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.A business will be seen to be inexistence if it has the ability to meet its operating costs as well 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.In making an informed decision whether the business is viable or one need such information.The financial decision making tools will be of help to make you understand about the progress of the business. A n accurate picture of the performance of can be provided by the tools.It is important to note amongst other tools such tools are the financial statements and the ratios.
The financial statements are for instance the balance sheet ,income statement and statement of cash flow.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 income statement serves to determine the amount of profits made by the business.From the income statement we can be able to determine the expenses that take a larger portion of the income that is generated by the business.
Important tool for decision making is the financial ratios.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 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 ratiosThe comparison will be helpful since one can determine how to be competitive in the market.
Another tool for decision making is the forecasting.The tool is essential as it will determine the amount of sales in the future.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 investment analysis tool will be so crucial in determining the investment projects that can reap the business profits in the long run.