The Following are Benefits of the Financial Decision -Making Tools
The progress of any business need to be established so that to determine whether his business is viable or not.For a business to continue to be in existence it must be able to cover its operating cost and also make some profits.It is important they profits that are generated are given back to the business.The profits that are generated can be used either to expand the products of the business or pen to new areas.The mere structures of the business cannot determine the success of the business but a careful analysis of the statement can determine the performance of a business.This will help one to make an informed decision about whether his business is viable or not.To have the best information about the progress of the business it is important to consider the financial decision making tools. The tools will serve to give you an accurate picture about the performance of the business.The financial statements, ratios and other are the tools.
The examples of the financial statements are the balance sheet, the income statement and the statement of cash flow.These statement helps to determine where the resources of the business were put thus can be used to come with the budget of a business.It also important to note that the liabilities in the business will be used to determine the debt profile of the business.This will help the business to devise the important mechanisms of reducing the level of leverage with the business.The income statement serves to determine the amount of profits made by the business.This is important since from the income statement we can be able to determine kind of the expense that take more of the income that are generated so that necessary steps can be taken.
Financial ratios are also an important tool for decision making.There are different ratios with different functions for instance the liquidity ratios are used to asses if the business can meet its obligations when they fall due.The sound financial base of the business can be determine by the use of the ratios.Releasing that the business has problems by the use of the ratios will make the business to take necessary stepsComparison of the business with other similar business will be made possible by the use of the ratiosDetermination on how to be competitive is possible by this comparison.
Another tool for decision making is the forecasting.The future sale to be made can be determined by forecasting.The forecasting will help the business to acquire the necessary resource to meet the expected sales.
Investment analysis is also an important tool when wants to make a decision on where to invest.The tool helps one to find the investments in the market that will make the business to reap profits in the long run.