300 words Discussion in 20 hours

Respond to  two or more of your colleagues’ posts in one or more of the following ways : (150 words each Colleague)

· Offer an insight you gained from your colleague’s definition of  financial health and the factors that they determined should be considered in assessing an organization’s health.

· Offer an insight you gained from your colleague’s analysis of the financial practices of an organization.

Return to this Discussion in a few days to read the responses to your initial posting. Note what you have learned or any insights you have gained as a result of the comments your colleagues made.

1st Colleague to respond to:

Briefly define, in your own terms, what financial health means from an organizational standpoint. Include in your definition the specific factors that would be taken into consideration when assessing an organization’s financial health and stability. In other words, what would you need to show to demonstrate that an organization is healthy?

Financial health for an organization is when the business is in stable condition. No debt, all bills are paid in an orderly fashion (on time), and accounts are maintained properly. Proof would be all the paperwork from finance when the company is being audited. The employees have to be sure all monies are accounted for.

Liquidity, solvency, profitability, and operating efficiency are important areas to consider, and all should be considered in combination. Liquidity is a key factor in assessing a company's basic financial health. Liquidity is the amount of cash and easily-convertible-to-cash assets a company owns to manage its short-term debt obligations (Maverick, 2022).

Identify two or more financial practices (good or bad) of an organization with which you are familiar, and categorize each practice based on your definition of organizational financial health, including a rationale for each categorization. Be sure to provide specific examples.

A financial practice that was bad for the business was when I was balancing our managers company credit cards and I brought it to their attention that a lot of the places they were purchasing at didn’t have relevance to the business. I did this because the credit cards transactions needed a description in order to submit. The staff would tell me that it was for this and that, but they actually used it for personal uses.

Another example was when the craft employees in the field would constantly order tools even though we had some in storage, they’d rather go and purchase a new one. After close monitoring, we lost out in hundreds or thousands of dollars and in the end the project actually went negative and owed in penalties.

 

Reference:

Maverick, J. B. (2022, November 22). What is the best measure of a company's financial health? Investopedia. Retrieved from https://www.investopedia.com/articles/investing/061916/what-best-measure-companys-financial-health.asp

2nd Colleague to Respond to:

Meaning of Financial Health

At the most basic level, when I think of the financial health of a company, it means profitability. The company’s Net Income is divided by Sales.  There are several factors that influence financial health like risks in the market, stability of sales and income flow, changes in the mark that influence the cost of goods, and debt level the company maintains to support ongoing activities. The company must have cash available to meet operating expenses like labor costs, supplies and inventory.  Liquidity is a measure of financial performance for the management team. Without sufficient liquidity the company may be forced into bankruptcy/ The company must have responsible professionals who rely on budgeting and GAAP to ensure management has access to reliable financial information to make the best decisions for the company and its stakeholders.

 

Financial Practices

I served on the Finance committee of the board of directors for a non-profit for a few years.  Although they were often limited in resources and the actual staff of the organization often had very little prior work experience as financial professionals, the board hired professionals to provide basic financial training for all new hires who had a role that touched either financial reporting, purchasing or supply and inventory management.

· Using Generally Accepted Accounting Practices is expected by the Securities Exchange Commission and financial professionals as a means to ensure best practices and reliable financials

· Working with a principal accountant or 3rd party accounting firm is a good way to ensure there is a check and review of the company’s financial reporting.

· Using ratios to measure and understand the company’s actual performance

· Comparing the company’s financial performance to the prior period for the same ratios

· Comparing the company’s performance to the industry and companies of similar size and operating structure.

· DuPont Return on Equity to assess profitability, efficiency, leverage

 

Categorize Financial Practices

 

· Hiring and training competent, talented professionals

· Establishing a culture that understands and is committed to the value of accurate and timely financial reporting

· Structured financial reporting and controls throughout the company

· Audit and Governance to ensure the financial reporting is complete and accurate

 

References

365 Careers. (2020, July 17). Dupont analysis explained [Video]. YouTube.  https://www.youtune.com/watch?v=hHultcTJJcs

IBISWorld. (2016, November 6). Financial ratios – IBISWorld industry product ]Video]. YouTUbe.  https://www.youtube.com/watch?v=6-JlnqWlyoU