Accounting of Taylor Wimpey Plc : Report

Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Description of existing product of the organisation...............................................................1
Evaluation how existing product is affecting competitive advantage....................................2
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Accounting is crucial in the business so that each and every transaction can be justified in
the best possible manner. Present report deals with Taylor Wimpey Plc which is engaged in real
estate development such as house buildings and is facing competition from another company of
the same sector which is Bovis Homes Group Plc. The former organisation is facing less
competitive advantage because of effective strategies implemented by the rival firm. Moreover,
profits are reduced in the current situation. Furthermore, report deals with whether Taylor
Wimpey Plc should discontinue existing product or invest in the same for further improvement.
Thus, several capital appraisal methods such as IRR, NPV, ARR and payback period are used to
provide clarity to Chief Operating Officer to take better and effective decision for strengthening
company in a better way and attain competitive advantage.
MAIN BODY
Description of existing product of the organisation
Business provides goods and services to society to earn profits and as such, society is also
benefited by the same. Investment should be made by the company which yields maximum
return in the best possible manner. It is required that business should be able to scrutinise various
alternatives and then evaluate the same to invest in good project which inculcates the highest
return with much ease. In order to overcome the same, investment appraisal techniques can be
used to assess various options available to the business and as a result, organisation may easily
invest in better project. The investment appraisal techniques are NPV (Net Present Value), IRR
(Internal Rate of Return), ARR (Annual Rate of Return), Payback period which are utmost
required to be carried out in order to invest money in high yielding project in effective manner
(Scott, 2015).
Taylor Wimpey Plc which is the largest house building organisation situated in UK is
facing low competitive advantage from the rivals. Another company which is one of the
competitor of Taylor Wimpey Plc is Bovis Homes Group Plc. The organisation is required to
implement well-structured strategies so that it may be able to strengthen its market share and
may earn more profits to outreach Bovis Homes Group Plc in the best possible way (Constable
and Kuasirikun, 2018). Taylor Wimpey Plc is engaged in construction of houses and as such, it is
required that company should strengthen its base in order to beat competitor and attain
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competitive advantage at the earliest. Furthermore, by enlarging market share, it may be able to
earn more profits quite effectually.
Moreover, it is required to improve upon its performance in that way so that profits are
not affected up to high extent. In current situation, Taylor Wimpey Plc has attained a downfall in
the Pre-tax profits with larger margin. This is evident from the fact that 6.9 % of pre-tax profits is
fallen in the year 2017. It has been emphasised that profits have been decreased because of
economic risks prevailing in the nation. The downfall is observed as pre-tax profit in 2016 was
732.9 million in pounds while in 2017, it has declined to 682 million in pounds.
There are seven business units in the company which provides individual services in
order to attain good revenue with much ease (Libby, 2017). This is evident from the fact that
organisation provides effective services to client and achieving satisfaction level in effectual
manner. However, organisation is facing tough competition from the Bovis Homes Group Plc.
This is evident from the fact that Bovis Homes Group Plc has effective strategies which are
becoming hurdle for the growth of Taylor Wimpey Plc quite adversely. It is required that
organisation should make further improvement in its product portfolio so that it may be able to
inject growth in the best possible manner. For overcoming this, whether investment should be
made in existing units or discontinuing the same, capital appraisal techniques will be used to
analyse the situation and as a result, decision will be taken in effective manner (Costa and
Torrecchia, 2018).
Evaluation how existing product is affecting competitive advantage
Income statement for five years
Year 1 Year 2 Year 3 Year 4 Year 5
Particulars Amount Amount Amount Amount Amount
Revenue 6000000 6500000 6600000 6650000 6680000
Less: COGS 1600000 1800000 1900000 2000000 2100000
Gross profit 4400000 4700000 4700000 4650000 4580000
Operating expenses
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