University Financial Management Report: Importance and Processes

This report provides a comprehensive overview of financial management, beginning with a definition and discussion of its significance for businesses. It delves into the core concepts of financial planning, procurement and utilization of funds, financial decisions, and increasing profitability. The report then explores the main financial statements, including income statements, balance sheets, and cash flow statements, highlighting their roles in assessing a company's financial performance. It also explains the use of ratio analysis, covering net profit ratio, gross profit, current ratio, and quick ratio. Finally, the report concludes with a summary of how financial management and analysis can be used to improve business financial performance. The report uses examples from the provided case study and includes a business review template, and calculation for financial ratios.

Importance Of
Financial Management

Table of Contents
INTRODUCTION...........................................................................................................................3
SECTION 1......................................................................................................................................3
Financial management & its importance:....................................................................................3
SECTION 2......................................................................................................................................4
Decision financial statements & use of ratios:.............................................................................4
SECTION 3......................................................................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Finance is the element for strategic planning, organising, control for financial undertaken
for the organisation. It is about managing financial activities for the organisation are necessary
for running its activities. It is necessary for businesses for purchasing raw material so that it can
produces goods & services. It includes procurement of funds for utilising it for meeting business
goals. Business finance includes various strategies as it includes financial statements, working
capital management, funds etc. company using ratio analysis for knowing business liquidity,
turnover, profitability etc. financial statements includes cash flow, balance sheet & income
statements. This report includes topics which are financial management & its importance for the
businesses. Apart from this it includes topics which are various financial statements & using of
ratio for financial management (Addo, 2017).
SECTION 1
Financial management & its importance:
Financial management is about managing finance & activities related for finance for the
company. It makes suers availability for funds for meet various business requirements &
utilisation for funds for effective manner. Financial management includes various decisions
which are related to investment, purchasing fixed assets, sources for funds etc. it provides
information which is related to profits loss, costs for company which helps managers for taking
decisions according to it. Managers knows which activities for business are invested & reduces
wastage of funds. Financial management are necessary for the success of business (Huang and
Wang, 2018).
Financial planning: Financial management helps company for financial planning for
business. It includes planning for business sources, budgets, requirements for funds etc. it helps
businesses for preparing typical situations which are related to changing environment. Financial
planning helps businesses for running its activities for arranging funds which helps for achieving
goals for businesses. It controls the costs, expenses, income for the company which helps for
better performance which helps for higher profitability for the businesses (Lee, Park and H 2019)
(Purwidianti, 2018).
Procurement of funds: Financial management helps the company for procurement for
funds less sources for business activities which are suitable for business requirements. Funds are

important for business for carry out the activities for the enterprise. It gives availability for funds
when businesses are needs for funds for running its activities. Financial management needs for
daily activities, investment, purchasing raw material for fulfilling the needs for businesses.
Utilisation for funds: Financial management helps the managers who are works for the
managing funds i5t tells how they can utilise the funds & allocate them for achieving goals. It
gives information which is related to allocation for funds which helps business for knowing how
the funds are investing & helps for reducing costs for businesses.
Financial decisions: Financial management helps the managers for taking financial
decisions as it managing functions for company. Financial decisions are helps various
departments for ruining these activities. Every department needs for funds & it fulfils these
needs. These decisions helps company for achieving long term goals for business. Financial
decisions includes managing funds & using them for achieving business goals which helps for
better performance which helps for higher profitability for the businesses.
Increase profitability: Financial management helps for utilising funds for increasing
profitability for businesses. It helps for reducing the costs for business by budgetary control,
costs analysis, various tools which helps for improving profitability for the businesses. As it
controls, costs analysis, various tools which improve profitability for the businesses. It helps for
promote savings for the company which reduces costs for borrowing funds which helps for better
performance which helps for higher profitability for the businesses.
SECTION 2
Decision financial statements & use of ratios:
Financial statements is about the indicators which helps for the enterprise for knowing
the financial performance for the company. There are three types for financial statements
available which helps for planning the activities the profitability for the businesses. company
using ratio analysis for knowing business liquidity, turnover, profitability etc. financial
statements includes cash flow, balance sheet & income statements.
Income statements: It is about which shows the profits for the company it includes
various expenses & income occurs in the businesses. This statement reflects the execution for
the project over patch, yield for the institution & stimulation which is needs for achieving the
goals. This shows the loss

