Economic and Financial Management: Financial Ratios, Strategic Decisions, and Impact of Economy on Business

Economic and
Financial
Management

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK...............................................................................................................................................3
1. Calculate and Analyse the Financial ratios........................................................................3
2. Identify, explain and justify three strategic decisions which would be helpful for financial
analysis of the company.........................................................................................................6
3. Determine and measure the impact of the economy on the business.................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Economic and financial management is the study in which managing the financial and
operational activities of the organisation are followed (Almeida-Filho, de Lima Silva & Ferreira,
(2021)). This report contains the computation of financial ratios of Octopus Energy, founded in
the year 2016. It is a British company that produces energy by considering sustainable goals. The
main aim of this company is to achieve net-zero carbon emission and operate the activities of the
organisation considering the environmental protocols. It also includes the analysis of ratios of the
last three preceding years which assist in knowing the deviations of the enterprise. Ratios help to
know the operational efficiency of the firm. By analysing ratios, it can predict the risk within and
outside the organisation. The ratios are divided into many categories such as liquidity ratios,
efficiency ratios and solvency ratios. Every organisation conducts its activities by focussing on
the key strategic decisions which are taken by the top-level managers. These decisions help to
forecast the future revenue and external factors which impact the working of the organisation
TASK
1. Calculate and Analyse the Financial ratios.
Liquidity Ratio: This ratio is used to assess the paying capacity of the firm with raising
furthermore capital to pay off its debts. This ratio involves the current assets and current
liabilities out of the balance sheet. This ratio includes the current ratio, Liquid Ratio and Acid
test ratio (Belhadi et.al., (2021)).
Current Ratio: In the following ratio, the company can determine that the assets are how
many times as of the current liabilities. That means the more the current assets, the more will be
ratio.
Current ratio = Current Assets / Current Liabilities
2019 = 124684 / 143229
= 0.87 times
2020 = 390308 / 364421
= 1.07 times
2021 = 369069 / 556276
= 0.66 times