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Figure 1: Key Functional Area
(Source: LumenLearning, 2022)
A functional area is related to a group or department workforce tasked within a specific organization. The functional area in a business allows a distinction and descriptive responsibilities and duties in the business. The entire functional area is divided into different parts such as Management, operation, sales or marketing, finance, research, and development. Each of the divisions has its specific and clear understanding of specific obligations across the organization (Study, 2022). However, each unit performs with its specialized staff and manager, this will introduce to pursuing organizational objectives and goals.
The “finance functional area” defines the evaluation of the funds of management. These provide proper knowledge to the department about the requirement of the capital in the business. Therefore, it is responsible for procuring, managing, and planning the finance in the accounting department. Based on it a finance manager may be able to analyze whether to sell or borrow stocks to raise money (LumenLearning, 2022). The accounting professionals may be able to show its translations to the stakeholders such as governments, and investors. This may also represent the financial position of an organization. Therefore, financial accountants become more responsible and able to accurately be responsible for the representation of the financial statement. Accounting is the most important and vital part of the finance functional area. Accountants of an organization provide information to the managers that help to make decisions in the process of allocation of the resource of the business. The “Financial data analysis” (FDA), is the process of evaluating the awareness of the organization, in making financial decisions. Furthermore, the application of the “Panel data” in an organization provides maximum insights that help in making a comparison between two types of databases. The panel data is used frequently to assess the newer concepts in finance that may include the activism of the shareholders (GAUTAM and BHIMAVARAPU, 2022). The panel data is used frequently to assess the newer concepts in finance that may include the activism of the shareholders.
Figure 2: NPV formula
(Source: Corporate Finance Institute, 2022)
The “net worth value” or “net present value” represents the current value of cash flow over the period of time for evaluating incoming and outgoing. Therefore, this describes the difference between the discounted cash outflow and inflows. According to Springer, (2019), the “investment profitability assessment method” is used to identify the future insights of cash flows. Hence, it represents that the NPV shows the future cash flow that shows the negative or positive impact on the entire time series of an investment that is discounted to the present values. There are various types of methods that may be used to evaluate the project in an organization. On the other hand, the use of the NPV method for the investment evaluation provides an opportunity cost of capital (Economicsdiscussion, 2022). Hence, the difference between the cost and various benefits of taking action is to consider the values to calculate it. Therefore, there is a general rule to make out the benefit that may be less than 50%. These may be impacted in both positions such as benefit-cost analysis and cost-benefit analysis.
Figure 3: NPV calculation
(Source: CorporateFinanceInstitute, 2022)
For example, there is the calculation of the “net present value” on the basis of a series of cash flows. The above figure shows the assumed data that is an investment return of $10000 per year over the period of 10 years. Furthermore, the discounted rate is 10%. The evaluation value resulted in the investment being worth $61446 for the day. It means a rational investor would be required to pay up to $61466 to receive $10000 every year over 10 years (CorporateFinanceInstitute, 2022). Therefore, it is required to receive an “internal rate of return” (IRR) that may be 10%. Hence, by paying the amount of less than $61000, the investor may visualize the earning amount. These may be greater than 10% on the basis of the internal rate of return.
The occurrence of long-term finance in an organization may be used to provide benefits to borrowers and fund providers. There may be different types of financial intermediaries such as institutional investors and banks that are also impacted due to the long-term finance in an organization. The application of long-term finance impacted the lenders to engage more with it as it provides maturity to sauvignon the long-term needs. These may contribute to a higher level of growth in the economy and lower macroeconomics volatility (Smallbusiness, 2017). Although, long-term finance is also helpful in completing the infrastructure of a project by evaluating the depths critically. Hence, it may take many years to complete the lumpy investment.
On the other hand, financing is not too necessary to describe all the situations for understanding the financial situations. These may also arise the risk between the debtors and creditors in the process of making various transactions and trades. Furthermore, the application of it in the management may help to bear the profitability fluctuation in the business by shifting the risk. Hence, the providers of the funds may also analyze the various types of risk and the process of working, and the profitability of the organization (geek tonight, 2020). These may be happening by connecting with them in the process of investing in long-term finance. Therefore, they may also be able to evaluate the changes in the volatility of interest rates, and the financial market in the UK.
