(AAF044-6) - Accounting and Finance

This assignment focuses on analyzing Aston Martin Lagonda Global Holdings PLC's financial statements, corporate finance concepts, and investment appraisal in relation to strategic corporate objectives. The company, known for manufacturing luxury sports cars and grand tourers, is headquartered in the United Kingdom and operates in 55 countries worldwide. The report discusses key resources such as raw materials, brand image, labor, technology, and finances. Management issues include capital constraints and project selection challenges in the competitive automotive sector. Ensuring worker safety while maintaining competitiveness against larger competitors poses another hurdle. The evaluation of capital structure investments explores the allocation of shareholder investments and borrowed funds.

University of Bedfordshire
Unit Title & Code: Accounting and Finance AAF044-6
Assignment Number and Title: Assignment Two – Main
Assignment Type: Business Report
Course Instructor: Fatima E-Khushboo
A Business Report on Aston Martin Lagonda Global Holdings PLC’s
Financial Statements and the concepts of corporate Finance and
Investment Appraisal in order to Evaluate Management Decision
Against Strategic Corporate Objectives
Submitted By
Name : Md. Shaon Molla
Student ID : 1866650
Course : Accounting and Finance
Program : International Business
Intake : March-2023
Submission Date: 24th May 2023
1

Table of Contents
Introduction………………………………………………………………........3
Evaluation of Capital Structure Investments.……….……….………............4-5
Tools for Investment Appraisal.….…………………………………………….6
The Advantages of Budgeting……...………………………………………......7
The Constraints of Budgeting ………………………………………………….7
Corporate Governance………………………………………………………….8
Corporate Governance code of UK Government ……..……………………......8
Corporate Governance of Aston Martin Lagonda Global Holdings………………8-10
BOD and Shareholders Accountability………………………………………………...10
Modern Days Thought of Aston Martin…………,,…………………………….……...11
Corporate Governance Limitation ……………………………………………..….…...11
Recommendations…………………………………...…………………………………12
Conclusion……………………………………………………………………………...13
References……………………………………………………………………………...14
2

Introduction
In this assignment, a company from automotive sector that works in the car manufacturing
business is chosen. Aston Martin Lagonda Global Holdings PLC has been chosen as the
company for the analysis. The chosen business is headquartered in the United Kingdom.
Key features
The business is engaged in the manufacture of luxury sports cars and grand tourers. Auston
Martin was Founded in 1913 by Lionel Martin and Robert Bamford and it is acknowledged
as an iconic global brand synonymous with style, luxury, performance, and exclusivity. The
corporation now conducts business 55 countries around the world.
Corporate Objectives
Key priorities are to focus on new growth areas such as the SUV and the mid-engine markets
to drive increased revenue. Engagement in F1 highlights performances and encourages
innovation and material cost restructuring.
Key Resources
Resources are the things that the company needs to run its business operations. The
company's raw materials and brand image are its most valuable resource. The Aston Martin
also has labour, technology, money, physical structure etc. as resources.
Management Issues and challenges
Capital constraint is a big management issue in the company. Also, selecting the appropriate
project is also a challenge for the company, as the investment of capital nature is very huge
in this automotive sector. Car manufacturing is an expensive, risky, and competitive
operation and the life of the workers are at also risk as this company made handmade car
instead of production line, to provide a safe working environment to the workers of the
company and compete with the others giant competitors is a challenge for the company.
3

Evaluation of Capital Structure Investments
Capital includes both the money invested by the company's shareholders and the money
borrowed from the public or financial institutions to run the company. This section of the
report will go through the company's capital structure and investment analysis.
Capital Structure:
The company's capital structure consists of long-term obligations and equity attributable to
its shareholders. The company uses no preferential shares or debentures to finance its
operations.
Equity - A company's equity is the amount of money donated by its investors or
shareholders in return for equity shares in the organization. The total number of equity
shares that the company is authorized to issue is known as authorized capital, and the
number of equity shares that the firm has issued to shareholders and investors is known as
paid-up equity shares. Dividend payments to shareholders are provided if the firm has
profits and is willing to distribute those profits with the shareholders; they are not mandated
by law. Otherwise, the earnings will become part of the firm's retained profits and will be
used for development and expansion if the company does not pay a dividend to its
shareholders.
Debt – The debt is the loan which is raised by the company to operate its business
activities. The loan might be raised by the corporation through debentures offered to the
public or financial institutions, or through loans raised through banks or financial
organizations. The interest is a fixed percentage imposed on the amount of debt paid to the
company's creditors. The amount of interest is seen as a less expensive source of capital
since the interest rate is not particularly high, but the risk associated with this source is
substantial because the company must pay the amount of interest regardless of the
circumstances. It should be mentioned that the company's interest payments are tax
deductible expenses, which reduces the cost of the source even further for the business.
4

