Accounting and Finance for Managers: Financial Performance and Decision Making

This report analyzes the financial performance of three companies in the UK soft drinks industry and explores their financial goals, success indicators, and decision-making strategies. It also examines the use of ratios to evaluate organizational performance and discusses different sources of financing.

Accounting and Finance for
Managers
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Table of Contents
Table of Contents.............................................................................................................................2
INTRODUCTION...........................................................................................................................3
SECTION 1.....................................................................................................................................3
Identifying the certain indicators, financial goals and decision making in respect of
organisation..................................................................................................................................3
Analysing organisational performance with the help of ratios........................................................5
Investment opportunity in best performing company..................................................................9
SECTION 2.....................................................................................................................................9
Sources of financing....................................................................................................................9
Long term financing affecting interest of stakeholder...............................................................11
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12
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INTRODUCTION
Financing is important part in the company that used in company to run and plays critical role.
They were need to use efficiently to avoid the wastages in the funds and fulfil the objective in
long term. In this report, it is being studied about the three company such as A.G Barr Plc
(Finkler, 2017). BRITVIC Plc and COCA COLA European partners. All these are manufactures
of soft drinks in the UK and it is being studied their financial performance through evaluating the
financial ratios and identify its financial goals and measurable success indicators in the relation
to financial growth. Apart from that determine the most appropriate source to different
companies for their potential development strategies should be developed and adopted to
increase their efficiency and effectiveness. Strategies has been formulated to develop the internal
and external stream of finance stream available to an enterprise has also been identified.
SECTION 1
Identifying the certain indicators, financial goals and decision making in respect of organisation
BARR plc- This company is founded by the A.G Barr PLC, a fizzy drinks maker in 1875.
Company follows the portfolio that comprises carbonate soft drinks, fruit drinks, juices, energy
drinks and cocktails.
Financial goals- As, this organisation reported the revenue of GBP255.7million for fiscal years
ended January 2020 and had decrease of 8.4% over in financial year 2019. Apart from that in the
financial year 2020, operating margin is 16% and in 2019 it is 14.9%. This indicates that the net
profit and gross profit has decreased by the 2.6% and lower down in the year from 12.8% to
11.7%. So it need to focus on generating more revenue and reducing the operating cost.
Success indicators
Financial expansion- According to the financial statements, firms’ earning is decreasing and did
not able to use its resources effectively. It earned 0.44% per share in the year 2018, but just 0.30
in the year 2019. In that year it should be observed that company has increase its dividend policy
which shows that it has better results and able to distribute its profit effectively to its shareholder.
Financial sustainability- Company also has implemented local and global premium brands and
encouraging the people to live happier environment and create development of new spaces to
achieve long term sustainability and long term performance. This will help in developing the
overall efficiency and increase its brand value by providing best quality of soft drinks.
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Financial efficiency- Maintain the proper financial system will help in formulating the best way
to use the sophisticated standard of tactical effective strategies and useful in greater performance.
Company able to produce enough profit and help in sophisticated standards to handle strategies
and allowing it for greater performance in the company.
Strategy for making the decision – To achieve the goals and objective the need ti make is to
fulfil the short-term and long-term judgement in order to determine its potential growth and
opportunities to increase the market share and profitability (Mburayi and Wall, 2018).
BRITVIC Plc
It is one of the most successful soft drinks manufactures in the UK and deals in energy drinks,
mineral water, syrups, juice and sparkling soda. Through licensing agreement with PepsiCo also
produces and sells soft drinks brands such as Pepsi MAX, 7UP, SoBe and Mountain Dew.
Financial goals- The company goal is to expand the sales and its market share in long term. To
gain this, it is important to boost the stable economic climate in order to progress in un upward
direction. It is being observed that operating margin and net profit has decreased by the 2.6% and
2.6% respectively. So, company has to focus more on its operational efficiency.
Success indicators
Financial expansion- In the company the net earning is decreasing and nor able to fulfil the
needs and requirement of the company and not perform in its operational efficiency. The need is
to reduce the cost and will increase current income generating capability.
Financial sustainability- Company has develops certain models to develop the effectiveness in
the organisation and in order to increase the market suitability in proper manner, Through this, it
will help in developing the profitability from certain sources. This assist in improving practice
and overall efficiency by giving best services and products to the costumer.
Financial performance- The performance of the company is essential to make the effective use
of all resources and will help in fulfilling the goal and objectives. This helps in maintaining the
reputation among the market and will lead to certain issues and helps in developing the financial
performance.
Decision making strategy- This is important to maintain and take informed decision to face the
appropriate steps and will help in achieving the efficiency of the company. Effective decision is
important to develop the overall profitability in ling term and gives the possible outcome of
results.
