Financial Management: Valuation and Capital Structure

FINANCE MANAGEMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
CONCLUSION................................................................................................................................1
REFERENCES................................................................................................................................2

INTRODUCTION
Financial management is used but organisations for recording the transactions and for
managing the finance. Financial management plays a very crucial role in organisation as it makes
available the funds required for running the business successfully. There are various sources of
finance that are available through which companies can raise funds. Financial management helps
in deciding and raising funds through best available options to the company. This report will
provide understanding abut the various concepts of financial management via numeric examples.
2.1 Financial Analysis
a) Assessment of financial and operating performance of BAE systems plc for the year 2018.
BAE Systems Plc
Particulars Formula 2018
Profitability Ratios
Return on capital
employed
Net operating
profit/Employed Capital 7.93%
Employed Capital
Total assets – Current
liabilities (24746-9307) 15439
Net operating profit 1224
Return on Equity
Net Income / Shareholder's
Equity 18.39%
Net Income 1033
Shareholder's Equity 5618
Gross profit margin
Total Sales – COGS/Total
Sales 7.77%
COS 15514
Sales 16821
Operating profit
margin
Operating Income/ Net
Sales 7.28%
Operating income 1224
Revenues 16821
Assets Turnover Sales / Net assets 299.41%
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Sales 16821
Net assets 5618
Liquidity Ratios
Current assets 9576
Current liabilities 9307
Inventory 774
Quick assets 8802
Current ratio
Current assets / current
liabilities 1.03
Quick ratio
Current assets - (stock +
prepaid expenses) 0.95
Efficiency Ratios
Inventory 774
Trade Receivables 5177
Trade Payables 7740
Days 365
COS 15514
Sales 16821
Inventory days Inventory/COS*365 18.210
Debtor days Debtor/ Sales*365 112.34
Creditor days Creditor / Sales*365 167.95
Investor Return
EPS
Total Earnings/
Outstanding shares
Total Earnings(post
tax) 1370
Outstanding Shares
(in millions) 3192
EPS 0.429
Gearing Ratio
Long-term debt 5050
Shareholder's equity 5618
Debt-equity ratio 0.90
Interpretations
Assessing the above financial statement of the company it could be interpreted that
financial health and positions of BAE Systems is having sound financial health and position. The
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