Improving Financial Performance: Analysis and Case Study Approach

This report provides a comprehensive analysis of financial management principles, emphasizing their importance in ensuring a company's economic stability and growth. It explores key financial statements, including the income statement, balance sheet, and cash flow statement, and demonstrates the application of financial ratios to assess a company's liquidity, efficiency, and profitability. Using a case study approach, the report evaluates a company's financial performance, identifying areas for improvement such as asset management, expenditure reduction, and inventory control. The analysis includes calculations of gross profit, net profit, current ratio, and quick ratio, offering insights into the company's financial health and strategic planning. The report concludes by recommending strategies for enhancing financial performance, such as increasing capital expenditures, implementing cost-efficiency measures, and utilizing NPV and IRR methods for project appraisal. This document is available on Desklib, a platform offering a wealth of study resources for students.

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Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
Section 1: The concept and importance of financial management..............................................1
Section 2: The main financial statements and explain the use of ratios in financial management
.....................................................................................................................................................2
Section 3: The main financial statements and explain the use of ratios in financial management
.....................................................................................................................................................5
Section 4: Using examples from the case study describing and discussing the processes this
business might use to improve their financial performance........................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
The process of systematically arranging, planning, controlling, and monitoring a firm's
financial sector in effort to make sure that this really functions efficiently and without
interruption is known as financial management (Bouveret, 2018). This study studies and
investigates the basic concept of financial management and the critical role it performs in a
corporation's economic viability. It also talks about the importance of the 4 major prosperity
measures: taxable income, total liabilities, financial reporting, and efficiency metrics. It uses the
Business evaluation method and financial data from the concrete approach to give a comparison
evaluation and get a full picture of the company's business area of programming improvement.
MAIN BODY
Section 1: The concept and importance of financial management
Financial efficiency is the consistency of the entity's economic characteristics that supports
in proper coordination, management, and monitoring. The accomplishment of the firm's financial
targets set at the start of the financial month is aided by financial management. To suit the
company's customer needs, the corporation accounting division prepares the proper allocation of
money. It aids the organisation in obtaining funds from a variety of sources and properly
administering those. Effective corporate finance helps an organization's sales growth and
optimum operation of its commitments. Financial management serves an important role for the
corporation by putting the allocated money to good use in a specialised sector. It assists a
corporation in lowering prices and increasing income. Financial management is in responsibility
of a company's financial health (Gomber, Koch and Siering, 2017). Price reduction appears to be
the responsibility of the finance section. This even helps in the management of protracted assets
and personal wealth. The proper allocation of finances from diverse sectors of the organisation is
critical to an organization's growth. The money planning of the numerous firms that adds to the
net value, is equally important to shareholders' success. Financial management is critical to a
company's long-term success. The prediction of the firm's future development prospects is reliant
on efficient financial management. In particular, an organization's business management impacts
its opportunities for development. The management of the investment company is critical to the
company's fiscal and commercial success. The presentation of a complete revenue statement to
shareholders is another important part of financial management. A company's financial

management division directs its employees in the organization to meet specified financial goals.
Private wealth management efficiency is reflected in the company's long-term plan, which helps
in the company's existing monetary improvements. The financial management group also makes
decisions on fundamental asset management, finished production stockpiles, and commodity
marketing. Operating cost cuts are also decided by the financial management board. For the
firm's profitability and dispersion, the financial management division often allocates assets
wisely. The firm's main goal is to increase income whilst investing less. It also assures the
company's monetary sustainability as it expands. The finance department seems to be in charge
of the firm's long-term growth, as well as remuneration and perks. The finance department is in
responsibility of enhancing the company's external image by gathering federal and municipal
taxes. In the end, the financial management team evaluates a firm's growth and income in
perspective of accomplishing already specified goals (Henager and Cude, 2016).
Section 2: The main financial statements and explain the use of ratios in financial management
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
Income tax payable 3,585
Other creditors
including tax and social
4,562

security
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 83,802
Business Review:
2016 20
15 Change
£’000 £’000 %
Turnover (continuing operations) 1,89,711 1,79,58
7
5.60
%
Profit for the financial year 43057 18,987 126.7%
Shareholder’s equity 83802 63,057 32.90
%
Current assets as % of current liabilities 222% 30
4%
-
82%
Customer satisfaction 4.5 4
.1
10
%

