Importance of Financial Management in Business | Desklib

Applied Business
Finance

Contents
Introduction.................................................................................................................................................3
Section 1: Concept and importance of financial management.....................................................................3
Section 2: Financial statements and use of ratios in financial management................................................5
Section 3: Business Review Template.........................................................................................................6
Section4: Improving Financial Performance...............................................................................................9
Conclusion...................................................................................................................................................9
References.................................................................................................................................................10

Introduction
The business finance is a center aspect in the business which is related to the finance and
credit employed in the industry. Business finance requires money for doing business activities
successfully. It involves those activities that related to the purchase and saving of capital funds in
fulfilling the needs and objective of financial business enterprise it is a foundation of the
business which involves the financial management. Every organization has a requirement of
fiancé for purchasing of assets, goods, raw materials and other flow of economic activities.
Hence, financial management is an applied branch of general management and looks after the financial
functions of business. It is the custodian of corporate funds. It has to plan, organize and control the
financial function of an enterprise (Amstad and et.al., 2020).
The study is done on Lloyds banking group established in 2009. It is a British financial
institution in the UK providing various financial services. It has 30 million customers with 65,000
employees. The company headquarter is situated at Gresham street, London, England. Its registered
office is located in Edinburgh, Scotland, UK. The products and services offered are retail and
corporate banking, investment banking, financial services, wealth management, credit cards etc. This
report basically includes, detail discussion that is related with the importance as of financial
management, the report also define the useful accounts of financial statements that support in ratio
analysis to determine the financial Stability of business. Different calculation related with income
statement, statement of financial position by using Business Review Template is also part of this
report.
Section 1: Concept and importance of financial management.
Financial management is divided into two parts where financial means management of money
including the activities of investing, borrowing, lending, saving etc. whereas management term refers
to the planning, organising, directing and controlling the activities in the organisation. Finance is
concerned with the assessment, reporting, and supervision of sustainable growth and it is essential to
the smooth functioning of industries and markets. The financial management is the functional area in
the organization concerned with the profit, expenses, cash and credit so that organization can meets
its requirement and achieves objectives providing base for maximizing the value of firm for

stakeholders. Financial management defines to the operating activity of a company that is responsible for
obtaining and efficiently utilizing the funds which is necessary for business operations. It is linked
with the short term working capital management involving current assets and current liabilities.
Financial management is concerned with acquisition and financing of short and long term credits for
the managerial decisions of the company. The concept of financial management in a business state
that use of financial resources by planning and directing the cash generated through operations and
capital obtain from investors. The financial management reduces the finance cost by ensuring
sufficient availability of funds (Benlemlih and et.al., 2018).
Importance of financial management
The importance of financial management is very important in the company as it provides
funds keeping objectives in mind where funds are procured by various institutions.
 The funds are procured by institutions. It is important for planning and forecasting the
company revenues and expenses which results in net profit. The forecasting is done
through budget.
 The financial management provides accurate financial reporting for decisions. It provides
economic stability, encourages employees for saving money. The financial management
assists in making critical financial decisions to organizations (Gourieroux and et.al.,
2018).
 It helps the company in allocating and utilizing the resources of funds. There is increase
and improvement of organization performance efficiently. Production delay is reduced.
 The financial management reduces the cost of funds by ensuring proper use of funds. The
shareholder wealth is increased having information on financial reporting. It helps in the
financial forecasting of short term and long term requirements of the funds.
 The financial management is important for financial planning which involves the
determination of objectives formulation of financial plans and development of financial
techniques. The financial management helps in coordination with the other departments
(Hasibuan and et.al., 2019).