BM 414 Financial Decision Making Report

The report prepared above summarises the working and functioning of panini ltd company in competitive environment. It further takes in account the computation of ratios such as inventory days, creditors and debtor’s collection period. It also gives certain recommendations on the basis of present working carried out in related environment.

BM 414 FINANCIAL
DECISION MAKING
REPORT

Table of Contents
INTRODUCTION ......................................................................................................................4
TASK........................................................................................................................................4
1.1 Assess the importance of accounting and finance related functions, roles and duties within an
organisation.......................................................................................................................................4
1.2 State several ways that would prove to be useful in finance related companies for growth and
expansion related functions...............................................................................................................7
TASK 2.....................................................................................................................................7
Compute the ratios............................................................................................................................7
CONCLUSION .........................................................................................................................10
REFERENCES...........................................................................................................................12

Executive summary
The report prepared above summarises the working and functioning of panini ltd
company in competitive environment. IT further takes in account the computation of ratios such
as inventory days, creditors and debtor’s collection period. It also gives certain recommendations
on the basis of present working carried out in related environment. There are many calculations
being performed for comparing related results in relation to company’s performance over a
certain time span.

INTRODUCTION
The report prepared as under takes in account the working and functioning of Panini ltd
company which would help in facilitating decision making process (Agnello, Laney and Lucey,
2019). There are many finances related tools that assess pros and cons of a related choice being
made in relation to usage of money. There are many business-related decisions such as finance,
investment and dividend which serves as a guide in near future for decreasing cost and
maximizing revenues & profits as well. The company chosen deals in production related
activities such as bread for super markets in UK country. It is further planning to develop its
related areas and facilitate expansion in coming years as well. It takes in account to understand
and collect information that would be helpful in computation of ratios. It also serves as an
effective method and technique for forecasting related results to be served in near future by the
business for a period of time. It is useful in finding several ways for generating related funds and
invest them for better opportunities and growth as well.
TASK
1.1 Assess the importance of accounting and finance related functions, roles and duties within an
organisation.
Accounting: The phrase can be described as sorting, compiling and collection of information
at one place and recording of the necessary money related dealings. Development of financial
records, statements and reports which would assist company in giving proper guidance for
managing funds so far collected. It can be explained as a procedure that would keep proper book
of accounts and use the data in related areas. The main role of accounting is to examine the
performance of staff being served by the business in related environment as well. Hence it is also
useful for evaluation of positioning and profitability of business & economy. It assesses reasons
behind cash inflow and outflow taking place in respective businesses. It is also observed that it
serves as a tool for people who are linked with the firm or planning to get engaged in business
being run in competitive environment.
Functions of accounting: There are different types of functions which would be useful for
Panini ltd. Company. Some are stated below:

 Evaluate valuable transactions: It is mandatory for Panini Ltd to record related
transactions that would give a clear and evident result recorded so far after
considering working of related business in environment (Brown and et.al.,.).
 Examine the performance served: Accounting is useful for having a proper study of
Panini ltd company that would help the business in managing related life cycle for a
certain time duration which would be beneficial in fighting a competitive
environment as well in near future.
Management Accounting: It helps to have an overview about roles being served by a
company for carrying out its related activities well in time and in an efficient as well as effective
manner. Some are stated as under:
 Keeps a track record of related spending and income: It keeps a recording of what is
being invested and what is being earned by the company. It would help Panini to
understand reasons which led to generating revenues and income by related function
and which activities must be controlled that would help in improving costs incurred
during running and functioning of business (Carr and Rosato, 2019).
 Facilitates in better decision making: Accounting is helpful in efficient and effective
decision making by choosing best alternative options available with Panini Ltd. It
further is useful in selecting what best fits the demands and requirements of a related
firm over a period of time and which strategies would be helpful in minimizing cost
and maximising profits in a certain duration.
Duties of Accounting:
 Finance: It helps to find out what would be the fund being invested in related activities of
a business and how inflow and outflow of cash must be managed by a company over a
period of time.
 Forecasting finance related activities and predicting threats: It is the duty of accounting
related factors to predict what would be risk and threats that would harm the growth of
company in near future.
 Monitoring and controlling of budgets prepared: Accounting serve as a helpful technique
in preparing and planning budgets. It also benefits in finding areas in which money is
invested without proper assistance and goes waste.

