Financial Management and Analysis for Business Organizations

Applied Business
Finance

Table of Contents
INTRODUCTION ..........................................................................................................................3
SECTION 1......................................................................................................................................3
Concept and importance of financial management................................................................3
SECTION 2......................................................................................................................................4
Description of main financial statements and explanation of the use of ratios in financial
management............................................................................................................................4
Section 3: ........................................................................................................................................5
Section 4: ........................................................................................................................................9
Using examples from the case study describing and discussing the processes this business
might use to improve their financial performance.................................................................9
CONCLUSION .............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Financial management is found as the most important prospect related to performing
business activities. It perform several of activities related to the funds such as raising funds,
distribution of funds in the entire organisation and many more. These functions help the business
organisations in smooth functioning. This report include the concept along with the importance
of financial management, description of main financial statements along with the use of ratios in
financial management. In addition to this, it also consider a brief discussion regarding the certain
ratios which include profitability, liquidity and efficiency ratio with the help of example given in
the income statement and balance sheet of case study. The business execution review has been
also included in this report for the purpose of analysing the financial performance of business. It
include the strategies which are required to improve the performance of enterprise.
SECTION 1
Concept and importance of financial management
Financial management refers to the procedure of planning, organising, directing and
controlling the practices related to the finance in an organisation (Terziev, and Klimuk, 2021).
Basically, it means to the utilization of general management principles to financial resources of
the business organisation. It has a vital role in an organisation as it help the management in
taking several decisions which include investment decisions, financial decisions and dividend
decisions.
Importance of financial management:
Financial planning: In order to do the financial planning, the financial management plays an
important role. It plays the role of determining the need of finance related with the business
entity. It is necessary for the business organisation to plan the finances as per the
requirement of business organisation. It has been found that the success of business is
majorly depend on it's financial planning.
Safeguarding/Protecting Funds: the importance of financial management include the saving the
finances to achieve the goals and objectives of organisation. It ensure the smooth
functioning of all operations of business. Lack of finance has been take place in the case of
overspending on any on one project.

Allocation of funds: Allocating the funds in an appropriate manner is the another importance of
financial management. The operational competency of business organisation have been
enhanced when the allocated finances are properly used to the assets. In addition to this,
allocation of funds also result in the reduction of business expenses along with increasing
the capital estimation.
Investment opportunity: If any business organisation perform well in managing their finances
and savings, it may present the opportunities for exploring the investment. Investment
opportunities plays an important role in creating wealth which will help the organisation in
facing and deficit time period.
SECTION 2
Explanation of major financial statements along with the use of ratios in financial management
All the books which are maintained by recording all the business transactions are known as
financial statements. Basically, the place of recording all the monetary transactions are
consider as the financial statement as it also shows the financial data and fiscal health of
company. It is the responsibility of financial manager to properly maintain all the
transactions and ensure the auditing as well. It make sure that the statements published by
the business organisation is authentic. Below mentioned are the main financial statements:
Profit and loss statement: It is the book which include the income, expenses and revenue along
with the accrued or outstanding income or expenses within the financial period. It involve all
the deals which take place within a specific time period along with the costs which have
been done by the business organisation in making sales. Net profit of a financial year can be
calculated by subtracting costs and wages of the business organisation (Tafsir, 2021).
Statement of financial performance: It is consider as the least important financial affirmation
within the business organisation as it provide wide perceptive to the clients which include
informations related to the exchange of money of the company. This statement represent the
assets and liabilities which the organisation is committed to pay in future. The primary
objective of making this statement is to record the monetary transactions.
Cash flow statement: It is defined as the fiscal report which represent the net amount of inflow
and outflow of cash from business in a particular period of time. Basically, it shows the
changes in the cash of a business organisation which include operating, investing and