Liquidity - Business Cycles and Monetary Policy

Question: Discuss about the Liquidity, Business Cycles and Monetary Policy. Answer: It is observed that a competent professional account in business is an invaluable asset to the organization. The individuals employ an inquiring mind to their work found on the perspective of their knowledge of the organizations financial base. The financial accountants have their skills as well as intensive understanding of the organization as well as the environment in which the firm operate professional accountants in business environment. The training in accounting enables the accountants to implement a pragmatic as well as objective approach to resolving issues. The field of accounting profession has continuously been expanding their path and the series of responsibilities that are incorporated for keeping the record relevant in most systematic manner. The current report specifies the issues and definitions of accounting professional as well as how accounting issues can be resolved. The current report highlights research problems and issues and based on the issues found, the research represents an intensive critical analysis. In addition, the by analyzing the existing literature, the suitable findings regarding the accounting has been derived. In addition, the findings from the secondary information have always been observed. Lastly, a discussion has also been conducted focusing the previously reviewed literature. Background and definition of the issue/problem, including a justification why the issue is crucially relevant to my profession Although, the accountants have observed an increasing development in their field, some major barriers prevent the growth of their career. As put forward by Burns and Needles (2014), new technologies continue to enhance, rules as well as the regulations change, the cost of administration rise as well as many accountants could be worrying about when the future is awaiting for them. In this context, Behn, et at., (2012) commented that trust in traditional financial organizations highly remains low; however the accountants are still the most trusted sources of the advice for the majority of business. Therefore, in order to maintain as well as live up to this status, accountants need to be aware of the major challenges faced by the accountant industry in the current days. It is observed that one of the major challenges faced by accountants in the present days is the advanced technology embraced by the organizations. As stated by Guthrie, Evans and Burritt (2014), if the organizations are not turning to the unqualified accountants, many business could be selecting to go it alone. The advent of new online technologies as well as a mobile internet culture has observed a proliferation in the field of cloud based accountancy software. On the contrary, due to implementation of the technology, the business owners of large firms may not ask for the accountants when they could do a large number of functions by their own with the help of the software. Hence, Brealey et al., (2012) commented that it is evident that qualified accountants provide the expertise on tax planning as well as the business suggestions along with the increasing variety of the skills. However, the small business in this context does not understand this. The accountants need to be taking the lead in educating small as well as medium sized organizations regarding the drawbacks of self-administrated accounting software. Hence, the accountants should also focus on developing their skills to deal with such possible challenge. Another significant issue in the field of accounting is the trend towards the firm consideration. In this context, Van Der Wijs (2012) commented that with increasing costs in all sectors, minimizing overheads as well as the expenses, sharing the overall resources and expanding the offerings to deliver a more diverse selection of the services to the customers may not make sense. This does not make sense, as there are many in the accounting sector, who might argue that organization consolidation is actually a solution to the issue dealing with a number of accountants. Projects aim, objective and questions The aim of the project is to evaluate and discuss the financial characteristic of small as well as large ventures and their implication in the business. Thus, to reach the aim of the research, some relevant objectives have been established in the following. To critically review and explain the relationship of financial characteristics of small as well as the large venture and its influence in respect of growth or failure of the business To critically examine how account as well as management make their decisions by assessing the financial characteristics of the organization To critically the role of the financial characteristics of business as well as their contribution invest for forming increasing returns on the base of financial ratio analysis Research Question How does the financial characteristics of small as well as large venture impacts on the success or the failure of the organization? How do the financial the characteristics of the organization help to take light investment decision What significant role of financial characteristics of business can be developed in the creation of higher returns on the basis of financial ration analysis? Detail critical and well-structured literature review Financial characteristics of small and large venture Small-seized venture are considered as the major employers as well as drivers of economic growth. It is often seen that small business entrepreneurs could often use their families finance to fund their business. On the contrary, the