| Value and Use of Financial Knowledge Essay
A position of a business manager in large or small company requires solid financial background. Successful business manager ultimately needs financial knowledge in order to perform financial analysis of the business entity, be able to compare periodic financial results of the business to competitors numbers and to choose the most suitable scenario for the future development.
Financial results of the business activity are the key characteristics used to determine the profitability of business activity. Even though all organizations have financial analysts who perform the solid analysis of business activity, asses the profitability and liquidity ratios, and subsequently, prepare the financial report that is used by business managers for further decisions. Nonetheless, a good business manager should know how to perform financial analysis and what stands for given numbers. Only in that case his decisions will be well thought and thorough. For instance, according to Kimmel, P. D. and Weygandt, J. J. (2011), debt/equity ratio of the company indicates the proportion of equity and debt that company uses to finance its assets, and high ratio means that company aggressively finances its operations by liabilities. However, the manager who understands the nature of this coefficient knows that high proportion is also the characteristic of capital-intensive business, and therefore, is able to make wise decision regarding the nature of business.
Another value of financial knowledge for business manager is the ability to perform relevant competitive and business analyses to compare the results of the entity with the industry data. For instance, the SWOT-analysis is important tool that manager can use to make business decisions.
Finally, financial knowledge allows manager deriving the possible scenarios for development and choosing the most likelihood possibility to build up the business plan or project for the short/long term period. The financial awareness will help to assess the economic and political macro indicators, and on this basis choose the appropriate (positive, negative or neutral) scenario for growth.
To conclude, it is important to mention that being a successful business manager requires relevant financial background, experience and the ability to apply knowledge into practice. Financial awareness will help manager to assess financial position of the firm, find the competitive niche and choose the relevant scenario according to internal and external economic factors.
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