Business Finance: Importance, Financial Statements, Ratios, and Performance Improvement

Business Finance

Table of Contents
Table of Contents.............................................................................................................................2
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Financial Management and its Importance..................................................................................3
Discussing financial statements and use of ratios........................................................................4
Business Review Template:.........................................................................................................6
Processes to improve financial performance:............................................................................10
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
Business finance pertains to the funds as well as money that a corporation uses to achieve its
targets and strategic objectives. From the purchase of raw materials to the delivery of products
and services to customers, finance is critical to the success of a company. The study covers key
discussion on financial management concept and its major importance (Canales, 2016). Further
this cover explanation about financial statements and usage of ratio. In later part, study contains
calculation for given business review template as well as preparation of income statement and
balance sheet.
MAIN BODY
Financial Management and its Importance
Financial management term relates to the mechanism of an organization's funding and
finance-related operations being managed. It ensures that funds are available to fulfil regular
business requirements and that funds are used efficiently. Financial management entails making
decisions on investments, fixed asset purchases, and funding sources, among other things. It aids
in planning, coordination, and management of financial activities. This also requires decisions on
the returns on investment for shareholders. It includes data on the corporation 's profits or losses,
and costs, allowing the management to make informed decisions. Managers will be able to see
where their company's cash is being used and will be able to cut down on business expenditures
(Bendell and Doyle, 2017). Following are certain ley roles of Financial management and its
processes in success of an enterprise, as discussed below:
Financial Planning: Financial management aids in corporate financial planning. This
entails preparing for the corporation's source of revenues, budgets, and funding requirements,
among other things. It aids businesses in preparing for tough situations that arise as a result of
environmental changes. Financial preparation assists businesses in meeting their defined
objectives. It has power of the firm's costs, expenditures, financing, and profits.
Procurement of funds: Financial administration aids the company in obtaining funds
from less expensive sources that are appropriate for the organization 's requirements Funds are
vital for a corporation 's operations to operate effectively. It ensures that funds are accessible
whenever a corporation requires them. This is needed for day-to-day functions, investment, debt
repayment, and the procurement of raw materials, and plenty of other daily financial tasks.

Utilisation of funds: Financial management aids a business's executive in making the
best use of funds by allocating funds in efficient manner. It provides transparency on fund
distribution, allowing businesses to see where their money is going and lowering company costs.
Financial decisions: Financial management assists administrators in implementing
financial decisions that have an influence on the organization 's activities Financial decisions
would have an influence on other areas of an organization and any department's activities need
funding. These choices assist the company in achieving its longer-term objectives (Babajide,
Olokoyo and Taiwo, 2016).
Increase profitability: Financial accounting aids in the optimal utilization of
business funds in attempts to maximize a company’s overall fiscal performance. It improves
market performance through controlling costs via budgetary management, cost analysis, as well
as other tools. It also encourages employees to save, lowering the costs of borrowing money.
Discussing financial statements and use of ratios
Financial Statements: A business’s financial statement implies to written formal report type
record which exhibits actual position of business as well as business’s all key financial activities.
The primary contents within a business’s financial statements are set of standardised reports like
business’s balance sheet, profit and loss or income statement, Cash-flows statements and change
in equity statement. Businesses can opt to produce financial statements on weekly, quarterly, or
yearly basis, that will be presented in annual report by the ending of the fiscal year. Businesses
are expected to follow widely agreed accounting standards in part to ensure continuity and
integrity of the wording and interpretation of such financial reports. Financial statements
are essential reports for assessing the company's performance and finance position. Following
are key aspects of Financial statements, as discussed below:
 Income statements: Earnings and expenditures, as well as resulting net profits or deficit
over period attributable to receiving operations, are all included in income statement. The
financial statement tells analysts and executives whether or not the company earned profit
during the time frame under consideration. Income statement depicts actual profitability
position of business for a specific period ended (Jordà, Schularick and Taylor, 2016).
 Balance sheet: The closing balances of company's asset, debt, and capital accounts as
on date specified on report are seen on balance sheet. As a result, it shows what company
owns as well as owes, and also how much sum has been employed in it. Balance sheet is