Importance of Financial Management

IMPORTANCE OF
FINANCIAL
MANAGEMENT

TABLE OF CONTENTS
MAIN BODY..............................................................................................................................................3
SECTION 1.................................................................................................................................................3
Describing the concept and importance of Financial Management (FM)................................................3
SECTION 2.................................................................................................................................................4
Explaining main financial statements......................................................................................................4
Utilization of ratios..................................................................................................................................5
SECTION 3.................................................................................................................................................5
i. Completing the information in business review template................................................................5
ii. Presenting the Income Statement.....................................................................................................6
iii. Balance sheet as per the given requirement.................................................................................6
iv. Presenting the calculation of ratios..............................................................................................8
SECTION 4...............................................................................................................................................11
Discussing the actions that can improve financial position....................................................................11
CONCLUSION.........................................................................................................................................11
REFERENCES..........................................................................................................................................13
APPENDIX...............................................................................................................................................14

INTRODUCTION
Financial Management is the process of assuring that company utilizes, manages and
control monetary resources in effective manner. In modern era, it plays significant role in gaining
competitive advantages to meet changing requirements. The present report will include concept
& significance of financial management. Present case study will comprise discussion of financial
statement and ratios. Current report will give emphasis on business template to accomplish the
case study requirements. Case study will focus on processes which can improve the financial
performance.
MAIN BODY
SECTION 1
Describing the concept and importance of Financial Management (FM)
FM is broad concept which play crucial role in organization for attaining success. There are
various reasons that validate that financial management should be implemented in business for
the purpose of attaining efficiency in its operational process. The following are importance of
FM:
 Guidance can be achieved by adopting the financial management techniques into
business procedure. Financial planning becomes possible in effectual way through
making implementing it in strategic manner.
 Acquiring funds from different sources becomes possible by utilizing the strategies of
financial management. It plays important role in diversifying risk and managing these
platform for increasing profitability of organization (Bulturbayevich and et.al., 2020).
 Organization’s operational efficiency can be increased with help of FM. In addition to
this, it reduces the delay production by cutting down financial cost.
 Proper allocation and optimization is ensured by financial management which provides
assistance to business to accomplish its objectives in effective manner.
 Relevant financial information is obtained which aid the firm to derive competitive
advantages through preparing financial reports more accurate. Controlling and

monitoring irrelevant actions becomes possible by using this procedure into operational
activities.
 Safeguarding and protecting funds can be exerted for obtaining smooth functioning by
gaining economies of scale.
SECTION 2
Explaining main financial statements
Main financial statements comprises equity shareholders, balance sheet, cash flow and
income statement. There are basically four types of Financial Statements (FS) which are as
mentioned below:
 Income statement plays important contribution in summarizing the huge monetary
transactions into shorter form. It provides details in way of segregating the income and
expenditure related to operational as well supporting activities of organization. The idea
regarding profitability and loss can be obtained by analyzing this particular statement (Easton
and et.al., 2018). Breakdown of expenditure and income provides assistance in evaluating and
making comparison of current statement with previous. Liquidity position for specific period
of time can be assessed.
 Shareholder’s equity statement shows investors contribution in company’s growth. This
type of FS is used to determine the ownership of equity shareholders in firm. Additional paid
up capital, preferred, common , etc stock information can be derived by taking this into
consideration (McCosker, 2021). Another form of FS is Balance Sheet (BS) which
contribute largely in determining the current financial position of company in industry. This is
prepared at the end of financial period for assessing the information in respect to assets and
liability to evaluate actual performance.
 Cash Flow (CF) is one of the essential statements of financial information. Details
regarding inflow and outflow can be obtained by preparing it. This measures company’s
ability of managing cash position through generating and monitoring its monetary resources.