BMP3005 - Applied Business Finance - Individual Report

This individual report for BMP3005 - Applied Business Finance course covers the importance of financial management, financial statements, and ratios. It includes a discussion on the processes a business can use to improve its financial performance with examples from the case study. The report is submitted for BSc (Hons) Business Management with Foundation. Course code and college/university are not mentioned.

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
Submitted by:
Name:
ID:
1

Contents
Introduction 3
Section 1: Definition and discussion of the concept and
importance of financial management 3
Section 2: Description and discussion of the main
financial statements and explain the use of ratios in
financial management
4
Section 3: Using the template provided 6- 10
i. Completing the Information on the ‘Business Review
Template (Ensure that you display your calculations for this
detail)
7
ii. Using Excel producing an Income Statement for the Sample
Organisation (see Case Study). This should be included within
your appendices 7
iii. Using Excel completing the Balance Sheet 8
iv. Using the Case study information describing the profitability,
liquidity and efficiency of the company based on the results of
ratio analysis 9
Section 4: Using examples from the case study describing
and discussing the processes this business might use to
improve their financial performance 11
Conclusion 12
References
Appendix 13
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Introduction
Financial Management alludes to the most common way of dealing with bookkeeping
of assets of the firm by breaking down, controlling and deciphering the information
connected with money and taking choices which are significant for accomplishing
hierarchical objectives. It asks the administration to prepare the different records and
reports done which the exhibition and point of firm is assessed by outer just as inside
organisation (Alhenawi, Hassan, and Hasan, 2022). The file is separated into four areas.
The initial segment of document specifies roughly the significance of fiscal
administration. 2nd section connects with the significant accounting statements and
utilization of proportions in overseeing them. Third portion presents a few reports
alongside inspecting the presentation of organization. Fourth portion bargains in the
process of improving financial performance.
Section 1: Definition and discussion of the concept and
importance of financial management
It is one of the main action taking place in and around an organization. It connects
with the most common way of working out and dealing with the costs, incomes,
profits and development of money in an association. This controls and coordinates
the financial assets of a firm toward accomplishing goals of the organization.
Monetary administration basically implies the act of controlling the capital of a firm
which aids it in becoming effective (Weber, and Müßig, 2022). This is for the most part
connected with the short term preparation of working capital requirements by
keeping in account the current assets and liabilities. At the point when every one of
the funds are managed appropriately, they at last aids in satisfying long term visions
of the business as increased benefits, reduced expenses and so forth.
The importance of the Financial management:
 Making sure there is good return of investment and business is able to
manage risk- It is likewise an vital feature of financial establishment. It
facilitates in prediction dangers that may appear in future and plans
techniques earlier to address them. They appoint assorted types of reserves
which includes diminution for gathering its known and unexpected situations.
It usually hold a eager sight at the companies in which they have invested and
makes an exit strategy for all its investments so that firm do not need to face
losses.
 Keeping enough supply of financial resources- It enables in estimating the
quantity of funds required by means of business for purchasing any asset or
for its growth or growth. Finance control crew then figures out the different
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assets of budget which can be adopted for raising capital like stocks,
debentures, loans and many others (Vartholomatou, Pendaraki, and Tsagkanos,
2021). They assists managers or proprietors in analysing professionals and
cons of diverse modes and choosing most ultimate supply of fund with low
cost and lesser wide variety of conditions.
 Prompt utilization of funds in business operations- Financial governance
guarantees that general dealings of organisation are provided with adequate
coins so that in that respect no monetary issue in displace out these works
smoothly. They negociate stock turnover ratios, debtor / creditor charge
duration so that employer have get admission to to coins and finances can
waft with efficiency.
Section 2: Description and discussion of the main
financial statements and explain the use of ratios in
financial management
Financial statements alludes to a composed report which involves the rundown of all
the bookkeeping exercises occurred during a specific bookkeeping period. It gives a
short data of the end balances of all costs, livelihoods, resources and liabilities.
There is a very much organized arrangement of these reports which make there
utilize simple and justifiable for outer just as inner gatherings (Farinha, Sebastião,
Sampaio, and Régio, 2020).
There are three types of financial statements namely,
1.Balance Sheet
2.Income Statement
3.Cash Flow Statement
1. Balance Sheet:- It shows the financial position of the business. On credit side
all the liabilities are shown and on the debit side all assets are shown. The
formula which it follows is as:-
Assets = Liabilities + Shareholders Equity
Above equation states that, It is must that the debit side and credit side of the
balance sheet should be equal. It can be presented in either of the form vertical or
horizontal according to their ease. Both the sides can be divided into two parts
namely:- current or non current on the basis of the time period of the
assets/liabilities. Long term assets and liabilities are those which are in the
organization from more than a year. Short term asset and liabilities are those which
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are in the organization from not more than a year. Short term are once which can be
converted into cash within a year they occurs from the day to day transactions of the
business. For example, trade receivable, trade payable, inventories,etc. Whereas
long term are those which takes long time in conversion into cash.
