Business Finance Report: Financial Management and Ratios

This report provides a comprehensive overview of business finance, encompassing key concepts such as financial management and its significance in achieving organizational goals. It delves into the importance of financial statements, including income statements, balance sheets, and cash flow statements, and explores the use of various financial ratios like net profit ratio, gross profit margin, current ratio, and quick ratio for assessing a company's financial health and performance. The report also includes a business review template and discusses processes for improving financial performance, emphasizing the role of financial planning, investment decisions, and cost control. The analysis concludes that effective financial management is crucial for the success of any business, enabling informed decision-making and enhancing profitability. The report uses different financial terms, such as economical and monetary terms, to analyze the process of financial performance.

Business Finance

Table of Contents
INTRODUCTION...........................................................................................................................3
SECTION ONE...............................................................................................................................3
Financial management and it's importance............................................................................3
SECTION 2.....................................................................................................................................4
Discussion about financial statement and use of ratio............................................................4
SECTION 3 ....................................................................................................................................6
SECTION 4.....................................................................................................................................7
Describe and discuss the processes this business might use to improve their financial
performance............................................................................................................................7
CONCLUSION...............................................................................................................................8
REFERENCES................................................................................................................................9
APPENDIX...................................................................................................................................10

INTRODUCTION
The term business finance is explicated as the study of funds and credits which is used by
an organisation for accomplish of organisational goals and objectives within a decided budget.
Finance is an important part of an organisation as it supports management to perform all
functions and operations that are performed by business. The term business finance undertake
acquisition of funds for match with business requirements (Birt, Muthusamy and Bir, 2017).
This also provide funds to organisation to work with appropriate working capital, diversification
of funds and capital requirement. This also include financial management and use of ratio in
different finance aspects.
SECTION ONE
Financial management and it's importance
Financial management is explicated as a process of managing all activities that is related
with financial aspect of an organisation. This also make sure about availability of funds that
match with daily requirements of business. Utilisation of funds is another approach and it define
about completion of work with arrange of all funds that helps to complete all operations in an
effective manner. Financial management undertake decision-making which is related with
investment, purchase of asset, raise of funds and many more. It also helps to perform all work by
planning, controlling and organising operations related with finance. Moreover, this also include
decision-making for earning high return on investment. This also aids to arrange information that
relates with profit, loss and cost of organisation in order to make appropriate decisions. With this
manager also get to understand about all those activities in which cash is invested to an
organised manner in order to reduce wastage of funds (Blouin, Lee and Erickson, 2018).
Financial management also perform an important role for success of business. Some of them are
mention as follow:
 Financial related plans- Financial management support to develop all investment
related plans. This include planning related with source of funds, requirements of funds
and formulation of budget etc. Monetary plans also help business to deal with complex
situation and competitive environment. Financial plan also support business to
accomplish their goals in minimum time-period. It also results to manage and control all
expenses related with credit and income of business.

 Procurement of funds- Financial management aids an organisation to complete all work
with undertake of all those aspects that is related with sources of funds. Funds plays an
important role to perform business operations. This also provide funds to manage work
when business has to manage perform their function (Bodiako and et. al., 2016). It also
results all operations are performed on daily basis to manage work like, to pay creditors,
purchase of asset etc.
 Utilisation of funds- With proper use of funds manager of an organisation allocate all
funds in an appropriate manner. Like, to delegate or distribute monetary requirement
according to business function. This also provide all information to allocate funds for
invest them properly as this reduce business cost through minimising wastage of
resources.
 Monetary related decisions- Financial manager are responsible for generating financial
decisions and it impacts on functions of business. With impact of financial decision-
making organisation manage and complete their work according to business
requirements. All decisions also aids organisation to manage work by adoption of
methods that aids to complete work with long term approach.
 Increase in profitability- Financial management aids an organisation to utilise all funds
that properly relates with profitability (Doni and et. al., 2019). This also control cost of
organisation by adopting budgetary control methods, analysis of cost etc. for improving
profitability of business. This also improve to save organisation profits through managing
cost related with creditors. With this organisation minimise cost of it's borrowing funds
by performing work through use of budget.
SECTION 2
Discussion about financial statement and use of ratio
Financial statements define about all those indicator which helps an enterprise for
conducting about reporting period. This helps to formulate proper picture that relates with
financial position and performance of organisation. Three types of financial statements that helps
to plan all activities is mention as follow:
 Income statement- This statement reflect about execution of project, all actions or steps
that are yield with institution and stimulation for accomplishing all results. It also

