Almost all kinds of business activities directly or indirectly involve the acquisition and use of funds. There exists an inseparable relationship between finance on the hard and production and other functions on the other. In a business set up, the functions of recruitment and promotion of employees are clearly the work of the personnel department. Sales promotion policies come within the functions of the marketing department. These activities performed by these departments (personnel and marketing departments) require outlay of funds and therefore affect resources. The finance function of raising and using money although has a significant effect on other functions but it need not necessary limited the general running of the business. Generally firms formulate their policies (marketing productions, personnel and other policies) most of the time, to tally with the financial resources of the company available to them.
The word “Finance” is viewed from different perspective by different group thus: -a. A layman sees finance as the volume of money in his prose, vault and at the bank.b. Investors sees finance as the provision of funds as at the time it is need for investment. It goes beyond coursing and applying the fund for profit maximization as well as the state of sharing the profits.c. Academic sees finance as the science of fund management. The investor view about finance shall be upheld in this write up. This because it emphasizes on profit making for the maximization of shareholders wealth. Wealth maximization is one of the corporate financial objectives of a firms. This can only be achieved by efficient and effective management of the company’s resources. Financial management involves all the activities that are concerned with planning cash and credit requirement, including the effective control of the financial resources The activities could be segregated as follows i. Forecasting the future availability of and requirements of cash ii. Converting forecasts into plans and budgets iii. Planning the appropriate capital structure iv. Raising of cash from outside the business v. Controlling cash balances and flows in accordance with plans and changing circumstances vi. Investing surplus fund In financial planning, this involves estimating and planning of the future flow of cash receipt and disbursements.
Also this is useful in raising of funds organizing and ensuring that funds necessary for carrying on the operation of planning is available. The wise use of funds by allocating such funds ensuring efficient use of funds. In financial controlling, monitoring financial operations to ensure that cash flows are proceeding according to plan. As a company is part of financial community, its financial management can be fully interpreted only within the context created by the workings of financial institutions and markers. The variables considered in the framework of financial management are: a. The financial goals of the company b. The valuation of the company and the extent to which this valuations uninfluenced by company decision. c. The means of measuring the performance of the company. When it goals have been identified and the method of valuation chosen, the company’s performance must be monitored and measured accordingly. The researcher here wants to access the financial health of a manufacturing industry, its strengths, weaknesses, recent performances, future prospects and the implementation of its financial policies. This involves a review of the financial policies. This involves a review of financial statements followed by careful consideration of their use in evaluating financial performance.
ASSESSING THE FINANCIAL HEALTH OF A MANUFACTURING COMPANY
The most important source of information for evaluating the financial health of a company is its financial statement consisting of a balance sheet and a income statements. EAGLE CEMENT is a public liability company and as required by law, it is expected to submit her annual account to the registrar, corporate ffaairs commission, Abuja. The account so prepared is for the consumption of many interest group like: the shareholders, tax authorities, investors, creditors etc. For the purpose of evaluating the financial health of the company (EAGLE CEMENT), the use of financial statement for 1999 year shall be reviewed and analyzed. See chapter four on data presentation and analysis.