Applied Business Finance

BSc (Hons) Business Management with
Foundation
BMP3005
Applied Business Finance
The concept and importance of financial
management and the processes
businesses might use to improve their
financial performance
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Contents
Introduction 3
Section 1: Definition and discussion of the concept and
importance of financial management 3
Section 2: Description and discussion of the main
financial statements and explain the use of ratios in
financial management
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Section 3: Using the template provided 5-9
i. Completing the Information on the ‘Business Review
Template (Ensure that you display your calculations for this
detail)
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ii. Using Excel producing an Income Statement for the Sample
Organisation (see Case Study). This should be included within
your appendices 6
iii. Using Excel completing the Balance Sheet 7
iv. Using the Case study information describing the profitability,
liquidity and efficiency of the company based on the results of
ratio analysis 8
Section 4: Using examples from the case study describing
and discussing the processes this business might use to
improve their financial performance 9
Conclusion 10
References 11
Appendix 13
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Introduction
Management of financial resources is one of the most critical and essential aspects of
running a business. It assure the activities in the organization run smoothly without the
disturbance in the allocation of funds (Egginton and McCumber, 2019). The report defines
the value of financial governance, few concepts of fiscal statements and the usage of ratios in
the operation a company. It has further discussed about certain ratios such as profitability,
liquidity and efficiency ratio by taking an example from the case study given with the help of
income statement and balance sheet. The business performance review is also done to
analyze the financial performance of the business. What are the strategies, the firm need to
refer for improving the performance of the enterprise. From the case study, what are the
factors that can help in analysing the performance.
Section 1: Definition and discussion of the concept and
importance of financial management
Financial management refers to a concept which refers to the directing, controlling,
planning, and organizing of the monetary undertakings in the business. It similarly integrate
utilizing the principles of management to the financial resources of a company, while
additionally having a momentous consequence in economic administration.
 Sustain adequate inventory of assets for the organization.
 Giving guarantee to the investors for the attainment of more benefits.
 Ideal and efficacious utilization of assets;
 Making authentic and harmless undertaking freedoms to put their resources into.
Importance of Financial Management:
1. Financial Decision: It assists in taking the critical money – oriented choices of the
organization. A decision which is can can take down the whole firms altogether. It tell
about the different risks and choices and helps in choosing the extent of the investor's
capital and the acquired assets.
2. Profitability: if the books of accounts and the resources are properly managed, it will
enhance the productivity of the organization. It will also ensure in analyzing the
efficiency and development opportunities of the company (Khera and et. al., 2020).
3. Funds allocation: The proper allocation of the fiscal resources are distributed as per
the profit of the company. It will improve the fiscal ratios and will help in reducing
the costs and increases the monetary state of the firm.
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4. Economic Stability: It gives the business an immovability, as it addresses the sound
monetary framework and can keep from the business activities which can be
corrupting for the association and help in maintaining and acquiring more benefits.
5. Capital structure formation: For the computation of the capital required, the design
should be formed properly. Any company which relies upon the measure of capital an
organization has and the amount it should be raised from the outside sources
(Seifzadeh and et. al., 2020).
Section 2: Description and discussion of the main
financial statements and explain the use of ratios in
financial management
Financial statement are those records which are compulsory for every listed company
to maintain. It shows the monetary activities of firm. These statements provide the financial
data and shows the fiscal health of the company. These are mandatory to get them audited
and is the responsibility of the financial manager. These can be audited through the internal
and external sources. It guaranteed that the statement which are published by the company is
not forged and are authentic. The statements are as follows:
1. Profit and loss statement: It tell about the income, revenues, expenditures and the
accrued or outstanding expenses and incomes which have been occurred in the
financial period. It likewise shows the deals that have been done in the period and
what were the costs that have been faced by the corporate to yield and make the sales.
By deducting the costs and wages of the period the organization shows its net profit
for the period. It is end component in the income statement (Pantielieieva and et. al.,
2018).
2. Statement of financial performance: This is the most crucial financial assertion in the
organization as it gives comprehensive understanding to the clients of monetary
information about the firm. This statement tells whole assets and the liabilities which
the enterprise is committed to pay in future. It is additionally perceived as monetary
record which is fundamentally the primary concern of the organizations. In basic
words, this declaration reflects where the corporate stands monetarily at a specific
mark of time.
3. Cash flow statement: This fiscal report shows the net amount of inflow and outflow of
cash from the business in a period of time. It displays the fluctuation in the cash from
the investing, operating and financing activities during a time frame. Operational
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