BSc Business Management: Financial Management Report and Case Study

This report, submitted for a BSc (Hons) in Business Management, delves into the core concepts of financial management, its significance, and the processes businesses employ to enhance financial performance. The report defines financial management and underscores its importance within an organization, emphasizing the allocation of resources, operational efficiency, and the role of financial managers in planning, organizing, directing, and controlling organizational funds. It explores key financial statements, including the balance sheet, income statement, and cash flow statement, and explains the application of financial ratios such as profitability, liquidity, leverage, and activity ratios. The report includes a detailed analysis of a provided business review template, calculations, and the construction of an income statement and balance sheet using Excel based on a case study. Furthermore, it assesses the profitability, liquidity, and efficiency of a company using ratio analysis, and concludes by discussing strategies to improve financial performance based on examples from the case study. Appendices are included with the Excel sheets.

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
0

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
1

Introduction
Financial management of the organisation will deal with all the financial resources in the
business organisation such that a smooth floor is carry forward in business operations
with the minimum utilisation of resources. This is a much needed part because in order to
attain the desired objectives of the organisation the company will have to get the limited
availability of capital. The report will defeat the importance of financial management in a
business entity and the financial statement with methods and ratio analysis that are
portrayed.
Section 1: Definition and discussion of the concept and
importance of financial management
The most essential component in every organisation is the financial management.
The area of the functions of the organisation will depend upon how far the
management is able to evaluate the profitability expenses cash and credit that are
related to the organisation. These objectives will be identified by proper allocation as
well as the acquisition criteria that is dealt by the management (Bulturbayevich and
et.al, 2020). The financial management will also define the operational efficiency of
the organisation. A proper financial planning organising directing and controlling
organisational funds will have to be inhibited by the organisation such that their goals
and objectives will properly analysed. It is entirely the duty of financial manager to
manage the resources in the organisation based on the key decisions that are being
adopted by the planning department of the organisation. When it is a good financial
manager then he will inculcate himself into planning as well as organising the
resources in a most prominent manner that will contribute for the maximization of
organisational value. In our company is there will be different processes that are
related to planning funds organising as well as controlling financial activities. This
process will be dealt by the financial management and the decisions that are to be
made on the investment as well as the finances will probably vary from capital to the
budgeting. Financing will indicate the entire performance of the organisation right
from the standard till the onset of time cost of financing will be evaluated. The gain of
profits or the losses will be included in the management is performing that financial
duties. A proper monitoring of financial activities will have to be carry forwarded such
that the details that are included and are to be understood will therefore be process.
The different functions of financial department are as follows:
Estimate required capital: it is the duty of financial managers in order to evaluate the
amount that is required to be the capital. There are several areas in the
organisations which require financial planning and based on this the implementation
criteria will be carry forwarded. Upon all the implementation plans there will be
established mint and based on that the expansion of the company can be known. In
this modernized business environment where investment is fixed and the assets are
decided upon the investment and therefore the financing should be properly
estimated today arrived the capital.
2

