Importance of Financial Management for Business Performance

BSc (Hons) Business Management with
Foundation
BMP3005
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
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Section 1: Definition and discussion of the concept and
importance of financial management p
Section 2: Description and discussion of the main
financial statements and explain the use of ratios in
financial management
p
Section 3: Using the template provided p-p
i. Completing the Information on the ‘Business Review Template
(Ensure that you display your calculations for this detail)
p
ii. Using Excel producing an Income Statement for the Sample
Organisation (see Case Study). This should be included within
your appendices p
iii. Using Excel completing the Balance Sheet p
iv. Using the Case study information describing the profitability,
liquidity and efficiency of the company based on the results of
ratio analysis p
Section 4: Using examples from the case study describing
and discussing the processes this business might use to
improve their financial performance p
Conclusion p
References
Appendix p
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Introduction
Financial management is defined as very important part of any business which
helps them in evaluating their budget that could assist them in accomplishing their
organizational objectives effectively. There are various types of explicit roles which are
different in nature that are represented by financial management that assist in achieving
several aims and objectives (Lan and Li, 2021). This could be executed by increasing
advantages, restricting costs, selecting development of capital and may other factors. In
current scenario the thought of financial management is very much associated with
working capital management. It assists in controlling and monitoring uncertainties which
might influence the continuous functioning of companies. The following report focus on
various kinds of financial conceptual techniques in terms of financial management.
Furthermore, with the help of significant analysis such as ratio analysis several financial
outlines associated to business procedure of companies could be utilized. Lastly, this
would assist to improve overall performance and financial of organization.
Section 1: Definition and discussion of the concept and
importance of financial management
Financial management is describing as important organizing, coordinating,
balancing and controlling of budget in companies. It is also associated with execution
of wide range of ideas to the executive standards of monetary areas of business
ventures. It also helps in adequately monitoring and taking decisions about how
much budget would be assigned to different departments within the companies. It is
defined as the most general method of developing, creating and implementing
strategies which needs to be execute in order to make sure that all divisions in the
company are working effectively to achieve their goals (Zhang, 2020). It also assists
companies in managing the decisions associated with the crucial financial and
business venture actions for growth of firms driving them to believe applicable
selection in setting goals and destinations of the institutes. The financial authorities
of the companies guarantee that their availability of money in every department in
the firm that must empower to smoothly achieve their business operations.
Financial management is considered as one of the essential variable of the
organizations empowering them to guarantee the availability of the budget for every
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division within firm. This will help the organization in guaranteeing the effective and
smooth supply of finances so that necessary assets could be obtained successfully
as well as proficiently. The proper implementation of financial management aid
companies in providing strong financial position through organizing the finances
effectively and successfully allocating the resources in every single department of
the firms empowering them to enhance their performance (Xu, 2019). Furthermore, it
also assists the finance manager to take all responsibility associated with financial
decisions which are adequately incorporated with aims of business.
Section 2: Description and discussion of the main
financial statements and explain the use of ratios in
financial management
Financial statements are described as the written summary of overall financial
transactions and budget allocated of companies. It assists in providing effective
growth to organizations and enhance their performance through evaluating financial
status. These financial statements are generally examined by various external
parties such as tax officials, government authorities, auditors and many more to
supervise the financial situation of organizations (Veledar and Letica, 2020). The
various kinds of financial statements which includes Balance Sheet, income
statements and cash flow that are described below in detail:
 Balance sheet: This factor is related to financial summaries which are
arranged by companies that involves all kinds of liabilities and assets. It also
contains the investors value that empowers to take decisions regarding
financial situation of companies.
Equation: Assets= ( Liabilities + Owner's Fund )
 Income statement: This is defined as another form of budget summary of
companies that mainly involves income statements, expenditures which are
mainly created from business operations (Liu, 2020). It also assists in
deciding the level of productivity that companies could achieve during a
particular financial year. It helps in evaluating overall pay, cost, incomes and
profit on shares critically.
Equation: Net Income=( Revenue - Expenses )
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