Financial Management Practices and their Impact on Organizational Performance

Financial Management Practices and Their Impacts on Organizational Performance
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Financial Management Practices and Their Impacts on Organizational Performance
Executive Summary
Financial management practices significantly affect organizational performance. Companies are not operated blindly, and proper planning and organizing ought to be done. The primary financial management practices discussed in the entirety of this paper include the capital structure decision, dividend policy, financial performance assessment, investment appraisal techniques, and working capital management. Capital structure decisions comprise the equity and debt ratio that help investors determine the risk associated with investing in a specific company. The investment appraisal techniques are the payback period, net present value, profitability index, internal return rate, and accounting return rate.
In addition, the dividend policy entails the guideline that a firm uses to calculate the amount of money that shareholders will get. Working capital management involves managing activities and operations that promote the smooth running of a company. Financial performance assessment help to identify an organization’s assets and liabilities. In that light, the failure of proper financial management can lead to numerous issues. For instance, a company might be unable to pay its employees, give dividends to shareholders, fail to allocate resources accordingly, and halt operations due to insufficient funds. That is why an organization should be concerned with managing its finances well to ensure that it meets established short and long-term goals and objectives. A firm should balance its focus on maximizing profitability and its engagement in other activities, such as corporate social responsibility, which help in building a good reputation. Additionally, assets and liabilities should be well-managed to ensure that an organization has enough resources to facilitate its daily operations. Stakeholders, such as employees, customers, and suppliers should not be forgotten since they play significant roles in a company’s success. The paper shows how financial management practices influence organizational performance.
Proper financial management is critical to the success of any organization. Financial management practices involve organizing and planning resources available in a company. Making good financial decisions enable an organization to have feasible short and long-term goals. That way, a company knows how much money to invest in different activities and takes appropriate strategies to get profits. Organizational performance entails how a firm is doing and all activities involved to achieve the vision, mission, and goals. The paper focuses on how financial management practices, such as the capital structure decision, dividend policy, investment appraisal techniques, financial performance assessment, and working capital management, impact organizational performance.
Financial performance assessment is one of the ways that determine the effectiveness of the management. In that light, it significantly affects organizational performance....