Financial Management Analysis and Improvement Report (BMP3005)

Verified

Added on  2022/12/17

|10
|2515
|23
Report
AI Summary
This report delves into the core concepts of financial management, emphasizing its significance in business operations. It begins by defining financial management and its crucial role in guiding business decisions, including investment and expenditure strategies. The report then explores the main financial statements – the income statement, statement of financial position, and cash flow statement – detailing their components and how they are used to assess a company's financial health. Furthermore, it examines key financial performance indicators, such as profitability ratios, and discusses practical methods businesses employ to improve their financial performance, including managing overdue payments and debt consolidation. The report uses the fictional company Airdri as a case study to illustrate these concepts, providing a comprehensive overview of financial management principles and practices.
Document Page
Applied Business
Finance
tabler-icon-diamond-filled.svg

Paraphrase This Document

Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser
Document Page
Contents
INTRODUCTION.....................................................................................................................................3
SECTION 1................................................................................................................................................3
Concept of financial statements & importance of financial management..............................................3
SECTION 2................................................................................................................................................5
Difference types for financial statements:...............................................................................................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..........................................................................................................................................8
REFERENCES..........................................................................................................................................9
Document Page
INTRODUCTION
The methodology of manipulating and regulating assets and several other financial
abilities is known as business sources of finance. The purchase of valuable raw resources,
qualities, and valuable things that contribute throughout the expansion of a business' future value
seems to be the primary focus of this sector. Functional processes evaluate the company's
business profits performance and condition throughout the duration of a budgetary year using a
number of financial statements. The fictional company Airdri been selected for such an essay in
order to help highlight the importance of financial management (Arcaya, Arcaya and
Subramanian, 2015). This report primarily contains a detailed description of the significance and
primary aspects of FM. This also defines the accounting and management of financial statements
which aid in ratio considering the financial security of a corporation. These section also contains
various income statement and statement of changes in financial situation calculations done with
the help of the Business Review Template.
SECTION 1
Concept of financial statements & importance of financial management
Financial statements assist in analysing operating expenses, profits, commitments, and
properties throughout the duration of such an accountancy year, enabling for better educated
competition options. The income statement, cash position, and book value appear to become the
3 primary accounting documents that aid in the major thing of all business governance in order to
measure a monetary gain or growth. The corporation keeps accounting reports with the help of a
journal and a ledger, which keeps track of the company's growth. Since the majority of such
financial statements are prepared using the necessary banking markets or arrangements, the
transition to internal auditing will be easier. Accounting data appears to really be evidence
generated by a particular set of financial through order to analyse the condition of the business
performance, including profit and loss. Financial records are utilised in companies. Operating
profits are the revenue generated by an economy as a result of a purchase contract. The debt
financing is a snapshot of such company's accounts, displaying its liabilities and assets. Those
similar phrases aid a firm's understanding of its situation. The ratio method is used to assess a
business's market position. It is really the processing of financial data that helps in the
comprehension of various types of market situations. There are also prices for liquidity,
Document Page
sustainability, and competition. It aids businesses in determining which assets provide an
advantage in order to generate long-term investments. This are the ideas that help a company
figure out what aspects lead to its growth. Annual accounts are records that show a company's
financial performance in the next fiscal period. This really is the official record of all transactions
that take place within a company. The below are the arguments:
Use of Financial Statements:
Assess the company's financial performance: The most general use of such an income report is to
provide information about just the company's performance at a particular time. The whole data is
used by a variety of people in order to make informed financial decisions.
There is cash available: Shareholders may utilise the payment platform to acquire a view of the
company, but they could use these to provide increased income for market expansion or to
restrict freedom so that payment might proceed.
Aids in the decision-making process for investors: The financial information provides all or most
of the relevant information by international clients to figure out what to pay for the stock As a
result, it aids in raising the price per shares that purchasers choose to acquire. Appropriate
accounting reports are required to make a profit (Ferraro, 2021)
Accounting data is useful to policy makers in the following ways: This will encourage
management to make decisions about tax regulations based on the company's results.
Government agencies can assess company tax rates based on income and assets. The most
crucial part of financial managing is monetary decision. A financial choice based on some kind
of market is required cannot be reversed. As a consequence, when a problem occurs, the money
being spent will not be reimbursed. Financial choices can change the future business process.
Financial stability is perhaps the most crucial component of a person's existence. The only
approach to attain financial stability is through economic growth, however the only method to do
so presently is through money management.
Investment bankers should know the following: The following is possibly the most crucial
information: Money managers can learn a lot about one prospective borrower from its balance
sheets and change their estimations accordingly. The importance of business bookkeeping is the
protecting of finances in order to meet company goals. It is vital to estimate the regions where
tabler-icon-diamond-filled.svg