Income Statements:- It is a diagram report for all pay procured and expenses
caused during a bookkeeping period. It portrays the reasonability of the exchanges
as these are productive or not. It is a basic financial declaration that computes
amount of pay procured via business. Benefit or misfortune is found out by utilizing
deducting charges from profit procured via firm in a chose bookkeeping yr (Abounoori,
2018). This report is parted into parts. Right away, gross income is determined
through deducting expense caused on creation from measure of deals. Then, at that
point, equilibrium of aberrant benefits and costs is diminished from net income to
accomplish web benefit acquired by means of big business. This statement groups
all assortments of charges and gives a summed up information about different
expenses. It is used by different inner notwithstanding outside occasions for
disentangling productivity position of manager.
Cash Flow Statement -It recognizes the progression of money in organization in a
specific time span, it very well might be month to month, quarterly, half yearly or
yearly. All in all, it is a short outline of the approaching and active of money and
money counterparts in the business (Gul, Subramanian, Paul, and Kim, 2021). The primary
point behind this report is to realize that where the assets are being utilized and how
capable the organization is, in utilizing its assets ideally. It supplements different
clients of fiscal summaries in leading investigation of monetary record and pay
report. This depiction is isolated into three sorts.
◦ Operating cash flows: It manages the exercises which helps in producing
cash for the business by covering ordinary activities under it. This segment is the
most massive piece of this assertion. It incorporates activities like money offer of
stock, installments, receipts of all sort of exchanges connected with day by day tasks
of organization (Pawlus and et.al.,, 2020).
◦ Cash flows from investing: It incorporates the progression of money through
speculation sources. These are for the most part long haul exercises like deal or
acquisition of fixed resource, advance given to any seller, obtaining of offers or
debentures, change in the worth of resources and so forth
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◦ cash flows from Financing: It incorporates the every one of the wellsprings of
cash which are obtained to maintain the business easily. This includes, issue of
offers and debentures, installment of profit and interest, taking credits from
organizations and so on The reimbursement of stock or long haul obligations is
additionally thought to be in it.
All the previously mentioned assertions are truly useful for the associations for
deciding the soundness of the organization and introducing the information to the
venture local area. There are number of methods for analyzing the presentation of
company, yet bookkeeping proportions are the main device as it tends to be utilized
by inner just as outside clients
Employments of Accounting Ratio in Financial administration
Bookkeeping proportions alludes to numerical assessment among or more
noteworthy bookkeeping data of soundness sheet and benefit and misfortune
account. These proportions support finding out position of the organization by
utilizing contrasting them and proportions of earlier year or with a couple of business
undertaking of equivalent subject (Bem, Daszyńska-Żygadło, Hajdíková, and Juhász, 2018). It
is communicated in extents, part, amount of cases ans percent. These proportions
work with in understanding the ones regions which needs additional interest and
endeavors for development.
• Productivity ratios: It alludes to appraisal of benefits as far as benefits
procured from assorted activities or resources recruited in organization. They permits
in examining job of association via assessing impacts with cost of forceful
organization or with past a year proportions. It helps business venture in producing
insights roughly productivity of organization in using its resources.
• Liquidity ratios: It ascertains brief term dissolvability position of office. It
permits in assessing ability of business in paying due sum to partners as and
keeping in mind that required. There are explicitly two sorts of liquidity proportions
present day proportion and short proportion. They each are processed through short
time frame period resources and liabilities.
• Proficiency ratio: Efficiency proportion is utilized to assess the capability of
business venture in using its resources and liabilities inside comprehensive of its
stock and human power. It processes various turnovers, utilization of capital, stock
and hardware. This proportion investigation the time taken through big business to
change over its property into income.
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Section 3: Description and discussion of the main
financial statements and explain the use of ratios in
financial management
Section 3: Using the template provided:
v. Completing the Information on the ‘Business Review
Template (Ensure that you display your calculations for this
detail)
7

vi. Using Excel producing an Income Statement for the Sample
Organisation (see Case Study)
This is enclosed inside appendix
vii. Using Excel completing the Balance Sheet
Enclosed in the excel.
viii. Using the Case study information describing the
profitability, liquidity and efficiency of the company based on the
results of ratio analysis
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Interpretation: The profitability ratios portrays that organization is performing very
well when contrasted with the earlier year. Albeit net benefit has diminished by
around 2%, however net benefit has bounced from 10.57% to 22.69% appearance
an extraordinary change. The purpose for this expansion can be decline in different
costs in year 2016 (Alhenawi, Hassan, and Hasan, 2022). Firm has shown an extraordinary
control on its costs even when it is delivering a larger number of items than prior. As
per the above diagram, it tends to be reasoned that the benefit procuring capacity of
firm is expanding. Net benefit procured by business has shown brief ruin when
contrasted with the earlier year. While, then again, total compensation of
organization was extremely less in year 2015 yet in the year 2016, there is a major
expansion in this income. The explanation for this climb is that firm has shown an
extraordinary control on its aberrant costs. This implies the association is making not
kidding moves for further developing its benefit file.
