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How well does 3M corporation generate and manage its accounting and financial information for decisions and control?
Financial management is pivotal to be a solvent and successful business concern. An organization can be symbolized as successful, if it has generated and managed its financials perfectly. Moreover, a common sentence “finance is life-blood of a business” is so right, when it comes to practical context.
How? Because, business starts with finance, performs with finance and succeed with finance. Nevertheless, the phases in financial activities are so different from one other. First phase called financial investment, second called financial management and the last one called financial control. When these three found in an accurate form it is called 3M Corporation, a symbol of managed and successful business concern.
3M Corporation and its financial control
Minnesota Mining and Manufacturing Company well-known as 3M Corporation is an American based Multinational Corporation with 60+ branches in different countries and 200+ retailers world wide. It retains the pride of huge but organized corporation in the world with more than 55,000 products and more than 76,000 employees.
3M Corporation always depend on its financial information for decision making and financial/organizational control. Perhaps, it would be more appropriate to say that well management of financials has led 3M Corporation to become successful. Over the years 3M Corporation always appear successful to manage and raise its rations and statistics. Therefore, an appropriate financial reporting and control has led the perfect decisions to manage and to grow up the organization. To prove it, a glimpse of 3M Corporation’s financials rations and statistics is enough to tell the success story.
3M Corporation ration analysis
Ratio analysis is useful to achieve four evaluation objectives i.e. evaluation of liquidity, profitability, long-term solvency and market strength. 3M Corporation have always managed to maintain each evaluation objectives at its best level. Data is extracted from last financials of 3M Corporation assess the solvency and growth.
Current Ratio - can the company pay short-term debt?
Current ratio shows relationship of current assets to current liabilities. It is used as an indicator of liquidity. Moreover, it measures liquidity or debt paying ability. 3M Corporation’s current ration is 2.37 ("Fundamentals - Ratios.", 2010).
3M Corporation’s current ration shows that it has plenty of liquidity potential to pay its shot term debt. A sufficient rise in current ratio from previous year’s ratio shows the perfect financial management by the Corporation.
Acid-test – can the company pay short-term debt without relying on inventory?
Acid test ratio indicates the short-term assets strength to payoff the insistent current liabilities without selling inventory. Acid-test ratio is much arduous than working capital due to non availability of inventory items in it. 3M Corporation’s acid test ration is 1.68.
Acid test ratio less than 1 is considered non-sufficient to pay the current liabilities. However, acid- test-ration of 3M Corporation shows sufficient liquidity in current assets excluding the working capital to reply the short term debt without relying on inventory. So, it is sufficient to overcome the immediate current liabilities without inventory.
Working capital - can the company repay current liabilities using only current assets? Working capital is the difference or excess of current assets over current liabilities. Working capital is considered as life-blood of a business. Moreover, it is considered source of day-to-day business activities. Shortage of working capital may cause a serious trouble to the company. 3M Corporation working capital is 5,898/- (In Millions).
Working capital of 3M Corporation is positive enough and shows that the corporation is capable enough to payoff its short-term liabilities which is 4,897/- (in millions) using only current assets.
Inventory turnover measures the size of inventory and affects the cash available to pay maturing debts. Therefore, inventory should be maintained at the best level to support production and sales. 3M Corporation’s inventory turnover is 4.67.
3M Corporation’s inventory turnover is good enough. A high inventory level never considered good due to its zero return as inventory. It may also put the company in trouble with fluctuation in product rate. So the inventory turnover of 3M Corporation is better.
This project is a comprehensive study of 3M Corporation financial generation, financial management and its influence on the decision making process as well as controlling the business.
In the paper, 3M Corporation’s financial reporting and financial management have been demoed. Hereinafter, after careful analysis of 3M Corporation’s financial reporting and financial management. It can be realized that progressive business needs to generate true business position through its accounting which helps to direct the decisions in right direction. Therefore, controlling the financials activities is important for progressive and solvent concern.
Evaluation of organization suggests that the organization is best. Therefore, it would be recommended to 3M Corporation, keep the process of up gradation in controlling, managing of financials at its high pace to make the decision more powerful and fruitful.