Analysis of Economic Factors and Financial Performance of British Heart Foundation UK

This study analyzes the economic factors and financial performance of British Heart Foundation UK. It includes macro and micro economic variables, as well as financial ratios to assess the organization's profitability and financial condition.

British Heart Foundation

EXECUTIVE SUMMARY
The economic results of British Heart Research UK have been described with the help of this
information in this study. The macro or micro economic variables that influence the organisation
are also included in this study. Investors are able to measure profitability and appreciate the
financial condition of the company with the aid of analysis of financial statements.

INTRODUCTION
Economic factors that generally influence companies involve consumer behavior, job
factors, inflation rates and lending and unemployment and aggregate economic data. They also
are some of the developed political legislation, listed in: Regulatory variables impacting
company. Since economic conditions make boots almost costly to manufacture, as a result, the
entire curve will change. For instance, something that raises the manufacturing costs will change
the supply curve upwards as well as to the left, raising the cost of products, increasing costs and
higher profit margins. This report based on the British Heart Foundation which is a charitable
foundation in the United Kingdom. It supports studies to beat emotional pain and its health
conditions from effects on the central nervous disorders. In this report consist of macro and
micro factors and calculate the financial ratios to analysis the financial performance. Along with
analysis accounting ratio in business with their importance.
MAIN BODY
TASK 1
Carryout Analysis of Economic Factors and discuss their impacts on the Business
Macro economic factors: A significant monetary, natural, or geographic occurrence that
generally affects the state or global environment is a macroeconomic factor. Instead of only a
few select people, economic conditions usually affect wide portions of communities. Instances of
macroeconomic variables include economic performance, unemployment and inflation rates.
Governments, companies and customers alike are closely watching these indices of economic
growth. It refers to external influences which do not influence, but are definitely influenced by,
the organisation themselves. External concerns, population forces, technological variables,
natural and physical pressures, political and legal forces, and social and cultural forces are the
factors that determine the macro-environment.

Micro economic factors: Essentially, the micro-environment is the climate that has an
immediate effect on the company. It is connected to the specific region that your industry works
and can impact either of your enterprise applications explicitly. In other terms, it comprises of all
of the variables that influence the company in general. They have the capacity to impact the
ordinary operating hearings and performance results. The influence they have still isn't a long-
lasting one. Clients, vendors, retailers, rivals, and the wider community are included in the
micro-environment.
Evaluate the performance of British Heart Foundation UK:
Together with group comrades of the Obesity Health Alliance, the BHF supports the
government's implementation of a sugar levy as component of the budget proposal for the soft
drink market. The levy that will be implemented in 2018 reflects the Government's dedication to
preserving developing nations' heart health and will help to curb the childhood obesity of the

country. Almost 1,000 of you decided to take action and started to call for color-coded labelling
and continuity throughout all products whenever the UK Government initiated their comment
period on color-coded food labels. The government sponsored your requests in July this year and
confirmed that they would be endorsing a cooperative unified branding system that requires
colour coding. The UK Government declared that from April 2015 the ban on cigarette
advertisements in stores or supermarkets will go ahead. We were very happy with this news, and
despite our campaigners' diligent research talking to their MPs and increasing visibility, the
result could not have been achieved.
TASK 2
Calculate the following ratios for each of the three years
Ratio Formula 2017 (£’m) 2018 (£’m) 2019 (£’m)
Return on Capital
employed
= Operating profit / Total
assets – Current Liabilities
* 100
= 650.9 / (732.9 –
430.0) * 100
= 650.9 / 302.9 *
100
= 214.88%
= 576.3 / (682.2
– 290.9) * 100
= 634.3 / 417.5
* 100
= 119.28%
= 560.9 / 490.5
* 100
= 156.56%
Net Profit Margin = Net Profit / Net Sales *
100
= 545.0 / 437.3 *
100
= 124.3%
= 530.3 / 433.2
* 100
= 122.41%
= 111.1 / 671.9
* 100
= 16.5%
Current Ratio = Current Assets / Current
Liabilities
= 166.7 / 121.7
= 1.37
= 154.3 / 125.4
= 1.23
= 155.9 / 139.1
= 1.12
Debtors
Collection Period
= Receivables / Sales *
365
= 900 / 4800 x
365
= 68.43
= 68 Days
= 1200/ 6000 x
365
= 73 days
= 262.2 / 671.9
* 365
= 142.4 days
Creditors
Payment Period
= Payables / Purchases *
365
= 570 / 4800 x
365
= 43.34
= 2100 / 6000 x
365
= 127.75
= 331.7 / 783 *
365
= 154.62 days