Liquidity position of business is great and as per wanted ideal proportion. It holds
the ability to take care of its obligations 2.2 occasions from its accessible resources. In the
event that firm eliminates its stock structure the estimation, even its most fluid resources are
to the point of settling its momentary liabilities anytime of time. The liquidity position of firm
is great. Checking out its present proportion, the business can take care of its liabilities twice
through the transient resources held by it. Regardless of whether, it can't deal out its stock, it
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will be left with enough of resources that can be utilized for paying its present obligations. In
the wake of paying them, it will be left with enough of the sum to run its day by day tasks.
Proficiency proportions of association demonstrate that organization is
productive enough in using its assets ideally. It requires 96 days for business to
change over its entire stock into deals which implies around 90 days. However, its
proficiency can be investigated exclusively by contrasting it and that of any of its
rival. Seeing at debt holders and lenders turnover proportion, the firm performs great.
It gathers cash from its debt holders 14 days (65 - 51) preceding making setting off
its exchange payables. This implies that organization is using its money successfully.
It very well may be deciphered that the borrowers and banks turnover proportions
are working appropriately in setting to one another. The firm has sufficient time in the
middle of it makes installment and gather cash. That implies, it holds the ability to
fulfill its banks immediately. The stock turnover proportion of organization can't be
deciphered without contrasting the information and another firm or with past
consequences of firm. It takes around 90 days for selling its entire stock, which can
be viewed as great.
Section 4: Using examples from the case study describing
and discussing the processes this business might use to
improve their financial performance.
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Examination of financial execution is of no worth to firm if doesn't involves
this assessment for advancing the place of firm. There are different advances which
might be taken to improve the presentation of organization (Alam. and Ali, 2021).
• Recuperate extraordinary obligation: By gathering its exchange receivables
time they will further develop their liquidity bringing about better monetary condition.
• Adjust costs: Firm ought to investigate the regions where it's spending
absurdly. It should set up a credit choose to help enormous costs to be caused in
future.
• Arrange off resources: By selling every one of the undesirable resources and
arranging off those resources which aren't performing successfully, a business can
further develop its presentation (Chiappini, 2021). it'll expand its liquidity and return on
resources turnover.
There are numerous other through which organization can upgrade its
monetary execution like advertising, appropriate contributing strategy, further
developing pay exercises and so on
Conclusion
From the previously mentioned report, it very well may be inferred that monetary
administration is a significant perspective in a business. It closed from the above
report that monetary administration is work the executives. It helps in dealing with
every one of the money related exercises of business and guides them towards the
benefit's boost. They investigation monetary execution of business by applying
different methods on bookkeeping proclamations. Proportions are significant
apparatus of this assessment. The above translation shows that organization is
performing great in different perspectives yet it can take on different strategies this
proportion.
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References
Alhenawi, Y., Hassan, M.K. and Hasan, R., 2022. Evolution of research in finance over the last two
decades–A topographical view. Research in International Business and Finance, 59,
p.101550.
Weber, V. and Müßig, A., 2022. The Effect of Business Strategy on Risk Disclosure. Accounting in
Europe, pp.1-36.
Farinha, L., Sebastião, J.R., Sampaio, C. and Régio, M., 2020. Flipping the Best Journals in
Accounting, Business, and Finance: What Fruits Do We Collect?. In Handbook of Research
on Accounting and Financial Studies (pp. 1-21). IGI Global.
Abounoori, E., 2018, July. Symposium: Applied Mathematics/Statistics in Economics, Management &
Finance. In AIP Conference Proceedings (Vol. 1978, No. 1, p. 200001). AIP Publishing LLC.
Bem, A., Daszyńska-Żygadło, K., Hajdíková, T. and Juhász, P., 2018. Finance and sustainability.
In Proceedings from the Finance and Sustainability Conference (Springer, 2014).
Alhenawi, Y., Hassan, M.K. and Hasan, R., 2022. Evolution of research in finance over the last two
decades–A topographical view. Research in International Business and Finance, 59,
p.101550.
Chiappini, H., 2021. Sustainable Finance and COVID-19 Pandemic: Weathering the Storm and
Preventing a New One. Contemporary Issues in Sustainable Finance: Financial Products
and Financial Institutions, p.285.
Vartholomatou, K., Pendaraki, K. and Tsagkanos, A., 2021. Corporate bonds, exchange rates and
business strategy. International Journal of Banking, Accounting and Finance, 12(2), pp.97-
117.
Gul, M.J., Subramanian, B., Paul, A. and Kim, J., 2021. Blockchain for public health care in smart
society. Microprocessors and Microsystems, 80, p.103524.
Alam, N. and Ali, S.N., 2021. Fintech, Digital Currency and the Future of Islamic Finance. Springer.
Andrikopoulos, A. and Triantafillou, A., 2021. The Essentials of Social Finance.
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Appendix:
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Income Statement
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