Question

1) What is the importance of financial information for entrepreneurs?

2) What are the benefits of the budgeting process?

3) What is a ratio analysis? How can it be used by the entrepreneur?

Answer 1

1) Managers need financial information if they have to effectively develop their business. They require certain financial tools to properly understand their business operations. Budgets and cash flow projections are the two most important tools for managing risk and in understanding the basic financial concepts.

2) Budgeting helps to avoid the unnecessary expenses on fees, products or services that cuts into our the financial goals. Budgeting helps to create a spending plan. Such planned spending helps to cut down on debt and prevents taking on additional debt.Budgeting helps focus on the most important financial goals.

3) Ratio analysis helps in analyzing the financial health of a company using the current and historical financial information. Understanding ratio analysis can help an entrepreneur get an insight into the financial trends and useful financial information. A comparative ratio analysis is useful. Ratio analysis in isolation cannot yield true results