others are observed to be seeking external funding, which could include additional equity or debt from family and friends. In this context, Gerber, Hui, and Kuo (2012) added that small sized venture are considered often for the analytical purpose, including the industry in which the small business is in probably to play a crucial role for determination of organizations financial characteristic. In general, the financial characteristic embedded with the several financial ideas such as profitability, indebtedness as well as liquidity. Conversely, on the financial perspective, small venture may not borrow compared to the larger ones. Hence, Atherton (2012) commented that large business tend to be formed more leveraged in comparison with the venture while bor rowing. However, in order to discuss the financial characteristics of all size of organizations, financial performance and the characteristics of Commonwealth Bank, Australia has been considered. The financial performance and the business review indicate that net profit of the organizations increased 5% on the prior year to $9,137 million (Commbank.com.au, 2017). Hence, the earning per share increased 5% on the prior year to 560.9 cents per share and the return on equity. In addition to this also observed that net interest income increased to 5% to $15,799 million and this reflects almost 7% growth interest earning assets, which is partly offset by five basic points decreased in net interest margin. Notwithstanding, the other basic income increased 12% to $4,839 million with the inclusion of 1% benefit from the lower Australian dollar (Commbank.com.au, 2017). This often reflects the volume driven growth in commissions. The data record also makes it evident that higher trading income is often driven by the strong market sales and business performance. On the other side, it is also learnt that insurance income of the company decreased 3% to $792 million. This happens due to the deterioration in claims experience and partly offset by average premium growth 6% of as the outcome of enhanced pricing as well as laps rates. The financial statement of the company indicates that firms operation has observed both profits and loss but several areas of the business gained the profits. These opportunities help the firm to further extend the operation. Whats the right perspective-Industry or Size? It is found out that small business are often grouped together for analytical purpose; however, the industry a small business operates probably play as significant role in determining organizations financial characteristic. For instance, small mining organizations are seen to be more similar to other mining organizations that are currently benefitting from high commodity price, whereas some organizations in such field related to tourism could be more aligned with other organizations that are currently facing the challenges. Thus, it can be mentioned that industry or size is more relevant in terms of financial characteristics such as profitability as well as liquidity. As stated by Dietrich (2012), the small business or the organizations are seen to be less likely to borrow in compared to large ones. It is identified that when the small firms do borrow, they tend to be leveraged than the large organizations. This could reflect minimized access to the finance for the smaller organizati ons, which is associated with more valuable revenue streams. This could make servicing debt more complicated and difficult. As commented by Killing (2012), the industry also appears to be more significant driver of the overall level of developing a business; however, within each industry. The business size plays a significant role in developing the business. Profitability In board terms, small organizations appear to be more profitable, which is measured as having higher return on the asset than the large organizations. Hence, it is observed that profitability could also vary across the sector. For instance, the constructions organizations are observed to be having a higher return on the assets over the most recent economical cycle. Nevertheless, in most of the sectors, the median return on the assets is higher for smaller organizations. This concept tends to reflect the fact that small ventured could be more risky with an increasing variation in return than large organizations. The investors tend to look for a higher expected return on the risk investment. Here, Brigham and Houston (2012) commented that the increasing dispersal of return on assets among the small firms compared to large organizations. Liquidity- Liquidity is usually referred to an organizations ability to pay the short term debt, bills as well as and other obligations from the cash or the assets that could easily be turned into cash. One significant measure is the quick ratio (Hochberg, 2012). This means the organizations current assets to its current liabilities. It is identified that small business is more likely to become liquid, which has higher quick ration compared to the large business. Hence, the industry could also play a significant role. For instance, organizations in the wholesales as well as retail trade sector should be less liquid. This could be due to the cashflow that remains relatively for long. Industry composition as well as associated economic condition The difference between small and large business conditions is partly because of the different industries in which the firms operate as the often seen in the small business. This can be understood by an example such as a small share of small business is directly demonstrated to the mining industry due the presence of mining related projects. On the contrary, there is an increasing