& profit account which shows the fiscal point of company where company exists which indicates
the elaborate financial expenses & gains. This is important for compare the expenses & revenues
for various variations for operating costs, research & technology costs which are for raw material
which affects the profits for the businesses (Sakouvogui and Shaik, 2020).
Balance sheet: It is very important element for financial statements which shows the
final position for company for depicting clear & precise image of management. It is includes
liabilities & assets, equity presents for monetary expression & it needs for showing equal for the
calculations. There are various equations shows that economic are picture by the assets which are
equivalent for the businesses & superior which helps for the better performance which helps for
the higher profitability for the businesses. Balance sheet shows the assets & liabilities for the
company which it uses for running its activities for profitability for the businesses (Sattoriy,
2020).
Cash flow statements: It is about the cash payments & receipts for the business. The
financial statement shows how much cash pays & comes for the three activities which includes
operating activities, investing activities & financial activities. These are the activities which
measures & analyse business performance & funds by investors & shareholders for evaluate the
profits. It helps for taking information decisions which are for the management & helps for
preventing funds. It summarising the cash which shows how well company is able to pays its
debts obligation & operating expenses for achieving profits which helps for better performance
which helps for higher profitability for the businesses.
Ratios are covering the various methods which shows liquidity, turnover & profitability
for the businesses.
Helps for comparison: Ratios are useful for giving comparison which outlook for the
company & helps for actions which requires for taken. These are the critically evaluating the
shareholders, investors for comparing the performance by evaluating the business profits.
Useful for decision making: They are prepare for gives better decision making & helps
the management for taking appropriate process for the company. They gives fruitful information
about the company better performance & accordingly analyst which draws the profits.
Supports in forecasting & planning: They were very useful for financial planning &
forecasting ahead activities & functions for calculating activities. These facilities are giving
adequate knowledge which is use for shareholders & investors they formulating their actions for

investment. It gives the idea for financial position for company for the external who has interest
for company which helps for better performance which helps for higher profitability for the
businesses.
SECTION 3
Ratio analysis is the activities which is uses for knowing business liquidity, turnover,
profitability.
Net profit ratio: It shows profitability for the enterprise. It shows the relation for sales &
net profits which tells how much profitability company earns for its sales. It is about ratios for
after tax profits & sales. It shows the remaining profits after costs of production, administration,
financing less for sales. It is use for compare the performance for the various businesses which
helps for better performance which helps for higher profitability for the businesses (Shapiro and
Hanouna, 2019).
Net profit margin = 43057 / 189711 * 100
= 22.69%
Gross profit: This is about measuring expressions for profits which is earn by company
for its activities. It shows relation between sales & gross profits for the businesses. It shows
financial ratios which helps for knowing better performance for the businesses for gross profits
for sales. It is shows in percentage which multiplies the performance by 100 which helps for
better performance which helps for higher profitability for the businesses. It is shows the gross
profit & sales.
Gross profit margin= 81125 / 189711 * 100
= 42.76%
Current ratio: It is the element for liquidity ratio which helps company's for knowing
how much cash it has for paying its debts. It shows the how much ability company has for
paying its debts. It includes current liabilities & current assets for the businesses. It is known as
working capital ratios which helps for measuring the capability for the business for meeting its
debts. It shows the financial health for the company & how it maximise the liquidity for its
current assets for paying debts.
Current ratio = Current assets / current liabilities
= 54349 / 37928
= 2.22:1