Average number of employees 649 61
8
5
%
Gross Profit = £81125
Net Profit = £43057
Net Profit increased in 2016by126.7 during the year.
Shareholders’ equity increased by 32.9% by £83802.
The company’s “quick ratio”(Current Assets(excluding stock)divided by Current Liabilities)is
1.47:1
The company’s “current ratio” (Current Assets divided by Current Liabilities.)is 2.22:1.
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
The following are the four components of financial facts and figures:
 The Income Statement is a depiction of a sales earnings as well as how the cash is spent.
This even shows how the major elements of a total wealth, revenue, and expenditures
change over time. The fiscal statement exhibits the company's complete accounting
statements over a number of time periods. It facilitates in the study of a firm’s financial
success using financial statements. To estimate the company's earnings and expenses, the
income statement estimates the expenses and revenues (Levy, Bouheni and Ammi, 2018).
 The financial leverage is the element of the company's accountancy which reflects a
network's assets and liabilities on a quarterly or recurring basis. A financial report
analysis could be used to simply understand a company's financial situation. The
accounting report also determines the shareholding of the entrepreneur and the business.

An investment's price appreciation can be calculated by looking at a report of fiscal
position and comparing it to the company's current status.
 The fiscal circulatory statement of a company shows the complete monetary input and
outflow figures. Cash flow is a term used to describe how much revenue a business has
had on board. Operating capacity is a measure as to where revenue would come through.
It shows the income made from numerous vendors and the income needed for company
activities. Information on loans containing explanatory criteria is also included in
financial basis. It supports in the financial performance of the organisation by examining
the various streams of finance and spending. Cash flow is also used to forecast expected
earnings (Maziriri, Mapuranga and Madinga, 2018).
 The quantitative appraisal of a firm's financial performance and productivity from an
operational standpoint is known as percentage analysis. It is organised into five segments:
revenue, security, operations, borrowing, and the company's competitive positioning.
Several organisations used a variety of revenue measures to assess company
performance. The fiscal ratio indicates the growth or decline of the business as a result of
the consequences. The efficiency percentage reflects a corporation's financial
performance.
Section 3: The main financial statements and explain the use of ratios in financial management
Strategic Planning Template-Filling in the Missing pieces- In 2015, the company made
£17,95,87,000 in sales, and in 2016, it made £18,97,11,000 in sales. This decision increased
revenues by 5.6 percent, and total profits more than twice in 2016, a differential of 126.7 basis
points that is quite outstanding. It denotes that the company provides outstanding services to the
customers. The capitalization of shareholders increased by 32.9 percentages to £39436,
demonstrating that investors are increasingly engaged in this business. Each one of these positive
improvements indicates a substantial monetary significance.
Using a Worksheet to Create a Finance Report for the Sample Institution- The income
statement is a fiscal overview which presents accurate information about a company over a
period of time. Seasonal income reports are frequently generated to show yearly expenditures
and income. As per the spreadsheets, the company does have a turnover of £18, 97, 11,000,
which is decent but again not exceptional. If the corporation wants to increase selling, it places
an emphasis on budget monitoring, as it is already £10, 85, 86,000, which is fairly considerable,

