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CMI Unit 7003V1 – Financial Management

INTRODUCTION

The project report summarises financial management in Company X NHS Trust. The financial management is defined as a process of collecting and modelling financial data so that a better decision can be taken out by managers. The report is based on a Company X, which is located in London, UK. It is an NHS organisation which offers health care services to the public. COMPANY X was established in 1968. The project report summarises about sources of financial information, various kinds of analytical tools as well as the financial performance of the above hospital are also analysed by help of ratio analysis technique. Besides, given the cash budget is also analysed in order to find out issues. In the end part of the report, the impact of commercial projects on the Company X NHS Trust’s objectives is summarised.

TASK 1

AC 1.1 – Determine How To Obtain Financial Data And Assess Its Validity

Financial data are available from a vital range of sources of business entities. The budget is the tool by which our COMPANY X transforms its strategy into action.

The process of analysing our COMPANY X’s financial statements for use in decision making is called financial statement analysis. This is used by external stakeholders for understanding our NHS Trust’s overall health, and evaluating its business value and financial performance.


Ensuing the financial year’s end, the COMPANY X and adjacent services within our NHS Trust accounting boundary must by statutory requirement create an ARA (Annual Report and Accounts). For bodies within the Trust’s accounting boundary, the COMPANY X needs to provide a consolidation of accounts data in addition to that. (Assets.publishing.service.gov.uk., online, 2020).

Financial statement analysis uses many different techniques. However, the main three are: ratio analysis, vertical analysis and horizontal analysis. Ratio analysis calculates statistical relationships by using vital ratio metrics, while vertical analysis focuses on the line items’ vertical effect on the business’ proportions and other areas of the business. Horizontal analysis analyses the line items’ values over two or more years – comparing data horizontally. (Financial Statement Analysis, 2020).

Our NHS Trust monitors and creates three primary financial statements: the income statement, the cash flow statement and the balance sheet. These are used by the COMPANY X to both manage their business operations while providing to their stakeholder’s report transparency. These three statements are all connected between each other and produce different views on our NHS Trust performance and activities.

Internal constituents use it as a monitoring tool for managing finances. There are two types of source of finance which are internal and external. Underneath, a description of this source of financial data is done:

Internal sources- In this source of financial information, users can get data from internal business processes and methods such as:

  • Internal accounting system- It is a type of accounting system which is requested an internal business process (Finkler, Smith and Calabrese, 2018). By the help of this crucial information can be gathered by users. Such as in the above Company X, financial information can be evaluated using the internal accounting system.
  • Internal business transactions- Besides, this is also an essential source of finance for companies. Users can gather critical financial information through the help of those internal transactions performed inside of the business. Like in the above Company X, financial information can be assessed in consideration of internal business transactions.

External sources- In this source of financial information, users can get data from external parties such as:

  • Suppliers- Suppliers offer raw material to our COMPANY X on credit or cash base. They know about businesses actual financial condition. For instance, in our NHS Trust, suppliers know their monetary situation.
  • Financial statements- Each company produce financial statements at the end of the financial year, and these statements help in gathering critical monetary information.

The validity of financial data:

  • Auditing- This is a crucial way to check the validity of financial data. COMPANY X applies the auditing process in which financial statements transactions are being reviewed.
  • Checking accounting standards- Along with auditing, accounting standards are also crucial in order to check the validity of financial data (Renz and Herman, 2016). It is so because if our NHS Trust follows accounting standards and principles, then their financial statements are considered to be viable.

 

AC 1.4 – Review And Question Financial Data

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