Financial Management: Importance, Analysis, and Performance Tactics

This report discusses the importance of financial management, focusing on the efficient management of corporate resources. It evaluates financial statements, including the balance sheet, income statement, and cash flow statement, and clarifies the use of financial ratios in fiscal management. The report includes a business review template, income statement, and balance sheet completed using Excel, along with calculations of fiscal ratios such as profitability, liquidity, and efficiency ratios. Furthermore, it describes in detail the tactics that a company can use to improve financial performance, drawing examples from a case study, and emphasizes the role of financial planning in making informed decisions and preparing for potential challenges.

Importance of
Financial
Management

Contents
INTRODUCTION......................................................................................................................3
MAIN BODY.............................................................................................................................3
SECTION 1................................................................................................................................3
Briefly discuss about the importance and concept of the financial management..................3
SECTION 2................................................................................................................................4
Evaluates the financial statements critically and clarifies the use of ratios in fiscal
management...........................................................................................................................4
SECTION 3................................................................................................................................5
(i) Complete the Business Review Template.........................................................................5
(ii) Complete the Income Statement using the Template in Excel.........................................6
(iii) Complete the Balance Sheet using Excel........................................................................6
(iv) Calculate the fiscal ratios................................................................................................6
SECTION 4................................................................................................................................8
Describe in detail the tactics that this company can use to improve financial performance
using examples from the case study.......................................................................................8
CONCLUSION..........................................................................................................................9
REFERENCES.........................................................................................................................10
APPENDIX..............................................................................................................................11

INTRODUCTION
Financing is the quantity of funds required to carry out its day-to-day operations of a
business. All actions that must be completed in order for the company to meet its objectives
are financed (Block, Hirt and Danielsen, 2018). By facilitating the use of tax ratios in
corporate decision making, the report presents the importance and ideas of financial
management. The statement of income is also prepared with the help of the balance sheet.
Then, on the basis of the results, different essential metrics such as productivity, efficiency,
and liquidity were computed, and the analysis was carried out. In addition, a study was
performed in order to enhance the company's performance in order to further its
development.
MAIN BODY
SECTION 1
Briefly discuss about the importance and concept of the financial management.
Financial management is the process of efficiently and safely managing an
organization's corporate resources, assets, and liabilities. It contributes to the company's
financial stability and income. Financial management is a concept that is used to track and
control spending, costs, and income in order to keep a firm running smoothly in the long run.
Significance of Financial Management:
1. Long term Stability: It assists the company in ensuring long-term viability. It helps to
decrease idle expenses by monitoring and verifying profit, cost apportionment, and
utilisation of cash. It also ensures this by completing everyday duties on time that
makes the organisation valuable for how it conducts its business. This ensures the
company's long-term viability.
2. Fund Estimation: Finance managers must examine a company's capital requirements
in order to conduct business. The corporation's economic policy in terms of predicted
profits and expenses has a big impact on this. The total capital value should be
conducted in such a manner that the firm's capital earning capacity is increased
(Montgomery, 2018).
3. Decision – making: It calculated the cost by creating a budget, from which it made a
decision by evaluating the organization's financial situation. It is a crucial component

of every business, as all of the decisions taken will have an impact on the
organization's position and usefulness. Individual factors influence how decisions are
made.
4. Profitability: The cash division is in charge of the organization's whole bookkeeping
and ensures that it is managed fairly and correctly. It will aid in the firm's expansion
of new opportunities while also improving its competence and efficiency.
SECTION 2
Evaluates the financial statements critically and clarifies the use of ratios in fiscal
management.
The financial summary is a collection of instances that each public company creates to keep
track of its monetary and financial data. It is essential for every organisation to have
everything in order (Vovchenko and et.al., 2018). It presents an overview of the company's
financial situation and current state. Some of the important financial management are:
1. Balance Sheet: It is also termed as Statement of Financial Position. It is divided into
two sections: assets and liabilities. These are usually made towards the end of the
fiscal year to determine the financial health of the company. The asset side of the
books of accounts consists of fixed, present, and non-current assets, which comprise
stock, intellectual properties, machinery, and investments. The creditors are the non-
current and existing agreements in liabilities. The non-current and current
responsibilities under liabilities are the banks, or bills payable. Investor funds,
acquisitions, and long-term advances are all examples of liabilities. It aids in
determining whether or not the organisation is prepared to take on new projects. It
also calculated the credit risk that could arise from its resources in the future.
2. Income Statement: It is an essential component of the company. As a result, several
accounting records have been created. It depicts the income statement profit as a
result of achieving its goals. Non-operating and working income and expenses are
affected by a variety of factors. Profit is calculated using these variables. Normally,
these are created over the course of a year; however, internal policies may necessitate
a temporary declaration. It shows the profitability of a company by subtracting all
revenue and expense. It can also be used to calculate financial ratios (Rendon and
Snider, 2019).

