Importance of Financial Management and Processes for Improving Financial Performance

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 1
Section 1: Definition and discussion of the concept and
importance of financial management 1
Section 2: Description and discussion of the main
financial statements and explain the use of ratios in
financial management
2
Section 3: Using the template provided 2-6
i. Completing the Information on the ‘Business Review Template
(Ensure that you display your calculations for this detail)
2
ii. Using Excel producing an Income Statement for the Sample
Organisation (see Case Study). This should be included within
your appendices 4
iii. Using Excel completing the Balance Sheet 5
iv. Using the Case study information describing the profitability,
liquidity and efficiency of the company based on the results of
ratio analysis 6
Section 4: Using examples from the case study describing
and discussing the processes this business might use to
improve their financial performance 7
Conclusion 7
References
Appendix 9
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Introduction
Financial management is the most substantial part of managing the funds and
appropriately considering the monetary aspects and economic activities. Financial
knowledge is needed to arrange finances from the market (Ayub, 2018). In the
following report it mainly divided into 4 segments. In section 1, Concept and role of
fiscal administration is explained. In second section, it explains about the key
financial statement of the management. In Section 3, business review template has
been given of the annual missing data of the organization along with income
statement and Balance Sheet. In Section 4, ratios need to be calculated and also
interpreted and ways are considered to improve the financial position of the business
concern.
Section 1: Definition and discussion of the concept and
importance of financial management
Financial Management is a concept of how a business manages its financial
requirements by applying management principles. It is basically focused on the
business activities that helps in increasing the profits of the business concern. It
clarifies difference between the total expenditure and incomes of the business
concern (Baker, Kumar and Pattnaik, 2021). It helps the business in making plans
regarding future investments and disinvestment process.
Significance:
1. Managing business procedure: The available cash in the business is used
by the organization in business activities. For such information various ratios
such as stock turnover ratio, creditors and debtor’s turnover ratio is
calculated. Payments are made on time to insure that the organization have
significant amount to cash reserves.
2. Balance of funds: Finance department helps in managing the funds and
allocating these funds for the investment purpose and also helps in allocating
it to the core business activities.
3. Decision making: Financial management helps business concern in making
decision that are fruitful for the management. This helps in making decision
regarding the economic factors and monetary activities of the business
organization. This is reason why every department is indirectly controlled by
the finance department (Corrales, Fenwick and Haapio, 2019).
4. Long term stability: It helps businesses to sustain for the long time in the
market. It facilities companies in decreasing the irrelevant expenditure of the
business concern.
Section 2: Description and discussion of the main
financial statements and explain the use of ratios in
financial management
Fiscal statement is the most essential part for a business concern what is to
be published in form of annual accounts on the website of the organization. It is
basically prepared for the whole financial year, which includes revenue,
expenditures, cost, profit, outflow and inflow of cash, liabilities and assets are
recorded to analyze the performance of the data. This information is generally used
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