Assessment Brief 2 Managerial Finance Contents

Assessment Brief 2
Managerial Finance

Contents
INTRODUCTION........................................................................................................... 4
5.1 Task........................................................................................................................ 4
Portfolio 1.................................................................................................................. 4
5.1.1 Task 1:................................................................................................................ 4
a) Calculation of 10 financial ratios as given below for two years (2017 - 2018):...............................4
b) Analysis of the performance of two selected companies and analysis of their financial position and
investment potential....................................................................................................... 5
c) Recommendations of how the financial performance of the poorly performing business can be
improved.................................................................................................................... 9
d) Discuss the limitations of relying on financial ratios to interpret companies performance..............9
Portfolio 2:................................................................................................................ 10
5.1.2 Task 2: Capital Investment Appraisal........................................................................10
a) Using appropriate investment appraisal techniques, advise senior management on whether they
should opt for Alpha project or Beta project....................................................................10
Payback period (PBP)............................................................................................... 10
Net Present value method (NPV).................................................................................11
b) Discuss the limitations of using investment appraisal techniques to help in long term decision
making.................................................................................................................. 12
CONCLUSION............................................................................................................. 12
REFERENCES............................................................................................................. 14

INTRODUCTION
Managerial finance refers to a branch of finance that is associated with the managerial
importance of techniques used in finance. It also highlights the most optimum way in which
money can be utilized in order to enhance futuristic opportunities related to money making. Also,
this helps in significantly reducing the consequences of financial losses and unfavourable
situations (Combs, Samy and Cengiz, 2017). This report includes the financial analysis of Marks
and Spencer and Next Plc. Also, this explores the various recommending by adopting which the
financial performance of poorly performing entities can be improved in an effective manner.
Furthermore, the limitations of relying upon financial ratios for analyzing a company’s
performance have been discussed. Also, capital appraisal techniques have been highlighted along
with their limitations in long term decision making.
5.1 Task
Portfolio 1
5.1.1 Task 1:
The analysis of the financial statements of Marks and spencer and Next plc. has yielded the
followings:
a) Calculation of 10 financial ratios as given below for two years (2017 -
2018):
M&S NEXT PLC
Formulae 2017 2018 2017 2018
Current ratios CA/CL 0.728 0.722 2.290 1.964
Quick ratios QA/CL 0.407 0.294 1.668 1.429
Net Profit Margin Net profit /net revenue 1.09% 0.27%
15.67
% 14.44%
Gross Profit margin Gross Profit/ net revenue 24.29% 23.22%
34.19
% 33.10%
Gearing ratios Total long-term debts/Equity 0.881 0.938 2.290 2.412
P/E ratio MPS/EPS 9.814 10.172 11.335 8.681