Essay on How Financial Management Decisions Impact the Organization

3 pages
616 words
George Washington University
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The financial management decisions are fundament organizational measure which when effectively enhanced it will promote profit maximization as well as liquidation stability. The financial management decisions comprehensively impact the organization success since the decision relating the investment such as working capital investment and capital budgeting decision determines the organizational assets composition as well as the complexion of the business risk (Brooks 2015). The financial management decision comprehensively entails the measure attributable to the organization proper asset utilization measures and assets replacement resolutions which determine the organizational success in achieving the goals of wealth maximization.

The financial management measure such as working capital decisions comprehensively determines the amount of the business cash, inventories as well as the accounts receivable that can be held within the accounting period thus determining the organization liquidity trend and ability to meet the liabilities when they fall due (Brooks, 2015). Financing decisions such as the use of external borrowing and or the internally share capital determine the organization credit worthiness as well as success in effectively making use of the financing concepts.

The role of taxes in the different legal categories of business organization.

Taxes play significant roles in four different of legal business forms in enhancing substantial contribution to the economic growth due to the compliance of the tax of conformity base. The tax enhances the state's competitive due to growth in economies archived through the effective tax schemes on the different legal forms of business.

Brooks (2015), describes the sole proprietorship and partnership business form revenues are not taxed on the business revenue income realized but the distributed and taxed on individual and partners which upsurge the countrys economies growth. Other legal forms of business such as cooperate bodies and companies describe the consistent tax appropriation which enables high successive tax resolutions that enhance the growth of the state economies.

Chapter 2

The structure of Financial Statements and how they interact with each other.

The structures of financial statements include the business income statement, balance sheet, cash flow statement and statement of owner equity (Brooks, 2015). The four structure of financial statement enact a comprehensive relation where the summative figures in the income statement are used in balance sheet while the cash in balance sheet defines the cash and cash times ordained in the cash flow statement and the retain earning in balance sheet is expounded in the statement of shareholders equity.

Brooks (2015), the structure of financial statement beginning with income statement describes the income reflected in balance retaining earnings and the statement of shareholders equity. The balance sheet structure defines the total shareholders equity and liabilities which id pragmatically reflected in the statement of shareholders equity. The cash flow statement net change in cash defines the cash reflected in balance sheet thus defining the interactive cycle of financial statement structures.

Why the cash flow statement is considered an accurate indicator to evaluate a company.

Cash flow statement describes fundamental performance indicator of the business since the statement provides better KPIs than the income statement. The cash flow statement provides a flow of cash from operation, investment and financing operations which enhance a benchmark for financial decisions due to cash flow performance metrics.

The cash flow statement details on the flow of cash base on different sections such as operating activities narrate where the cash is injected or utilized as compared to the profit and loss statement which give a summative cash evaluations rather than highlighting different sections of cash circulation. Brooks (2015), accentuates that Cash flow statements configure better financing decisions since the statement helps in ordaining the cash variances in the three section thus facilitating viable financing of business growth.



Brooks, R. (2015). Financial management: Core concepts (3rd ed.). Pearson Education.



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