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Accounting and Financial Management- Doc

   

Added on  2020-10-22

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Accounting andFinancial Management

Table of ContentsINTRODUCTION...........................................................................................................................3PART A...........................................................................................................................................3Introduction.................................................................................................................................31. Computation of financial ratios in order to analyse performance of the company.................32. Computation of working capital cycle....................................................................................6Conclusion...................................................................................................................................8PART B............................................................................................................................................81. Different types of investment appraisal techniques................................................................82. Benefits and limitations of investment appraisal techniques................................................143. Effective sources of funds for the investment of Bitmap Plc................................................16PART C..........................................................................................................................................161. Budget and its relationship with strategic plans and objective.............................................162. Budgeting process and interlinking of budgets that are used in an organisation..................17CONCLUSION..............................................................................................................................18REFENRENCES............................................................................................................................19

INTRODUCTIONAccounting and financial management is the process of formulating financial statementsand managing the performance of the organisation so that business can be executed successfully.For all the managers it is very important to keep financial and accounting information in the formof accounting reports so that stakeholders can analyse actual position of the company (Alves,2012). Main aim of this assignment is to enhance knowledge about financial and accountingmanagement of an organisation. In this project report two different companies are going to beanalysed first one is Bitmap Plc which is a manufacturing company of furniture and establishedin London, UK. Second company is Toyland Ltd which is a toy manufacturing company andoperating business in London. For the purpose of analysis, various topics are discussed under thisreport that are financial ratios, working capital cycle, different types of investment appraisaltechniques their benefits and limitations and sources of funds. Budgets, budgeting process andtheir relation with strategic plans and objectives are also covered in this report.PART AIntroductionBitmap Plc is manufacturing company which is dealing in furniture and operatingbusiness in London, UK. The Board of directors of the company have identified changes infinancial statements. They have asked the management accountants of Bitmap Plc to form areport on the results of last two years of income statement and balance sheet. In this reportdifferent financial ratios and working capital cycle have been calculated (Armstrong, 2014).1. Computation of financial ratios in order to analyse performance of the companyRatio analysis: It is a technique which is used by various organisations to evaluate theirprofitability, efficiency, liquidity and other factors that may affect overall performance ofbusiness operations. Management accountant of Bitmap Plc have been asked by the directors tocalculate financial ratios so that cause of changes in income statement and balance sheet can beidentified (Arroyo, 2012). Different types of profitability, gearing, liquidity, asset utilisation andinvestors potential ratios are calculated in order to analyse actual performance of the company.The calculations are as follows:Profitability ratios: When the managers are willing to analyse actual profitability of thecompany than such type of ratios can help to determine that company is generating3

profits or facing losses. It also guide stakeholders to evaluate organisation's ability toacquire profits and this will help them to formulate appropriate decision regardinginvestment, providing credit and other. The management accountant of Bitmap Plccalculated gross profit and net profit ratio to determine overall profitability of thecompany (Beatty and Liao, 2014). Liquidity ratios: All ratios that are used to analyse organisations liquid strength arecalled liquidity ratios. Current and quick ratios are calculated by management accountantof Bitmap Plc to analyse overall liquidity of the organisation.Gearing ratios: Such ratios that are related to capital structure of a company andcalculated to establish proper balance in to assets and liabilities are called gearing ratios.It is focused with the assessment of long term financial stability of business entities. Itguides managers to analyse the proportion of funds which is related to internal andexternal sources. Management accountant of Bitmap Plc have calculated debt equity andtotal assets to debt ratio under gearing ratios.Asset utilisation ratios: All the ratios that are mainly used to analyse that organisation isappropriately using its assets to generate revenues or not. Management accountant ofBitmap Plc calculated fixed assets and total assets turnover ratio to assess utility of assetsof the company.Investors potential ratios: The ratios that are calculated to provide appropriationinformation to investors are known as investor potential ratios. They use such ratios toanalyse the rate which is going to be offered by the company on the invested amount. InBitmap return on equity and dividend coverage ratios are calculated by managementaccountant of the company (Cheng and et.al., 2014).Name of the ratioFormulaCalculationRatio2016201720162017Profitability ratios:Gross profit ratioGross profit/total9100/18000*12200*230050.56%53.04%4

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