Financial Management includes, but is not limited to, the following:

1 – Ratio Analysis: Overall Financial Health

  • Liquidity – shows the firm’s ability to pay off debts as they become due
  • Asset Management – also known as efficiency or activity ratios that evaluate how efficiently management uses resources and how much activity is generated from assets
  • Debt Management – shows the extent to which a company finances its assets with debt
  • Profitability – shows the combined effects of liquidity, asset management, and debt on operating results
  • Market Value – The stock market’s assessment of the company as an investment

2 – Common Size Analysis: Cutting Costs

  • Uses historical data to point out financial trends
  • Helpful with finding ways to cut costs
  • Keeps track of increases and decreases in gross profit

3 – Budgeting: Planning for the Future

  • Budget creation for new projects (new product line, opening a new location, etc.)
  • Tracking budgets to ensure profitability