Finance for Managers: Evaluating Financial Performance and Stakeholder Needs

Finance for Managers

INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
TASK 1............................................................................................................................................1
1. Determined the financial information that needed and assess its validity ..............................1
2. Analyse different financial document and information which helps in formulating
conclusion about financial performance and need of stakeholders ..........................................4
3. Conduct comparative analysis of financial information and data ...........................................5
4. Critically review and question financial data and information..............................................10
TASK 2..........................................................................................................................................11
1. Identify how budget can be produced taking into account financial constraints and
achievement of targets and accounting conventions..................................................................11
2. Be able to assess a budget......................................................................................................12
2. Identify how a budget for a complex organization can support organizational objectives and
targets.........................................................................................................................................13
TASK 3..........................................................................................................................................14
1. Identify criteria by which proposals can be judged ..............................................................14
2. Critically analyse the viability of a proposal for expenditure ...............................................16
3. Identify the strengths and weaknesses of a proposal and give feedback on the financial
proposal .....................................................................................................................................17
4. Analyse the viability of a proposal for expenditure...............................................................17
CONCLUSION..............................................................................................................................18
REFERENCES .............................................................................................................................19

INTRODUCTION
Finance is the management matters about the administration, development, and analysis of
money and assets (Begkos, Llewellyn and Walshe, 2020). Basically, it addresses the issues of
how and why an person, corporation or state receives the funding necessary which is called
capital in the business sense as well as how it spend or start investing to maximise company's
earnings. Mangers of the company required each and every detail of company’s finances to make
effective decisions which helps in improving its operational efficiency as well as effectiveness.
Pfizer Inc Company is selected for better underrating and it is American based Pharmaceutical
Corporation and it does headquarter situated in New York. This assessment covers the several
topics such as evaluate financial information by using financial documents, evaluation method
and how budget prepared by using several financial constraints.
MAIN BODY
TASK 1
1. Determined the financial information that needed and assess its validity
Financial information of a company determined with the help of ratio analysis which help
the managers to evaluate data which allow them to make strategic decisions (Brealey and et.al.,
2018). By using financial information of Pfizer Inc, manager calculates the following ratios
which are as follow:
Profitability Ratio:
Formula:
Gross profit margin = Gross profit / Total revenue * 100
Item 2018 (‘000) 2019 (‘000)
Gross profit 42399 41531
Total revenue 53647 51750
Gross profit margin 79.3 % 80.25 %
Formula:
Net profit margin = Net income /Total revenue * 100
Item 2018 (‘000) 2019 (‘000)
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Net Income 11153 16273
Total revenue 53647 51750
Net profit margin 20.78 % 31.44 %
Efficiency Ratio:
Formula:
Assets turnover ratio = Revenue / Total assets
Item 2018 (‘000) 2019 (‘000)
Revenue 53647 51750
Total assets 159422 167489
Assets turnover ratio 0.33 0.30
Formula:
Inventory turnover ratio = COGS / Inventory
Item 2018 (‘000) 2019 (‘000)
COGS 11248 10219
Inventory 7508 8283
Inventory turnover ratio 1.49 1.23
Liquidity Ratio:
Formula:
Current ratio = Current Assets / Current liabilities
Item 2018 (‘000) 2019 (‘000)
Current assets 49926 32803
Current liabilities 31858 37404
Current Ratio 1.56 0.87
Formula:
Quick Ratio = Quick assets / current liabilities
Item 2018 (‘000) 2019 (‘000)
Quick assets 42418 24520
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Current liabilities 31858 37404
Quick Ratio 1.33 0.65
Stability Ratio:
Formula:
Equity ratio = Shareholder’s total equity / Total assets
Item 2018 (‘000) 2019 (‘000)
Shareholder’s equity 63407 63143
Total assets 159422 167489
0.39 0.37
Formula:
Debt ratio = Debt / Equity
Item 2018 (‘000) 2019 (‘000)
Debt 63806 66738
Equity 63407 63143
Debt ratio 1.006 1.056
Investor Ratio:
Formula:
EPS Ratio = Net income / Number of shares outstanding
Item 2018 (‘000) 2019 (‘000)
Net income 11153 16273
No of outstanding shares 486 485
EPS Ratio 22.94 33.55
Formula:
P/E ratio = Market price per share / EPS
Item 2018 (‘000) 2019 (‘000)
Market price 37.66 42.88
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EPS 22.94 33.55
P/E ratio 1.64 1.27
Cash flow: From the cash flow of the company it has been analysed that at the end of
year 2018 the closing balance of cash was 1225 and for the year 2019 it was 1350. It
demonstrates that the company's financial viability is increased for the year.
Business valuation: By evaluating the performance of the company with the help of
annual report it has been analysed that the value of business or its equities for year 2018 was
63758 which was decreased up to 63447 in 2019. It shows that the figures are not changed very
much that demonstrates that the financial viability is almost same for the year 2019.
Financial stability: From the consolidated statement of comprehensive income of the
company it has been analysed that in year 2018 net comprehensive income of the organisation
was 9198 dollars. For year 2019 it was 15908 which shows that financial viability of the
company is high as the profits for the year are increased in 2019.
Sales: The income statement of the company is reflecting that for year 2018 the value of
sales was 53647 and in year 2019 it was decreased up to 51750. It demonstrates that the revenues
generated by the enterprise during the year were very low as compared to the previous year that
reflects decreased financial viability.
Dividend: The cash flow statement of the enterprise is showing that in year 2018 total
dividend which was pad by the organisation in cash was around 7978 and the value of it was
increased in 2019 up to 8043. It reflects that in year 2019 the profits of the entity were very high
that enhanced the value of dividend that paid to the investors. It also demonstrates that the
viability of the company is very good that results in enhancement of the performance.
Capital structure: The combination of all the assets, liabilities and equities is known as
capital structure. For year 2018 the assets of the organisation were valued at 159422 which were
increased in 2019 up to 167489. Apart from this, liabilities for year 2018 and 2019 were 95664
and 104042 respectively. Additionally the value of equities for 2018 were valued at 63758 and
for 2019 their value was 63447. The capital structure of the company is reflecting that the
business has improved its performance but the value of equities is decreased in 2019 as
compared to the previous year.
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