Paraphrase This Document

Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser
Document Page
assets are required and redistribute them effectively in all sectors for such a party to build
properly. Overspending on one enterprise can have a severe impact on other businesses,
especially if they are cash-strapped. It's critical to keep their money safe so as to save properly.
The importance of business bookkeeping is the protecting of finances in order to meet company
goals. It is vital to estimate the regions where assets are required and redistribute them
effectively in all sectors for such a party to build properly. Overspending on one enterprise can
have a severe impact on other businesses, especially if they are cash-strapped. It's critical to keep
their money safe so as to save properly.
Empowerment as Well as its Significance: Due to the increasing scope and complexity of the
elements driving actuating, it is necessary to be exposed to technological innovations throughout
order to cope without proposed method viability. Upper management demands up-to-date, clear,
and accurate information. Managers of even a firm's earnings plan are knowledgeable of the
plan's evolution, expectations, and main competitors. Shareholders' Importance: A management's
role is confined to managing corporate operations. Throughout company activity, board members
are unable to speak with one another. On either hand, the impact of the same operations must be
communicated to investors in the form of economic information distributions at such a special
investor meeting.
Empowerment as Well as its Significance: Due to the increasing scope and complexity of the
elements driving actuating, it is necessary to be exposed to technological innovations throughout
order to cope without proposed method viability. Upper management demands up-to-date, clear,
and accurate information. Managers of even a firm's earnings plan are knowledgeable of the
plan's evolution, expectations, and main competitors.
Shareholders' Importance: A management's role is confined to managing corporate operations.
Throughout company activity, board members are unable to speak with one another. On either
extreme, the impact of the same operations must be communicated to investors in the form of
economic information distributed at such a special investor meeting.
Document Page
SECTION 2
Difference types for financial statements:
The whole analysis of financial information must be used should give the group with just an
assessment of performance and financial condition. The following are the four most important
financial findings:
Profit and Loss Statement: The profits, expenses, and income for the current term have
already been witnessed. They are frequently regarded as being the most crucial income statement
because they represent the outcome of a group's actions. It benefits employees by revealing the
company's value. It encompasses all financial actions for which the business is responsible. This
statement leads to the company's growth, resulting in higher returns on investment.
Statement of financial position: At the moment of initial acceptance, the financial statements of
the corporation comprises obligations, cash, and ownership. As a result, the information provided
is current. As a consequence of the particular comment model being built, the overall value from
all inflationary pressures, plus equal sale price of all obligations, includes numerals, is
determined (known as the accounting equation). This is perhaps the most significant financial
documentation since it shows the importance of money and how it should be employed in a
company (Hatzenbuehler, Phelan and Link, 2013).
Cash Flow Statement: The cash income and outgo for the period ended as as shown in this
document. This will help with operating income estimate, particularly if recorded earnings need
not precisely represent cash flow. This explain the financial developments that occurred
primarily near the maturity date. The assessment' contents varies, and that usually includes
equity trades and repurchases, as well as gains and adjustments arising from the stated value
shift. These are frequently listed in financial accounts and would be extensively used throughout
the accountancy set of tools.
Statement of equity: It shows how equity evolves during the duration of the program. The
aggregate version will show stock sales and repurchases, as well as dividends and variations in
stated revenues and expenses. The bulk of these are reported in detail all through the accounting
records, and they are frequently already included in consolidated accounting information
presentation.
Document Page
SECTION 3
Company’s key finance performance indicators:
It's all like how a company's earnings position is seen in consideration of financial
performance for calculating profitability, which helps firms achieve better profits and increased
profitability.
Profit and loss statement: It shows what further money was earned, invested, and just how
much money was spent or missed, primarily during the time ending. Since they reflect the
organization's business output, they are often considered as the most important cash flow
statement. It aids the company in calculating its profits. It includes all of an organization's
financial transactions. This statement helps the team flourish, which leads to a higher return on
capital (Levy, 2018).
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
tabler-icon-diamond-filled.svg

