Applied Business Finance - Definition, Financial Statements, Ratios, and Improvement Techniques

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 p
Section 1: Definition and discussion of the concept and
importance of financial management p
Section 2: Description and discussion of the main
financial statements and explain the use of ratios in
financial management
p
Section 3: Using the template provided p-p
i. Completing the Information on the ‘Business Review Template
(Ensure that you display your calculations for this detail)
p
ii. Using Excel producing an Income Statement for the Sample
Organisation (see Case Study). This should be included within
your appendices p
iii. Using Excel completing the Balance Sheet p
iv. Using the Case study information describing the profitability,
liquidity and efficiency of the company based on the results of
ratio analysis p
Section 4: Using examples from the case study describing
and discussing the processes this business might use to
improve their financial performance p
Conclusion p
References
Appendix p
p
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Introduction
Financial management is seen as a critical component of a corporation's operation. It
helps the element develop and achieve all of the advantages required to succeed in
the organization's environment. Financial management performs a number of distinct
and important responsibilities that have far-reaching implications. The most
important benefit of employing monetary management is that it aids in the most
efficient handling of working capital management. It also aids in increasing net
revenues and reducing a variety of unusual charges that could obstruct the
company's growth. Monetary management is regarded as a crucial tool for managing
and controlling all of the obstacles that arise over the course of corporate operations.
In agreement with the application of monetary administration, the study will focus
specifically on numerous monetary administration techniques. Similarly, with the aid
of the proportion analysis instrument, viable results were obtained, which aided in
the examination of the financial position of the business organization.
Section 1: Definition and discussion of the concept and
importance of financial management.
Financial management can be defined as the organisation, sorting, coordination, and
maintenance of all financial operations of a company. It contains all financial
recommendations from top management for the seamless operation of the
organization. It looks after the company's financial resources so that any financial
obstacles can be properly removed. It is thought to be the best method for designing,
developing, and implementing a strategy aimed at achieving the organization's end
goal. It also aids in the management of all financial and business decisions
necessary for the company's success, as well as instilling the importance of
motivation in the workplace (D’Orazio and Valente, 2019). In this regard, the
business's financial authorities ensure that each branch of the company has enough
finances to run all of the company's operations as effectively and efficiently as
feasible.
Financial management is often regarded as one of the most important core tools for
assisting organization in ensuring the timely availability of funds. This will assist the
corporate entity in achieving the highest level of financial efficiency by ensuring
effective levels of financial sustainability. Financial management will be fully utilized
to assist the business association in achieving strong financial stability through
financial arrangements and the successful use and allocation of assets in every
component of the business, allowing businesses to run successfully and efficiently.
Furthermore, it assists financial authorities in making all financial decisions that are
correctly connected with the business's ultimate objectives.
Section 2: Description and discussion of the main
financial statements and explain the use of ratios in
financial management.
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The written record containing all transactions linked to the financial operations of the
corporate organization is referred to as financial statements. It aids in the growth of
the company and the establishment of acceptable financial standing in order to
assess the company's success (D’Orazio and Valente, 2019). External authorized
parties such as government officers, tax officers, and auditors, among others,
frequently inspect and evaluate these financial accounts in order to check and
analyses the financial status of the corporate organization. A company organization
prepares numerous types of financial statements, including the balance sheet,
income statement, and cash flow statement, which are listed below:
 Balance sheet: It is one of the most main financial statements, with primarily
two components. Assets and liabilities, as well as the shareholder's equity,
are the two components. It aids in the evaluation of business performance,
resulting in the financial condition of the organization for a specific financial
period.
Equation used for preparing a balance sheet: Assets= ( Liabilities + Owner's Fund )
 Income statement: It's another crucial financial statement that shows all of
the company's earnings and expenses. It aids in determining if a company's
business operations are profitable or not for a given time period. The income
statement also aids in the representation of a company's financial health.
Equation: Net Income=( Revenue - Expenses )
 Cash flow statements: It is a financial statement that aids in the delivery of
accurate information about a company's cash inflows and outflows as a result
of its activities and investment sources (Boyce and Ville, 2017). It also aids in
the assessment of a company's ability to create cash in order to satisfy its
financial commitments quickly and effectively. Finance managers are also
given the authority to make all financial decisions based on the cash flow
statement's outcomes.
 Accounting ratios are among the most effective cost management tools for
examining a company's aggregate financial data over two or more years,
primarily to determine its financial status in comparison to its competitors. It is
regarded as one of the most important and necessary instruments used by
businesses to extract and investigate their financial position (D’Orazio and
Valente, 2019). Accounting ratios are also extensively used to evaluate and
contrast the performance of a corporate organization with that of all of its
competitors in intense competition. Accounting ratios are divided into several
categories, including liquidity ratios, profitability ratios, solvency ratios,
turnover ratios, and others, and are used to determine financial performance
in order to accomplish the firm's ultimate goals.
Section 3: Using the template provided:
v. Completing the Information on the ‘Business Review Template
(Ensure that you display your calculations for this detail)
Kindly check the appendix section.
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