The advantages 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.A business will be seen to be inexistence if it has the ability to meet its operating costs as well make some profits.The profits that made are ploughed back to the business.This will help the business to expand its products or open up to new area.The determination of the success of the business is not by mere look of the structures but it needs a careful analysis of the statements of the business.In making an informed decision whether the business is viable or one need such information.To assess the progress of the business you need the financial decision making tools. A n accurate picture of the performance of can be provided by the tools.The financial statements, ratios and other are the tools.
The balance sheet, the income statement and the cash flow statements are the example of the financial statements.The importance of the financial statement is that will help one to determine the use into which the resources were applied.The debt profile of the business can be determined by the liabilities in the statement.The debt profile will help the business to come up with ways to reduce the leverage level of the business.The profitability of the business can be determined by the help of the income statement.Through the income statement one can be able to determine to what expense the income generated go to.
In decision making also the ratios serve also as an important tool.It is important to note that there are different functions for the different ratios, for example the liquidity ratios are used to determine if the business can meet is obligations when they fall due.the ratios help to measure if the business has a sound financial base.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.To meet the expected sale forecasting will be important in a acquiring the necessary resources for the same.
Investment analysis is also an important tool when wants to make a decision on where to invest.This tool will help one to identify those projects that are in market thus will in the long run reap profits for the organization.