2022 2021 2020
£0.00
£200.00
£400.00
£600.00
£800.00
£1,000.00
£1,200.00
£1,400.00
£1,600.00
£1,800.00
£2,000.00
Aston Martin Debt & Equity for last Three Years
Debt Equity
Amount in million (£)
Aston Martin has employed a higher level of debt than equity over time. For instance, it
employed debt and equity in this order approximately; £1580 million and £772.5 million,
£1740 million £660.4 million, £1610 million, and £804.1 million in the financial years 2022,
2021 and 2020 respectively. It means for the last three years Aston Martin highest debt was
in the year of 2021 and they successfully reduce nearly 160 million of debt by the next year
that is the lowest among three years. Equity has almost the same scenario, 2020 was the
highest amount of equity whereby the next year they lose more than 140-million-pound
equity but last year they gain almost more than 110-million-pound equity than previous year.
Effect of the capital structure of the company
The company’s last three years total employed capital of £772.50 million, £660.40
million, £804.10 million respectively. The last three-year debt-to-equity ratio of the
company is calculated as 2.04, 2.63 and 2.0 respectively, it is calculated by using the
formula Debt / Equity of the company. The debt equity ratio of the company is used for
making the evaluation regarding the leverage of the company. When the debt equity ratio or
leverage ratios of the company is high, it indicates that the shareholders of the company
have higher risk. When the amount of debt taken by the company is higher, then the
company must pay a high amount of interest and the repayment of the principle is also
done by the company. Aston Martin has not a good debt equity ratio at all although we that
for some giant companies that much of debt is not create any worried who has a huge
amount of fixed asset but in this case, the shareholders of the Aston Martin company are in
5

risk about of their investment.
Tools for Investment Appraisal
When a company decides to invest in a project or an asset, it must consider its cash inflows
and outflows. Different evaluation tools, both traditional and modern, are employed to
complete the analyses. The traditional and modern techniques of investment appraisal are
discussed below.
Traditional Tools
Traditional capital or investment valuation approaches do not consider the time value of
money. A few examples are payback time, accounting rate of return, and standard tools.
When time value of money ideas was less widely recognised and analysts were not utilising
them to do analyses of the investment and capital choices available to corporations,
organisations used them in the past.
Modern tools
Analysts regularly use modern capital budgeting and investment appraisal tools to make
effective and efficient judgements. Modern approaches employ the time value of money
theory to estimate cash inflows and outflows. Analysts use the discounting factor to assess the
present value of future cash flows. Examples include net present value, internal rate of return,
profitability index, and other contemporary capital planning approaches.
Use of Capital Appraisal tools by the managers for efficient decision making
The capital assessment tools are used by the management to make sound decisions. When a
company has to make an investment, it has several options from which to select. When a
company's management has the option to invest, it uses the NPV or IRR technique to
evaluate the project's viability. If the NPV is positive, the project is approved by the firm, and
management must approve the project if the IRR of the investment decision surpasses the
company's cost of capital. Managers may also use the capital evaluation tool if the company
has a lot of investment options. When the organization's management must choose between
investing in various initiatives and selecting the best option from the available options, they
use this technique.
6

The Advantages of Budgeting
➢ It assists the organisation in determining the likelihood of a project generating future
revenue. The company can decide whether to invest in the project by looking at the
predicted income.
➢ When the firm has projected future income, it can easily allocate expenditures and
costs to it. It assists the company in calculating the expenditures and expenses that
must be incurred in order to achieve the required amount of revenue.
➢ It helps a business plan expenses, reach its goals, and anticipate any changes to
operations that could be required. A budget may be used to monitor performance and
assist a business in understanding its operating expenses.
➢ The company may assess future situations by making budgets for them, and it can
also plan for any contingencies that may arise.
The Constraints of Budgeting
➢ Budgeting is not an end in itself. Budgets are simply devices that may be used to
improve management, but they cannot replace management. On the other side, if
some assumptions are inaccurate or improper, a budget might quickly become
unrealistic.
➢ Budgeting has the additional disadvantage of not accounting for inflation or deflation.
The market situation is dynamic, and projections stated in year 0 may differ from the
actual outcomes in year 5.
➢ Budgets must be changed on a regular basis to account for changes in conditions.
Making a budget in the real world is quite difficult since it requires making
predictions about the future. After all, the new year may bring about anything. For
instance, the beginning of the Russian-Ukrainian War in 2022 will have a significant
influence on global economies.
➢ Budgeting's success or failure largely depends on how well the process's human
components are managed. As a result, the company's committee is entirely responsible
for Aston Martin's budgetary performance.
7