share of small business in the construction sector, which has observed a soft demand for the residential as well as commercial construction. A detailed discussion on the implementation of the project- In order to implement the current project successfully, the research conducts detailed analysis. The existing literature on this context has been reviewed to find out the gap the previous research. Methodology- It is observed that research techniques are backbone of the research as it helps to stand the research meeting all requirements. The outcome of the research projects depends on the implementation of the research. Therefore, it is necessary to apply each technique effectively to gain the desired outcome. Thus, the current research starts with providing the descriptions of the variables of the research topic. The research variables reviewed and analyzed with the finding found in the existing studies. Based on the discussion and the comparison with the existing literature, the research issues have been found. Thereafter, research questions and objectives have been formed considering the major issues such as the challenge of advanced technology and firm consideration. Likewise, based on the issue and the objectives made, the existing studies have been evaluated. Based on the finding found, the secondary information has been evaluated. The research does not include any primary analysis. T he secondary analysis has been conducted with the findings found in the existing literature. Furthermore, the research extends to the discussion on the findings of previously reviewed literature. This analysis has been carried out to emphasize on other related variables. Findings from the secondary information analysis The secondary information indicates that small and medium-sized enterprise plays a pivotal role in national economies of nations around the world. This is particularly true for the emerging market. The availability of finance has been considered as the major factor in the development, growth as well as successfulness of small and large venture. Financing method employed by small and medium organization could vary from initial internal sources such as owner manager financial assistance from family and friends (Benavides-Velasco, Quintana-Garca, Guzmn-Parra, 2013). In this context, in accordance with the context of financial growth as well as financial needs, the financial options available for small and large change throughout the different phase of organizational lifecycle. It is also identified that financial strategies are needed at different stage of firms growth cycle. Generally, due to the unique feature that characteristics small and large venture at the time of start-up phase such as information opacity. Furthermore, it is also observed that due to the lack of trading history as well as increasing high risk of failure, the small and large venture in this stage rely on insider funding sources. As commented by Babajide (2012), the small and medium organizations advance through their business lifecycle, they start to steadily adjust their capital structure. The findings indicate that during the growth stage of the business, the small and medium organizations mature, they begun to build a track record in addition to the ability to provide collateral (Brewer Genay 2015). It is further observed that this serves to enhance the creditworthiness of the organization. Therefore, they attract the attention of investors eagerly inject the money into the business. As the outcome, the organizations begin substitute internal with the external financial sources involving venture capitalists, bank loans as well as trade credits to name a few of them (Chemmanur, Loutskina and Tian, 2014). A number of empirical researches indicate that the use of lifecycle model as their selected approach to realize the understanding the financial behavior of small and large organizations. In field of discussion, Mollick (2014) mentioned that financial behavior of small and medium size organization to a large extent could be attributed to the lifecycle pattern which was found consistent over time as well as completely similar across the different sectors and organizational context. Notwithstanding, secondary information make it evident that growth life cycle model that it may not offer a complete picture of small and large venture financial decisions as well as behavior. Generally, the characteristics of small and large venture affect their financial decisions as well as behavior and eventually the organizational performance and growth (Malmstrm, 2014). Hence, the existing literature has identified several characteristics particularly related to the small and large venture as the factors influence the financial behavior of the organization in this sector. This may include organizational size, age, the type of ownership and the legal form. It is also identified from the secondary information that size of the firm has as effect on small and large ventures activities as well as its potential to expand to acquire general agreement. The size of the firm is usually coupled with the age as they tend to have similar influence on organizational life cycle. Discussion of the findings in light of previously reviewed literature The findings of previously reviewed literature indicate or provide different perspective in respect to the establishment of the small and large venture. When it comes to growth of such venture, the literature indicates that growth is one of the significant phenomenons especially in small enterprise. Moreover, their state of existence or the survival depends relies on their power to take part in the market with other large organizations. It is