Financial Management and Use of Ratios in Business

APPLIED BUSINESS
FINANCE
Table of Contents

Section 1................................................................................................................................................3
Section 2................................................................................................................................................3
Main financial statement and use of ratios.........................................................................................3
Section 3................................................................................................................................................5
i. Completing the information on business review template.........................................................5
ii. Showing income statement as per the given template................................................................6
iii. Showing Balance sheet as per the requirement......................................................................6
iv. Describing the profitability, liquidity and efficiency ratio as per the case study...........................9
Section 4..............................................................................................................................................10
Describing the ways which can improve the financial performance of company............................10
CONCLUSION...................................................................................................................................11
REFERENCES....................................................................................................................................12
Section 1
Financial management is a process defined as managing and controlling the financial
resources associated with the business entity. The concept of financial management is about

to monitor and control all the financial resources associated with the business entity.
Financial resources are limited in number so the concept of financial management make it
more empowering for the company to utilise its financial resources in the most optimum way
possible. This report will discuss about different aspects associated with the financial
management concept. Henceforth, report will emphasis over different financial statement and
the focus will be on the use of ratios in financial management. Projection of certain financial
records will also do in this report. Furthermore, certain areas will be highlighted to strengthen
the financial position of the business entity.
Section 2
Main financial statement and use of ratios
Financial management process is supported with different types of financial
statements such as balance sheet, profit and loss account and all other financial records. All
these statements are the key document that is utilised in the best way possible to reflect te
actual financial situation or position of the business entity. All these are the main financial
records and document that can motivate and guide the business organisation taking best level
of business decision making.
Balance sheet
Balance sheet is among the prominent financial record that depict about the actual
position or situation of the business entity. This financial statement talk about the projection
of all different assets such as current asset and long term asset associated with the business
entity. All assets of company are projected at the book value in the statement. This is
considered as the main financial record of the business entity. The other side of the balance
sheet talk about the liability section (Dance and Imade, 2019). The statement segregate
liability into two different parts current liability and long term liability part of the business
operations of company. Liability is a key crucial financial record that needed to be coping up
by the company in any given situation. Along with the liabilities this section of balance sheet
also reflects the capital value invested in the business. Balance sheet is a finaial record that
clearly depicts the overall financial position of the organisation. Financial stability is also
disclosed with support of the balance sheet of the organisation.
Profit and loss account

Profit and loss account is another key financial record that is prepared by the financial
team. These financial records depict the profitability of the company for the respective
financial year. This is a financial document that clearly states all the income belongs to
respective financial year. On the other hand this document depicts all the expenditure both
direct and indirect in the income record so that actual position of the profitability of company
could have been measured by the business entity. Profit and loss account is a crucial financial
record that clearly states the actual financial or profitability position of the business entity.
Business decision making always influence the profitability of company. Profit and loss
statement clearly indicates all the respective financial statement of the business entity. This is
considered as the core financial record surrounded with the actual profit for the respective
financial year.
Cash flow statement
Cash flow statement is another crucial financial statement. This statement reflects the
position of cash and liquidity of the business entity for the respective financial year. Cash
flow statement project all the inflow and outflow of the cash in the respective financial year
(Siekelova and et.al., 2017). Cash inflow involves all types of income and other form of cash
inflow for the financial year. In case of cash outflow the factor depict about the entire cash
outflow for the respective financial year. This statement celery demonstrate the liquidity
situation of the organisation for the respective financial year ended.
The above mentioned financial documents are the prominent and key financial
records that clearly demonstrate the financial position and situation of the business entity. All
different financial statement talk about different aspects of the financial record associated
with the business entity. Company and its management assess the overall financial position of
the business with support of all different financial records so that overall position of the
business entity could have been depicted in the best way possible.
Use of ratios
Following are the points demonstrate about the utilisation of ratios. There are various
aspects are interpreted with support of ratios of the company. All different use of ratio can be
demonstrated in the following points.
 Ratios support in taking managerial decision making at the organisation level.