Overview

Your company is preparing a plan to increase profits by 10 per cent next year. What do all managers need to understand before they can start to contribute to the plan?

All managers with collective responsibility for preparing and then implementing the plan need to understand:

• What is meant by the term profit

• How they are expected to contribute to the financial plan

• How their own actions will impact upon the financial measures

• The way in which changes in the business environment, for example, a downturn in the economy will impact upon the actions necessary to achieve the financial plan.

A company without cash cannot buy the people, materials or equipment it needs and without these a profit cannot be earned.

Owen

(2003)

In this theme you will start to develop your understanding of financial matters by investigating the main statements used to present financial information. All financial reports aim to tell a story about how a business is performing. The financial statements tell you about past performance or plans of an organisation, and help you to make decisions about the direction of the business.

Throughout the book we ask you to relate what you learn to the practice within your organisation, and to ask questions which perhaps you have felt reluctant to ask in the past.

In this theme, you will:

• Explore why cash planning is essential to running a business and practise preparing a cash flow forecast

• Discover how profit measurement differs from cash flow and why...