Analyzing Financial Performance: Applied Business Finance Report

This report provides a comprehensive analysis of applied business finance, focusing on financial management principles, financial statements, and the use of ratios to assess and improve business performance. It begins by explaining the concept and importance of financial management, highlighting its role in maintaining assets, ensuring shareholder returns, and making sound investment decisions. The report then describes the key financial statements—profit and loss statement, statement of financial position, and cash flow statement—and explains how financial ratios are used to evaluate a company's profitability, efficiency, and solvency. Through a case study example, the report calculates various ratios, including liquidity, profitability, and efficiency ratios, and analyzes how these ratios can inform strategies for improving financial performance. Key strategies discussed include cost reduction, debt consolidation, and asset management. The report concludes that effective financial management is crucial for business success, enabling informed decision-making and enhanced financial stability.

Applied Business Finance

INTRODUCTION...........................................................................................................................3
SECTION 1.....................................................................................................................................3
Explaining concept and importance of financial management....................................................3
SECTION 2.....................................................................................................................................4
Describe the financial statement and the use of the ratios used in the financial management....4
SECTION 3.....................................................................................................................................5
(i) Complete the Business Review Template...............................................................................6
(ii) Produce the income statement using Excel............................................................................6
(iii) Complete the Balance Sheet using Excel.............................................................................7
SECTION 4.....................................................................................................................................7
By considering the example of the case study, calculate the ratios and analyse how the
financial performance of the business can be improved..............................................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................11
APPENDIX....................................................................................................................................12

INTRODUCTION
Financial analysis and data are essential elements of the business enterprise, regardless of
its level of growth or size. Management, can analyse that what inventory the company has and
how they can utilize them in order to smooth as well as profitable way in accordance to enhance
the expected outcome, and the at which lead them to success in a accordance to accomplish the
appropriate decision. Business finance refers to the gaining of the investment for the aim of
satisfying the needs of the market (PRIAMBODO, and et.al., 2021). It gives operational fiscal
rules, fiscal diversification and investment as well. It concentrate on financial management and
economy worth of the company. There are discrepancies in the use of percentage and in the
financial documentation of the financial administration. The main aim of this report is to tell
what money management is and need of the financial statement like balance sheet, financial
condition and net earnings are mandatory. In addition to this it will also include the use of metric
in financial management and business technique for enhancing their income.
SECTION 1
Explaining concept and importance of financial management
Financial management refers to which link to the method of regulating, leading managing as well
as coordinating firm’s financial practices (PURI, and SINGH, 2021). It also in enhances the
principles of management to the firm’s financial abilities, and which is having impact on
financial organization.
 Maintaining adequate inventory of assets for the company.
 Giving assurance to the shareholders that their capital will gain them better return.
 Effectual and optimal use of asset.
 Making safe and real organizational opportunities to invest capital into.
Importance of financial management
 Monetary judgment- It assist the firm in making essential financial decisions. As such
decisions can possess the potential to bring whole organization collapse.
 Profitability- In order to enhance the productivity and performance of the company
records of accounting and supplies need to be well maintained and it also assist the
company in their expansion and long term success.

 Financial distribution- By appropriate distribution of allocation of budget is depend on
the income of the company. It will support the organizations budget proportion in an
improved manner as well as expenses and increase its financial situation.
 Economic strength- it supports company in Addressing cash linked based and avoiding
commercial action which may be risky for the firm and supporting in acquisition of
upcoming perks.
 Forming the position of the cash- The base should be properly made in accordance to
calculate the investment mandatory (Siu, 2021). Any organization which is dependent on
the quantity of cash they have and how can it increase to coming from outside suppliers.
SECTION 2
Describe the financial statement and the use of the ratios used in the financial management.
Financial statements are writing documents which the organization need to maintain.
These financial information shows the profitability and stats of the organization. These
are need to be evaluated and it is the duty of the owner of the company. Externally as
well as internally data can be utilised to audit them and it makes sure that the
organization financial statements are authentic and genuine. The following are the
assertions.
 Profit and loss statement- This statement consists of the sales, expenses, earnings and
liabilities of the company for the accounting period. It also tells about the transactions
which were done in the specific time. And the expenses which the organization had to
made which leads to accomplishment of the sales. The company’s net profit for the
specific time by subtracting the compensation and expenses of the quarter.
 Statement of financial results- It is the most essential fiscal document of the company
as it gives consumers with the verbal knowledge of the firm’s existing account (Utama,
and et.al., 2021). It tells the total assets and the responsibilities which the company has
ready to pay their lender. In other words, it tells the fiscal situation of the company at the
specific point in time.
 Cash flow statement- Cash flow statements tells the cash outflow and inflow from the
organization over the specific time Frame. It also tells about the cash flow from,
operating, acquiring as well as financing functioning for the particular time. It also