= 43 Days = 128 Days
Efficiency ratio = Noninterest Expenses/
(Operating Income – Loss
Loan Provision) * 100
= 581.6 / (776.2 –
0.8) * 100
= 581.6 / 768.7 *
100
= 105.65%
= 701.5 / (621 –
0.7) * 100
= 701.5 / 615.6
* 100
= 121.7 %
= 783 / (599.9
– 0.8) * 100
= 783 / 589.1 *
100
= 125.25%
Return on capital employed: A lengthy-term profitability ratio that calculates how efficiently a
business uses its capital is the return on employed capital, or ROCE. The different quintiles the
benefit that each dollar (and other money department) employee produces. A valuable way to
measure income between businesses depends on the quantity of capital is to calculate the return
on capital employed. In order to decide which business is a good investment, it is not enough to
focus at EBIT alone. The capital also needs to be looked at and the ROCE measured. Due to
various current liabilities and expenditures, many find ROCE a more accurate method than ROE
for estimating the potential earnings of a business.
The BHF ROCE ratio is 214.88 percent in 2017, compared to 119.28 percent in 2018 and in
2019, 156.56% for an upward increase in the ROCE, as mentioned above. A high Roe is helpful
in showing that the business produces more sales than a pound of capital expenditure made by
the organization. A higher amount of ROCE is beneficial, meaning that the organization provides
more sales even within organisation than the couple of pounds of money employed.
Net profit margin: The Net Profit Margin (also referred to as "Profit Margin" or "Net
Profit Margin Ratio") is a profitability measure that is used to measure a company's portion of
the profits from its overall sales. Usually, managers and investors consider net margin to evaluate
how effectively a business is run and forecasting potential efficiency dependent on the revenue
projections of management. Buyers want to see what portion of income contributes to the
payment of activities and non-operating costs and what proportion is saved over to compensate
stakeholders or expand in the business by contrasting net profits to gross revenues.
A higher profit margin is often favorable than a lower profit since, at the ends of the year, it
ensures that the business will convert much of its revenue into profits. Bear in mind that margins

dramatically shift between sectors and only become a significantly lower margin for one sector
than someone else does not indicate that it would be less competitive. In this respect, it was
evaluated that the company's gross profit ratio level in 2019 was only 16 percent, of which 122.5
percent in 2018 was 124 and the consequence of a slight reduction in overall NP percentage,
based on the evaluation of the ratios of company BHF. Below, this reduction in the net profit
margin suggests that the actual output of BHF in converting its total assets into cash has
decreased over the defined duration.
Current ratio: One of the most relevant types of liquidity ratio is the current ratio. Not only
does it act as a critical financial indicator, this also helps both corporations and shareholders to
make well - informed decisions. To best explain how this basic liquidity ratio is useful to
consumers, almost as much as the current sense of the ratio should be understood. The current
ratio has two main elements, respectively current assets and current liabilities. Current assets are
simply savings which can be quickly turned within the first year into cash equivalents. The
current ratio in three year near to ideal ratio which 2:1 but effective performance in the year of
2017 but in 2018 and 2019 continues decreasing the ratio.
Debtor’s collection period: This ratio measures how fast the money from the business is
bound up in consumer credit. It allows the study of the list of receivable accounts, but this isn't
always the same as that of supply of payment given to clients. The 'performance' of such
receivables can be measured by observing payment period. An 'efficiency ratio' is the Debtor
Collection Period that indicates it shows a company's effectiveness. As profitable firms are
typically more successful, effectiveness and efficiency are related. Growing market has an
average collection duration, but usually 10 to 15 days can trigger concern about the longer
repayment term. That ratio gives some insight into your organization. You would also need to
value all the partnership assets and measure the other profitability ratio in order to assess the
corporation's complete financial results.
As listed in the table, BHF's debt collection duration is 68 days and 73 days in 2017,
2018 and 2019 appropriately, indicating an increase in the billing cycle that is not a reliable
indicator for the company as the organisation requires more money in 2019 than in 2018 to 2017
recover the sum of accounts receivables. It may contribute in an adverse capital investment role