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COCA- COLA EUROPEAN PARTNERS PLC
It is one of the biggest and repudated brand and it has its own market value in the industry. This
independent Coca-Cola bottling company. This produce and distributed various packaged
beverages to the customer and vending partners who in turn sell these products to the customer.
Financial goals
Since the company is now stable and profitable, it should pursue the growth and increasing the
units in many other countries in order to gain more exposure and market share (Han and et.al,
2018).
Success indicators
Financial expansion- In order to expand financially, organisation has to adopt expenses and
certain technologically advanced tools that helps in taking the appropriate steps further. This also
needs to compete the competition and will help in fulfilling the market share.
Financial sustainability- Regulating the proper and natural organic beverages will help in
improving the related chances of financial success in order to gain relevant market share.
Customer will be motivated to drink eco-friendly assets in order to promote sustainable climate.
Financial performance- The business is performing well in terms of sales, operating income and
profitability that will lead to result in more effective trading dynamics and investor.
Decision making strategy
To sustain in long term basis, it is important to adopt long term sustainable framework that will
include the manufacture of organic and nutritious beverages in order to maintain sufficient
number of consumers.
Analysing organisational performance with the help of ratios
BARR (A.G) Plc
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Profitability ratio- This ratio is refers to the tool that will help in analysing the profitability in
the organisation and evaluate how effectively generating the revenue. In the company in the year
2020 the ROE is 17.96% and in the year 2019 it is 21.2% and in the year 2018 the ratio is 22.3.
This indicates that company has reduces its ROE ratio after following years and that indicates the
lower efficiency. On the other hand, the profit margin is also reducing from 2018 to 2020 by
approximately 3% and that shows company so losing its money and not performing well (Smith
and Urquhart, 2018).
Operational ratios- This refers to measuring the operational efficiency in the company and will
help in managing the revenue of production to determine operational performance. In the
company, the ratio in the year 2018 the ratio is 1.15 and goes down in 2020 by 1.08. This shows
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the lack of control over the assets and will leads to many problems. In interest cover ratio,
company has increased in 2018 to 2020 by 21%..
Liquidity ratio or structure ratio- This ratio tells the liquidity in the company and measure its
short-term effectiveness. In the company, the liquidity ratio in 2018 is 1.52 and decrease in 2020
with 1.44. Quick ratio in the year 2018 is 1.22 and reduce and become ratio in 2020 with 1.14.
This overall indicate the lower liquidity and hence need to be improved to fulfil the goals and
objectives.
Per employee ratio- In this case, it determines the organisational activities that need to change
in order to generate more and promote the staff in efficient manner. In the case of A.G Barr Plc,
the ratio indicate that firm has to improve its’s per working earning power in order to encourage
the long-term performance.
BRITVIC Plc
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Profitability ratios – In the BRITVIK plc, it is found that the organisation’s revenue is falling in
consecutive years and did not aspects as good sustainability. In the year 2018, it is 9.70 and
reduces to 7.14 in the year 2020 as it falling and not appropriate for the company.
Operational ratios- In the situation, the operational effectiveness is important to be maintained,
is it has interest expenses of 8.43 in 2019, which is comparatively better than the expected. It
shows that company has successfully earnings to pay down its interest and liabilities.
Structural ratios- In the context of BRITVIK Plc, it is being falling flow of earnings in terms of
present ratio and liquid ratio. While on the other hand Shareholder financial leverage shows
positive growth and owner’s money is too solvent to be used for future acquisition.
Per employee ratio- In the given company, it has optimal employee ratio pattern and indicating
stable and effective relationship with its shareholder and shows positive sign for the company
(Suryanto, 2017).
COCA- COLA EUROPEAN PARTNERS PLC
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Profitability ratio- This ratio shows the overall efficiency of the company and tells the
efficiency in terms of sales. In the context of selected organisation, the ROE is
decreasing from 2018 to 2020 and shows inefficiency. Profit margin has increased from
the 2018 to the 2020 and indicate positive mark in the company (Ali and Ahmed, 2017).
.
Operational ratios- It tells how effective management team is increasing the sales and keeping
cost cut. In the selected organisation, Net asset turnover has increases and interest ratio has also
seems to be increasing. This shows the positive sign for the company.
Structure ratio- This ratio define the efficiency of the company and in selected organisation it is
showing decreasing in the current ratio and also in the Quick ratio. This is not positive sign for
the company.
Per employee ratio- It is non-financial ratio that specifies the total income earned by each
employee. This is equivalent the overall numbers of employees and measure by the gross sale
(Zhu and et.al, 2017).
Investment opportunity in best performing company
From the overview of overall different ratios in different organisation, this could be said that
COCA COLA EUROPEAN PARTNERS Plc has performed well and able to generate enough
revenue. It has optimal liquidity, sound earning power, financial leverage and good employee
turnover.
SECTION 2
Sources of financing
Internal financing- This source of capital is characterised as capital that arrange from the
internal sources or within the organisation. Many organisation use certain financial approaches.