According to Wang et al. (2020), the “Mean-Variance” (MV) is the type of methodology that is used to solve the issues of a company. It initiates the base level of the modern portfolio theory to qualifiers various investment risk, variance, and return rate values. Therefore, the key use of the MV methodology is to keep the expected values unchanged for getting long-term finance. A wide range of researchers and organizations accept the method for getting the long-term finance of return in the UK. it indicates the preference for liquidity and the impact of invested wealth on the business. The uses of the model to determine the amount in the monetary assets of the business and formulate to construct the effective portfolio by analyzing the combined risk-free assets as well as the special types of risk assets in the management.
A budget is one of the key tools in the process of making financial planning. Hence, the budget also responds to the various risks in the management. These may have an impact on the economic growth and management process in an organization. The budget becomes more difficult in the sector of achieving financial goals (tandfonline, 2022). This includes the fiscal operation in an organization to maintain the operation of the government. Furthermore, the use of a budget in an organization helps in making financial decisions for the accessible, communicated, and clear view to the wider community. An organization may get timely and accurate information on the outputs, and costs for the essential purpose. This provides making decisions to the process accountability that may be held responsible to the provided authority. The “sales budget” helps in making future sales in both the sector's currency and units. It creates the sales goals for the company and these may enable the financial operations based on the data forecasting.
Several times the application of Budget may become bad for the wealth of an organization. It became time consuming in the process of making a budget for a business (Oecd, 2022). Furthermore, in a special case when there is a poorly organized environment. These may be involved in the process of well-designed budgeting in a company. Furthermore, the budget prescribes a certain amount of expenses and cost of overheads that may be allocated to the various departments in the allocation of methods. There may be “strategic rigidity” at the time of making a budget by management. The focus of an organization may require meeting the target by outlining the budget. These may create problems for the management in different directions during the budget year (Accountingtools, 2022). The allocation of cash at the specific activities in the business transaction, there is no deal with subjective issues and service issues that are provided to the consumer.
The application of the execution strategy as an investment resource may impact the overall organizational purpose. There is a wide development of the strategy to the leadership performance of protecting governance approaches (Balanced Scorecard, 2022). There may be mandatory attendance in the strategic cadences in the viewpoint of the execution process. Communicating start to get may become the widest issue in the process of making future insights. Hence the governance of the country may create the biggest illusion and problems in the sector of contacting the consumers.
The implementation of the strategy may initiate massive changes in an organization. Therefore, monitoring the outcomes and the performance results by using the report may conduct the business in the different sectors of an organization. There may be the occurrence of explicit and implicit changes in the business environment. There may be an occurrence of a breakdown in the process of communication in the business.
The introduction of poor strategic planning in the process of making additional tools in the management. Therefore, these may be mitigated by using the swot analysis in the business. Furthermore, the “consumer value proposition” is another process to mitigate the scenario analysis, five forces analysis, and foresight analysis. These mitigation processes may be introduced to promote leadership issues and governance issues by stopping worrying about retreatment (Balanced Scorecard, 2022).
The organization is required to build cross-unit relationships with the different sectors of the management. The requirement for a better relationship with the executive, team leaders, and managers made the level the performance of the culture across the different levels of the organization.
Importance of working capital to the security and profitability of a business operation.
Figure 4: Working capital
(Source: Mpra, 2016)
The use of the working capital at the optimal level of the business may increase the profitability and security of a business. It is used to determine the outcomes and meaning of a study process in a business. The above figure shows that the working capital may be seen as the “gross working capital” and “net working capital”.
“Gross working capital” refers to the investment of a company in current assets. These may include various debtors, prepayments, funds, and the cash balance of a business (Utwente, 2020). These may help in the employment of the focus on the business and in the optimization of the investment in the current assets and in financial management.