include existing resources and present liabilities and income as well as essential
expenditure which are there in process of operating. The inflow of cash by providing
convertible notes, stock dividends, mortgage and stockholders equity are also there in the
financial practices.
Use of the financial ratios
Ratios are the analytical method which show large quantity of data into a specific place in
order to sheer and are also utilised to evaluate documents which are read on annual basis. They
have several data we shows the market activity and operations of the company. The aim of ratio
analysis in fiscal planning is to evaluate and understand the performance of the company while
utilising the ratio across productivity, inventory, assets, and income (Yusoff, and et.al., 2021).
Therefore, understanding global trade and fiscal productivity, it also assist in the creation of
fiscal management opportunities that are essential to the performance of the company yeah and
summarises accounting documents which needs to be concentrated on.
 Financial ratios support associates in making appropriate decisions- in order to
calculate essential following judgment of various economy analysis, advantages, ability
in acquisition, percentage. And many others are used. The higher level management or
the decision maker of the company that provided with the appropriate over you what they
need to achieve in order to gain more rewards.
 Effectuality of activities- The ratios is utilize to understand profitability, efficiency and
solvency off the bank. It supports organization in keeping lower cost at the time of
managing higher skills of technique in accordance to accomplish aims and goals of the
organization.
 Comparative research- Proportional evaluation of the company is utilize to compare
several features in the fiscal security of the information. It analyses the organization
whole situation and makes a specific benchmark in order to compare to other company in
the same industry.

SECTION 3
(i) Complete the Business Review Template.
(ii) Produce the income statement using Excel.
Shown in Appendix.

(iii) Complete the Balance Sheet using Excel.
SECTION 4
By considering the example of the case study, calculate the ratios and analyse how the financial
performance of the business can be improved.
Calculations:
Gross profit = sales – COGS = 189711 – 108586 = 81125
Net Profit = Revenue – total expenses = 81125 – 38068 = 43057
Profit = 43057 – 18987 = 24070
Current ratio = current assets / current liabilities = 54349 / 37928 = 2.22:1
Quick ratio = (current assets- stock) / current liabilities
= (84349- 28571) /37928 = 1.47:1
Equity = 63057 / 20745 = 83807

Increase in profit = 63057 / 32.9% = 20745
Liquidity ratios – These ratios are utilised to measure the management’s volume to meet their
financial obligation and their margin by evaluating several ratios like current, quick and so on.
The above mentioned estimated ratios like the current and quick ratio will support in identify
how effectively the management and repay the loans by utilising money and comparable
resources (Alta’ani, and Dali, 2021). The estimated current ratio is 2.2 times, that are higher than
other conventional qualitative assurance. As there are standards for things to change in respect to
avoid financing higher term of present resources. The optimal margin for a quick ratio is one that
are smaller than other define night result of 11.47 times. Such ratios should be supervised by
particular management in respect to accomplish effective standards.
Profitability ratios – The profitability ratio might be utilised to identify how effectively
management earns profit from selling effective quantity of products and activities. Gross profit is
related to identifying how much the management can decrease their price of products that are
sold in respect to manage their turnover. The present analysis resulted that 42.76 per cent that are
more than or equal to 40 per cent. It will deals with the manner that can be concluded that the
management have been efficient in decreasing expensive in respect to maximize the profit.
Moreover the management's follow the net profit is 22.70 per cent that are higher than the other
management average of 20 per cent that shows that the management is making enough hard
work to enhance their goods sales. As a result, the operating cash flow has been maximized.
Efficiency ratio – The inventory and asset turnover ratio is estimated to hold the information
about the management's global financial wealth. The outcome of this is 3.80 that shows an
efficiency in replacing the equity assets (ARIFIN, and et.al., 2021). It is a symbol of the
management’s week outcome that should be improved by taking effective sections. It is
important to apply procedure enhancement in the fixed asset turnover in respect to hold an
effective potential to develop income.
Improve financial performance
It is critical to develop the impact of estimated ratio on the management performance by
which the higher amount of effort can be put into making variation. As there is a requirement to
execute several sort of tactics and plan of actions that involves selling of assets, consolidating
depths, cutting cost, offering our clients high term of payments and the alternative by producing

