The Concept and Importance of Financial Management

BSc (Hons) Business Management with
Foundation
Applied Business Finance
The concept and importance of financial
management and the processes
businesses might use to improve their
financial performance
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Contents
Introduction p 3
Section 1: Definition and discussion of the concept and
importance of financial management p 3
Section 2: Description and discussion of the main
financial statements and explain the use of ratios in
financial management
p 4-10
Section 3: Using the template provided 10-11
i. Completing the Information on the ‘Business Review Template
(Ensure that you display your calculations for this detail)
P 16
ii. Using Excel producing an Income Statement for the Sample
Organisation (see Case Study). This should be included within
your appendices p 14
iii. Using Excel completing the Balance Sheet p 15
iv. Using the Case study information describing the profitability,
liquidity and efficiency of the company based on the results of
ratio analysis p 10-11
Section 4: Using examples from the case study describing
and discussing the processes this business might use to
improve their financial performance p 11
Conclusion p 12
References p 13-14
Appendix p 15-19
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Introduction
This study will provide a good explanation of the notion of financial management, the
primary financial statements will be discussed and explained and the proper
explanation on how to use the ratios in financial management, additionally, it will also
assess the organization's results, viability, productivity, and efficiency using the
income statement and calculations.
Section 1: Definition and discussion of the concept and
importance of financial management
StartUp Plan. (2018). claims that the method of preparing resources, arranging cash
reserves, and monitoring income and expenses in terms of achieving an institution's
objective is known as financial management. For a set period of time, three steps are
needed: having to borrow, investing, and dividends. Cash flow and financing
decisions are two kinds of investment strategies. Financial management is critical to
the success of every company. It is a means of achieving targets and aims. Via
correct allocation, procurement, and administration, the financial planner assess the
performance of the organisation. It increases operating performance by ensuring that
funds are available where they are required.
Section 2: Description and discussion of the main
financial statements and explain the use of ratios in
financial management
According to Murphy, C. (2019). financial statements are formal documents that
reflect a company's corporate practices and financial reports. Government divisions,
accounting professionals, and enterprises, also review accounting records to ensure
continuity and for accounting purposes., funding, or purposes of investments.
According to Lang, A. S. (2017). financial statements can include a rundown of the
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non-profit institution's fi financial status and operations. According to Bragg, S.
(2019). the statements must inform the user how well the organisation fulfilled its
purpose or business strategy and met the needs of its people, partners, someone in
need of its programs, as well as those who benefited from its providers. Any
nonprofit company has a message to say, and the financial statements can help with
the connection.
The financial statements are made up of four simple statements, and they are listed
below:
Income statement
According to Bragg, S. (2019). The income statement shows the sales,
expenditures, and profit margins for the tax year. This is generally regarded
as the most critical of the financial statements because it shows an
individual's operational performance. The income statement is a financial
report that illustrates a company's financial situation for a particular timeframe.
The timeframe covering is often a month, half of the year, or year, but partial
cycles can also be used. This has been the most important profitability
statement and is the most probable to be circulated within a company for
executive analysis. The below are the general classifications of facts listed on
the income statement:
 Earnings
 Price of products sold
 Gross profit margin
 Expenses for merchandising, financial, and administrative purposes
 Profit from organisation (gross margin - selling, general and
administrative expenses)
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