3. Cash Flow Statement: It is where the company's cash outflow and inflow of the
financial decisions are made. All expenses are categorized into three parts: operating,
financial, and investing. The money produced for the business's usual operations are
covered by operating activities. The acquisition and selling of assets, as well as the
investment and repayment of a borrowing for the purpose of generating money, are
examples of investing operations. The capital stock in the business as well as
dividends paid transactions are all part of the financing operations.
Uses of the fiscal data:
1. Source of Information: When presenting financial accounts to stakeholders, it is
required since it assists them in comprehending huge and complex financial figures.
Investors find it tough to make comparisons at times, but measurements assist users
comprehend the current success of a company so that they may continue investing in
it (Mosteanu, 2019).
2. Solvency: The sustainability, acid test, quick ratio, as well as other indicators, such as
whether the company is willing to fulfil its commitments within a financial quarter, all
play a role in a business's ability to pay back its existing financial obligations. A
company's payment cycle is routinely examined using ratios in attempt to enhance it
and increase its credit worthiness.
3. Evaluation of Risks: A company that engages in a variety of business areas and
industries, many of which are riskier. Risk and its numerous categories can be
examined using ratios, and remedial measures can be taken to mitigate it. The debt to
equity and debt to coverage ratios show how reliant a company is on outside funding
and how well it can repay it (Nizam and et.al., 2019).
SECTION 3

(i) Complete the Business Review Template.
(ii) Complete the Income Statement using the Template in Excel.
Shown in Appendix.
(iii) Complete the Balance Sheet using Excel.

(iv) Calculate the fiscal ratios.
 Profitability Ratio: It assists in determining a company's profitability at the end of
the fiscal year. Investing, normal company activities, stock earnings, and other kinds
of income could all contribute to this total. To put it another way, it calculates the
amount of money it can produce from its earnings (Rahman and et.al., 2020).
Analysis: The data above show that the profitability of the company is improving. The
company's margin has reduced by the minute compared to the previous year. On the other

hand, the company's net profitability in 2015 was fairly low, but revenue surged considerably
in 2016. The corporation's indirect spending has been maintained under tight control, which
has resulted in this growth. This shows that the company is putting up significant effort to
improve its profitability index.
 Liquidity Ratio: These metrics are used to evaluate a company's ability to meet
short-term obligations with current assets. This ratio is especially useful for creditors
when deciding whether or not to extend credit available to the company and how
much credit they should extend.
Analysis: The company has a good cash flow situation. Given the current state of affairs, the
firm has sufficient short-term assets to cover its debts twice over. It will have enough assets
to pay off of its outstanding debt, despite its unwillingness to sell its stock. After the
payment, there is enough cash left over for day-to-day operations.
 Efficiency Ratio: It evaluates a business's ability to profit from its resources. It also
maintains track of the time it can turn its own head in one direction.
Analysis: In this circumstance, the borrower and lender turnover rate appears to be
appropriate. The corporation has enough time to pay it back to collect money in the
meanwhile. That is to say, it is able to pay its debtors on time. A company's inventory
turnover rate cannot be calculated without comparing its results to those of other companies
or previous findings from same company.

SECTION 4
Describe in detail the tactics that this company can use to improve financial performance
using examples from the case study.
The aforementioned ratios are used to assess a company's financial productivity.
Investors can utilise this information to make predictions and choose investments that will
grow in earnings, stability, and efficacy. It helps the company plan to manage by anticipating
the company's predicted position in terms of economic difficulties. As a result, determining
ratios and analysing the financial health of the organisation are essential. Maximizing wealth
is critical because it assures the strategic or long sustainability of an organisation, which is
defined by its revenues (Henager and Cude, 2019).
Completing a company's requirements is, in fact, a metric that can be utilised to
improve the company's success. This can be attained by employing advertising techniques
and studying managerial practises. It focuses on accounting ratios, which is useful for
determining a company's financial health, value, and solvency
This can be attained by employing advertising techniques and studying managerial
practises. It focuses on accounting ratios, which is useful for determining a company's
financial health, value, and solvency.
It concentrates on improving its public relations strategies in order to gain more
consumers. It will expand its customer base while also generating revenue. On the other
hand, the project's earnings will be depleted as a result of this. It will have an influence on the
statement of financial position as a consequence of the progressiveness duty.
The financial viability of the organisation is determined by the decisions made by the
finance department. All expenditures should be visible from all angles and broken down to
determine whether they are justified.
CONCLUSION
Financial statements are an essential and vitally crucial feature of any business organisation,
as the accompanying report summarises. It will assist management in allocating funds to
areas to help the firm grow and expand. The notion of financial planning has shown that it is
primarily used in crucial decision-making. It will assist in predicting business conditions and
preparing for any prospective organisational issues. Finance ratios are also produced, which
will assist in evaluating the company's financial health and enabling for comparison research.
Performance – enhancing methods are also available.

REFERENCES
Books and Journals
Block, S.B., Hirt, G.A. and Danielsen, B.R., 2018. Foundations of financial management.
McGraw-Hill Education.
Montgomery, B., 2018. Basics of financial management. In Biopharmaceutical
Processing (pp. 1171-1189). Elsevier.
Vovchenko, N.G. and et.al., 2018. Information and financial technologies in a system of
Russian banks’ digitalization: A competency-based approach. In Contemporary
Issues in Business and Financial Management in Eastern Europe. Emerald
Publishing Limited.
Rendon, R.G. and Snider, K.F., 2019. Management of defense acquisition projects. American
Institute of Aeronautics and Astronautics, Inc..
Mosteanu, N.R., 2019. Intelligent tool to prevent Economic Crisis–Fractals. A possible
solution to assess the Management of Financial Risk. Calitatea, 20(172), pp.13-17.
Nizam, E. and et.al., 2019. The impact of social and environmental sustainability on financial
performance: A global analysis of the banking sector. Journal of Multinational
Financial Management, 49, pp.35-53.
Rahman, M.T. and et.al., 2020. Impact of management practices and managerial ability on
the financial performance of aquaculture farms in Bangladesh. Aquaculture
Economics & Management, 24(1), pp.79-101.
Henager, R. and Cude, B.J., 2019. Financial literacy of high school graduates: Long-and
short-term financial behavior by age group. Journal of family and economic
issues, 40(3), pp.564-575.

APPENDIX