Corporate Governance
Corporate governance describes how businesses are run and for what purpose. The power
structure, accountability structure, and decision-making process of an organisation are also
defined by corporate governance. It is simply a set of tools that allow management and the
board of directors to operate a business more efficiently and effectively. Company
governance include environmental awareness, ethical behaviour, company strategy, pay, and
risk management. Poor governance may harm a company's operations and profits.
Corporate Governance code of UK Government
The UK government has issued a code of conduct for corporate governance to corporations.
Companies must follow the code's five guiding principles in order to implement corporate
governance in their company. Companies must explain how they implemented the core
principles of the code in their annual reports, as well as any instances in which they failed to
fulfil the code's criteria.
Corporate Governance of Aston Martin Lagonda Global Holdings PLC
Board Leadership - Leadership in the firm must be moral. The organization's CEOs, CFOs,
and COOs are instances of leadership. The company's management must guarantee that the
company follows the highest ethical standards. The company will publish a report that
includes information on how the company applied and adhered to the norms and regulations
of the 2018 UK Corporate Governance Code (the "Code"), as well as the directors'
remuneration report on it.
Board Effectiveness - It suggests that the company must do its tasks successfully and
efficiently. Management must guarantee that the company's actions have no negative
consequences for anyone. The Aston Martin Board is convinced that there is a good mix of
executive and non-executive directors on the board, preventing any one individual from
exerting unconstrained decision-making authority and allowing directors to carry out their
tasks and obligations.
Accountability - The management and anybody with power to act on their behalf must be
answerable to all the company's stakeholders. For transparency, it is the responsibility of the
Aston Martin corporation to publish the financial report each fiscal year. Corporate
8

accountability is the process through which an organization's stakeholders hold it accountable
for its actions and results.
Remuneration - The directors' salaries must be sufficient; no director should be paid more
than they deserve while maintaining within the legal restrictions. The Aston Martin
Compensation Committee evaluated the CEO and CFO's wages for 2023 and agreed to boost
them by 2.9% and 4.4%, respectively, bringing their compensation to £900,000 and £470,000
(effective January 1, 2023). This increment is less than the 2023 wage raises that were
granted to all workers nationwide. In order to promote long-term investor alignment, the
incoming CEO and chief financial officer must adhere to ownership standards that are 300%
and 200% of their respective salaries. The CEO had 25,000 shares (worth £38,513) and the
CFO held 358,769 shares (worth £552,684 or 123% of pay), both of which were newly
appointed Executive Directors, as of December 31, 2022.
9

Relationship with stockholders- There must be transparency in the relationship between the
management and the shareholders. The management is also responsible for what it does in the
interests of the shareholders. The Yew Tree Consortium and Mercedes-Benz AG ("MBAG")
were the Company's two largest shareholders at the beginning of the fiscal year. The company
had three major shareholder groups by the end of the year, including the Yew Tree
Consortium, MBAG, and PIF, following the capital raising in 2022. The Company's
relationships with each of these significant shareholder groups are governed by separate
relationship agreements. These agreements are intended to ensure that the company may
function freely and in the best interests of all shareholders. Relationship agreements between
the company and the Yew Tree Consortium dated February 27, 2020, the MBAG dated
October 27, 2020, and the Public Investment Fund on July 29, 2022 regulate the Company's
relationship with each of these shareholder.
BOD and Shareholders Accountability
Aston Martin Lagonda is committed to conducting business in a morally pure and open
manner, guided by solid corporate governance. Their objective for the next century is to
develop Aston Martin into a sustainable premium brand by supporting ethical and long-term
economic prosperity. This determination motivated them to develop an integrated CSR
strategy for the organization based on the UN Global Compact's ten principles. The
committee is responsible for overseeing the company's executive and non-executive
leadership needs in order to preserve the company's capacity to compete successfully in the
market, carry out the strategy, and fulfil its goals.
Shareholders - Shareholders are the company's owners. Because shareholder approval is
required in many key decisions, the company's shareholders must ensure that the decisions
taken by management and authorized by them are ethical and do not harm any part of society.
The shareholders are responsible for ensuring that the company adheres to all moral and
ethical standards.
Directors – The persons who make decisions on the company's behalf are known as directors.
The board of directors must ensure that everyone who works for and with the company
follows all corporate governance requirements. Furthermore, they will guarantee that there is
transparency between the company and all of its stakeholders.
10

