BSc Hons Business Management: BMP3005 Finance & Performance

This report provides a comprehensive analysis of financial management principles and their practical application in improving business performance. It begins by defining financial management and highlighting its importance in organizational success. The report then describes the main financial statements—balance sheet, income statement, and cash flow statement—and explains the use of financial ratios in assessing profitability, liquidity, and efficiency. Through a provided template and a case study, the report demonstrates the application of these concepts, including the creation of an income statement and balance sheet using Excel. The analysis of the case study data identifies areas for improvement in financial performance, such as managing liquidity, maximizing manufacturing output, and optimizing trade practices. The report concludes by emphasizing the importance of strategic financial management for long-term stability and growth.

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:
Contents
Introduction p
1

Section 1: Definition and discussion of the concept and
importance of financial management p
Section 2: Description and discussion of the main
financial statements and explain the use of ratios in
financial management
p
Section 3: Using the template provided p-p
i. Completing the Information on the ‘Business Review Template
(Ensure that you display your calculations for this detail)
p
ii. Using Excel producing an Income Statement for the Sample
Organisation (see Case Study). This should be included within
your appendices p
iii. Using Excel completing the Balance Sheet p
iv. Using the Case study information describing the profitability,
liquidity and efficiency of the company based on the results of
ratio analysis p
Section 4: Using examples from the case study describing
and discussing the processes this business might use to
improve their financial performance p
Conclusion p
References
Appendix p
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Introduction
Business finance is an essential part of the corporation. Every business firm
requires monetary value for running the firm in effective way. Cash are needed to
buying the assets that are fixed in nature, raw material and so on. It also assists to
run the activities of day basis (Zhou and Li, 2019). The monetary value is
considered as firm's backbone. It plays very essential role for maximizing the growth
of the enterprise. In general words, the availability of the money receives by the
owner of the company in any business or organization for meeting up with the day to
day expenses. The finance of business is needed for each and every commercial
enterprise. The manager of the business firm can invest or raise the funds with the
aid of various sources such as loan from bank, government grants and investors or
stakeholders. In this report, it discuss the necessities of the financial management.
Section 1: Definition and discussion of the concept and
importance of financial management
The financial administration contains the activities of managerial that assists in
designing and monitoring the factors of the financial of the organization. It refers the
maintaining or managing, buying and investing of the assets to maximize the value of
the firms. The cash in flow of the company helps to do comparison with the book
profit of the corporation. It also assists in predicting about the future of the
organization for the purpose of recognizing the favorable cash. The financial
management maintains the fund in the firm. It aids to take the decision regarding
short term and long term credits for the corporation (Tran, Hoang and Nguyen,
2021). There are important term of financial statements which are crucial for the
administration of the finance.
Acquisition of funds- The fund can be procured from various elements. This term
has complexity in the business firm. It contains the large number of fund factors such
as shares, loans, debentures, bonds and so on. In current situation or scenario, the
business entity or firm does not rely on the sources of the finance. The corporation
manager chooses the best sources of funds that helps in running the modern
business.
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Usage of funds: The manager of finance has lot of roles and responsibilities. They
evaluate or examine all over the funds that have got at optimum cost. The finance
manager also considers about the risk that can be arise during the financing of the
funds. If the utilization of the funds is not in appropriate and effective manner then
their procuring cost would become high (Steurer, 2021). The organization funds of
the business are utilized to adopt or buy the assets that are fixed in nature and
working capital as well. There are various necessities of financial administration that
can not be exaggerated. It is the crucial term in the organization. In the enterprise,
there finds improper management then the corporation can not stand for the long
time duration. Some of them are defined below:
 It helps to predict the future plan of the business entity.
 It revises the position of the financial of the corporation.
 It assists the funds to attain the goal and objective of the funds.
 It promotes the business.
 It aids in declining the production cost.
Section 2: Description and discussion of the main
financial statements and explain the use of ratios in
financial management
Financial statements refers to the hand written material that assists in the practices
of the firm and the action of the financial of the corporation (Ryu, 2022). These
statements are approved by the government and the accountant. The main purpose
of these statements provide the status of the financial position of the firm, cash inflow
or out flow and performance of the business that is useful in decision making such
as:
 Balance sheet: It is the statement that helps to provide the information
about the company's position on a specific given time period. It is the
main feature or key for the accounting and financial modeling. It has
been divided into two parts total assets and other part is about debt or
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equities. It is the last step of any company's final accounts. Their both
side total should be balanced or equal. In general words, it is mainly
designed to evaluate the growth of the business firm while doing
comparison with various years. The analysis of balance sheet helps in
detecting the business expansion and upcoming expenditure as well.
 Income statement: It also considered as part of the financial statement
that states the net earning or expenses of the corporation in a given
time period. It is the core part of the statement of the financial. The
earnings and losses are evaluated or determined by considering all
revenues and deducting all the expenditures from both the activities
operating as well as non operating. It presents the cost, gross profit,
revenue, expenses of selling and administration, depreciation, taxes,
net profit and so on. In general words, it states that what the firm earns
or gains and what it expends if the corporation creating the incomes
over a particular time period (Migliorelli and Dessertine 2019). It is
very essential tool for maintaining the business and designing the
strategy. This statement is utilized by investors, lenders and other
partners to know the financial standards and take the decisions that
can influence the future of the business.
 Cash flow: It refers to the cash that the firm get or give out the
payments to the suppliers is known as the cash flow. This analysis is
often utilized to evaluate the position of the liquidity of the organization.
It provides a snapshot of the cash amount that is coming into the
enterprise and going out from the firm. It comprises the cash inflow and
outflow of cash amount in the company. It decides the cash that has
consumed for a particular period. This analysis also helps to recognizes
the present sources of the cash flow with possibility of the cash inflow.
It involves three categories operating, investing and financing activity.
The cash flow activity helps to the investors in taking the decision
regarding investment. It presents the position or value of the
corporation. The operating activity contains the transaction that are
operating in nature, investing practices involves the transaction of
buying and selling of the assets that are fixed in nature and the last
financing practice refers to the debt and equities (Mayer, 2018).
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Financial ratio
This ratio comprises the two chosen numerical value received from financial
statements of the enterprise. These ratios are utilized to try to examine the all over
condition of financial of an organization. The ratio analysis refers the quantitative
method of achieving the insight into liquidity, profitability and operational efficiency of
a firm with the help of balance sheet and profit and loss account. It basically refers to
the relationship of two or more accounting figures. It can be defined in quantitative
term. The ratios are used for analyzing the business's performance, strength and so
on. The financial ratios are helped to the corporation in decision making (Huang,
Lao, and McPhee, 2020). It evaluate or compute the numerical term on the base of
past years and on the base of the other organizations to compute the financial status
of the corporation. The ratios have many types such as turnover, profitability, liquidity
and solvency ratio. These ratios are utilized by the owner of the company, finance
manager, creditors, debtors and investors. It can expressed decimal as well as
percentages and general numbers. It focuses on various principles and accounting
standards.
Liquidity ratio: It is an essential class of metrics of financial that are utilized to
determine the capabilities of the debtors to doing the payments off present debt
induces without raising fund through external capital. The basic liquidity ratio
contains the days sales outstanding, current ratio, quick ratio and so on. This ratio
tells how hurry an organization can transfer their assets that current in nature into
cash so they can easily pay off their liabilities on time. The short term solvency ratio
and liquidity are utilized simultaneously.
Efficiency ratio: It is utilized to evaluate that how effective an organization utilizes
their assets and liabilities liabilities. This ratio can compute the turnover of recipients,
liability payments, quantity and utilization of the equity and the basic usage of
machinery and inventory. Generally, it utilized to track, monitor and evaluate the
performance of the investment and commercial banks. In other words, this ratio is
measured for analyzing the ability of the corporation for the purpose of utilizing the
resources in effective and appropriate manner to generate the maximum revenue.
Profitability ratio: These ratios refers to the financial metrics which are utilized to
valuate the capacity of the corporation to make the incomes that are related to their
revenue, assets of balance sheets, operating costs and the equity of the
shareholders (Donovan, 2021). These kind of ratios can be done the comparison
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with the efficiency ratios, which contemplate how well a corporation utilizes their
assets on the base of internal to operate or generate the profits or income. If this
ratio comes higher it means the position of the organization is favorable.
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)
8

