Question

Difference between financial performance and financial position

Answer 1

Answer:

Explanation:

Financial Accounting vs Financial Management: An Introduction

The fundamental difference between Financial Accounting and Financial Management is that financial accounting is the process of recording, maintaining, and reporting of financial affairs of the company that depicts the clear financial position of the company, whereas, financial management refers to management of finances and investment opportunities of different individuals, organizations, and other entities.

Financial accounting and financial management are two separate functions of finance where financial accounting requires to report the past financial transactions, on the other hand, financial management requires to plan about future transactions.

Now, let’s begin to learn the differences between these two terms.

What is Financial Accounting?

Financial accounting is the process of measuring, processing, and recording financial transactions of an organization. The process involves summarizing, analyzing, and recording such information and reporting it to the management, creditors, shareholders, investors, and oversight officials.

The major objective of financial accounting is to report financial information or transactions using GAAP (Generally Accepted Accounting Principles).

What is Financial Management?

Financial management assists in managing the finances and economic resources of the organization. It is concerned about managing the economic activities of the organization efficiently in order to achieve short-term and long-term financial objectives. It also aids management in better financial and investment decision making.

The main objective of financial management is to generate wealth for the business and investors, earn cash and up to par returns at adequate risk by using organizational resources efficiently and effectively.

Financial Accounting vs Financial Management: Key Differences

Here is a cumulative list of differences between financial accounting and financial management:-

● Financial accounting is primarily focused on reporting whereas financial management involves assets and resources of the company and their effective utilization.

● The main objective of financial accounting is to provide financial information using standard procedures and rules whereas the main objective of financial management is to create wealth, cash, and returns by effective use of the company’s assets.

● Financial accounting reports the financial information to the management, creditors, investors, analysts, and regulators whereas financial management is used by the management of the company to forecast its future.

● Financial accounting involves reporting past financial transactions, on the other hand, financial management involves planning about future financial transactions.

Financial Accounting vs Financial Management – Final Thoughts

Both these specialties are imperative for an organization in their own capacity. While both are part of finance, financial accounting and financial management have their own differences that set them apart from each other. While financial accounting revolves around reporting financial transactions, financial management is all about managing the company’s resources to manage future growth.

If you want to build a successful career in any of these domains, it is recommended to take up financial management online training. Scout the internet for financial management online programs, find a credible one that suits your budget and begin your career in the field of finance. Financial management online training allows you to get hands-on knowledge about the key aspects of the financial world and helps you understand how to run this world effectively.

Answer 2

Financial performance is a gauge of how effectively a company can employ resources from its main line of business and create money. The present balances of an organization's assets, liabilities, and equity are referred to as its financial position.

Financial Performance

• Financial performance is a thorough assessment of a business's position across various areas, including assets, liabilities, equity, costs, revenue, and overall profitability.
• It is measured using a number of business-related formulas that enable users to compute precise information regarding the prospective effectiveness of a company.
• Internal users review financial performance to assess the health and standing of their individual companies, among other benchmarks.
• In order to identify possible investment prospects and whether a company is worthwhile to them, financial performance is analyzed for external users.

Financial Position

• The documented assets, liabilities, and equity balances of a company are represented by its financial position.
• One of the financial statements that contain this information is the balance sheet.
• The balance sheet of an organization shows its financial situation as of the date indicated in the report's headline. In a broader sense, the idea can be used to describe how a company's financial health is determined by comparing and analyzing the data in its financial statements.
• This usually entails computing a variety of financial ratios using the information provided, looking at the findings on a trend line, and contrasting the results with those of other companies operating in the same sector.