Following are as follows-
 Owner’s capital- This refers to the capital that is spend or used by the owner of the
company himself and paid by landlord’s own money. This is critical in company as
return on the expenditure on consistent basis.
Cost- It is essential to pay earnings per share in order to achieve the shareholder. For
example, if corporation earns 255 million pounds in sales and earning per share of 5%.
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Risk- For beginners, if an entity is losing the money, it can lose important amount of
shareholder.
Effect on cash flow- There will be no direct impact on the working productivity as
results of owner’s equity, but capital expenditure will strengthen as result of more
productive activities.
 Retained earnings- This is another form of internal funding. This is amount that is left
by paying all expense and tax and will help in grow the business. It is essential sources
of finding options. Organisation can use this to reinvest in the organisation to grow more
further in future and will facilities in proper effectiveness.
Cost- It is essential to control the cost that is being incurred by the company in order to
make the successful investment in the company.
Risk- There is always being risk to make any steps and will help the managers to closely
look into the subject manner (Yapa Abeywardhana, 2017).
Effect on working capital- In order to achieve the good financial condition, retained
profits have an impact on revenue and give optimum results in the return on investment.
External financing-The finance that used from outside the company is concern with the external
source of funding. It has its own benefit to finance from the different sources and will help in
acquiring efficient amount of funds from many sources. Following are some of the external
financing factors are as follows-
 Debt financing- This money is generally lend by the different corporations and
institution who deals in providing the required funds to needy company who wants
additional capital to start their business or any other purpose. Debt money market
instruments that are investing in the fixed income such as shares. The rate of return paid
is on regular basis.
Cost- This type of financing is expensive since the interest rate is charged even though
the money is losing by the company. Apart from that interest is also high which add cost.
Risk- This helps in interest payments and its regarded as risky source of financing in the
company.
Effect on working capital and cash reserves- Debt financing is form of funding that
ahs impact on the cash funds and will leads to certain problems.
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 Term loans- Term loans is kind of money that lent from bank by an individual and
company to secure financing it is repaid at fixed rate for specific period of time.
Cost- This source of finance includes the cost of debt which is generally charged to
many creditors over span of time (Sohrabi, 2017).
Risk- This present in the form of bankruptcy and other future uncertainty that might
occur in future and in which company is not able to pay its debt.
Effect on working capital and cash reserves- It has major impact on cash flow and other
capital expenditure that effect the functioning.
Long term financing affecting interest of stakeholder
Owner’s capital is consider as strongest form of funding among above options as it carries
less risk and expenses. This will help in developing the investment potential and long term
business decision (De Villiers, Venter and Hsiao, 2017).
CONCLUSION
From the above report it is concluded that company is able to successful only when it effectively
evaluate the financing sources and identify them thoroughly to achieve long term goals. It is
important to critically examine the financial ratio of different company and make appropriate
decision to make the effective steps. In order to achieve this sufficient market research is needed
to identify the consumer demand and taste and offer them accordingly. So proper market demand
is needed to be done by many company to effectively rectify their mistakes and efficiently fulfil
the targets.
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REFERENCES
Books and Journal
Finkler, S. A., 2017. Finance & accounting for nonfinancial managers. Wolters Kluwer.
Mburayi, L. and Wall, T., 2018. Sustainability in the professional accounting and finance
curriculum: an exploration. Higher Education, Skills and Work-Based Learning.
Han, J., He, J., Pan, Z. and Shi, J., 2018. Twenty years of accounting and finance research on the
Chinese capital market. Abacus. 54(4). pp.576-599.
Smith, S. J. and Urquhart, V., 2018. Accounting and finance in UK universities: Academic
labour, shortages and strategies. The British Accounting Review. 50(6). pp.588-601.
Suryanto, T., 2017. Cultural ethics and consequences in whistle-blowing among professional
accountants: An empirical analysis. Journal of Applied Economic Sciences. 12(6).
Zhu, Y. and et.al, 2017. Media sentiment, institutional investors and probability of stock price
crash: evidence from Chinese stock markets. Accounting & Finance. 57(5). pp.1635-
1670.
Yapa Abeywardhana, D., 2017. Capital structure theory: An overview. Accounting and finance
research. 6(1).
De Villiers, C., Venter, E. R. and Hsiao, P. C. K., 2017. Integrated reporting: background,
measurement issues, approaches and an agenda for future research. Accounting &
Finance. 57(4). pp.937-959.
Ali, M. J. and Ahmed, K., 2017. Determinants of accounting policy choices under international
accounting standards. Accounting Research Journal.
Sohrabi, M., 2017. The Relationship between Non-Financial Innovative Management
Accounting Tools and Risk and Return of Iranian Stock Market Listed
Companies. Dutch Journal of Finance and Management. 1(2). p.40.
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