Quick assets: It shows the liquid assets for the company how much cash company has
for paying debts. It shows relation for quick assets & current liabilities. These are includes cash,
account receivables, market securities, inventory which converts into cash for better
performance.
Quick ratio = (Current assets – inventory) / current liabilities
= (84349 – 28571) / 37928
= 1.47: 1
Above ratio analysis explain that efficiency level of an organisation is generating high
level of profitability in relevance to its core operations. It can be stated by analysing margin of
gross profit of an enterprise as business is generating high gross profit margin. While on the
contrary, organization needs to improvise margin of net profit that can be evaluated by reducing
unnecessary expenses. Apart from it, financial position of an enterprise is appropriate. Hence,
company is required to enhance its efficiency by eliminating unnecessary expenditures and
ensuring proper incorporation of financial management which enables company in improvising
proficiency level of business (Waxman and Massarweh, 2018).
CONCLUSION
From the above report it has been concluded financial management is about managing
financial in formation for planning, organising, budgeting which uses for running business
activities. It is about managing financial activities for the organisation are necessary for running
its activities. It is necessary for businesses for purchasing raw material so that it can produces
goods & services. It includes procurement of funds for utilising it for meeting business goals.
Company using ratio analysis for knowing liquidity, turnover, profitability for the businesses.
Business managers use this for knowing how much fund company needs & where it has to invest
for generating profits. Financial statements includes cash flows, balance sheet, income statement
etc. These financial statements helps company for knowing performance for the businesses.
Financial statements are the elements which uses company's for better performance which helps
for higher profitability for the businesses.

REFERENCES
Books & journals:
Addo, I. K., 2017. The effect of financial management practices on the financial performance of
top 100 small and medium enterprises in Kenya (Doctoral dissertation, University of
Nairobi).
Huang, W. Q. and Wang, D., 2018. A return spillover network perspective analysis of Chinese
financial institutions’ systemic importance. Physica A: Statistical Mechanics and its
Applications. 509. pp.405-421.
Lee, J. M., Park, N. and Heo, W., 2019. Importance of subjective financial knowledge and
perceived credit score in payday loan use. International Journal of Financial Studies.
7(3). p.53.
Purwidianti, W., 2018, July. An empirical study on family financial behavior. In 2018 3rd
International Conference on Education, Sports, Arts and Management Engineering
(ICESAME 2018) (pp. 406-409). Atlantis Press.
Sakouvogui, K. and Shaik, S., 2020. Impact of financial liquidity and solvency on cost
efficiency: evidence from US banking system. Studies in Economics and Finance.
Sattoriy, F., 2021. THE IMPORTANCE AND FEATURES OF MANAGEMENT IN SMALL
AND MEDIUM-SIZED BUSINESSES AND ENTREPRENEURIAL ACTIVITY.
InterConf.
Shapiro, A. C. and Hanouna, P., 2019. Multinational financial management. John Wiley & Sons.
Waxman, K. T. and Massarweh, L. J., 2018. Talking the talk: Financial skills for nurse leaders.
Nurse Leader. 16(2). pp.101-106.

APPENDIX

Appendix 1.0
1 INVESTMENT RATIOS
i. Earnings per share = Earnings
Number of ordinary shares
2 EFFICIENCY RATIOS
i. Debtors collection period = Trade receivables
x
3
6
5
Credit sales
ii. Creditors payment period = Trade payables
x
3
6
5
Credit purchases
3 LIQUIDITY RATIOS
i. Current ratio = Current Assets
Current Liabilties
ii. Quick asset ratio = Current Assets - inventory
Current Liabilties
4 FINANCING RATIOS

i. Gearing ratio = Debt x100
Debt + equity
ii. Interest cover = Profit before interest and taxes
Interest charges
5 PROFITABILITY RATIOS
i. Gross profit margin = Gross profit x100
Sales
ii. Net Profit margin = Net profit x100
Sales