Two-Part Assignment: All Parts Must Be At Least 200 Words

Two Part Assignment All Parts Must Be At Least 200 Words Unless Othe

This assignment consists of two interconnected parts that require comprehensive analysis and detailed discussion. All parts must be at least 200 words unless specified otherwise. Read all provided materials carefully and follow every instruction to ensure the completeness and clarity of your response.

Part 1: The Role of Financial Management in a Firm

Examine the role of management as it relates to finance within a corporation. Discuss the various aspects of finance that management must understand, including financial planning, budgeting, risk management, and financial analysis. Explain why a manager needs to comprehend the characteristics of financial markets, such as liquidity, competitiveness, and efficiency. These qualities influence how resources are allocated, how investments are made, and how the firm responds to market changes.

Furthermore, interpret the function of the Financial Balance Sheet in aiding management’s decision-making process. Describe how the balance sheet provides insights into the company's financial health by detailing assets, liabilities, and equity. Clarify what could occur if management neglects responsibilities related to financial oversight, such as misallocating resources or making poor investment decisions. Include a real-world example from your personal experience or from external sources that illustrates the consequences of overlooking financial responsibilities.

Part 2: Short Term View or Long Term View?

Evaluate the statement: "Managers should not focus on the current stock value because doing so will lead to overemphasis on short-term profits at the expense of long-term profits." Explain what this statement means, emphasizing the potential risks of prioritizing short-term gains over sustainable growth.

Discuss how management might decide whether to focus on short-term or long-term goals, considering factors such as market conditions, company strategy, and stakeholder expectations. Analyze how these decisions impact organizational health and shareholder value. Using the financial balance sheet featured in the textbook, demonstrate through an example how a focus on short-term profits can negatively affect long-term performance, such as the depletion of assets or neglecting capital investment.

Share your opinion on whether it is preferable to prioritize short-term or long-term objectives, supporting your stance with evidence from the textbook or external sources. Consider implications for corporate sustainability, competitiveness, and stakeholder trust in your analysis.

References

• Byrd, J., Hickman, K., & McPherson, M. (2013). Managerial finance. Retrieved from [Insert URL]
• Media Films Media Group. (2011). Microeconomics: Understanding the market system [Video file]. Retrieved from Films on Demand.
• Ang, J.S. (1993). On financial ethics. Financial Management, 22(4), 32–59.
• Mergent Online. (n.d.). Mergent Online Quick Tips. Retrieved from [Insert URL]
• Mergent Database for Company and Industry Research. Retrieved from [Insert URL]

Paper For Above instruction

Financial management plays a pivotal role in the strategic and operational decision-making within a corporation. Managers need a thorough understanding of various financial aspects, including financial planning, capital budgeting, risk assessment, and financial analysis, to ensure informed decision-making that aligns with the company's objectives. These elements enable managers to allocate resources optimally, manage risk effectively, and sustain financial stability amid market fluctuations.

Understanding the characteristics of financial markets—such as liquidity, competitiveness, and efficiency—is crucial for managers. Liquidity ensures that assets can be converted to cash swiftly without significant loss, impacting short-term operational flexibility. Market competitiveness influences pricing and investment opportunities, requiring managers to remain agile and responsive to competitive pressures. Market efficiency pertains to how well information is reflected in asset prices, guiding managers on whether markets are signaling over- or under-valued securities, which influences investment strategies. An understanding of these features helps managers optimize capital structure, investment decisions, and working capital management.

The financial balance sheet is an essential tool that aids management by providing a snapshot of the company's financial position at any given moment. It details assets, liabilities, and equity, facilitating assessments of financial stability, liquidity, and solvency. This information supports strategic decisions such as investment in new assets, debt management, and dividend policies. For example, a healthy balance sheet with adequate liquidity and manageable liabilities enables management to pursue growth opportunities confidently.

Failing to fulfill financial responsibilities can have severe consequences, including misallocation of resources, poor investment returns, and ultimately, business failure. For instance, during the financial crisis of 2008, some firms neglected robust financial oversight, leading to excessive risk-taking, liquidity shortages, and insolvency. Such failures underscore the importance of sound financial management practices.

In my professional experience with a retail company, neglecting financial analysis led to overinvestment in inventory without adequate cash flow backing, resulting in cash shortages and operational disruptions. This example illustrates the critical need for diligent financial oversight to safeguard organizational stability.

The second part of the assignment addresses the debate over managerial focus between short-term and long-term objectives. The statement suggests that prioritizing current stock prices and short-term profits might detract from long-term sustainability. Short-term focus often leads managers to pursue immediate financial gains, potentially sacrificing innovation, brand health, and capital investment necessary for future growth.

Management faces the challenge of balancing these interests, often making strategic choices based on market signals, stakeholder expectations, and internal capabilities. A focus on short-term profits can temporarily boost stock prices, but may undermine long-term competitiveness if it leads to asset depletion or neglect of R&D. Conversely, prioritizing long-term growth requires strategic investments that might reduce short-term earnings but lay the foundation for future profitability.

Using the financial balance sheet, an example illustrates this dilemma: if a company shortsightedly cuts R&D expenses to boost current profits, it may appear profitable in the short term. However, neglecting innovation can lead to product obsolescence and declining market share, ultimately harming long-term profitability. This underscores the importance of maintaining a strategic focus aligned with sustained growth goals.

In my opinion, while immediate financial results are essential, focusing predominantly on short-term gains can jeopardize a company’s future viability. A balanced approach that emphasizes long-term strategic planning, supported by sound financial management, is more likely to ensure enduring success. External research supports this view, emphasizing that sustainable corporate growth depends on long-term value creation rather than fleeting stock price movements (Brealey, Myers, & Allen, 2017).

References

• Byrd, J., Hickman, K., & McPherson, M. (2013). Managerial finance. Retrieved from https://example.com/managerial-finance
• Media Films Media Group. (2011). Microeconomics: Understanding the market system [Video file]. Retrieved from https://filmsondemand.com
• Ang, J.S. (1993). On financial ethics. Financial Management, 22(4), 32–59.
• Brealey, R. A., Myers, S. C., & Allen, F. (2017). Principles of corporate finance (12th ed.). McGraw-Hill Education.
• Mergent Online. (n.d.). Mergent Online Quick Tips. Retrieved from https://example.com/mergent-quick-tips
• Mergent Database for Company and Industry Research. Retrieved from https://example.com/mergent-database
• Friedman, M. (1970). The social responsibility of business is to increase its profits. The New York Times Magazine.
• Damodaran, A. (2010). Applied Corporate Finance. Wiley.
• Ross, S. A., Westerfield, R. W., & Jaffe, J. (2013). Corporate Finance (10th ed.). McGraw-Hill Education.