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
Submitted by:
Name:
ID:
Contents
Introduction p
0

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
1

Introduction
The present report is based on the discussion over the concept of financial management. In the
report, there are four section, first section is all about the concept and importance of financial
management, in the second section various financial statements of the company will be discussed
along with the use of financial ratios in financial management (Tanklevska and Miroshnichenko,
2019). In third section, various financial calculations will be done and on the basis of which
analysis of company’s profitability, efficiency and liquidity will be done. And at last various
business processes will be discussed through which financial position of the business can be
improved.
Section 1: Definition and discussion of the concept and
importance of financial management
Introduction to the concept of financial management and its importance
Financial management in businesses is considered as one of the most crucial function
performed by financial experts and a distinct team of finance. These financial team of experts
has an important role of procuring funds for the business operations by evaluating alternative
options available for financing to reach at an optimum capital structure, so that acquisition
and utilization of funds can be done in a cheapest possible manner (Spuhlera and Dew, 2019).
Also, whatever the returns obtained out of these funds should always be greater than what is
paid for its acquisition. The aim of this function of the company is to make sure sufficient
availability of funds with the business, so that business operations can be run in a smoothest
manner.
Definition of financial management: “It is an activity concerned with the management of the
company where the aim is to make judicious use of funds through the efficient selection of
financial resources, so that adequate amount of funds can be raised to allows a company
reach its end goals.”
Financial management has the following importance with respect to businesses:
 Timely and adequate injection of the funds in a business can be ensured through the
performance of this function (Maher, Ebdon and Bartle, 2020).
 Keeping shareholder’s expectation as a center objective of the company and better
stock market performance of the company can be facilitated through the performance
2

of financial management function which ensure higher earnings and wealth
maximization for the company’s shareholders.
 It makes sure that that acquired funds has been obtained at a lowest possible costs and
thus allows for deriving higher benefits for the company.
 It facilitates capital structure designing for the business which allows to ensure safety
of funds that has been invested in the ventures (Topa, Hernández-Solís and Zappalà,
2018).
Section 2: Description and discussion of the main
financial statements and explain the use of ratios in
financial management
Major financial statements of the company
Financial statements can be defined as the financial reports which aims to indicate financial
performance of the company by providing financial information namely cash flows, liabilities
and assets, equities, income and expenses for the specified period for which the financial
statement has been prepared (Kumar, 2017). The three financial statements for any entity are
Statement of financial position or balance sheet, income statement and cash flow statement.
The financial information provided by these financial statements acts as a base for corporate
accounting. These financial statements will be discussed in brief as follows:
Balance Sheet: Statement of financial position or balance sheet where all the outstanding
liabilities, equities, assets held are mentioned in a standardized and well defined proforma.
This proforma facilitates valuation of the company by using assets and liability’s book value
mentioned in this proforma. A quick of the financial position of the business can be gained
through this statement by the investors and creditors of the company (Boisjoly, Conine Jr
and McDonald IV,2020).
Income statement: The proforma meant for indicating company’s income earned by it
through its operation undertaken during the period for which it is being prepared and along
with the income, expenses incurred to ensure smooth operations of the business are also
stated in the income statement of the company (Al Ahbabi and Nobanee, 2019). It indicates
the financial performance of the company during a given time period and aids investors in
making various decisions related to the company as it shows whether the business is making
3