Determine capital structure: it is first necessary that one must be able to determine
the required capital funds through which easy proportions as well as appropriate mix
can be derived. This is the stage where financial manager will be included in the
process of evaluation and the short term as well as the long term ratios in the
process of debt will be known.
Evaluate and select sources of funds: funding is the most probable criteria that is
being captured by the organisation. It is a requirement where the initial capital or the
financial standard will therefore be decided (Ameliawati and Setiyani, 2018). Based
on the approach of management or the base of the company the sources of funds
will be decided. When an organisation is an MNC then the funding criteria will vary
as it is a Start-up then the funding will therefore be derived from the owner itself.
Allocate and control fund: each financial area in the organisation will have to be
divided and the decisions that are to be made in determining the necessary amount
which is to be allocated such that the funds can be maintained accordingly. When
there are different changes in the financial decisions with regard to the rise and fall of
allocated amount then the manager will have to keep an appropriate track such that
the shortage can therefore be fulfilled.
Section 2: Description and discussion of the main
financial statements and explain the use of ratios in
financial management
There are a set of different financial statements that the organisation usually
(Siminica and et.al, 2017). The different financial statements will bring about the
varied principles of accounting into the levels of organisation. Some of the financial
statements include those of balance sheet, income statement cash flow and
shareholder’s equity statement.
Balance sheet: the balance sheet in the financial statement will bring about all the
requirements of the assets that are being included in this statement. This will also
highlight the abilities as well as the shareholders equity. It is necessary to maintain a
balance sheet to anomaly identify the choices that are being made by the
organisation every now and then. equations are to be performed on the balance
sheet fact that the entire asset will be known to the management. The equation will
include: assets = liabilities + shareholders equity.
Income statement: the balance sheet that is present in the financial statement will
vary more when compared to the income statement. The income statement will bring
about the revenue and the expenses that are being tackled by the organisation. This
will start with gross sales or revenues and the deduction and any sales will therefore
be calculated up on the net sales. The net sales will be constituting the ones in which
the direction will take place based on cost of goods that are sold.
Cash flow statement: the cash flow statement is one of the important constituent of
every investor and they will have to have a look about all the separate prospects of
the statement. There are a set of activities that are being performed by the cash flow
statement right from the investments to the finance activities. Cash flow operations
will reflect upon the core operations of business and also the buying property of the
organisation will be depicted in the activities that are being invested.
The financial ratios in every Financial Management is categorised into four sectors.
They are as follows:
3

Profitability ratios: Every organisation that is striving for excellence will aim for the
profitable conditions of the organisation. Profit is defined to be one of the prominent
aspects that will distinguish an organisation from that of the other which is working in
the same field. The profitability ratios of the organisation will bring about the
measuring between the performing business aspects that are categorised into
profitable ratios. The basic financial ratios will derive the different conditions which
will give various scales that are necessary to measure success of the organisation.
The company's performance is based on how far it is being able to attain its
profitability and it can be able to derived by the competitive factors from other
organisation by this peculiar ratio. If the profitability ratios are said to be high for the
organisation than it is performing well in its term. This will also derive the income
statement ratio which are hand-picked.
Liquidity ratio: With regards to the organisation there will be short term obligations
that will fall as the liquidator conditions which are readily converted into cash
(Atmadja and Saputra, 2018). There are different acids with regard to organisation
and they are to be referred as liquid assets. When it comes to the business financial
statements the current assets will define the short-term obligations. There is a
measure for cash or investments that is reflected over the deaths that will occur in
the company's period. The current liabilities that the organisation will deal with
include those that will define the current ratio as well as the quick ratio.
Leverage ratios: when the organisation is involved in borrowing finances from other
operations then it will be regarded as leverage ratios. The result of these ratios will
therefore fall under the bankers as well as the investor. There is a comparison that is
carry forwarded in this particular ratios and that will compare the assets with their net
worth. There will be different risks and downturns that are included in the business
that will derive the potential with which the organisation is working. When there is a
higher risk that is associated with the returns then that can be taken care about.
Activity ratios: activity ratios are those that are defined by the measures that will
bring about assets which are used in the organisation. This will also decide the
turnover that well be reflected over the benefits of the organisation. When the activity
turnover ratios will deal with the managing and its inventory then it is known to be the
inventory turnover ratio.
Section 3: Using the template provided:
v. Completing the Information on the ‘Business Review Template
(Ensure that you display your calculations for this detail)
2016
£’000
2015
£’000
Change
%
Turnover (continuing operations) 189,711 179,587 +5.6%
Profit for the financial year 43057 18,9
87
+
127%
Shareholder’s equity 83802.75 63,057 +32.9%
4

