What are the best ways to use final accounts to improve your company's financial performance?

3 Optimize working capital management

Working capital is the difference between current assets and current liabilities, and it represents the amount of funds available for day-to-day operations. Working capital management involves balancing the trade-off between liquidity and profitability, by optimizing the levels of inventory, accounts receivable, and accounts payable. By using final accounts to calculate working capital ratios, such as inventory turnover, receivables turnover, and payables turnover, you can determine how efficiently your company is managing its working capital cycle. By improving these ratios, you can reduce your cash conversion cycle, increase your cash flow, and enhance your profitability.

4 Evaluate investment and financing decisions

Final accounts can also help you evaluate the effectiveness of your investment and financing decisions, which affect your long-term growth and value. By using final accounts to calculate investment appraisal techniques, such as net present value, internal rate of return, and payback period, you can estimate the expected returns and risks of your capital projects. By using final accounts to calculate financing ratios, such as dividend payout ratio, dividend yield, and earnings per share, you can determine the optimal mix of debt and equity financing for your company. By making informed and strategic decisions based on these techniques and ratios, you can maximize your shareholder value and competitive advantage.

5 Implement budgetary control and variance analysis

Budgetary control is the process of comparing the actual results with the planned or budgeted results, and taking corrective actions if necessary. Variance analysis is the tool that helps you identify and explain the causes of the differences between the actual and budgeted results. By using final accounts to perform variance analysis, you can measure the performance of your company in terms of sales, costs, profits, and cash flows. By analyzing the favorable and unfavorable variances, you can determine the factors that contributed to your success or failure, and take appropriate actions to improve your performance in the future.

Final accounts are not just numbers on paper, they are valuable sources of information and insight for your company's financial performance. By using them in the ways described above, you can gain a deeper understanding of your company's strengths and weaknesses, opportunities and threats, and goals and strategies. By applying the knowledge and skills of corporate accounting, you can use final accounts to improve your company's financial performance and achieve your desired results.

6 Here’s what else to consider

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