Organizational Financial and Operational Analysis Term Paper

Pages: 8 (2516 words)  ·  Bibliography Sources: 8  ·  File: .docx  ·  Level: Master's  ·  Topic: Literature

Finance and Operations Management

Balanced Score Card

Strategic Map

Break-Even Analysis

Analysis of Financial Statements

Finance and Operations Management

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There are several changes faced by organizations in present times. The main challenge faced by the management team of organization encompasses achieving a sense of poise between providing and supplying operationally and thinking in a strategic manner. One of the tools that can facilitate effective financial and operational decision-making is employing a balanced scorecard. The balanced scorecard links the non-financial activities and operational activities with the necessary initiatives to the long-term strategy of the organization. In turn, this creates a premise for the employment and management of all business activities in proportion to their strategic importance. This tool facilitates the effective implementation of strategies initiated by the company, which facilitates the analysis of the financial performance of an organization. On the other hand, the strategic map functions as an effective and productive communication tool that the organization can use to increase its accountability, level of performance, and place an emphasis on organizational outcomes and results. This is purposed to improve the performance of the organization as it outlines in detail the internal and external perspectives of the organization, together with the financial perspective, consumer perspective and operational perspective. In general, it shows the basis of the strategic objectives of the organization which in the end lead to its operation and overall performance. Lastly, the analysis of the financial statements of the organization will also facilitate the organizational performance. This will be done through time series analysis, cross sectional analysis and financial analysis.


Term Paper on Organizational Financial and Operational Analysis Assignment

One of the important managerial challenges being faced by the organization is to attain a balance between providing and supplying operationally and thinking in a strategic manner. In a more usual manner, managers are measured against tangible outcomes. As a result, the skills, proficiencies and competencies to attain these tangible outcomes ought to be developed. In the contemporary, organizations continue to experience tempestuous times, despite the fact that recession is considered to be over in theory (Coolican, 2015). The main resolve to this challenge and difficulty is the engagement and stimulation of teams in the course of yet more change. Organizational teams might anticipate more stability and rigidity (or consistency) but the actuality may be additional change, and market place and customer outlooks might also imply that change required to take place more rapidly. One other actuality is that personnel might have the perception that they are not yet back to wages and conditions that prevailed prior to the recession yet even more is expected and necessitated of them (Coolican, 2015). The purpose of this research paper is to outline a plan that engages effective financial and operational decision making to effectively meet this difficulty and enhance organizational performance.

Balanced Score Card

The balanced scorecard is a constituent for management that facilitates the effective implementation of strategies instigated by the company. This is an implement that has been measured lengthily both in study and in a real-world manner as well. By linking company activities that are non-financial and operational with essential initiatives to the company's long-lasting method, the Balanced Scorecard supports the employment and management of all business activities in proportion to their strategic importance (Figge et al., 2002). In theory, value-based sustainability management endeavors to take into consideration the aspects of business offerings and impacts to sustainability in an integrative way (Butler et al., 2011). It suggests that for companies to complement to sustainable growth and improvement, it is desirous that business performance progresses in all three scales of sustainability, which encompass social, financial and environmental in a coordinated way (Figge et al., 2002). This particular plan purposes the suggestion of a Sustainability Balanced Scorecard (SBSC) to unequivocally interpret its strategy into a number of financial and non-financial measures, encompassing a variety of standpoints.

Strategic Map

Strategy mapping is an effective and substantial tool utilized in business. Strategy maps show in depth, the manner in which organizations generate value for customers and different stakeholders. Suitable and fitting strategy maps connect strategic goals and objective both in an internal and external manner. In particular, this strategic map will offer a solution to the organization's challenge as it is an effective and productive communication tool that the organization can use to increase its accountability, level of performance and place an emphasis on organizational outcomes and results (Armitage and Scholey, 2006). Strategy mapping starts with the formation of different strategic objectives that serve and act as the foundation and basis of the business strategy of the organization. In turn, these strategic objectives are then interrelated in cause-effect relationships to come up with a strategy map.

The diagram illustrated below shows the strategic map of the organization in coping with its challenge:

Returns and Profits GeneratedFinancial perspective

Cost Effectiveness in Business Operations

Increase in Market Share

Customer perspective

Increase in Consumer Base

Proper Stakeholder Perspective

Quality Supplies

Productive Labor Internal Process Perspective

Company Resources Efficiency

Quality Control

Employee Satisfaction

Employee Health and Safety

Effective Operation

Learning and Growth Perspective

One of the important aspects that the organization ought to undertake is to commence from the roots and work its way up to the top strategic objectives. One of the major strategic objectives of the organization is to ascertain that its labor force is satisfied and has proper welfare. Employee satisfaction is a strategic objective that the organization ought to take into consideration so as to succeed (Rausch et al., 2013). Efficiency and level of productivity of the organization are dependent on the extent level of satisfaction of the personnel. The welfare of the workforce is a significant factor. In addition, the efficiency and preservation also plays a vital role and therefore is a strategic objective for the organization (Rausch et al., 2013).

Secondly, the internal process of the organization in the strategic map have an influence on the performance of the company as it leads to the different perspectives of the organization in the eyes of the consumers. Social view and opinion of the organization is a significant aspect assuring success. The consumers are major stakeholders of the company and how they perceive e-company matters fundamentally. It is also indicative of the efficiency in the resources of the organization (Rausch et al., 2013). In general, this encompasses the analysis of whether the company is on track or alternatively, if it has deviated from the actual initially set out plan. This assists the management team to gain insight as to whether there is a need for increasing efficiency and altering its policies. In general, it indicates whether the internal processes of the organization are productive or not. The positive impact of constantly comparing the actual performances together with the planned performances plays a vital role in the ensuring that whether projects are completed in a timely fashion and are in consonance with the schedule (Rausch et al., 2013).

Break-Even Analysis

The break-even analysis is calculated using the following formula:

Break even in units = Fixed Costs / Unit Contribution margin

The unit contribution margin = selling price -- variable costs

The fixed costs in this equation are costs that do not differ with the number of units produced or retailed by the organization. On the other hand, variable costs are expenses or costs that vary in proportion to or differ, with the number of units produced or retailed (Rene, 2013).

Break even analysis can be used by the organization to determine and ascertain the total sales in addition to total number of units that are necessary so as to attain the desired or projected level of profit that has been predetermined by the company or by the business. Through break even analysis, the target sales volume is computed using the following formula:

Target Sales Volume: (Fixed Costs + Desired Profit) / (Contribution Margin per unit)

The breakeven point is considered to be the sales volume at which a particular business gains exactly no additional accruals over the investment deployed. In other words, it is the point at which the amount of costs and the amount of company sales are equivalent. In this case, break-even analysis will be beneficial to the challenge faced by the organization owing to the following number of reasons:

1. The analysis will enable management to ascertain the level or amount of outstanding capacity once the break-even point is achieved. The advantage of breakeven analysis is that it shows the amount of profit that the organization can generate.

2. Break-even analysis will enable the organization to determine the magnitude and impact in which the replacement of variable costs with fixed costs would have on the profit generated. For instance, a decrease in the variable cost per unit will point toward a decrease in the breakeven units. This assertion follows from the fact that every unit that is produced constitutes a contribution to the fixed costs and the selling price. In the break-even analysis, the margin of safety is computed by the following formula:

Margin of Safety = (expected sales… [END OF PREVIEW] . . . READ MORE

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