Importance and Concepts of Business Finance

Applied Business Finance
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Contents
Contents...........................................................................................................................................2
Introduction......................................................................................................................................3
Section 1..........................................................................................................................................3
Financial management and main advantages..............................................................................3
SECTION 2.....................................................................................................................................4
Discussing financial statements and use of ratios........................................................................4
SECTION 3.....................................................................................................................................5
Review of business performance.................................................................................................5
Section 4..........................................................................................................................................6
Processes that support company in increasing financial performance........................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8
Books and Journals......................................................................................................................8
Appendix..........................................................................................................................................9
Notes to the financial statements..........................................................................................10
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Introduction
The sources like funds, credits or any other monetary resources which are used by company in
attaining the desired goals for a specific purpose in known as business finance (Ahamed and
Mallick, 2019). In every kind of business financial resources are very much essential which help
in performing all business activities. The concepts of business finance mainly include
distribution of monetary funds, making best use of reserves which all support to meet needed
requirements. In this report, importance and concepts of financial management and different
processes which are helpful in making improved decision to increase overall performance.
Section 1
Financial management and main advantages.
The detailed process of controlling finance and relevant activities in an organisation for
increasing the profit making is called as financial management. It makes sure that desired
information relevant to profit, losses, company expenses that enables manager to make valuable
decision. It ensures that funds are sufficient to meet everyday business needs and that funds are
used efficiently. Financial management entails making decisions on investments, fixed asset
purchases, and funding sources, among other things. It assists in the planning, coordination, and
management of financial operations. This also requires decisions on the return on investment for
shareholders (Bendell and Doyle, 2017).
Financial planning: Financial administration aids the organization with raising funds from
less costly outlets that are sufficient for the company's needs. Funds are required for a company's
activities to operate smoothly. It ensures the funds are available anytime a company needs them.
It is needed for day-to-day operations, savings, debt repayment, and the procurement of raw
materials, among other things.
Fund procurement: Financial accounting aids a company's boss in making the most use of
funds by allocating capital in an efficient manner. It provides transparency on fund distribution,
allowing businesses to see where their money is going and lowering company costs.
Fund utilisation: This aids a company's boss in making the most use of funds by allocating
capital in the most efficient manner possible. It offers reports on fund distribution, allowing
companies to see where their funding is heading and lowering company costs.
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Financial decision: Financial administration assists administrators in making financial
decisions that have an impact on the organization's activities. Financial decisions would have an
impact on other departments of a company and any department's activities need funding. These
choices assist a company in achieving its long-term objectives.
Profitability increment: Financial accounting assists in the appropriate utilization of funds in
order to maximize a company's performance. It improves market performance through
controlling costs through budgetary management, financial estimation, and other tools. It also
allows employers to invest, lowering the cost of withdrawing capital (Brooks and et.al., 2019).
SECTION 2
Discussing financial statements and use of ratios
Financial statements are metrics that aid the organization in conducting the reporting cycle
and in providing a complete understanding of the prospective borrower and success. The below
are three forms of financial documents that aid throughout the preparation of processes and
activities:
Income statements: This statement illustrates the progress of a project over time, the
institution's output, as well as the stimulus needed to produce the outcome. This represents the
statement of financial position, which justifies the upcoming fiscal status by showing the
extensive financial profits and expenditures. This is a vital aspect of the process because it allows
one to measure sales and losses from various differences of running costs.
Balance sheet: It is a crucial aspect of financial reporting because it depicts the corporation's
final status by depicting a straightforward and implement strategic of management. This covers
assets and liabilities, as well as equity expressed in nominal terms, both of which must be
comparable at the conclusion of the assessments. There have been some equations that show that
the commodity depicted by the financial communicator is proportional to the superior and
indebtedness. As a result, the two nations of an accounting records also must be identical, as
stated in the basic principles (Canales, 2016).
Asset = Liabilities.
Cash flow statements: This study focuses on the cash transactions and purchases made by
a corporation during a particular time span. This financial statement indicates how much
business is needed out now and bringing in through three different forms of activities:
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