cash by several terms of mediums. Moreover it is critical for the particular management to
determine fields where enhancement is required by which the suitable variation management
tactics might be executed. By such factors that have an effective and important role in
influencing managerial economic success with particular management's efficiency in using
resources and renewing inventory that are decreased. In respect to it, the management should use
performance review approach to identify these fields that are short and required to be followed. It
make it effective and easy to decrease the barriers so that weakness and obstacles should be
eliminated and effective condition can we obtain (Irani, Katircioglu, and Gokmenoglu, 2021).
Stock turnover ratio may be changed by executing measures that a shot that there is no shortage
of oversupply, that enable for the capacity to accomplish cost pressure. There should be an
effective assessment of present skills by which cash on monetary fund might be allocated to
follow unanticipated scenarios and cases. By this targets, a particular management should
employ a sort of fundraising tactics in respect to decrease the risks and price.
CONCLUSION
From the above mentioned report it has been concluded that, finance management is the
backbone of the business. The procedure of monitoring or controlling the managerial economical
function is term to as financial management. As the financial management enable for the manner
of the managerial successful, such sort of techniques will involves enough capital that maintain
the financial report, accountancy and money transfer to follow investor action. Accountancy
record also offers snapshot of the managerial financial situation as the report follows the
summary of the managerial financial position. A ledger is also maintained and also standardise
with effective records that hold track of the managerial financial transaction. It involves all
financial data that are suitable and relevant for the business. As the result, of the accounting
information might allow the management in creating and developing successful advisable
manner for maximizing their financial position. Moreover estimating fiscal reports will enable
the management and executive of the business to follow well defined night decisions coma and
also support the management enhance the production and consistency that are accomplished as
effectively and successfully. The balance sheet, functional income and cash flow statement also

financial statements. Moreover percentage evaluation will also have the management in holding
their solvency, profitability, management and usefulness and as well as identifying their
outcomes of the task and activities.

REFERENCES
Books and Journals
Alta’ani, A.Z. and Dali, N.R.S.M., 2021. A Systematic Literature Review on Liquidity Risk
Management and the Financial Performance of Banks. Asian Journal of Accounting and
Finance, 3(1), pp.32-41.
ARIFIN, N., and et.al., 2021. The Antecedent of Employee Engagement and Its Effect on
Innovative Behavior: A Religiosity-Based Social Exchange Theory (SET)
Perspective. The Journal of Asian Finance, Economics and Business, 8(7), pp.313-322.
Irani, F., Katircioglu, S. and Gokmenoglu, K.K., 2021. Effects of business and finance
conditions on tourism firms’ financial performances: evidence from major tourist
destinations. SAGE Open, 11(3), p.21582440211040120.
PRIAMBODO, I.T., and et.al., 2021. E-Commerce readiness of creative industry during the
COVID-19 pandemic in Indonesia. The Journal of Asian Finance, Economics and
Business, 8(3), pp.865-873.
PURI, N. and SINGH, H., 2021. Current Trends in Finance in the Context of Adoption of
Principle-Based Accounting Standards in Accounting Education. Financial Intelligence
in Human Resources Management: New Directions and Applications for Industry 4.0.
Siu, T.K., 2021. The risks of cryptocurrencies with long memory in volatility, non-normality and
behavioural insights. Applied Economics, 53(17), pp.1991-2014.
Utama, A.G.S., and et.al., 2021. Influences of Advertisement on Buying
Behaviour. International Journal of Accounting & Finance in Asia Pasific
(IJAFAP), 4(3), pp.17-30.
Yusoff, M.N.H.B., and et.al., 2021. The Role of Government Financial Support Programmes,
Risk-Taking Propensity, and Self-Confidence on Propensity in Business
Ventures. Sustainability, 13(1), p.380.

APPENDIX
Income statement:
Amount
Turnover 3 1,89,711.
Less cost of sales:
Material Cost 42,597.
Production Cost 15,231.
Labour Cost 50,758.
1,08,586..
Gross profit 81,125..
GP %
= 42.8
Less Expenses:
Administrative expenses 13,751.
Other operating overheads 22,374.
Interest 1,943.
Total Overheads 4 38068..