also evident that growth decreases the possibility of closing small venture. Thus, the author in the existing literature have mentioned that strengthening is the more significant not because of the enterprise as well as their owners but for all the stakeholders involved, as these firms thrust forward the economy through the action of highlighting diversity of the products and the services. It is also identified that growth phenomenon of the small ventures had been largely analyzed within the entrepreneurship. However, the one single motive found is that most of them fail to expand during their survival. Hence, the small business abstains from maximizing or growing. Conversely, some of the organizations having the economic stability do not wish to increase the growth while other desire slows growth even though they are run their operations quite successfully. In addition to this, it is also observed that most of the small ventures usually do not go beyond the stage when they begin their activities. From the findings of previous reviewed literature, it is observed that the complex nature of growth of small venture may require further intensive research as many studies have been enhanced to measure the growth of the firm. Furthermore, the other studies have dealt with the growth strategies or on the development intention. It is observed that explication on growth decisions, contextual dimensions and the role of venture agency are still lacking. Thus, the requirement for the future studies could be justified because of the fact that theories developed to describe the growth of the large organizations that are not adapted to foreground the same phenomenon in small ones. Notwithstanding, the researchers could develop explanations on the context the owner of the business take decisions whether to expand their business growth or not. The existing research on this context also say that growth of the small venture could be related to the new markets, particularly in the case of technology, the organizations in respect to diversification. In addition to this, there are some opinions that growth could occur alternatively as the integration of the part of the value chain or kind of vertical growth. However, the research also indicates that growth can be affected at several levels but the formulation of the growth widely depends on the identification of origin of the resources, capacities as well as accumulation method. Lastly, from the strategic perspective, it can be added that it is necessary to rely on the people with the cognitive capacities for the growth of small and large venture because of the holder of such as foundation are not the sole protagonist of growth. Additionally, the competence of business owner should be involved in broadening the network, which is highly important. Conclusion On the completion of the report, it can be mentioned that growth of small and large venture could depend several significant factors. However, it is necessary for the owners of such firm to understand dynamics of market. One of the most threatening dynamics is the s unstable state of economy which large influence the growth and the failure of the business. Finding of the literature make it transparent that there is an influence of firms variable on the growth. It is observed that besides the individual level another intermediary level could affect the growth through the organizations. Thus, one of the widely discussed aspects in the literature is the effect exerted by the size of the venture. Nevertheless, further studies have demonstrated that the size influence the growth although no particular agreement has been formed on whether small venture tend to increase more than the large organizations. Recommendation It is necessary for the accountant professionals to understand current dynamic situation of the market. The accountants should gain the ability of building a small firm to its desired position. The following suggestions could help the accountants to enhance their skills and knowledge in their field. Mentoring-Each small and large firm has started providing employee mentoring programs. The mentors could help the accounting professionals to increase their interpersonal skills and knowledge. Training and ongoing education- The certified public accountant need continued professional development each year. Thus, it is necessary for the accountants to take part in such training and development session to gear up any challenge in their field. Enhance knowledge in Advanced technology- It is necessary for the accountants to understand the importance and learn the use of advanced technology. Both small and large organizations have been embracing the new technologies. Thus, gaining knowledge about the software and its use, the accountants could deal with the issues. Limitation and Future Research- The current study is restricted to certain area such as large and small venture as well as financial characteristics. The research does not provide any discussion on the profitability of such size of venture or their current position in the market. In addition, the research is only restricted to secondary information. The research can be further extended by considering an organization of such large and small venture and conducting a primary analysis. The primary analysis can be conducted by considering the current situation of the firm. Reference list: Atherton, A. (2012). Cases of start-up financing: An analysis of new venture capitalisation structures and patterns.International Journal of Entrepreneurial Behavior Research,18(1), 28-47. Commbank.com.au.. (2017).Annual reports - Commonwealth Bank Group. 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