Applied Business Finance: Definition, Importance, Financial Statements, Ratios, and Improvement Processes

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 9
References 10
Appendix 11
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Introduction
Management of financial resources is one of the most critical and essential aspects of
running a business. It assures the activities in the organization run smoothly without the
disturbance in the allocation of funds (Egginton and McCumber, 2019). By facilitating all
use of revenue proportions in managerial decision - making, the report presents the relevance
and ideas of financial planning. The statement of income is also prepared with the help of the
financial statements. Then, upon that basis of the findings, different essential metrics such as
profitability, efficiency, and solvency were computed, as well as the assessment was
performed out. In furthermore, a study was conducted in order to enhance the firm's behavior
in order to further its expansion.
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 integrates
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. Long-term stability: It aids the organization in ensuring long-term viability. It helps
reduce idle expenditures by monitoring and verifying profitability, cost distribution,
and utilization of cash. It also ensures this by completing everyday duties on time that
makes the organization attractive for how it conducts its business. This ensures the
company's long-term viability and growth.
2. Budget Estimation Requirement: Financial manager must examine a firm's capital
requirements in order to conduct business. The corporation's economic policy in term
of predicted earnings and expenditures has a big impact on this. The total capital
value must be conducted in such a manner that the industry's investment generating
capacity is increased (Khera and et. al., 2020).
3. Making decisions: It calculated the cost by establishing a budget, whereby it reached a
choice by evaluating the company's financial situation. It is a critical element of every
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business, because all of the decisions taken will have an impact on the organization's
standing or effectiveness. Various factors determine how decisions are made.
4. Profitability: The money branch is the part of the organization's whole accounting and
ensures that it is managed fairly and correctly. It will aid in the company's current
expansion of new opportunities while also improving its competence and
effectiveness (Seifzadeh and et. al., 2020).
Section 2: Description and discussion of the main
financial statements and explain the use of ratios in
financial management
The financial overview is a collection of instances that each public company creates
to keep track of its financial and monetary data. It is essential for every organization to have
everything in order. It gives an analysis of the company's financial situation and current state.
These are mandatory to get them audited and is the responsibility of the financial manager.
These are managed intrinsically and extrinsically from the view point of the organization. It
guarantees that the report which are published by the company is not forged and are
authentic. The statements are as follows:
1. Profit and loss statement: It is an essential component of the company. As a
consequence, several accounting entries have been created. It depicts the firm's total
profit as a result of achieving its goals. This determines a variety of non-operating and
commercial sales and expenditure. Profit is calculated using these variables.
Normally, that those are prepared over the course of a year; however, business
policies may necessitate an interim statement. It shows the profitability of a company
by subtracting all expenses from revenue. It can also be used to calculate financial
ratios (Pantielieieva and et. al., 2018).
2. Statement of financial performance: It is divided into two sections: assets and
liabilities. These would be usually made towards the end of the fiscal year to
determine the financial health of the company. The assets section of such financial
accounts consists of fixed, existing, and non-current elements, which comprise
inventory, intangible resources, infrastructure, and investments. The clients are the
non-current and current commitments in liabilities. The non-current and current
commitments under liabilities are the lenders, or bills due. Shareholder funds,
acquisitions, and long-term advances are all examples of liabilities. It aids in
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