Effective Use of the Financial Resources-Free-Samples for Students

Question: Your task is to identify any one concept of finance which you have used in your current position as manager in your organisation recently. Provide a practical example to demonstrate the use of the concept. What challenges you faced in dealing with the situation and how you handled the situation. What have you learnt from this experience? Answer: Introduction Financial management can be defined as the effective use of the financial resources which are available to the company in the overall development of the company. Financial Management is considered as a core part of business nowadays as most of the business are thriving to get competitive advantage and effective maintenance of the financial resources (Kou, 2012). I am appointed as a finance manager in AB company and my primary objective is to look after the financial resources of the company and also take crucial decision which are associated with the effective management of financial resources. Some of the decisions which are taken by is related to credit sourcing decisions, funds allocations decisions are taken by me. Budgeting Concept The preparation of a budget is done by the finance manager of a company and all the companies are engaged in the preparation of budget. Budget are used by the management of the company to forecast financial data on the basis of which targets are set which the company needs to achieve (Robinson, 2013). Budgets are also techniques which are used by business to measure the overall performance of the company and also the measure the companys performance in terms of the standards set in the budget. In our company I am responsible for approving and verifying the budget as prepared by my team. In the company a lot of budgets are prepared such as capital budget, labour budget, direct material budget. The budget which me and my team are suppose to prepare is the finance budget. In finance budget a lot of things are to be considered such as what are the sources of income, what expenses are to be identified and what is the estimated profit the company can expect to earn (Rogulenko et al., 2016) . Such information are estimated while referring to the growth trends, past years financial reports and sometimes on pure judgements. Examples of Finance Budget Particulars 1st Month 2nd Month 3rd Month 4th Month 5th Month 6th Month Sales Revenue $30,00,000 $30,00,000 $30,00,000 $23,28,375 $23,28,375 $24,44,794 Cost of Sales: Salary to Support Staffs $6,50,000 $6,50,000 $6,50,000 $6,50,000 $6,50,000 $6,50,000 Wages to Labors $8,50,000 $13,50,000 $6,50,000 $10,47,769 $10,47,769 $11,00,157 Electricity $15,000 $15,000 $15,000 $11,642 $11,642 $12,224 Telephone Internet $7,500 $6,500 $7,500 $5,821 $5,821 $6,112 Stationery Charges $2,000 $3,000 $4,500 $2,328 $2,200 $2,445 Legal Fees Registration $30,000 Software Installation $5,000 Rent for Office Floor $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 Advertisement $90,000 $45,000 $22,500 $22,500 $22,500 $22,500 Insurance $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 Cleaning Charges $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 Depreciation on Shifting Equipments $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 Depreciation on Vehicles $6,500 $6,500 $6,500 $6,500 $6,500 $6,500 Depreciation on Office Equipment $1,300 $1,300 $1,300 $1,300 $1,300 $1,300 Misc. Expenses $5,000 $5,000 $5,000 $6,000 $6,000 $7,000 Commission on Sales $60,000 $60,000 $60,000 $46,568 $46,568 $48,896 Store Supplies $3,00,000 $3,00,000 $3,00,000 $2,32,838 $2,32,838 $2,44,479 Interior Cost $45,000 Total Operating Expenses $21,33,800 $25,08,800 $17,88,800 $20,99,765 $20,99,637 $21,68,113 Net Profit before Interest Tax $8,66,200 $4,91,200 $12,11,200 $2,28,610 $2,28,738 $2,76,681 Less: Interest Expenses $18,750 $18,750 $18,750 $18,750 $18,750 $18,750 Net Profit before Tax $8,47,450 $4,72,450 $11,92,450 $2,09,860 $2,09,988 $2,57,931 Less: Income Tax Expenses @30% $2,54,235 $1,41,735 $3,57,735 $62,958 $62,997 $77,379 Net Profit for the Period $5,93,215 $3,30,715 $8,34,715 $1,46,902 $1,46,992 $1,80,551 Figure 1: (Chart showing Finance Budget) Source: (Created by Author) Challenges and Measures The challenges which I face while preparing financial budget is there is always an issue on the financial forecast for expense. The expenses are not always accurately ascertained and specially when the expenses are of variable nature (Li, 2012). Another aspect which is challenging is predicting expenses which are of contingent nature. Another challenging area of the budgeted is setting appropriate standard which the company will be following in pursuance of the goal of the company. In order to estimate the expense and income, I had refer to the growing trends of the company and analyze the growth rate in expenses by analyzing income statement for the past 3 years, however the accuracy is not possible to achieve but the projected figure will be close to the actual results. Conclusion From the situation of estimating the budget for the year, I realized that the accuracy in the estimation process cannot be achieved but an approximate estimate can be achieved if I analyze past years financial records. Another thing which I understood is that good judgement sense will come with experience as I develop more forecasting skills. References Kou, M. A. (2012). Discussion on Financial Management of Micro-Enterprises.Journal of Tianjin Institute of Financial and Commercial Management,3, 007. Li, C. H. E. N. (2012). Discussion on Some Business Financial Management Issues.Mechanical Management and Development,5, 095. Robinson, M. (2013). Program Classification for Performance-Based Budgeting.World Bank Publications. Rogulenko, T., Ponomareva, S., Bodiaco, A., Mironenko, V., Zelenov, V. (2016). Budgeting-Based Organization of Internal Control.International Journal of Environmental and Science Education,11(11), 4104-4117.