demonstrate about profit and loss account which justify about fiscal point of organisation.
This indicates and elaborate about financial expenses and gains by comparing revenue
and expenses with each other. It results management perform work with different
variations to perform task with operating cost, technology and research etc. because it
impacts on results of organisation.
 Balance sheet- One of the most important part of financial management is balance sheet
and this demonstrate about business position of organisation. It includes liabilities and
asset, equity, gross profit ratio and net profit ratio (Edmonds and et. al., 2017). This is
also used by management to manage all calculations in the end. Some equation that
demonstrate as an economical communicator to picture all asset in a superior manner.
Balance sheet includes two different sites and it define they must be equal in end to
manage cost in an organised manner.
 Cash flow statement- It refers to all those cash receipts that is paid by an organisation
within a specific period. Financial statements calculate how much amount is paid and
earn from three activities that include operational action, financing and investment
activities. All this activities are measured and analysed by management to identify
efficiency of an organisation. This also facilitates investor or shareholder to evaluate all
results in an accurate manner. It also helps to take informed decisions related with
management for minimising risk related with financial management.
Ratio cover a wide variety of calculations and this indicate as a measure that is used to manage
and measure profitability of organisation. Some utilise of ratio within financial management are
mention as follow:
 To compare- Ratio are most useful to compare about and outlook about organisation
and it helps to perform all actions and activities in an appropriate manner (Mio and et.
al., 2020). With analyse of all shareholders, investor and organisation return this is easy
to compare performance for compare past performance with current year.
 Effective for decision-making- This is used to prepare about appropriate decision-
making that helps management for adoption of appropriate steps. Financial management
provide useful information and this aids an organisation to draw appropriate conclusion
by using budget in an appropriate manner.

 Support for forecasting and planning- It is beneficial for formulation of financial
plans that forecast about all activities and functions through calculating on the basis of
years. It also facilitate an organisation to utilise all knowledge that aids shareholders to
generate appropriate action related with investment. It also provide ideas related with
financial position of organisation to all those persons who had interest in company to
become a stakeholder or investor.
SECTION 3
Business Review Template
Net profit ratio- This indicate about profitability of an organisation and it also reveal
about profitability of an organisation through deducting all expenses from earned revenue that is
gain from sales.
Net profit margin= 43057 / 189711 * 100
= 22.69%
Gross profit= Their are different analytical metric that enable an organisation for express about
all profits that is generated by business from it's main operations. Gross profit is also used to
evaluate by deduct operational expenses from the net sales of business.
Gross profit margin= 81125 / 189711 * 100
= 42.76%
Current Ratio- The liquidity ratio ensure about measurement of all abilities that is related with
organisation. This is used to analyse about paying capability to perform work according to short
term obligations (PLANT, 2019). It also incorporate about current liabilities and asset for
balancing between creditors and debtors.
Current Ratio- Current assets / current liabilities
= 54349 / 37928
= 2.22:1
Quick ratio = The quick ratio indicate about liquidity position of organisation that is related with
short term and it also enable measurement to understand about capabilities of organisation. It
aids persons to pay about their short term debt. This is also recognised as acid test ratio which
will be 1:1. Overall, liquidity ratio gauge about liquidity position of an organisation.
Quick ratio = (Current assets – inventory) / current liabilities