Tax Function – Tax payment is the duty of all organization which is controlled by the
department of finance. It focuses on making the good relationship with government by
remitting PAYE to the appropriate authority, and also try to assure that payment of tax
should be done within the systematic policies.
Auditing Function – The finance department of the company focuses on the current
assets. The company working capital need to be controlled effectively for making more
profit in relation to the amount of funds tied up and it is more accusation on the company
liquidity
Functions of finance:
 Planning funds in a specific manner: It states that the funds which are scarce in nature
must be planned in such a way that would serve the purpose and goals set in right manner
(Chidakel, Eb and Child, 2020).
 Raising of funds: It focuses on areas that would contribute in generating cash and revenue
that could be used in further operations of company as well.
Types of Finance
 Investment Function – Investment function is used to gain profit or interest within a
given period of time. It is an opposite relationship between rate of interest and
investment. Investment function leads to maximize the income level and production by
maximizing the manufacturing and purchase of capital goods.
 Financing Function – This function is used to manage the finance of the company and
helpful in decision making. It is indicating the receiving and utilizing of funds specific
for efficient operations. Finance is the most important part to run any organization, it
provides the money.
 Dividend Functions – It is the distribution of marketing profits to necessary shareholder.
Dividends functions refers to payment which are made by rank holder companies to
reward investor for investing their money into their venture.
 Working Capital Functions – Working capital is the calculated by subtracting the
current assets into current liabilities. It is the money which useful for company daily
expenses and also require to paid the company short- time period expenses, which need
to paid within the end of financial year.

Examples: Current assets are managed in a specified manner and it also helps to manage
current liabilities in a manner that would assist in minimizing related risks and threats of
Panini ltd.
1.2 State several ways that would prove to be useful in finance related companies for growth and
expansion related functions.
There are many ways that would prove to be helpful in case of organisations for generating
funds in order to expand and grow business related functions and activities. The sole
purpose of Panini ltd company is to expand its working on international ground and on a
larger scale as well. It would also contribute in development and working business over a
period of time. Some tools that would serve as a beneficial tool is stated as under:
 Equity: Such shares help to engage people from environment who want to become
owners of the company and practice rights being given to them at that point of
time.
 Retained earnings: Another better option that can be counted for carrying out
finance related functions are retained earning which can be used in the hour of need
for facilitating growth and expansion. It is also considered best way for generating
opportunities as it involves no sort of debts or borrowings which must be paid back.
 Debts: It is considered as a method that helps in collection of funds for investment
such as debentures, borrowings from banks and financial institutions as well. It is a
money that charges interest as well and must be paid in specific duration as well. It
can also be counted as a source of finance.
TASK 2
Compute the ratios.
1. Gross profit margin: Gross profit/ Net sales * 100
2018: 3500/ 10000 * 100 = 35%
2019: 3265/ 11500 * 100 = 28.39%
 Rising expenses that are linked with goods being sold by Panini ltd company which
might serve as an issue leading to declining Gross profit margin of related business.
 Another reason that can be stated behind such reduction is existing mark-up policies
adapted by Panini ltd company.

 Reducing prices that related to rate of good and services without any declining cost of
goods being offered by the business might be considered as a reason behind declining
profit margin of Panini ltd company.
2. Operating profit margin: Operating profit/ Net sales * 100
2018: 2765/ 10000* 100 = 27.65%
2019: 2305/ 11500* 100 = 20.04%
 Higher level of operating expenses: It is being observed that company is facing increase
in level and scale of expenses being incurred in operational activities that result in falling
profitable margin.
 Fall in sale scale held by organisation over a period of time: It is also counted as one of
the reason such as decline in sales performance served by the company in competitive
environment. It leads to decline in margin being measured in case of operating profit.
3. Return on capital employed: Earnings before interest and tax/ Share equity + Long term
liabilities * 100
2018: 2765/ 8755= 31.58%
2019: 2305/ 10211* 100 = 22.57%
 Rising liabilities and debt: Issue that reflects falling return on capital employed is
observed to be increasing debts and liabilities associated with the company for a period of
time. It is also advised that the firm must look into matter which affect the efficiency and
effectiveness of business. It further is seen that minimizing the debt occurrence or finding
related solution that would help in controlling such situations would also help in
increasing profitability of organisation.
 Poor usage of capital resources: It states that the capital resources are being used poorly
and in an inefficient as well as ineffective manner. It then results in declining return on
capital employed as well. It is further necessary for company to understand the allocation
of scarce resources in best possible alternatives and places which would facilitate best
outcomes and outputs as well.
4. Current Ratio: Current assets/ Current liabilities
2018: 1175/ 970 = 1.211: 1
2019: 2110/ 512 = 4.12: 1

