Importance of Financial Management

Importance of financial management
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Contents
Introduction......................................................................................................................................3
Main Body.......................................................................................................................................3
Section 1...........................................................................................................................................3
Concept and importance of financial management:...............................................................3
Section 2...........................................................................................................................................4
The main financial statements and explain the use of ratios in financial management:........4
Use of ratios in financial management:..................................................................................5
Section 3...........................................................................................................................................6
Section 4...........................................................................................................................................9
Processes this business might use to improve their financial performance:..........................9
Conclusion.....................................................................................................................................10
References......................................................................................................................................11
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Introduction
Financial management is managerial function of a company which is accountable for
acquiring and efficiently using the funds required for productive operational activities (Akhtar
and Liu, 2018). The study covers discussion on definition of financial management and its key
significances in business. Further it overs discussion on key financial statements and uses of
financials ratios along with computations of ratios.
Main Body
Section 1
Concept and importance of financial management:
Financial management is described by Guthman and Dougal as " practice concerned with
effective planning, collecting, managing, and overseeing of funds employed in the enterprise."
Financial management is field of business administration dedicated to judicious utilization of
capital funds and careful selection of financing options in order to allow an expenditure unit to
step in direction of meeting the objectives according to J.F. Brandley (Beinke, Nguyen and
Teuteberg, 2018).
Importance of financial management:
Safeguarding / Securing Funds: One of the most important aspects of the financial management
is the protection of funds in order to achieve business objectives. For a company to run smoothly,
it is necessary to calculate the areas whereby funds are needed and distribute them appropriately
in all fields. Overspending with one project can have a negative effect on other business
activities, particularly if they are short on cash. It's important to keep money secure and invest
carefully.
Allotment of Funds: Allocating funds properly is an important aspect of the financial
management within an organisation When properly allocating finance to properties, business
concern's organizational proficiency improves. Finance professionals may minimize business
expenses and raise capital projected for corporation when they are using funds efficiently and
distribute them wisely.
Investments Opportunities: If business owners are successful at handling thier finances and
investing, they would be able to pursue investments opportunities. Investments opportunities will
help them to build assets so that they can enjoy their retirement years. One may look into various
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investment options such as stocks, jewellery, savings accounts, property, properties, and so on.
One will learn everything there is to understand about investing, including the risks and returns.
You can then select the best investment options based on risk tolerance (Cornwall, Vang and
Hartman, 2019).
Financial Decision: One of the most crucial aspects of framework of financial management is
fiscal decision It is difficult to undo a financial decision based on a market concern. As result,
any money spent wouldn't be repaid if a mistake is produced. Financial decisions can have an
effect on the entire business activity. Because it has immediate partnership with all of business's
divisions. For instance, production, advertisement, rentals, human resource salaries, and so forth.
Economic Development and Sustainability: Effective financial planning would ensure
that business grows and prospers. Progressively, wealth creation will increase, allowing you to
prosper financially. The most important aspect of a person's life is fiscal security. Economic
development is only way to maintain financial sustainability and only manner to do that is by
financial management (Klopotan, Zoroja and Meško, 2018).
Section 2
The main financial statements and explain the use of ratios in financial management:
Income statement: This reveals net profit/loss is among the four forms of financial statements.
This form of statement keeps track of all money coming in as well as heading out. Expenditures
are money that has been paid out, while income is money that has been received. Income
statement would report a net loss if the costs outweigh revenue (Kovacova and et.al. 2019).
Income statement of business is divided into several parts, including:
 Sales and operating costs
 Expenses not related to operations
 Advertisement and office rent are examples of operating expenditures. A one-time
payment and interests on lent funds are examples of non-operating expenditures. The
costs of all items sold is included in sales.
Balance sheet: This is among the four forms of the financial statements, and it appears that of
all financial statements available, this one is most overlooked. The income statement fascinates
entrepreneurs, but they are uninterested in other aspects of financial statements, such as balance
sheet. It's particularly unfortunate since this is among the most critical forms of financial
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