Importance of Financial Management and Use of Ratios in Financial Statements - Desklib

Table of Contents
INTRODUCTION...........................................................................................................................2
TASK...............................................................................................................................................2
1 Definition and discussion of the concept and importance of financial management...............2
2 Description and discussion of the main financial statements and explain the use of ratios in
financial management..................................................................................................................3
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Finances the method of maintaining the funds in the business organization that assist the firm in
operating there several daily functions but also support them at the time of the requirement
of the capital. Every objective of the firm can be effectually accomplished by the working of
appropriate financial practices. The following report will cover about the data in the
significance and the idea of the financial management by using the ratios of finance that
assist the firm in their process of decision making. In addition to it the report will also
include completion of the income statement with the utilization of the balance sheet (Song,
Yu and Lu, 2018). Moreover, to this, several ratios like efficiency, productivity as well as
liquidity ratios are calculated with the support in evaluation the financial performance of the
firm in the current competitive Environment of the market and it will also mention about
analysis which has been done which develop the performance of the firm.
TASK
1 Definition and discussion of the concept and importance of financial management
The financial management refers to the method of managing the funds and capital of the
organization in the effectual as well as efficient way. In other words, it is the way of
managing the liabilities as well as asset of the business enterprise. With the support of
effectual and appropriate fiscal management it will support in the stability of the firm and
also it improves it but the profits of the company have been enhanced. The main aim of the
business firm by utilising the fiscal management of the organization is to manage the
expenses as well as cost of the organization that commonly better the income of the
organization (Chin and Gallagher, 2019). As because of this company are capable to
function there several business operations in the smooth way that lead to long term growth
as well as success of the company.
Significance of the Financial Management has been discussed below:-
Long term stability – if the company is actually maintaining their funds, then they can cherish
the long term stability in the market area. As with the support of fiscal management, revenue of
the company can be observed, monitored and allocation of the cost can be carried out in an
effectual way. By working on all these activities the cost or expense can be reduce. In addition

to this, it also supports in operation of daily practices inappropriate way and also in a given time
period.
Estimation of the required funds – The manager of finance department is obliged for managing
and maintaining the fund of the business. Company requires to get the several sources of raising
the capital to fulfil their need of the investment when required. The fiscal policies of the
organization impact the requirement of the capital to the company. The total assessment or the
structure of the capital of the respective business organization is done in such a way that supports
women enhancing their capacity of earning (Liu and He, 2019).
Decision – making – The making of the financial budget assist in analysing the cost do to which
major decision link to the company status which has been done in an effectual way. Process of
decision making in respect to the finance is being considered as the essential component of any
kind of business. As this decision making has a large effect on the productivity as well as the
performance of the firm in a very optimistic way.
Profitability – The workers of the finance department is obliged for maintaining all the practices
or the dealings of the finances of the firm the associate of the finance department make sure that
all the books and accounts of the firm are appropriately managed in an accurate way without any
mistake. By operating all these activities, the firm is capable to grab several opportunities from
the market area that pronounce is their performance as well as productivity.
2 Description and discussion of the main financial statements and explain the use of ratios in
financial management
The financial statement is commonly written document in which all the dealings of the firm has
been maintained or recorded and in addition to this, these statements also support in conveying
the fiscal performance and position of the firm (Coakley and Huang, 2020). These statements can
be ordered by the several organizations, accountants and government agencies. It is very much
essential for all the firm to manage also statements in a particular way. With the support of it the
basic understanding of the firms’ fiscal condition and the current status of the organization can
be conveniently measured. The most essential fiscal statements that is necessarily need to be
made has been mentioned below briefly:
•Balance sheet- The balance sheet of the firm refers to the most essential financial statement and
this statement is also known as the balance sheet. It is divided into two parts that is liabilities as
well as assets. The asset belongs To the right side of this balance sheet whereas liabilities are on