and thus could help grow the 42.8 percentage selling volume. Yet, businesses will then need to
maintain administrative expenditures whilst boosting running profits by 53.1 percentage.
Using a Worksheet to Complete the Finance Report- The balance sheet of a company is a
financial report that shows the company's present financial status. In this company, the internal
assets are £57 93,000, which is less than the tangible assets of £5 28 12,000 in this firm. This
indicates that the company is spending fewer attention to its and trustworthiness, which might
also hurt its marketing strategy. The company invested £1, 06, 93,000 in 2016; for survival and
prosperity, it will need to invest much more. Commercial creditors are due £194,933,000 that
should be returned to maintain the corporation's reputation (Osadchy and et, 2018).
The profitability, liquidity, and efficiency of a company are all affected by financial
metrics-
 Liquidity: A company's sustainability is measured by its liquidity ratios. It shows the
company's ability to repay its debts. Since the company's liquidity ratio is 1.47, it may
convert its assets into sales very quickly as possible in effort to start paying off its debts.
 Effectiveness: The disclosure accounting for this company shows gross sales of
£6,92,98,000, which seem to be greater than present indebtedness of £3,79,28,000,
indicating that the company is capable of producing enough money out of its assets.
 Revenue: By deducting expenditures from sales, a company's profits can be computed.
The company had a sales of £1 89 87,000 in 2015, and a profitability of £4, 30, 57,000 in
2016, indicating that it is making a significant income. People would see the increased
impact on the company's operational revenue. It might assist the company in the long run
if it focuses on its expenses and works to reduce them.
Section 4: Using examples from the case study describing and discussing the processes this
business might use to improve their financial performance.
The methods listed below could help the company improve its company performance-
 Engaging in assets: Considering the state of the firm, capital expenditures should be
increased in attempt to solve the issues. This must help the company maintain a sufficient
revenue circulation. The idea behind asset expenditures is that the money spent on items
will generate income and also that product value will increase exponentially, enable the
company to enhance its revenues (Sari and Fatimah, 2017).

 Expenditure reduction- As this is one of the tools for improving the company's financial
status. Businesses who are successful invest in R&D to find better cost-
efficiency production procedures that generate high-rated products.
 Projection appraisal for financial planning: The use of NPV and IRR methods is
advised. Those will be calculated utilizing the procedures below, which indicate a
company's value in proportions instead of dollars. It is used to evaluate a company's
spending and network enhancements.
 Inventory management: The one and only in Instant inventory monitoring strategy is
suggested to improve the company's responsiveness. This type of approach supports in
the efficiency of a company's current resources as well as the avoidance of waste
(Villasanti and Passino, 2016).
CONCLUSION
This study looked into the consequences of financial management including its importance
in a business. It also performed a financial analysis. The managerial evaluation instrument,
balance sheet, and income statement, and also the clear illustration, have been used to analyse the
company's efficiency, profit margin, and ownership. Ratio analysis were used to help people
grasp the particular topic. After the culmination of the real scenario, tactics for enhancing the
company's financial management were suggested, as well as ideas for addressing the identified
flaws.

REFERENCES
Books and journals
Bouveret, A., 2018. Cyber risk for the financial sector: A framework for quantitative assessment.
International Monetary Fund.
Gomber, P., Koch, J. A. and Siering, M., 2017. Digital Finance and FinTech: current research
and future research directions. Journal of Business Economics. 87(5). pp.537-580.
Henager, R. and Cude, B.J., 2016. Financial Literacy and Long-and Short-Term Financial
Behavior in Different Age Groups. Journal of Financial Counseling and Planning,
27(1), pp.3-19.
Levy, A., Bouheni, F.B. and Ammi, C., 2018. Financial management: USGAAP and IFRS
Standards. John Wiley & Sons.
Maziriri, E. T., Mapuranga, M. and Madinga, N. W., 2018. Self-service banking and financial
literacy as prognosticators of business performance among rural small and medium-sized
enterprises in Zimbabwe. The Southern African Journal of Entrepreneurship and Small
Business Management. 10(1). p.10.
Osadchy, E. A. and et.al, 2018. Financial statements of a company as an information base for
decision-making in a transforming economy.
Sari, R.C. and Fatimah, P.R., 2017. Bringing voluntary financial education in emerging
economy: Role of financial socialization during elementary years. The Asia-Pacific
Education Researcher, 26(3), pp.183-192.
Villasanti, H.G. and Passino, K.M., 2016. Feedback controllers as financial advisors for low-
income individuals. IEEE Transactions on Control Systems Technology, 25(6),
pp.2194-2201.

Appendices
Income statement:
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
Profit/(loss) for the financial
year 43057 NP%= 22.7