vii. Using Excel completing the Balance Sheet
9

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viii. Using the Case study information describing the
profitability, liquidity and efficiency of the company based on the
results of ratio analysis
The case study, that is given above defined the profitability position of the
business enterprise. The profit of the company is higher than the year of 2015 but the
net earnings of the business entity and gross profit has been compared with the
sample organization then it is best option for the firm (Chen and Sivakumar,
2021). The company should maintain or create the strategy and maximized the
revenue at the cost of the production. In compared with the company of sample the
firm has more satisfactory assets that has liquidity to pay off their liabilities. The
company's efficiency ratio is good as compared to the sample business firm.
Section 4: Using examples from the case study describing
and discussing the processes this business might use to
improve their financial performance.
If the business are able to manage their liquidity of the cash then they can get the
stability for long time in future. The business enterprise can collects the monetary
value through bank loan and operating practices of the company. The firm should
maximized their quantity of the manufacturing units and trade of the goods as well in
heavy amount for the purpose of increasing the profitability of an organization. There
are two techniques or methods that are commonly utilized to improvement of the
company's efficiency such as:
Budgeting: It refers to the making the plan to expend the monetary term. It is
expending less as compare to their earnings by considering the financial goals that
has already planned (Bandelj, Sowers and Morgan, 2019). It is a fundamental
method in attaining literacy of the financial, approaching financial securities and
freedom as well. It is the procedure of making or designing the plan to expend and
finance their earned money for the purpose of meeting their goals of personal and
financial in life.
Risk management: There are number of risk that has to faced by the organization.
It is procedure of the identifying and monitoring the risk.
Conclusion
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As per the above data, there can be concluded that administration of the
financial runs crucial part in the firm. It assists to the corporation in effective decision
making. It manages or handles the funds or capital of the company that they can
operate the organization continually in appropriate manner. The statements of the
financial expressed the financial status of the firm. The company evaluates the ratios
such as profitability, efficiency and liquidity as well. These ratios presents the
capacity of the business firm to pay off their liability.
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