Concept of Financial Management and Use of Ratios in Financial Management

Applied Business Finance
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Contents
Contents...........................................................................................................................................2
Introduction......................................................................................................................................3
Section 1..........................................................................................................................................3
Concept of financial management...............................................................................................3
Section 2..........................................................................................................................................4
Financial statements.....................................................................................................................4
Use of ratios in financial management........................................................................................5
Section 3..........................................................................................................................................6
Business Review Template..........................................................................................................6
Income Statement........................................................................................................................6
Balance Sheet...............................................................................................................................6
Review of performance of the business.......................................................................................6
Section 4..........................................................................................................................................7
Processes helpful to business in improving financial performance.............................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9
APPENDIX....................................................................................................................................10
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Introduction
Financial management is mainly related with an organization's financial health. The purpose
of this report is to explore the significance of the principle of financial leaders and managers. For
some of its financial status, the company uses different financial reports such as cash balances,
income statement, balance sheet, and so on. This financial report assists a firm in understanding
its financial condition, which aids in improved management and increased profitability. In
contrast, financial reports for the company used as a given scenario have been planned in order
to measure ratios and conduct research on them. The corporation's model was evaluated using
accounting ratios, as well as further findings were made in order to enhance the business success.
Section 1
Concept of financial management
Financial planning is the technique of a company's financial capital being planned,
procured, allocated, and used. This is a component of the corporation's planning process, as well
as its aim would be to leverage the productivity of financial capital in order to increase the
corporation's value and shareholder’s resources. Its priorities include:
 Ensuring that resources are invested to businesses in a timely way, and also that
their acquisition and delivery improve the company's financial framework and
resources governance.
 Prepare a resonant financial performance with some acceptable debt-to-equity
ratios in order to reach the profitability margin.
There have been different kind of importance of financial management which support companies
in order to operate business as per accounting standards to meet the desired results. Some of
these are mentions below:
Preparation and strategy: It evaluates financial information help develop forecasts, spending
strategies, including financial performance in order to help a company expand efficiently and
environmentally sustainable. It allows for the probability of market contingencies.
Controlling: It utilizes a range of schedules as well as other financial statements compiled by
finance officers as benchmarks on which the company’s capital success is measured. Variations
are identified, and corrective procedures are devised, scheduled, and carried out. This is done in
order to improve the financial efficiency of the company.
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In business, manager have to play different roles and duties such as managing of funds,
allocation to the best activities etc. some of these important roles are discussed underneath:
Capital structure management: They are always in charge of deciding the right capital strategy
for the firm, as well as collecting and administering investments. They carry out debt-equity
shortages and also financial performance. They will have the authority to make decisions about
the business performance, diversifying of assets, creativity in increasing the business revenues
and also making useful decision for dividend distribution.
Financial controls: They are in charge of managing and regulating the firm's earnings
performance, but they employ a range of methods and strategies to do so, including ratio
estimation, accounting systems etc. They must ensure that the firm's ability to pay and financial
planning run smoothly in order to prevent over-liquidations as well as under-liquidations.
Section 2
Financial statements
The company's assets are documented and listed in accounting books. This are then
categorised and examined into further financial accounts, which are formal statements. These are
designed to help users appreciate the financial success and status of the company in a
straightforward manner. Internal users, such as company management, and key parties, such as
shareholders, are also consumers of this material. The following are an organization's proper
accounting declarations:
Income statement: It was also recognized mostly as gain as well as changes in equity, which is
used to work out a firm's earnings success over time. It's a financial statement compiled using
accounting concepts like financial basis or even the matching term. It considers costs incurred
and income generated mostly during accrual basis, which is normally 1 month. After that, the
company's net gain is measured by subtracting all costs from across all forms of sales. This net
income would then be then paid to stock holders or held by the funds for future activities. This
benefit is maintained and distributed to the investment owners' account of the company.
Statement of financial position: Statement of financial status is another name for it. This is a
moment in time that specifies the present state of an organization's assets and liabilities. Apart
from revenues and expenses, the shareholders’ equity investment is taken into account, that can
be expressed as Assets = Liabilities + Capital. Present and non-current assets as well as liabilities
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