People who are involved in crucial and tough business financial decision of the company are categorized into three groups, namely:
*** First, people who manage the business – This is the management group which is responsible in the business operation and the measuring up as to the profitability and liquidity goals of the company. If a business is extremely large, then the management will outsource and hire people to perform the job. The managers need to answer important questions such as what was the company’s net income, and if they have a substantial rate of return. Does the company have enough assets, and which products bring in the most money? When making a decision, managers usually follow a systematic approach. Even though larger businesses require a more concrete analysis, they follow a similar pattern to small businesses.
The other scope of management in a business are subdivided and inclusive of the following:
a) Financing a business: This is critical in a company, because they need the required financial support to sustain their business operations.
b) Investing in a business: Companies invest in their current assets so that it can make them money in the future.
3) Producing goods or services: Operations and production management is responsible in the development and production of goods and services that the company can sell.
4) Marketing: Responsible in the marketing of goods and services that the company is offering to consumers. They are also responsible in the efficient distribution of goods and services they are marketing.
5) Human resources – Responsible in the recruitment and hiring of qualified people to work in the company, and accordingly keeping their employees’ employment profile.
6) Information dissemination: Responsible in providing information such as company profile, financial report, etc.,and organize them in a way that it can be useful to managers, creditors and investors and to people with vested business interest in the company
*** Secondly, the external people who have a direct financial interest to the business – This is the other group of individuals who have a direct interest in the business who is only relying from the the financial report of the company.They use the information to analyze how a business is performing. Most businesses generally publish their financial report periodically which shows how well they meet their profitability and liquidity goals.These statements display how well a company did in the past and probably most importantly, how well they will do in the future.
*** Lastly, the people who have an indirect effect on the business – They are the investors and the creditors. These are the people outside the business who also scrutinize the financial reports of the company. The investors are the individuals that invested in the business and they will keep as the co-owner of the company. They are concerned with their past success and failure, and also will like to know the potential earnings of the company. A concrete analysis of the financial statement will help prospective investors to make vital business decisions. Once they finish investing they must continue to receive and review the business financial statement of the company that is being issued to them from time to time.
Next, the creditors are the companies that lease money to businesses for short or long term needs. Creditors are the people that deliver money or provide services for companies in advanced before getting paid. Their main concern is whether a business will have the money to repay the money with interest in an approximate time. Some of the things they study before they make their decisions are a company’s liquidity, cash flow, and profitability. Some examples of creditors are banks, mortgage companies, and insurance companies.