Accounting and Financial Management: Assignment

Accounting and
Financial Management

Table of Contents
INTRODUCTION...........................................................................................................................1
PART A...........................................................................................................................................1
1. Calculation of relevant ratios to analyse organisation's performance................................1
2. Calculation of working capital cycle for Bjam Plc............................................................6
PART B............................................................................................................................................8
1. Various investment appraisal techniques:..........................................................................8
PART C..........................................................................................................................................14
1 Budget and relationship of budget with strategic objectives & plans:..............................14
2. Evaluation of Budgeting Process by interlinking various budgets used within a business :14
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Accounting and financial management is a complete set of activities related to
finalisation of annual financial reports and analysing financial performance and efficiency of
organisation. For better accomplishment of such activities key managerial personnel of the
company are responsible for safeguarding of financial and accounting information that are
relevant for users of financial data (Ward, 2012). To achieve the predetermined performance or
objective, various accounting techniques such as ratio analysis, capital budgeting and cost of
capital assists management. This project report exhibits different aspects of accounting and
financial management in the context of two different companies i.e. Bjam Plc and Toyland Ltd.
In this project report analysis of these companies are done through accounting ratios, working
capital cycle and capital budgeting based on data provided in case studies.
PART A
Overview of company:
Bjam Plc is London based company which is engaged in manufacturing furniture items
and doing its business activities successfully in London. Directors of the business entity wants to
analysis the financial performance of the company because they have analysed significant
changes in the financial statements of Bjam Plc. For this, board of directors asked to the
management accountant to prepare a report on the financial statements of two years of the
organisation (Banerjee, 2012).
1. Calculation of relevant ratios to analyse organisation's performance
Ratio analysis: It can be defined as a quantitative analysis of organisation's performance
with the help of various information which is recorded in financial statements of the company.
Ratio analysis is used to evaluate various aspects of a company’s operating and financial
performance such as its efficiency, liquidity, profitability and solvency. The directors of Bjam
Plc is required these ratios to evaluate the changes in financial statements of two years and for
this ratios are calculated by management accountant. (Blankespoor and et.al., 2013). There are
various types of ratios which are calculated by management accountant from the financial
statements of two years of this organisation which are as follows:
Profitability ratios:
1

Profitability ratios are calculated by the accountants of the companies in order to identify
whether business is running good, whether its business is more profitable as compared to
competitors. Following are the ratios that are calculated by management accountant of Bjam Plc:
 Net profit ratio: This ratio is calculated to find the overall profitability of the company
after taking into account both operating and non operating items of expenses and
incomes. It shows that how much profit a company earn taking sales as a base
Calculation of this ratio is as follows:
Particular 2016 2017
Net profit after tax 3220 4060
Sales 18000 23000
Net profit ratio 17.89% 17.65%
Note: Gross profit ratio = Net profit after tax/total sales*100
From the above calculation it has been observed that Bjam Plc's net profit ratio decreases
to 17.65% in year 2017 as compared to previous year (Khan, 2015). This mean that company is
not work effectively and efficiently to earn more profit in proportion to sales. It should control
either its expenses or increase its operating incomes.
 Gross profit ratio: It is a profitability ratio which establishes a relationship between
revenues and gross profit of Bjam Plc. By the help of this ratio, operational efficiency of
company can be evaluated. Calculation of gross profit ratio is as follows:
Particular 2016 2017
Gross profit 9100 12200
Sales 18000 23000
Gross profit ratio 50.56% 53.04
Note: Gross profit ratio = gross profit/total sales*100
From above calculation, it is observed that gross profit ratio of the company increases in
year 2017 as compare to previous year due to increase in gross profit with higher rate. This
means that company has better operational position in current year as compared to previous year.
Liquidity ratios:
2