Business Finance - Management Business Finance - Management Business Finance - Management Business Finance - Management Business Finance - Management ASSIGNMENT (APA, NO PLAGARISM, GREAT WORK, ON TIME)

Discussion no more than 300 words (APA format, references)

Examine three different categories of people who read financial statements – financial analysts, creditors, and investors. Choose one category and provide examples of the types of information the person would be interested in. Explain why each type of information may be important to the person. Plus, describe the financial functions performed in an effective financial system.

PL - RESPOND WITH 100 WORDS OR LESS

From our earlier assignments we learned how accountants can understand and communicate the performance and financial health of a company through the four key financial statements. The balance sheet, income statement, statement of owner’s equity, and statement of cash flows provide different insights into financial situations but some users, be it creditors, investors, or analysts might favor one over the other. Using the “language of business” is key to achieving a full picture of finances (Dahlquist & Knight, 2022).

Commercial banks and other lending institutions use the balance sheet the most because managing the relationship between their assets, like loans, and liabilities, customer deposits is central to their core business model, financial health, and regulatory compliance. A bank's primary activity involves taking in deposits and issuing loans. The balance sheet provides a real-time snapshot of this core operation at any given time, which is more central to a bank's ongoing management than the income statement which measures performance over a period. Regulators, investors, and internal management heavily scrutinize the balance sheet to assess a bank's ability to meet its short-term obligations and long-term debts.

The balance sheet also helps identify and manage risk exposure by showing the types of assets and liabilities held, their quality, and the associated risks, such as credit or interest rate risk. Banks are subject to strict capital adequacy regulations set by central banks and other authorities. These rules require banks to maintain a certain level of capital relative to their risk-weighted assets, metrics that are calculated directly from the balance sheet data.  When assessing a potential borrower's loan application, banks themselves rely heavily on the applicant's balance sheet to determine creditworthiness, demonstrating the document's critical role in lending decisions.

An effective financial system requires several key functions to allow for the movement of funds and the management of risk in society. First, a savings function to provide a secure and efficient mechanism for individuals and entities to save and store their capital. Second, wealth function to enable the accumulation and growth of wealth through various investment vehicles. Next, a liquidity function to ensure assets can be converted into cash quickly and at a reasonable price. A credit function that serves as a vehicle for lending money from those who have it to those who need it. A payment’s function provides an efficient means to make payments for goods or services. I absolutely love Apple Pay! With so much capital moving around a function to protect from risk is important as it protects individuals through funds insurance, while a pricing function helps aid decision-making for investors and borrowers. Lastly a policy function, aka The Fed, is used to control interest rates and influence the overall economy.

LS – RESPOND WITH NO MORE THAN 100 WORDS

Financial statements are primary tools for external users to assess a company's health. Below is a summary of the key types of information that financial analysts, creditors, and investors typically seek, along with examples and explanations of their importance. These interests often overlap but are tailored to each user's goals.

Financial Analysts use financial statements to gather the following information - Profitability ratios, Trend analysis, and Efficiency metrics. Analysts use this to evaluate overall performance, identify strengths/weaknesses, and forecast future trends. For instance, low profitability might signal operational inefficiencies, helping analysts recommend buy/sell/hold decisions to clients or inform market reports. This provides strategic advice and supports investment research.

Creditors use financial statements to gather the following information - Liquidity ratios, Leverage metrics, and Cash flow from operations.  Creditors focus on repayment risk; strong liquidity ensures short-term obligations are met, while low leverage reduces default probability. For example, a declining interest coverage ratio could indicate cash strain, prompting creditors to adjust loan terms or deny credit, protecting their capital and minimizing losses.

Investors use financial statements to gather the following information - Earnings per share (EPS) and return on equity (ROE), Dividend history and payout ratios, and Growth in retained earnings. Investors prioritize returns and value creation; high EPS/ROE signals profitability for shareholders, while consistent dividends provide income. For instance, robust retained earnings growth suggests reinvestment potential, aiding decisions on stock purchases or portfolio diversification to maximize wealth.

An effective financial system facilitates the flow of funds in an economy, promoting stability, growth, and efficiency. It performs several core functions, which can be described as follows: Allocation of Resources, Risk Management and Transfer, Price Discovery, Liquidity Provision, Payment and Settlement Services, and Information Aggregation and Monitoring.

These functions interconnect; for example, strong liquidity supports price discovery. Ineffective systems (e.g., due to regulation gaps) can lead to crises, as seen in 2008, underscoring the need for robust oversight.

Week 3 DISCUSSION NO MORE THAN 250 words

https://open.umn.edu/opentextbooks/textbooks/mastering-strategic-management

https://www.youtube.com/watch?v=5FiNwDjGJ0A

While the SWOT analysis you performed last week is geared toward analyzing the potential of an organization, Porter's Five Forces are all external. For the same organization you selected in Week 1, produce a Porter's Five Forces analysis by conducting research using any two of the following three AI tools (free version is sufficient) for this organization: ChatGPT, Gemini, Copilot. Synthesize the results produced by the two chosen tools to arrive at a finalized version of the Five Forces for this organization. Be sure to explain how the four elements that pertain to the bargaining power of suppliers and customers, as well as the threat of new entrants and substitute products, determine the fifth element of competitive rivalry within the industry. Your primary posting should include an overview (in your own words) of the results produced by each of the two chosen tools, as well as the finalized Five Forces for this organization. For your additional postings, consider potential AI hallucinations in your classmates’ posts. In addition, as part of your responses to your classmates, pose questions to them about their Five Forces analysis from the perspective of a VP of Operations role.

For the same organization you selected in Week 1, produce a Porter's Five Forces analysis by conducting research using any two of the following three AI tools (free version is sufficient) for this organization:

Week 1- The for-profit organization I previously worked for was Nike. Nike was founded in 1964 and is based in the surrounding region of Beaverton, Oregon.

The four components of the balanced scorecard would apply as follows: 

Financial Perspective: NIKE Incorporated has over $51 billion in revenue and is the largest supplier of athletic equipment, shoes and apparel.

 Customer Perspective: Nike consumers are continuously seeking athletic apparel due to Nikes creativity and modern innovation. Nike’s sports equipment and sneakers are outstanding in terms of comfort, durability and performance.

  Internal Business Processes Perspective: Nike's internal strengths are its brand equity, Research & Development spending, and its digital platform. Threats include Under Armour, Puma, Reebok and Adidas.

Learning and Growth Perspective: Nike has insisted that offering solutions, and not symbols, should be the target for sustainability in buying power. In addition, diversifying and expanding into categories such as digital fitness and health technology.