Modern days thought of Aston Martin
Aston Martin is now committed to good corporate governance. Aston Martin Lagonda Global
Holdings PLC is a company that uses corporate governance quite effectively. For the time
being, Aston Martin’s one of the key goals is to be the world's most desirable, ultra-luxury
British brand, creating the most exquisitely addictive performance cars. The company is also
attempting to uphold its corporate social responsibility by aiding society via a number of
welfare programs. According to the corporation's board of directors’ guidelines, all directors
are obligated to disclose their interests when they are recruited.
Corporate Governance Limitation
Split between management and ownership- Many of the company's policies are frequently
decided by administrators and executives who are not usually investors. This might cause
issues for large, publicly listed companies. In the absence of a controlling shareholder and
when numerous shareholders vote by proxy, the assets of the company are handled by the
board of directors and the authorities.
Increased expense- The expense incurred by the company because of the implementation of
corporate governance is quite high, Extensive study and professional consultations are
required for corporate governance, it is expensive since consultants and research
professionals demand a premium fee for their services.
Inaccurate reports- Financial statements can be presented in a number of ways that mislead
investors while remaining factually true.
Costs of regulation- Misuse of corporate governance has resulted in the creation of a greater
variety of federal and state legislation to prevent similar abuses from occurring again.
Compliance with this regulation can be time-consuming and expensive for businesses.
11

Recommendations
Diversity- The management of Aston Martin must make sure that the company's corporate
governance policies are diverse. Corporate governance policies must be tailored to specific
situations rather than being general.
Making risk management a top priority- The management committee of Aston Martin
Lagonda Global Holdings PLC must make sure that the company risks are given top priority,
and policies must be created in accordance with this. This will make it possible for the
company's management to establish various rules for handling various forms of risk.
On-time reporting- Effective and efficient reporting is required for all challenges or issues
the organisation may be experiencing. The Aston Martin must establish a system that will
allow difficulties to be reported effectively and efficiently.
Prevent money from leaking out- To reduce the total debt Aston Martin Lagonda Global
PLC must have to cut the overhead cost and operating cost to gain a greater equity that leads
the company towards consistency of profit margins.
Productivity Enhancement- Enhancing productivity is a crucial next step. Such radical
modifications have the potential to interfere with current procedures and necessitate more
resources to accomplish goals. Instead, focus on increasing every measure that affects the
company's revenue by 10%. Company’s net income will likely go from a loss to a profit due
to the overall increase in sales, which is probably exponentially bigger.
12

Conclusion:
Aston Martin, a manufacturer of high-end sports cars and touring vehicles, was chosen to do
the assessment for this research. The company's capital structure demonstrates that it has
more debt than the equity in its operations, which high its debt-to-equity ratio and high the
risk to shareholders an investor of the company. As a result, the company has performed
below average for Aston Martin PLC's shareholders. Aston Martin adjusted operating losses
also increased significantly from £74 million in 2021 to £118 million last year, revenues rose
by 26% on the year to £1.38 billion, with gross profit up by 31% year-on-year to £450.7
million. This paper has covered both conventional and contemporary capital budgeting
methods. The ideas for adopting a more efficient corporate governance in the are because the
corporate governance policies are crucial for the business to execute its operations without
any frauds and misconducts.
13

References
➢ https://www.astonmartinlagonda.com/investors/annual-report
➢ https://uk.investing.com/equities/aston-martin-balance-sheet
➢ https://companiesmarketcap.com/aston-martin/total-debt/
➢ https://companiesmarketcap.com/aston-martin/total-debt/
➢ https://www.hl.co.uk/shares/shares-search-results/a/aston-martin-lagonda-ord-10p/
financial-statements-and-reports
➢ http://aml-corp-uat.azurewebsites.net/responsibility
➢ https://www.legalwiz.in/blog/corporate-governance-principles-advantages-and-
disadvantages
➢ https://www.thecorporategovernanceinstitute.com/
➢ Betz, F., 2018. Capital Structures: Vectorizing the Harrod-Domar Model in Macro-
Economics. Theoretical Economics Letters
➢ Kengatharan, L., 2018. Capital Budgeting Theory and Practice: A review and
agenda for future research. American Journal of economics and business
management.
➢ Sunita, r. and Siddik, m.m., 2020. linkage between capital structures with financial
performances of automobile industry in India–comparative analysis. journal of
critical reviews.
14