Importance of Financial Management: Concept, Financial Statements, Ratios, and Suggestions

IMPORTANCE
OF
FINANCIAL
MANAGEMENT

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
SECTION-1 Concept and importance of financial management in the company.......................3
SECTION-2 Financial statements and the use of ratios in financial management......................4
SECTION-3.................................................................................................................................6
SECTION-4 suggestion to improve financial performance.........................................................9
CONCLUSION..............................................................................................................................10
REFERENCES................................................................................................................................1

INTRODUCTION
Finance management is defined as the function of an organization which is associated
with profitability, cash, credit and expenses to carry out objective of maximization of wealth.
This report will cover concept and importance of financial management in order to increase
value of the firm. This report will also study meaning of financial statements and use of ratios in
financial management. Likewise, positional statement and income statement will be drawn on the
basis of available data. Last but not the least, this report will provide some suggestion to improve
financial performance of the company.
MAIN BODY
SECTION-1 Concept and importance of financial management in the company
Financial management involves in planning, controlling and directing of all the financial
activities. It is vital activity that connected with all the area of an organization. Financial
management is an ideal practices which is followed by the company to manage financing
activities such as procurement of fund, payment, accounting etc. Proper financial management of
an organization give a fuel to all the other area of an entity to work efficiently. Financial
management of an organization keep a deep knowledge of financial information. With the helps
of financial data, management can take right decision for future growth of the company.
Moreover, it also focuses on what all opportunity available in the market to increase the value of
the firm. In addition to this, It also usage different type of strategic techniques to reduce expenses
and cost in order to maximize profit. The success of any business is depended on how well
finance is managed by the manager (Spuhlera and Dew, 2019). Moreover, manager apply
management principle in order to manage their financial assets.
Importance
Strategic planning
Financial management helps to take appropriate decision by analysing long term and
short term goal of the company. It analyses all the available resources in order to meet business
requirement.
Maximization of wealth
The primary objective of financial management is to maximize the wealth of shareholders
of the company. Company focuses on increasing profit in order to provide high rate of dividend
which directly impacted on shareholder wealth.

Acquisition of fund
Financial management analyse the requirement of the fund to meet short term and long
term obligations of the company. Further on the basis of requirement, it tries to arrange fund
from the right sources. These sources are equity, debenture, bank loan etc. While acquiring fund
from the market, It studies all the positives and negatives sides of an asset (Musah, Gakpetor and
Pomaa, 2018). Moreover, it helps to get right sources of fund at which loss cost is associated.
Increase profit
Financial management helps to increase the profit by well managing all the financial
resources. With the help of financial management, company acquire goods after negotiate prices
with supplier so that the best deal can be grabbed. It helps to reduce the cost of the product which
automatically increase the profit.
Assets management decision
Financial management put more emphasis on best utilization of resources by analysing its
strengths and weaknesses (Karadag, 2017). It avoids to invest in all such assets that are
associated with high cost and less return in near future.
Allocation of fund
Financial management take wisely decision to allocate their available finance in such a
way that provide high return in near future. It helps to evaluate the procurement and deployment
of fund in an organization. It also facilitates to the business by well managing their finance
structure.
SECTION-2 Financial statements and the use of ratios in financial management
Financial statements are the formal document of all the financing activity which are
related to the business. It includes positional statement, income statement and cash flow
statement. Moreover, financial statement convey the true and fair position of company's
performance. Further, it is used by ultimate internal and external user while taking decision
related to investment or business dealing etc. Financial statements is prepared on quarterly,
annual and half-yearly basis. Moreover, it also states company's sources and usages of fund in
order to increase the profitability (Vakhrushina and et.al., 2018). Income statement that is also
known for profit and loss account. It measures the profit and loss of the company during the
period. Moreover, it presents business performance report that how well company is managing