Vocabulary and Practice of Organizational Finance - Essay Example

Vocabulary and practice of organizational finance Vocabulary and practice of organizational finance Worldwide, all business, profit or non-profit, must maintain a score of their progress and performance. Despite the fact that there exists a number of ways for evaluating a business, the regular one is financial in scope. Since all business must understand, how they are performing after a particular time, maintaining financial statements is necessary since they avail basic information that helps in analyzing and understanding how the prospective business is performing.

Financial statements are reports that a business designs in order to summarize certain financial activities over a given period, which could be a month, year, or five years (Seifert, 2011). As a case in consideration, this paper will focus on AMD Corporation, which is one of the leading producers of microprocessors and 3-D graphics technology. The paper will provide a presentation of financial information of AMD and describe how the company uses this information to inform its investors. Additionally, the paper will outline how the company’s financial information aids at internal decision-making.

Analysis of the financial information prepared and released by Advanced Micro Devices, Inc shows that, this company uses its financial data to inform three different categories of investors about their viability for investment. The three categories of investors comprise of individual investors, financial investor, and institutional investors. With the help of financial information, AMD Corp. informs both institutional investors and individual investors about long-term capital gains (Zager & Zager, 2006).

As such, it is agreeable that, at AMD, financial information is crucial since the company presents it to investors in order for them to assess the viability of investing in that company. AMD Corp uses its financial information to inform its investors on matters regarding investment choices. As such, investors are able to make the right choices when assessing the viability of investing at AMD Corporation. Financial information of AMD Corp represents the company’s aggregate financial transaction for periods that inform investors of potential gains and the level of risks.

AMD Corp uses its financial information to inform investors of its status in litigation. AMD is a party to litigation and finds it considerable to become party to other claims mainly to deter the company from incurring substantial expenses (Labor Department, 2010). Therefore, with the help of financial data, it informs its investors of probable presence of substandard goods selling using the trade secret or trademark of the company. Knowing this could lead to cumulative loss of prospective investors, the company prepares and uses its financial information to assert investors to be careful with probable presence of counterfeit goods that may be in the market selling against the law (Seifert, 2011).

How AMD uses financial presentation in making decisions internally Analysis of financial statements comes before the process of management. Management process comes before the process of planning despite being a vital component of management process. Planning is an essential aspect of good management and a good financial plan helps consider all the weaknesses and strengths of a company (Labor Department, 2010). With that respect, the task of financial information at AMD Corp in making internal decisions is to analyze and recognize the best characteristics of the company in order to utilize the most of competitive advantages.

In addition, the company incorporates the use of financial information in internal decision making with the aim of identifying and analyzing the weaknesses of the company in order to take corrective measures (Zager & Zager, 2006). Due to that, we can deduce that, management, which is the company’s decision making organ is the most significant department of the company that uses financial information in coming up with up relevant decisions regarding the success of AMD Corp. According to AMD Corp, financial data is very significant within the context of business quality.

This is because, upon analyzing financial statements of a company, decision makers acquaint themselves with business quality. Upon presenting financial information, AMD policy makers are able to estimate the efficiency of the business and security of AMD Corp on the basis and instances of observed changes. The ratios formed from different financial statements aid in the context of measuring the quality of the business. Ratios are significant instruments that a company uses in its process of decision-making (Labor Department, 2010).

For instance, in the case of AMD, the company uses liquidity ratios to measure capability of the company to settle its payable liabilities. Furthermore, it uses leverage ratios in measuring how creditors finance the company and activity ratios to measure the efficiency at which the company utilizes its resources. In conclusion, with reference to Advanced Micro Devices, financial information differentiates segments that the business is willing to initiate a decision. With the help of financial information, decisions made by this company determine the business’ efficiency (profitability), criteria, liquidity, and financial stability, which in turn ensure satisfaction of the business quality (Seifert, 2011).

Further outlook into the financial data of this reveals that, AMD Corp uses financial analysis of balance sheet, financial statement analysis ratios, and cash flow statements as well as changes in owners to inform its decisions. Financial information of a company is of paramount importance in making internal decisions of every firm. As a result, preparing financial information after a specific period is necessary. References Labor Department, (2010). Occupational Outlook Handbook. Washington, DC.

: Government Printing Office. Seifert, T. (2011). AMD 2010 Annual Report on Form 10-K. retrieved from AMD's 2010 10-K filing on May 29, 2012. Zager, K. & Zager, L. (2006). The role of financial information in decision making process. Retrieved from http://businessperspectives.org/journals_free/im/2006/im_en_2006_03_Zager.pdf on May 29, 2012.