Financial Analysis For Decision Making

Decision Making has always been an integral and primary function of management. A decision is that specific course of action, which is selected from a pool of other alternatives, to optimally utilize an organization’s resources, to achieve its objectives. The availability of quality & wholesome information is central to decision making. While information is ubiquitous, it can still be classified using a very primary parameter viz., financial information and non-financial information.

Similarly, from an organizational point of view, the consumers of information can also be classified into different categories viz., internal & external. Financial Reports of an organisation are its primary source of financial information and are analysed by both internal and external members alike. However, the decision making process is different for each. Therefore, to facilitate quality financial analysis, it is imperative that financial statements provide a realistic and objective picture of the business.

‘Investment’, ‘Financing’ and ‘Dividend Decisions’ while using ‘Comparative Ratio Analysis’, are some of the few functions that the internal consumers of financial information look to achieve, for determining business security and efficiency. The management has to evaluate the overall health of the organization, in every aspect, to take sound decisions.

On the other hand, financial statements provide the public at large, investors, banks and other financial institutions with a clear picture of the organisation’s overall financial health facilitating them in decision making. This information is central to the decision making by investors.

Conclusively, decision making propels modern management.

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