Importance of Financial Management and Processes to Improve Financial 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
:
Contents
Introduction p
Section 1: Definition and discussion of the concept and
importance of financial management p
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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
The concept of financial management is one of the most important prospect
to run the business as it assures organizational activities to run smoothly
without any disturbance in allocation of financial resources. The existing
report states the importance of financial management and along with it
concepts related to financial statements and the usage of financial ratios in
company’s operations. Moreover, this report also includes examples of
certain ratios from case study with help of income statement as well as
balance sheet (Abounoori, 2018). Review of business performance will also
be conduct in this report for making an analysis of its financial performance.
Furthermore, strategies required by firm to improve its performance are also
going to be discussed and along with it there will be a description of factors
from case study that help in analyzing business performance.
Section 1: Definition and discussion of the concept and
importance of financial management
The concept of financial management is referred to the strategic planning,
directing as well as controlling of monetary undertakings. Similarly, it incorporates
the application of management principles to financial resources of an organization
while it has a crucial impact in financial administration. There are some important
points that are to be taken into consideration while conducting business operations:
 Guaranteeing capitalists of the organization for achieving higher profitability
level from their revenues.
 Creating genuine as well as safe venture freedoms for putting resources into
(Agyapong and Mordi, 2020).
 Keeping up with sufficient inventory of assets for the organization.
 Optimum utilization of assets
Importance of financial management:
There are several importance of financial management within an organization
and some of them are described as follows:
Formation of capital structure: For making calculation of the capital that is
required within the organization, the design should be formed in an appropriate
manner. Any organization that depends on the measure of the capital as well as
the amount it has should be increased from the external sources.
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Allocation of funds: Within an organization, there should be appropriate
allocation of funds according to the profitability of the business. It helps in
improving the financial resources as well as reducing the costs and expands the
state of monetary of the organization.
Helps in financial decision: Financial management within the organization
helps in taking the critical monetary- oriented choices of business (Currie and
Pandher, 2020). It helps in ascertaining different types of risks as well as
choices and also facilitates in making selection of the extent of capital and
acquired assets of investors.
Economic stability: It is another importance of financial management that
gives business an immovability because it helps in addressing the strong
monetary framework. It can keep monetary resources from activities of business
that can be corrupting for association as well as facilitates in acquiring and
maintaining more advantages.
Profitability: Within the organization, if books of accounts and the resources
are appropriately managed then financial management helps in enhancing the
level of productivity as well as profitability of the business. This would also
facilitate the company in making an analysis of the efficiency and development of
opportunities of the business.
Section 2: Description and discussion of the main
financial statements and explain the use of ratios in
financial management
Financial statements are the financial records of the company that are
compulsory for each listed organization to maintain. Financial statements
within the organization expresses the monetary activities of the business.
These types of statements give financial information and data that shows the
fiscal position of the company. It is mandatory for an organization to get
financial statements audited and it is also a responsibility of the financial
manager within an organization (Du and et.al., 2020). The financial
statements of the organization can be audited through the internal as well as
external sources of the organization. It guaranteed that the statements that
are got published by the organization is not forged and are considered as
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