Essential Factor of Business

Added on -2020-02-12

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Leading Strategic Decision-Making
Table of ContentsINTRODUCTION...........................................................................................................................1Main Body.......................................................................................................................................1A ) Calculation of ratios: ............................................................................................................1b) Comparison between financial profile of THIS plc and THAT plc on the basis of ratios.....8c) Analysis of suitability for making business merge with other one.......................................10d) Advantages and disadvantages of various financing options...............................................12CONCLUSION AND RECOMMENDATION.............................................................................13REFERENCES..............................................................................................................................15
INTRODUCTIONDecision making process is an essential factor of business through which target getascertain in an effective manner (Goetsch and Davis, 2014). Leading strategic decision making isa process through which management become able to frame their policies according to time byleading it from front. Leaders and management have to analyse all facts and figures of businesswhich are related with that for attain and ascertain targets and goals on time. This report is basedon two entities which are THIS plc and THAT plc, who want to conduct a process of acquisition.Thus, by using their financial information, Expanding business Plc will become able to analysethat which company have good growth rate for merge the business. There will be variousfinancing options are identify which have several advantages and disadvantages which have toget analyse in an appropriate manner. Along with all these things, a proper recommendationsalso get provided by clarifying the overall findings. Main BodyA ) Calculation of ratios: (i)Return on Capital EmployedIt is a ratio which is apply for analysing the financial performance and efficiency of a companywith which its capital get employed (Hacklin and Wallnöfer, 2012). This get calculated withapply a formula which is:Earning before interest and tax/ capital employedLong term borrowings + net assets THIS plcTHAT plc Net assets 27359851ADD: Long term liabilities 96911761Capital employed 370421612EBIT 5134223Return on capital 13.849892008619.54007033131
employed According to the ratio determination it get identify THAT plc have good return on capital whichthey employed. Thus, chances of acquisition is high as compared to THIS plc. (ii)Return on EquityEquity is a company assets or shares which issue by them with a motive to arrange some fund.Thus, ROE is a measure which aid in analysing that how much dollar a company generate withrespect to each of their shareholders equity (Hrebiniak, 2013). Another term for stated return onequity is return on net worth. Formula for calculating the ROE is:ROE = Net Income/Shareholders' EquityTHIS plcTHAT plcNet income3622763Shareholdersequity:Share Capital5575Share Premium Account125133Reserves2555964327359851Return on equity13.235831809928.0479139174Net income of THIS plc is low as compared to THAT plc and thus this impact is easilydetermine on their shareholders equity as well. The return on equity of THIS plc is 13% which isnot high but if the data of THAT plc get underlying then a thing get determine that return onequity is just double of THIS plc. (iii)Gross Profit MarginIt is a sort of model which usually used to identify the health of a company by revealing theproportion which get left after revenue determination with cost of goods sold (Johnson and et.al., 2013). Gross profit= Gross profit / sales *100THIS plcTHAT plcGross profit26445463Sales2771116292

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