Financial management refers to the competent and effectual management of

money in such a way as to achieve the objectives of the organization. It is

the focused function unswervingly connected with the top management. The
implication of this function is not seen in the 'Line' but also in the capability
of 'Staff' in on the whole of a company. It has been defined in a different way
by different experts in the field. The term financial management applies to
the financial strategy of the organization. It involves the allocation of funds
and also ways to raise funds required to carry out business smoothly in any
organization. Financial management is not only beneficial for long term
planning but also for allocating short term resources. Further, it also deals
with dividend policies of shareholders.

Flash Memory Inc. is a small firm operating in the computer and electronic
device market. The products that the companies produce have a short
product life. The dealings within the organization are mostly on credit as
major sales are on credit basis.

Going by the financial reports of the firm it clearly shows that the sales
of Flash Memory Inc. (Flash) increases swiftly in the first few months of 2010,
additional working capital is requisite to make certain smooth operations and
uphold their current growth rate. on the other hand, Flash currently has
almost attain its notes payable limit of 70% accounts receivables with its
current commercial bank and therefore, need to look for a variety of
alternative financing means to offer the requisite amount of funds it needs to
finance its forecasted sales for year 2010onwards. The report also provides
an insight to flashs financial position for the following 3 years (2010 till
2012) through the use of pro-forma income statement and balance sheet. For
Flash to be able to keep up with the sales projections, additional financing of
$4.04million and $2.61million are required in 2010 and 2011. In calculation,
Flash is also considering investing in a major new product line and a
valuation analysis is done to establish whether the new product line should
be invested or not. According to the a variety of sales and expenses
projection, a assessment analysis has shown that the new product line will be
appreciated at a favorable NPV of approximately $2.8 Million using Flashs
weighted cost of capital as the discount rate. As such, in the occurrence that
the new product line is invested, extra financing will be required to instigate
and preserve this product line in 2010, which amounts to S7.48 Million.
Lastly, the report also provides an estimate on various alternative financing
methods that Flash can mull over to attain the additional funds needed to
finance its forecasted sales of its accessible and new product lines. These
methods are:
(1) Finance with Internal Financing
(2) Short Term Debt
(3) Long Term Debt and
(4) Equity issuance.

The recommended form of financing that Flash should seek is to finance its
operations according to the Pecking Order Theory. This theory preserve that
businesses hold on to a pecking order of financing sources and have a
preference of internal financing when obtainable, and debt is favored over
equity if external financing is required. Therefore, the form of debt a firm
select can act as a indicator of its need for external finance where the
company can generate finances from three different sources which are as
follows:
Internal financing which means raising capital from their own sources
within the different departments of the organization.
Secondly, by taking various long term or short term loan depending
upon the financial needs of the organization.
Finally, the company can raise funds through equity by introducing
shares in the share market. Equity can also be the last resort for
 raising the funds for the company. The problems that are faced by the
company are
POOR CREDIT MANAGEMENT: the credit management of the company
is very poor. There are pending amount of credit that are still not
cleared by the firm which results into no more credit for carrying out
business transaction in the near future.
AMOUNT OF CASH TO BE BORROWED: the amount of cash that is
borrowed is quite more as compared to its paying capacity. The
company in an act of raising capital and expanding its business have
ended up taking both long term as well as short term loans due to
which the company now owes a huge debt to various financial
institutions. No proper arrangements were made by the firm to pay off
the debt on time resulting in huge debt.
USE OF BORROWED CASH: Not only the firm has borrowed huge
amount of cash but has also misused the borrowed cash in an
ineffective way which has done no profits but only losses to its firm.
There were n proper channels and no sense of direction for the proper
allocation of the borrowed cash.

CONCLUSIONS:

Going by the financial reports of the firm, following recommendations can be

given to the firm with a view overcome its failures and rise again after the
financial breakdown emerging as a self sufficient firm whereby it can meet
its all financial needs.

The company can implement a strict credit policy so that there are no
further bad debts in the firm also it offers the potential for better short-
term cash flow. The faster the cash is in hand, the faster the firm can
pay their own creditors and obtain more inventories. Supremely, credit
policy should be viewed as reasonable to a certain extent than too
tight or too loose but considering Flash Inc. a stricter credit policy
needs to be implemented
 Issue a new common stock a new stock issue raises funds and
diminishes the riskiness of the firm. It also inclined to send a
unenthusiastic signal to the market because many investors consider a
corporation would only sell new stock if future financial prospects were
not bright.
Invest in a new product line Product innovation isnt an option in
todays business world it is somewhere become a necessity. Long gone
are the days when companies could depend on their flagship products,
long product cycles, or customary business models to sustain growth
as the companies must keep pace with the rapid changes in
technology and consumer behavior by either innovating new solutions
or improving existing products in order to constrain growth and
productivity.