Paraphrase This Document

Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser
Document Page
10.57259 22.6961
SECTION 4
Discuss the process which business use for improve its financial performance:
Some of the main methods ort process which are used by company in improving overall financial
performance are as follows:
Recover Overdue Payments: Unpaid invoices will cause problems on the working capital as
well as the financial stability of your company. If customers are having trouble covering your
debts, it might be necessary to employ a debt recovery firm. Meanwhile, make sure they inform
debt holders of their commitments on a daily basis. When drafting purchase agreements, make
sure the terms are clear about when reimbursements are anticipated and what happened even if
they're not received on time.
Debt Consolidation: Examining current consumer bonds is crucial when considering ways to
improve a company's financial position. Aggregating their debts may be a smart choice whether
they have quite couple of them. It is indeed simplest and most cost to refinance the loan into
some kind of cash transaction. Do some research and weigh your choices before committing to a
current deal.
Fill out such a main financing implementation: Using for a lender will assist them in
obtaining much-needed funds while also improving the company's financial performance
(Latulippe, Hamel and Giroux, 2017). Find a new invoice while keeping in mind if the
corporation's ownership is unknown, whether the rate of increase makes the bank worried, or if
simply need to get out of debt. If a business can gather cash on its own, such as from
investments, friends, or family, it must be in a stronger position to negotiate conditions through
financial institutions.
CONCLUSION
In last it is stated that financial accounts, as per that post, were those who assist
businesses in determining their financial status. All expenditures, incomes, liabilities, and
properties are recorded in tax accounting. These studies aid ratio study, even if the factors
employed in profitability were collected from accounting transactions. The financial situation of
a firm, which comprises both expenditure & profits, is used to assess its viability. The financial
Document Page
account is a bit of paper which details a company's obligations and assets. Customers can utilise
this financing facilities to assist them in making long-term choices. Ratio assessment is a method
for assessing a cash flow, revenue, and competitiveness. It boosts the company's profit margins
by assisting with management, especially maintain profitability that improves the productivity
and hence higher margins.
Document Page
REFERENCES
Books and Journals
Arcaya, M. C., Arcaya, A. L. and Subramanian, S. V., 2015. Inequalities in health: definitions,
concepts, and theories. Global health action, 8(1), p.27106.
Ferraro, G.P., 2021. The cultural dimension of international business. Prentice Hall.
Hatzenbuehler, M. L., Phelan, J. C. and Link, B. G., 2013. Stigma as a fundamental cause of
population health inequalities. American journal of public health, 103(5), pp.813-821.
Latulippe, K., Hamel, C. and Giroux, D., 2017. Social health inequalities and eHealth: a
literature review with qualitative synthesis of theoretical and empirical studies. Journal
of medical Internet research, 19(4), p.e136.
Levy, S.M., 2018. Project management in construction. McGraw-Hill Education.
chevron_up_icon
1 out of 10
circle_padding
hide_on_mobile
zoom_out_icon
[object Object]