Factors affecting Financial Structure and Performance In an organization
Interestingly, these concepts are interrelated which makes the sole objective of this paper is revealing the interrelations between the business concepts and their effect on an organization or firm. The major concepts include risk management, corporate governance, and strategy. Other concepts include capital structure, dividend policy, mergers, cash management, financial distress and capital policy. Corporate governance Corporate governance may be defined as the existing relationship between a firm’s director, the shareholder as well as other stakeholders. These individuals play a vital role in the development and growth of any organization. A firm whose board members who are also shareholders in the firm have a higher likelihood to make improvements in their financial performances due to the factor that they will efficiently execute their role to attain a significant investment return.
‘ Additionally, corporate governance is a vital concept in avoiding financial losses and distress in an organization. This is due to the factor that its main objective is countering agency issues. However, a chief issue that often arises in this concept is the management’s team compensation since in some case, shareholders tend to develop a feeling that the compensation offered to the director’s board hinders the rise of their earnings hence calling for subsidization. Such conflict leads to dissatisfactions which cause poor production due to the disruption of production processes. An organizations management is obliged with developing strategies that shied the firm form risk impacts to hinder adverse impacts on the production processes as well as a financial performance like bankruptcy.
Notably, Swedish Match’s management has established a mitigation technique that hinders the firms from being bankrupt despite it indulging in development projects. The form uses equity rather than debt as an ideal drive to drive the projects. Strategy Organizations make use of different operational and management strategies to operate and ensure there are development and growth. The management employs various strategies that will ensure there is financial stability. Studies reveal that effect strategies result in increased financial performance in a firm (Businessballs, 2017). A major objective of organizational managers is minimizing the production cost as well as maximize the output of an organization. However, cost limiting should be done comprehensively to ensure it does not impact the production cost. Notably, while implementing change, managers should be keen since it changes cause inconveniences to the organization.
First, the manager should consider the conditions of the market to ensure the firms gets enough time to the market with the newly implemented changes. Notable some industries have become more proficient and through such an approach, they deliver merchandise with minimal spending of capital. However, other organizations utilize a bureaucratic approach; their generation, promotion as well as dissemination focuses are distant from each other hence increasing cost due to the passing of information back and forward. Apart from that, other organizations use a lean approach; their working staff is less, the circulation, stockpiling and creation focuses are near each other hence minimizing superfluous cost. Mergers and Acquisitions Acquisitions and Mergers have a vital impact on the development and growth of a business.
Merging can be defined as the act two firms in similar production lines while acquisition entails taking over the all operations in an organization. Additionally, another major risk s culture clash. The organization may have different cultures hence there is need to create new internal controls after joining to ensure effective governing of the employee as well as equity. With respect to Nwamaka and Elizabasili (2017), acquisitions and merging may have a positive or negative effect on employee productivity. Studies suggest that employees of superior organizations tend to despise employees of inferior firms in spite of joining forces. This results in a decline in productivity due to demoralization employees. The internal controls set by organizations are used to determine the action a firm takes.
Managers should choose policies they intend to apply, whether they increase debt to raise leverage ration or not. Illustratively, In Apple, Steve Jobs decided to retain profits made by the firm, however, the chief executive who preceded that chose to pay dividends to shareholders after realizing holding money lowered returns on the organization. Conclusion By analyzing the different concepts in an organization, one understands their significant effects on financial growth and development and growth of a firm. Corporate governance, strategy as well as risk management are connected with more concepts like capital structure, dividend policy, mergers and acquisition, financial distress and cash management. businessballs. com/strategy-innovation/strategy-implementation-and-realisation-17/ Manzaneque, M. , Priego, A. M. & Merino, E. & Ezeabasili. Effect of Dividend Policies on Firm Value: Evidence from quoted firms in Nigeria.
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