Current assets as % of current
liabilities
54.72 % 304% -82%
Customer satisfaction 4.5 4.1 +10%
Average number of employees 649 618 +5%
Gross Profit for the year 2016 = Sales - COGS
= 189,711 -108,586 = £81125
Net Profit for 2016 = Sales- COGS- administration – operating expenses- interest
= 189,711 -108,586 - 13,751 - 22,374 – 1943
= £43057
Net Profit increased in 2016 by 127 % [(43057 – 18987) / 18987 *100] during the
year.
Shareholders’ equity increased by 32.9% by £83802.75 (63057 * (1+32.9%).
The company’s “quick ratio” (Current Assets (excluding stock) divided by Current
Liabilities) is £55778 / 37928 = 1.47.
The company’s “current ratio” (Current Assets divided by Current Liabilities.) is
£84349 / £37928 = 2.22.
vi. Using Excel producing an Income Statement for the Sample
Organisation (see Case Study)
Excel sheet not provided.
vii. Using Excel completing the Balance Sheet
2016
Total
£0
Non-Current
assets
Intangible assets 5,793
Tangible assets 52,812
Investments 10,693
69,298
Current assets
Stocks 28,571
Trade debtors 26,367
Short term deposits 14,779
Cash at bank and
in hand 14,632
84,349
Current liabilities
Bank loans and
overdrafts 9,610
Trade creditors 19,493
Other Creditors 678
5

Income tax payable 3,585
Other creditors
including tax and
social security
4,562
37,928
working capital 46,421
Total assets less
current liabilities 1,15,719
Non-Current
Liabilities
Bank loans and
overdrafts 16,506
Other Liabilities 7,304
23,810
Provisions for
liabilities 8,094
Net assets 83,815
Capital and
reserves
Called up share
capital 39,436
Reserves 1322
Retained earnings 43,057
Total equity 83,815
Working note:
Total Assets
153,64
7
Less: Total Liabilities 69,832
Total equity 83,815
6

vii. Using the Case study information describing the profitability,
liquidity and efficiency of the company based on the results of
ratio analysis
Particulars Formula 2015 2016
Gross profit 80612 81125
Net Profit 18,987 43057
Sales 179,587 189,711
Gross profit Ratio Gross profit/
sales*100
44.88 42.76
Net Profit ratio Net Profit/
sales*100
10.57 22.69
Efficacy:
Particulars Formula 2016
Stock 28,571
COGS 108586
Inventory turnover
ratio
COGS /
Average
stock
3.8
Section 4: Using examples from the case study describing
and discussing the processes this business might use to
improve their financial performance.
Based on the ratio analysis that is depicted which will bring forth the liquidity position of
the company and which is necessary to move ahead with the company's investments
and the results it is stated that the quick payment to its trade payables is currently
reduced. Focusing more on the increase of gross profit the company will have to inhibit
the challenges in order to reduce the cost of its goods such that the gross profit can rise
to the net profit of the organisation. The financial managers in the organisation can focus
more on the control techniques of the budgetary such that the expenditure will be
towards limited resources. This in terms of inventory turnover ratio of of the organisation
is considered to be the one where efficiency is regarded to be very low. Added to this the
company will also have to come up with the strategies in order to enhance their
advertising and promotion such that it will lead to an increase in customer base.
Conclusion
7

The report concludes upon highlighting the aspects of financial management to be
the crucial factors in attaining decisions of the organisation. Through this report one
can easily understand the relevance of financial management and the ways that are
included in a full stop through the template it is depicted with the financial ratios upon
determining the financial performance of the organisation. The different analysis that
are based on identifying the key areas of function are being put forth in this report
was the strategic decisions that are undertaken by the organisation.
References
Bulturbayevich and et.al, 2020. Modern features of financial management in small
businesses. International Engineering Journal For Research & Development.
5(4). pp.5-5.
Ameliawati and Setiyani, 2018. The influence of financial attitude, financial
socialization, and financial experience to financial management behavior with
financial literacy as the mediation variable. KnE Social Sciences, pp.811-832.
Atmadja and Saputra, 2018. Determinant factors influencing the accountability of
village financial management. Academy of Strategic Management Journal.
17(1). pp.1-9.
Siminica and et.al, 2017. Financial management as component of tactical
management. Polish Journal of Management Studies, 15.
Appendix:
Income Statement
No excel sheet provided.
8