Finance Policy Assignment Example | Topics and Well Written Essays - 1750 words

Finance Policy - Assignment ExampleA businesss pecuniary position is apparent(a) from its profit and loss account and the balance sheet. The balance sheet and the profit and loss statement should communicate the appropriate results of the theatre to the CEO so that he can make decisions regarding investment. The fiscal statements of the soused should be made available to all so that they can make their own conclusions from the financial statements with respect to the trading operations in the firm. It is very important that the financial information provided must be reliable and authentic. The primary objective of my role as CFO is to interpret the firms accounts accurately and identify which of the investment methods could benefit the firm in the long as well as the short run. This could be achieved by make appropriate review of the financial statements as well as developing accurate interpretations. This is supposed to benefit the firm and its stakeholders. b) The company can use pithy financial report, which consists of Consolidated Income Statement, Statement of Comprehensive Income, Balance Sheet, and Statement of Changes in Equity, Statement of Cash Flows so that all the third party investors and stakeholders could evaluate the firms business. ... The taxation requirements of the government should be met with appropriate heads showing profits before tax and profits after tax. Similarly the employees can get an idea some the functioning of the firm by analyzing the financial statements. The creditors and debtors value in the balance sheet along with the bad debts gives a clear understanding about the total debtors and creditors of the firm. The shareholders can understand the way the firm is functioning through the payment of dividends and the return on equity, which is projected in the financial statements. Question 2 a) High dividend policy to the shareholders signifies that the firm is earning high profits and, thus, is paying high dividend to its shareholders. This creates anticipation among the shareholders that the firm will pay them a higher amount of dividend in the next financial year. High dividend also signifies that the portion of debt capital in the firm in comparison to its equity capital is less, which implies that the firm has its own financial stability. b) If there are negative profits in the firm then the firm will pay a lesser amount of dividend. If the firm chooses to go for a high portion of its earnings for investment activities, even then the dividend payment will be less. c) High dividend payouts are popular and well comprehended by all the shareholders. But the problem that arises here is that if the firm earns high profits and provides high dividend to its investors in one year and in the next financial year its profit is less comparatively and so it fails to pay high dividends, then the shareholders will be unhappy with the firm. This will affect the bond and apprisal they have with the firm. A s the shareholders are the primary investors in the