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
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
Completing the Information on the ‘Business Review Template (Ensure
that you display your calculations for this detail)
p
Using Excel producing an Income Statement for the Sample Organisation
(see Case Study). This should be included within your appendices
p
Using Excel completing the Balance Sheet p
1

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 refers to the planning, organizing and directing the financial resources
of the business in attempt to establish effective control over the financial activities of an
enterprise which involves acquisition and utilization of funds. Within the present report,
discussion pertaining to the concept and importance of financial management will be done
along with the discussion of main financial statement that the business prepares at the end of
every reporting period. Also, the uses of ratios that are calculated on the basis of information
obtained through these financial statements will be stated in this section of the report. Further,
the financial analysis of case study organization will be done and accordingly, processes that
could be adopted in order to improvise its financial performance will be discussed.
Section 1: Definition and discussion of the concept and
importance of financial management
Definition of financial management: As per the views of Solomon and Phillippatus,
financial management refers to the efficient utilization of economic resources of the business.
It involves decision making with reference to acquisition and utilization of long and short
term financial needs of the business. In this financial assets and risks can be managed in
better way (Al Breiki and Nobanee, 2019).
Concept of financial management
The concept of financial management revolves around making of decisions with regard to the
following three areas:
Investment decision: It involves decision regarding which project should be chosen for
better returns on investment along with ensuring generation of required level of cash inflows.
Financing decision: Here, it is being determined that from where to obtain funds for
financing business affairs, so that there could be lower financial risks and costs for the
business.
Dividend decision: It involves deciding on how much should be distributed among
shareholders in the form of dividend and how much earnings should be retained with the
business in order to finance future needs of the business for growth.
Importance of financial management
 It helps in making sufficient funds available with the business at every point of time.
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