In the “net working capital,” there may be the conversion of the cash on the expected nature of the business. These may increase the profitability of the management. A positive working capital in a company may be able to pay off the short-term obligation of the negative working capital that may impact the security of an organization. There may be an impact of the working capital on the external factors of an organization. There may be an impact on the higher rate of interest and an increase in the cash demand in the management. Therefore, there may be a rise of cash and capital in the management and an impact on the security of the business. Hence the saving scale of the management may become higher than the liquidity. The demand of the working capital may be maintained by the organization and bank also in the process of making maintenance between fixed deposits and current savings (Mpra, 2016). Therefore, there may be the appropriate and adequate working capital of finance that ensure the significance of the firm. This shows to the management and is aware about the requirement of the cash to make the payment.
Lumenlearning, 2022, Functional Areas of Business, 2022, Available at: https://courses.lumenlearning.com/wm-introductiontobusiness/chapter/reading-functional-areas-of-business/ (accessed on: 29.07.2022)
Study, 2022, Functional Areas of Business Concept & Groups, 2022, Available at: https://study.com/learn/lesson/functional-areas-business-concept-groups.html (accessed on: 29.07.2022)
GAUTAM, R.S. and BHIMAVARAPU, V.M., 2022. Data Driven Decision Making: Application in Finance. Iconic Research and Engineering Journals, 5(12), pp.52-56.
Corporatefinanceinstitute, 2022, Net Present Value (NPV), 2022, Available at: https://corporatefinanceinstitute.com/resources/knowledge/valuation/net-present-value-npv/ (accessed on: 29.07.2022)
Springer, 2019, Project Net Present Value estimation under uncertainty, 2019, Available at: https://link.springer.com/article/10.1007/s10100-017-0500-0 (accessed on: 29.07.2022)
Economicsdiscussion, 2022, Top 4 Methods of Project Evaluation | Firm, 2022, Accessed on : https://www.economicsdiscussion.net/firm/capital/top-4-methods-of-project-evaluation-firm/24371(accessed on: 29.07.2022)
Wang, W., Li, W., Zhang, N. and Liu, K., 2020. Portfolio formation with preselection using deep learning from long-term financial data. Expert Systems with Applications, 143, p.113042.
smallbusiness, (2017), Understanding the Use of Long-term Finance in Developing Economies, 2017, Available at: https://smallbusiness.chron.com/companies-prefer-longterm-debt-61041.html (accessed on: 29.07.2022)
geektonight, 2020, Long Term Finance, 2020, available at: https://www.geektonight.com/long-term-financing/ (accessed on: 29.07.2022)
tandfonline, 2022, BUDGET AND FINANCIAL PLANNING, 2022, Available at: https://www.tandfonline.com/doi/full/10.1111/jsbm.12438 (accessed on: 29.07.2022)
Oecd, 2022, Effects of Budget Support, 2022, available at: https://www.oecd.org/dac/evaluation/dcdndep/35031496.pdf (accessed on: 29.07.2022)
Accountingtools, 2022, The disadvantages of budgeting, 2022, Available at: https://www.accountingtools.com/articles/what-are-the-disadvantages-of-budgeting.html (accessed on: 29.07.2022)
Balancedscorecard, 2022, Common Risks and Challenges Impacting Strategy Execution, 2022, Available at: https://balancedscorecard.org/blog/common-risks-and-challenges-impacting-strategy-execution/ (accessed on: 29.07.2022)
Mpra, 2016, How working capital management affects the profitability of Afriland First Bank of Cameroon? A case study?, 2016, Available at: https://mpra.ub.uni-muenchen.de/75356/1/MPRA_paper_75356.pdf (accessed on: 29.07.2022)
Utwente, 2020, ‘Impact of Working Capital Management on the Profitability of Public Listed Firms in The Netherlands During the Financial Crisis’, 2020, available at: https://essay.utwente.nl/61524/1/MSc_M_Baveld.pdf (accessed on: 29.07.2022)
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