within the company. The increase in this percentage can also explicitly influence corporate
entity's short-term liquidity position.
Creditor’s payment period: Payment period of creditors is a concept that specifies the
duration (in weeks) over which unpaid current liabilities (the company uses global trade credit)
exist. An metric calculates the average time a business to resolve its debts (accounts payable)
with trade suppliers. Therefore, it offers, among several other items, data on payment patterns
and even whether a company takes full advantage of the abundant credit terms. That is, when we
don't pay too early, in other terms.
The ratios recorded by BHF show that the collections periods of the creditors: 128-days
and 43-days throughout 2019 and 2018, 2017 respectively, suggesting a high pause in the
creditors' payment period. This rising pattern and over time period shows that during that time
period, the ability of the corporate company to make reimbursements to its lenders has
diminished. This spike in the duration suggests that, in a quick interval of time, the business does
not provide sufficient or fair funds to pay creditors, indicating an oppressed liquidity status. Also
in business, when a company makes late payments to its vendors, it may also affect the
reputation of the business entity, that may lead to loss of support for main suppliers.
Efficiency ratio: Efficiency ratios also consider the time it takes businesses to receive
revenue from consumers or, in other terms, sales, the time it would take businesses to turn asset
into throughput. Also referred to as operation ratios, productivity ratio shows how effectively
businesses use their assets to produce profits. Organizations utilize these measures to help boost
the company, and also potential investors and lenders who aim at the firm's financial activities.
Ratios of productivity go hand in glove with levels of productivity. They become successful
quite often when businesses are productive with their capital.
TASK 3
Explain Accounting Ratios and their importance in Business
Accounting ratios represent a wider variety of ratios used among auditors that serve as
distinct metrics that in the financial statements of a business assess profitability, liquidity, which

future financial pressure. The ratios are being used to coordinate and detect problems or
accomplishments inside a given time span by investors and corporate practitioners. Accounting
ratios are mostly measured quarterly or monthly, and for different sectors, liquidity sources are
more significant. The inventory turnover ratio, for instance, would be dramatically relevant to a
supermarket and to a small consulting firm of about no importance.
On the basis of financial statements, any company will assess its productivity and efficiency.
While productivity can be improved efficiency in financial reports, with the aid of accounting
ratios, the organization’s effectiveness can be understood. Thus the, the importance of ratio
analysis should not be ignored by companies. In assessing the company's financial position, the
correlation or partnership between one financial data set and the other improves. Analysis of the
ratio is conducted to validate how well the business delivers with those in the industry and also
to assess the actual output of a business in compare to earlier periods. Here have been a few
more explanations for the value of accounting ratios.
RECOMMENDATIONS
1. We campaign for and for communities impacted by cardiovascular and circulatory
disorders, as the nation's heart charity. By actually listening, collaborating closely, and
dreaming big, we build new ways of addressing their needs. Throughout the nation, this
one pioneering area of analysis transformed different structure of the board. This is the
fantastic tale of the impact that high-quality studies can create. We have an outstanding
job system that offers tangible benefits. So far, we have to tell the tales of our
performance.
2. The approach of "We fight per each heartbeat" places the role of the BHF as a "research-
driven charity" at the core of its strategies. BHF executive chairman Simon Gillespie
acknowledges that the organisation was not as great as it should have in hearing the tale
behind the positive report.
3. The monitoring needs of the BHF have been well served by MyMetrica, the interactive
web tool of Metrica that enables users to access assessment information at any time and
from every internet connexion. MyMetrica allows consumers to investigate and cross -

check their own data within minutes, creating tables and graphs. The online service of
Metrica helped the team to identify the strengths and weaknesses in a timely manner and
to generate regular updates to evaluate the output of various problems. Countries and
unique job candidates / areas. Relevantly, MyMetrica has allowed the BHF to assess the
strategy's total overall performance.
4. From the ratio analysis it is recommended that record all the transactions in the journal
book and get right performance changes of company that present effective activities.
CONCLUSION
As per the above report it has been concluded that development of a population's wealth,
finances, sales, and expenditures, business enterprise, etc. In developed countries, economic
management remains a major concern. In particular, economics can be subdivided into
economics and finance, that reflects on the conduct of the society of the whole of the, and
econometrics, that relates to personal individuals and enterprises. Different accounting ratios
present all the financial changes in the company over 3 years. It is important for business and
noted all the changes of business.

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