Importance of Financial Management in Business

Business Finance

Table of Contents
INTRODUCTION...........................................................................................................................1
SECTION 1......................................................................................................................................1
Financial Management and its Importance..................................................................................1
SECTION 2......................................................................................................................................2
Discussing financial statements and use of ratios........................................................................2
SECTION 3......................................................................................................................................3
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................6
APPENDIX......................................................................................................................................7

INTRODUCTION
Finance is about where various businesses using financial performance for businesses.
Businesses uses finance for running its activities. Finance gives information for generating
income for businesses. There is advantage for financial department it manages funds & using it
for getting higher benefits. Finance is element which gives higher profitability for businesses.
Financial department helps various activities by gives funds for manages those activities. It is
about it helps for financial planning, organising, analysing, managing, budgeting etc. This report
is about important of finance in business. It includes various concepts of financial management
& its importance.
MAIN BODY
Financial Management and its Importance
Financial management is defined as the strategic planning, planning, directing, and
managing the financial performance of an organization or institution. It includes applying the
principles of management of financial assets of the respective organization, that plays important
role in management of finance. Some goals are defined below:
Maintaining adequate funding of business entity
Ensuring that shareholders get a good return on their investment;
The efficient and effective utilisation of financial funds.
Creating real and safe finance investment opportunities for you to invest money.
Financial management builds various factors that are discussed below:
Financial planning: Financial planning is defined as the process of assessing and calculating the
amount of money needed by an organization and allocate it according to demand. The financial
plan includes some important objectives that are defined below:
Assess the amount of finance required;
Analyse capital requirement and building planning;
Fencing the organisation's financial planning and effective regulations
Financial management: financial management is one of the important aspects that plays vital role
management of finance. Its main function is to analyse that whether the organization meets its

defined goals or not. Financial management provides appropriate answer of these questions that
are discussed below:
Are organisations assets are used in effective manner?
Are the organisational assets are safe?
Are the executives acting financially organization and role major stakeholders?
Financial decision-making process: This includes investing as well as funding in relation of
organization. The financial department decides the methods that are used by the organization to
raise money, there are various alternatives are available such as the organisation sell new shares
in open market and how the profit on shares are shared among shareholders.
The financial department of company is managed by the chief financial officer. There are various
functions are performed such as:
Assessing the required amount of finance: The financial manager must assess as well as analyse
the amount of finance that is required by the organization. This depends upon policy of
organisation on the bases of expected costs and benefits. The required finance should measured
by number of way such as organizational power of the organization increases.
Construction of capital: When the required finance amount is determined by the organisation, a
financial statement will need to build. This includes short-term as well as long-term debt
analysis. It depends on cash that the company owns, as well as determine the finance that need to
be taken by various external financial sources.
Investing: Each and every organization or firm invest finance in various activities to make more
finance and earn a continue profit. Therefore, it is the responsibility of financial manager to
invest money in safe investments.
Profit distribution: Once an organization has received a fair amount of total profit, it is the
responsibility of the finance manager to distribute it properly. This may include keeping part of
all profits for events, improvement as well as expansion purposes, and rest of profit is distributed
to the shareholder of organisation.
Financial management: The department of finance is responsible for the management of
organisational finances. Funds are required for various activities and purposes in organisations