= (84349 – 28571) / 37928
= 1.47: 1
The above ratio analysis as well as it's interpretation define about efficiency level of
organisation for generating high profits by analysing their core operations and functions. This
also state and analyse about methods that is related with gross profit of organisation. On the
opposite side, an organisation is focused to improve their net profit margin that is used for
evaluating about all unnecessary expenses (Raimo and et. al., 2020). Similarly, financial position
of an organisation is more appropriate and this aids an organisation for enhance company
efficiency through minimising unnecessary expenditures and it ensure about all those methods
that is used to corporate with formulate of appropriate financial results in order to improve
efficiency level of an organisation.
SECTION 4
Describe and discuss the processes this business might use to improve their financial
performance
Financial performance perform an important role and this is used to perform all work
with analyses of all task that is related with company information. In the present scenario, there
are different perspective aids to manage all resources that is used to manage all task by analyse
of all ratio. The process which is related with business helps for completing task through
understand of different ratio. It also results all work is completed through develop of financial
terms that is focused towards completion of work with use of financial terms such as to manage
work within decided budget. Income statement is also developed and this aids to perform work
with analyse of company performance through which financial department calculate income and
expenses related with organisation. The process of financial performance aids to manage all
work through analyse of all task that is focused towards implement of work through which
financial performance aids to develop and manage task with decided income. Balance sheet is
most important factor and this is used towards completion of work by performing task that
define revenue and profits are managed to manage work by decided information (Sinervo and
Haapala, 2019). Moreover, economical or monetary terms is focused towards formulation of all
work with decided calculations. With compare of all work this is easy to understand about all
accountable factors through which work is managed according to decided information. For

improving business performance management is focused towards development of all those
factors by which financial task is completed through implement of cash related factors. The
business performance is improved by implement of all task through which business positions is
improved. Moreover, financial performance is defined as a subjective measure that allow an
organisation to identify primary mode of business. This results management easily generate
revenue to improve overall financial health through adopting and implementing net and gross
profit ratio.
CONCLUSION
With the analyse of above report it is concluded that financial management is explained
as a lifeline of an organisation. This indicates about practices that relates with handling of all
activities which is related with monetary terms or finance. Financial management also enable an
organisation to manage work through develop of all activities by which work is completed
through analyse of all information that is used to process about payment towards organisation.
Moreover, financial statement provide information about all those aspect that incorporate about
development of information that improve financial position of organisation to enhance
profitability of business.

REFERENCES
Books and Journals
Birt, J.L., Muthusamy, K. and Bir, P., 2017. XBRL and the qualitative characteristics of useful
financial information. Accounting Research Journal.
Blouin, M.C., Lee, R.L. and Erickson, G.S., 2018. The impact of online financial disclosure and
donations in nonprofits. Journal of Nonprofit & Public Sector Marketing, 30(3), pp.251-
266.
Bodiako, A.V and et. al., 2016. The goal setting of internal control in the system of project
financing. International journal of economics and financial issues, 6(4), pp.1945-1955.
Doni, F and et. al., 2019. Voluntary versus mandatory non-financial disclosure: EU Directive
95/2014 and sustainability reporting practices based on empirical evidence from
Italy. Meditari Accountancy Research.
Edmonds, C.T and et. al., 2017. Does timeliness of financial information matter in the
governmental sector?. Journal of Accounting and Public Policy, 36(2), pp.163-176.
Mio, C and et. al., 2020. The predictive ability of legitimacy and agency theory after the
implementation of the EU directive on non‐financial information. Corporate Social
Responsibility and Environmental Management, 27(6), pp.2465-2476.
PLANT, P., 2019. FRONTIER CERAMICS LIMITED NOTES TO THE CONDENSED
INTERIM FINANCIAL INFORMATION FOR THE NINE MONTH ENDED 31
MARCH, 2019 (UN-AUDITED). Relation.
Raimo, N and et. al., 2020. Non-financial information and cost of equity capital: an empirical
analysis in the food and beverage industry. British Food Journal.
Sinervo, L.M. and Haapala, P., 2019. Presence of financial information in local politicians’
speech. Journal of Public Budgeting, Accounting & Financial Management.

APPENDIX
Income statement:
Balance sheet:

Business review: