Importance of Financial Management

Importance of
Financial
Management

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY ..................................................................................................................................3
Section 1: ........................................................................................................................................3
Definition and discussion of the concept and importance of financial management..................3
Section 2 ..........................................................................................................................................5
Describe and discuss the main financial statements and explain the use of ratios in financial
management................................................................................................................................5
Section 4...........................................................................................................................................7
CONCLUSION................................................................................................................................9
REFERENCES .............................................................................................................................10
Book And Journals ..................................................................................................................10
Appendices.....................................................................................................................................11
Section 3.........................................................................................................................................11

INTRODUCTION
Like personal finance management, a company also required a constant flow of capital,
therefore effective financial management is of absolute important for a business. During project
management finance terms in more significant this is because proper accumulations and
availability of finance is necessary for effective project management function. Financial
management is financial administration function which is concerned with the strategical planning
of profitability, expenses and liability and directing or controlling the financial undertaking or
utilisation of the finance of the company (Shapiro and Hanouna, 2019). Following report throw
light on the concept and importance of financial management for a company along with
illustrating different main financial statements which company adopts in its accounting and
auditing. Report also highlight and explain the use of ratio in financial management by
considering its importance and implication in a firm. At the end, measures and ways are
developed by considering the appendices data in which effective process of financial
management might used to improve financial performance of a company.
MAIN BODY
Section 1:
Definition and discussion of the concept and importance of financial management
Definition of financial management
In a business one need money to make money, by considering this it may be not wrong to
say that finance is the life-blood cell of every organisation and it is suggested that there must be
consistent flow of funds in and out of a company. Therefore proper allocation and utilisation of
funds is necessary in order to make money from the money which can be achieved though
financial management. In accounting term, financial management can be defined as the
systematic and disciplined process of planning, organisation, directing and controlling of the
financial undertaking activities such as profits, expenses, cash and credit of a company
(Plaskova, Prodanova and Reshetov, 2020). Financial management is concerned with the
acquisition and utilisation of funds in appropriate way to achieve strategical business goal of
employer. Financial management may be said as the organic function of any firm this is because
every organisation whether small or large and public or private requires finance to abstract
physical resources and carrying out thr business operations in effective and smooth manner.

Scope and nature of finance management
Financial management may be defined as the management principles and practices which
were applied to finance and funds theretofore financial management is said to be an integral part
of whole management which assists in decision making. The fundamental focus of financial
management is valuation of the firm therefore financial management is all about acquisition and
utilisation of the available funds in effective manner to achieve business goals (Okanazu, 2018).
The function of finance management encompass the various activities theretofore the scope of
finance management which include financing raising decision, invest raised funds in asset
through investment decision and distribute returned earned from the asset to the stakeholder in
dividend decision making process.
Importance of financial management
 Financial planning
Financial management supports to demonstrate and ascertain the financial requirement of
the respective business and plays a critical in the financial planning this is because financial
planning is a significant part of a business. Financial planning associates need to take prompt and
rectify the measures despite worrying in later stage of financial management life-style of a
company. Proper allocation and acquisition of funds
Core importance of financial management for a company is to allocate and acquisition of
funds properly. When organisation makes appropriate accumulation of allocated funds it increase
the operational efficiency of a firm (IMPORTANCE OF FINANCIAL MANAGEMENT, 2018).
This is because when appropriate funds are available, firm can ensure undisrupted organisational
operations and funds can be raised from the possible lowest cost from various sources.
 Assist in sound financial and investment decision-making
Financial management is consider to be systematic and disciplined approach which aids
in to take sound financial and investment decision of business concern. Sound financial decisions
are necessary as these can make and wreak any company and can be act as disputer and armoury
tool of business operations (Mahtani and Garg, 2018). Financial management is necessary in
financial and investment decision as one it take place it can not be rewind back.
 Improve profitableness of a company