Financial Management Report: Performance Indicators and Strategies

This report provides a comprehensive overview of financial management, encompassing its core concepts and significance for businesses. It delves into the different types of financial statements, including income statements, cash flow statements, and balance sheets, and explains the use of financial ratios in analyzing a company's performance. The report presents key financial performance indicators, such as gross profit and net profit ratios, and discusses how businesses can use these metrics to assess their financial health. Furthermore, it explores strategies for improving financial performance, including managing costs, recovering outstanding debts, and making informed financial decisions. The report concludes by emphasizing the importance of financial planning, safeguarding assets, and ensuring the efficient allocation of funds to achieve business objectives. This document is a valuable resource for students seeking to understand and apply financial management principles.

Importance of
Financial
Management

Contents
INTRODUCTION...........................................................................................................................................3
SECTION 1....................................................................................................................................................3
Concept & importance of financial management....................................................................................3
SECTION 2....................................................................................................................................................5
Difference types for financial statements and use of ratios in financial management............................5
SECTION 3....................................................................................................................................................6
Company’s key finance performance indicators:.....................................................................................6
SECTION 4....................................................................................................................................................7
Discuss the process which business use for improve its financial performance:.....................................7
CONCLUSION...............................................................................................................................................9
REFERENCES..............................................................................................................................................10

INTRODUCTION
Financial management is the process of increasing efficiency and productivity, allocating
financial capacity, and monitoring financial activities in order to meet an institution's objectives.
Financial management can assist a corporation in achieving the majority of its objectives.
Management consultants will gain a thorough picture of their company's accounting health if
they make good business judgments. This allows the finance department to supply information
that aids in the development of a long-term strategy and decision-making. The significance and
meaning of financial reporting in the workplace are discussed. According to the calculations, the
company must employ all of its ratios in order to increase profitability because this aids in the
execution of the company's objectives and goals. Financial ratios are important to attain in
addition to evaluating an employee's performance.
SECTION 1
Concept & importance of financial management
Funding is the lifeblood of any business, and it necessitates a constant flow of cash in and out.
As long as there is demand, the gears of industry will continue to turn fast. Accounting is the
method of planning, organising, managing, and controlling a corporation's monetary operations.
Financial management is defined by Guthman and Dougal as "the act of planning, acquiring,
handling, and protecting capital employed in industry." It has to do with the proper acquisition
and deployment of capital.
Importance of financial management
Financial planning: Financial planning is one of the most important components of financial
management. It lies forth all of the financial terms that related to a company's interest. In the
later stages of a company's earnings accounting life, financial advising partners will also make
suggestions and sensible activities rather than stressing. Any industry appears to have a key part
of money management. As a result, the bulk of the responsibility for its growth goes to corporate
accounting procedures.
Safeguarding: In order to achieve company goals, one of the most crucial components of
financial accounting is maintaining financial security. For a corporation to operate properly, it is
critical to quantify the areas where finances are necessary and to allocate them correctly across

all areas. Spending wastefully on one business might harm the functioning of other businesses,
especially if they are cash-strapped. It's critical to keep money safe and make good investments.
Funds distribution: The appropriate amount of funding is one of the most critical roles of
financial management in a corporation. As money are allocated appropriately to assets, the
corporation's operational performance improves. Finance specialists can cut business
expenditures and run deficits that are projected for a firm since they manage funds wisely and
wisely.
Financial decision: A profitable transaction is the most important component of economic
management. It is impossible to undo a fiscal decision based on a business situation. As a result,
if a problem emerges, the money spent will not be reimbursed. The business operating process
will be affected by specific decisions. Because it has a direct link to all of a company's
departments, including manufacturing, advertising, leasing, IT wages, and so on.
Accounting information's importance in an organisation can lead to an increase in the number of
shareholders and the structure of the business. The ability to make revenue through increased
efficiency is the most important attribute of any firm. It could be due to an increase in demand or
the growth of the company into new areas. Every sector's profitability can be increased with the
help of great business and monetary specialists.
Cash reserves have always been a feasible choice as a company's profits rise to new heights and
expansion opportunities present themselves. The way a firm expands and generates cash reserves
in its accounting records demonstrates the relevance of financial accounting in its growth.
Ensure correct fund usage: these aids in the efficient use of assets as well as the effective use of
all finances and resources inside the organisation. It's the most efficient way to retain
productivity, and it comes with a slew of other benefits. This makes it easier for the company to
manage funds from diverse procedures, resulting in increased efficiency.
Assists in establishing the necessary resources to invest: Accrual analysis also ensures that
almost everything flows efficiently in the firm and that company's goals are met as efficiently as
feasible. This allows the employer to make well-informed decisions on how to distribute revenue
to various outlets.