Managing receivables and payables: Increasing current ratio can be due to receivables
and payable being managed properly by the organisation for a period of over two years. It further
would help business to grow and expand and earn a good brand image as well.
Covering debts and liabilities: Rising current ratio must be because debts and liabilities
are set off and paid off well on time by the enterprise. It thus would serve as a fruitful situation
for the organisation as well (Ghasemi, Habibi, Ghasemlo and Karami, 2019).
5. Quick Ratio: Current assets – Inventory / Current liabilities
2018: 1175 – 350/ 970 = 0.85: 1
2019: 2110 – 675/ 512 = 2.80: 1
 Reasons which led to rising quick ratio of related business is proper management of
inventories and stock available with the company for certain duration being recorded.
Inventory and stock are necessary for converting the raw material in finished goods and
improving the quality of goods & services of business being offered.
 Rise in selling results in increasing quick ratio of the business which can be due to more
sales being recorded and observed in respective business. It is necessary for every
business to concentrate on activities that would help in increasing sale margin of related
company. Improving quantity or quality would help increase in engagement of users with
firm that is necessary in long run of enterprise.
6. Inventory turnover days: Cost of goods sold / average inventory
2018: 6500 / 350 = 18.57 times
2019: 8235 / 674 = 12.22 times
It is being observed that the inventory turnover days have been taken a hike which can be
due to proper management of production related activities and operations as well.
Eliminate usage of old inventories: It is advised that the company must reduce or
eliminate, if possible, the use and adoption of old or obsolete machinery and inventories as well.
It would help in minimizing the unwanted cost and expenses associated with company.
It further is stated that there must be low expenditures and related risks connected
towards the working and functioning of company. It facilitates in rising inventory turnover days.
7. Receivable collection period: 365 / sales on credit / accounts receivable

2018: 365 / 10000 / 760 = 27.74 days
2019: 365 / 11500 / 1340 = 42.54 days
 Causes behind changes observed in ratios in year 2018 and 2019: It states that in year
2019 more-time duration is consumed for collection of debt by the company.
 Methods for improving the value of ratio in near future: The above computed ratios of
year 2019 it demands improvement in their ways if collecting debt and it would be
consuming more time which would decrease the efficiency of company as well.
8. Payable payment period: 365/ cost of sales / trade payable
2018: 365 / 6500 / 920 = 51.6 days
2019: 365 / 8235 / 495 = 21.94 days
 Reasons behind fluctuation in ratios between year 2018 and 2019: The causes which led
to declining payable payment period is due to poor and bad financial situations associated
with the company over a time period of 2 years. It hence leads to a condition where
payable payment is noted to decline.
 Payment processed towards vendor is slow: It is also observed that when the payment
made towards supplier chosen becomes slow and gets delayed it might result in a
situation such as declining payable payment period. It further helps to find related reasons
which would help to manage such conditions. The delayed process thus leads to declining
payable payment duration.
CONCLUSION
The report helps to conclude that what are the related measures that must be taken in
account. It takes in account what have been the issues and impacts that the organisation has went
through for maintaining current stability and sustainability in competition. Suggestions which
can be given to business is that it must look into matters producing lesser amount of revenues
and improvise the collection period. It further helps in computation of ratios over a period of two
years that would help in finding reasons behind the variation observed between different
companies and ratios as well. It helps in finding what has been the solvency and liquidity of a
business for a point of time. The report gives an overview as what has been the position of
company in related environment and how the effects are affecting the working and functioning of
firm. It also provides connected solutions that would contribute in betterment of position and

working in environment in which the company exists. It is further recommended that the
company must look after its related debts and liabilities to be controlled and minimized such that
it would help in growth and expansion over a time span of 2 years.

REFERENCES
Books and Journals
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