Sample Solution

Financial records can be invaluable in helping to identify problems in a business. By closely tracking and analyzing them, managers can diagnose underlying issues and devise an effective solution before they become too serious.

For example, if the financial statements of a company indicate that revenues have not grown over time, this could signify a lack of customer demand for its products or services. In this case, managers may need to reassess their pricing strategy or marketing efforts in order to generate more interest from customers (Hatten & Ferreira ,2020). Similarly, if costs are rising but revenue is declining then taking corrective action such as reducing expenses or increasing efficiency may be necessary (Hatten & Ferreira , 2020 ). Moreover , financial records should also be reviewed regularly with regards to cash flow in order to prevent any shortfalls resulting from miscalculated projections (Moeller et al., 2017).

In addition to identifying areas of improvement within the company’s operations itself, financial records can also provide insight into competitive forces impacting the firm’s performance. For instance, by looking at changes in competitors prices or entry costs it is possible to determine whether they are gaining an advantage on your business and adjust accordingly (Moeller et al., 2017). Furthermore , examining all sources of income(including government grants)can reveal market trends that help shape strategic decisions about pricing models or product lines (Kirby et al., 2019).

In conclusion , through careful analysis of financial data small businesses can gain insight into internal and external influences affecting their operations which helps develop appropriate strategies for managing these issues effectively.