SECTION 2
Difference types for financial statements and use of ratios in financial management
Accounting information includes assets, loans, investments, revenues and losses, shareholder
support, income, and other essential data that detail a firm's earnings reports throughout time. For
many stakeholders, the financial statement is the most important source of information. It's why
the correctness, consistency, and legitimacy of the evidence in these audited financial statements
are so important to audit committee standards.
Income statements are a type of financial statement that illustrates a company's revenue and
spending over time. A total income report is the most popular means of determining action
potential, but monthly and mid income accounts are also popular. People should examine
financial documents to determine whether businesses are lucrative and wealthy enough to fund
production systems and future expansion.
A cash flow statement is a financial summary that displays the movement of money from one
person to another over time. This statement helps consumers figure out how well a person's
money is being spent. This statement is divided into three parts. Cash flow from sales, cash flow
from savings, and revenue stream from cash reserves are the three types of cash flow. By
focusing at earnings from financial expenses in particular, people can discover how much
revenue an organisation makes from its activities. The particular would be revealed effect on the
cash flow operation of the individual. It is made up of processes that occur both within and
externally.
A balance sheet is a summary of a company's financial position up to a specific point in time. As
of a certain date, the balance sheet reveals the assets, liabilities, and workers' equity. The balance
sheet represents, in some situations, a snapshot of the business on a given day. Equity investors
will look at a company's cash situation to examine how it funds capital projects and activities, as
well as current investor data.
The measurement of a firm's equity's starting and latest balances during the course of a financial
period is known as the proclamation of improvement in expenditure. While it isn't considered a
critical aspect of the monthly accounting results, this was the most probably of all the financial
reports to be neglected. In actuality, it's a need for reviewed accounting data. The statement

begins with the initial connected and instead removes or subtracts factors such as financial
results distributions to reach at the present closing completing amount.
Use of ratio in financial statement
One application of financial statement is to compare a company's financial records with those of
similar companies in the industry in order to determine the core business. By gathering financial
ratios from existing competitors and adding them to the business's ratios, the team will be able to
identify competitive differences and assess the corporation's strategic advantages, capabilities,
and weaknesses. The data can then be used by company to achieve decisions that improve the
company's market situation.
External buyers, including as stockholders, banks, consumers, borrowers, and debtors, frequently
analyze and appraise profitability statements. They use accounting information for their own
interest, such as stakeholders evaluating business transaction using ratio analysis, return on
equity ratios, and share price ratios. Many other players utilize financial ratios to compare to past
years or an industry competitor. This allows them to forecast when they will be able to make
more money and, at some point, include it in the finest quality payouts.
SECTION 3
Company’s key finance performance indicators:
Income statement
Particulars 2015 2016
Turnover form the
sales 179587 189711
Costs of goods sold
Material costs 38845 42597
production costs 12845 15231
labour costs 47285 50758
Gross profits 80612 81125

Overheads
Administrative
overhead 20251 13751
Operating costs 34293 22374 L
Interest 7081 1943
Net profit 18987 43057
Gross profit ratios gross profit / sales * 100
44.88744 42.76241
Net profit ratio Net profit / sales * 100
10.57259 22.6961
SECTION 4
Discuss the process which business use for improve its financial performance:
The calculation of ratios in a business helps to understand ability and utility while also assessing
the value of the organization.
Gross profit
Year 2016 2015
Gross profit 81125 80612
Net sales 189711 179587
GP Ratio 42.76 44.89
Gross profit is a procedure that refers to an organization's production which can be used to
measure a company's financial status as well as cause a variety of impacts. As stated above,
operational income in 2015 was 44.89, whereas it was 42.76 in 2016. This means that gross

margin declined in 2016, indicates that the firm improved in 2015 and was able to increase profit
margins.
Net profit
Year 2016 2015
Net Profit 45057 18987
Net sales 189711 179587
Net profit ratio 23.750336 10.5725916
Shareholder equity
2016 2015
Shareholder equity 83802 63057
Current ratio
Year 2016 2015
Current assets as % of current
liability
222% 304%
Ways to improve financial performance
While it is true that cutting rates attracts more customers, in some circumstances, the opposite
method is beneficial. Any corporation's prices are lower than the market, owing to the fact that
the market has altered in recent months as well. Raising fees without putting a large number of
customers at risk could be a smart method to improve the financial market's predicament.

Recover outstanding debts: This is crucial for the business to ensure that payments are made and
so its operational efficiency is not impacted. As a result, they will be unable to focus on their
fields, resulting in a reduction in total profitability, which will be harmful to the organization.
CONCLUSION
Financial management is defined as the act of organizing, planning, maintaining, and managing a
variety of accounting procedures, such as the acquisition and usage of a fund, as described in the
preceding report. The core of sound finance is the alignment of business development strategies
with the company manager's alternative investments.

REFERENCES
Books and Journal
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Chinakai, E., 2019. The Development of an Elderly Personal Financial Management Curriculum
for Working Age Adults in Laung-Neau Sub-district Municipality, Doi Saket District,
Chiang Mai Province. Dhammathas Academic Journal. 19(1). pp.67-78.
de Castro, N., Salamat, L. and Tabor, M., 2020. Financial literacy of young professionals in the
Philippines. EPRA International Journal of Research and Development. 5(3). pp.217-
220.
Dohwe, S., 2019. The effectiveness of internal auditing in the financial management of a firm. A
case study of TelOne (Private) Limited (Doctoral dissertation, BUSE).
Nazari, F., Fathi, Z. and Shafie, H., 2020. Providing a Model for the Impact of Corporate
Governance and Ownership Structure on Innovation. Financial Management Strategy.
Pali, Ç. D., 2019. Importance of Risk Management and Risk Management Process.
In Maintaining Financial Stability in Times of Risk and Uncertainty (pp. 157-176). IGI
Global.
Tan, K. L., Imam, S. and Babu, M. M., 2019. The use of information by financial analysts during
a financial crisis. Strategic Change. 28(5). pp.369-379.
Vanhanen, J., 2020. Automation of financial management processes by utilizing robotic process
automation: a Finnish banking case.