho) First 4

Answer 1

1) How are we doing? Are we making or losing money?
2) How much cash do we have on hand?
3) Do we have enough cash to meet our short-term obligations?
4) How efficiently are we utilizing our assets?

Question 2

What are the questions Financial management deals with (No need to remember all, very important tho) last 4

Answer 2

5) How do our growth and net profits compare to those of our industry peers?
6) Where will the funds we need for capital improvements come from?
7) Are there ways we can partner with other firms to share risk and reduce the amount of cash we need?
8) Overall, are we in good shape financially?

Question 3

What is done in ratio analysis and why?

Answer 3

Comparing a firm’s financial results to industry norms helps a firm determine how it stacks up against its competitors and if there are any financial “red flags” requiring attention

Question 4

What are Pro Forma Financial Statements?

Answer 4

it’s similar to its historical financial statements except that they look forward rather than track the past, it helps a firm rethink its strategies and make adjustments. Also necessary if a firm is seeking funding or financing.