Financial Decision Making for Business Growth and Profitability

This paper evaluates accounting and financial processes to make financial choices for a corporation. Learn about financial alternatives for business growth and profitability and how to calculate ratios. Subject: Finance, Course Code: N/A, Course Name: N/A, College/University: N/A

FINANCIAL
DECISION MAKING

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Given the importance of accounting and finance divisions.........................................................1
Financial alternatives for business growth and profitability........................................................3
TASK 2............................................................................................................................................4
Calculating ratios.........................................................................................................................4
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
This paper evaluates accounting and financial processes to make financial choices for a
corporation (Abadie, Brown and Fisher, 2019). Finance management take financial decisions.
The finance and accounting operations of Panini plc are analysed in terms of achieving future
objectives and desires. This study additionally mentions cash alternatives which contribute in the
company's capital growth. Panini plc's performance is measured using financial proportion.
Ratios are by far the most dependable way to evaluate a company's profitability. To estimate
production, ratios across two years of financial statements are employed.
TASK 1
Given the importance of accounting and finance divisions
Accounting Section: The accounting unit's principal tasks involve keeping record of all
internal corporate activities. This operation includes commerce transactions and collects, product
procurement and sale, lending repayment, and borrowers gathering. Accounting analyses
financial information and generates revenue statements which show the company's financial
status.
Managerial tasks: The managerial job contributes to the creation of company evaluations
which look at emerging developments and selling projections. Decision-making is aided by
managerial activities. Management aids in the production of inventive goods and assesses their
effectiveness by calculating expected costs. These are some of the aspects listed:
 It comprises acquiring and analysing information regarding everyday routines.
 It aids in determining the participation rate and income of the company, and also
providing ways of improving the company's fundamental performance. It assists in
estimating higher dividends so that the most profitable proposition can be selected
(Andarsari and Ningtyas, 2019).
Financial unit: The basic function of accounting is to evaluate financial transactions and
turn them into pooled business statistics. The technique of tracking all financial operations in
intended to assist in future decision-making and asset maximisation assessment is known as
financing accounting. The relevant operations are taken into consideration:
 The duty of budgetary accounting is reviewing and producing financial statements which
appropriately depict the corporation’s financial situation.

 A business supervisor's purpose is to cut charges and expenses in terms of enhancing a
firm's financial performance.
Tax tasks: Tax aspects are accounting approaches which concentrate on payments and tax
forms rather than overall revenue statements. Whenever it comes to tax documents,
administration should follow all applicable legislation and regulations. The accompanying
characteristics are described:
 This position assists management on how to execute operations such that the company
will never have to pay more taxes and can increase profits.
 Income, contributions, earnings, shortfalls, and write-offs are all factors considered into
view throughout a tax audit.
Auditing tasks: It has to do with verifying the accuracy of a company's financial records.
Auditing helps in the uncovering of financial irregularities inside a company. The activities listed
below are outlined:
 The majority of auditing operations are governed by accounting and fiscal accounting
agencies (Barr and McClellan, 2018).
 The investigator should assure privacy protection and accurate stock evaluation
throughout interior evaluation function.
 The auditing feature is crucial for establishing the length and breadth of the impartial
evaluation method.
Department of Finance: It is a crucial part of a firm which works with salaries and
budgeting. It additionally provides precise statistics to assist in decision-making. This
department assists in the administration of the company's revenues and expenses.
Role of investing: The function of the fiscal controller is to decide where the company's
assets must be allocated. This is an important task that perhaps the company must complete in
addition to achieve maximum its resources and income.
 To increase a company's net worth, shareholders should spend in cutting-edge technology
and research which would give long-term benefits. Financing decisions are made after a
comprehensive review of the firm in which the cash will be invested for a greater yield.
 Whenever a company chooses to invest in longer run assets, it takes into account its
revenue, scalability, and growth, and also the impact on competitive risks. Shareholders'
primary aim is to optimize their return on investment.

Dividend payouts tasks- It serve the purpose of distributing a part of the firm's profits to its
stakeholders. As a result, this may be seen as a manner of repaying investors for their belief in
the company. A significant part of business concerns is the decision to give a dividend (Chen,
Tan and Fang, 2018).
 Both shares and preferred shareholders receive earnings. Payouts are paid out to benefit
shareholders and to improve the corporation's reputation.
 The dividend is first distributed to preferential shareholders, then if there is enough left
over, it is distributed to equity shareholders.
Working Capital: This metric represents the difference between current obligations and
current holdings. It additionally covers all day-to-day transactions like share purchasing and
selling, along with mortgage write-offs due within a year. This tool can be used to determine the
company's shorter run financing capability.
 The company in this example uses a finite amount of funds to grow and extend its
activities.
 The firm's main goal is to increase profits by effectively controlling expenses and thereby
conserving funds.
Finance tasks: This result is due to improving equipment efficiency whilst reducing losses.
This function assists with the monitoring and administration of financial holdings. It also assists
in the formulation of monetary decisions.
 This job entails obtaining initiative capital and keeping proper accounts of loans and
collections.
 The fundamental responsibility of a financial is to prudently increase funding for
expenditures, operations, and investments. Investment planning decreases the risk of a
shortfall.
Financial alternatives for business growth and profitability
There are numerous types of financing alternatives for both brief and extended term
projects (Eichelberger, Mattioli and Foxhoven, 2017). A company's funding sources include
equity, loans, marketable securities, loans, and debts. The main factors are investigated:
Credits and advances: Credits can be short-term or long-term depending on the cardholder's
time frame. Borrowings are typically acquired for the purpose of business progress and growth.
They could be classified into two groups:

 Loans taken out on the basis of specific resources are known as security loans. If the
company is unwilling to reimburse the lender, the banker may seize the company's
resources to cover the loan.
 Unsecured loans are typically authorized based on a user's reputation, and the account
balance is significantly lower than covered loans.
Public sourcing- It is when a small amount of funds is raised from a large number of people
in effort to expand involvement. This is a vital source of revenue for an entrepreneur.
 Public raising is a long-term funding strategy which includes selling sector shares to
generate funding. This company exchanges money for a piece of its shares.
 Firms usually pursue public acquiring funding from a variety of other organisations to
supplement funds for their company practices.
Cash advances and credit card: Each of those facilities are provided by banks and other
financial institutions. Credit cards are used to make these purchases, with the possibility of
carrying back the amount later. It allows consumers to borrow money to acquire stuff. The card
owner will face serious consequences if the payment is not completed (Idris, Krishnan and Azmi,
2017). So when current bank balance reaches zero, the overdraft alternative on either end offers
liquidity. It allows the company to refund expenses even if the account is exhausted.
 Credit cards have such a greater fee % and are a firm's shorter-term financial strain. The
client financial firm sets an engagement limit for every credit card.
 A shorter-term borrowing is known as an overdraft. Although it has a low proportion fee,
there seems to be a withdrawing limitation.
TASK 2
Calculating ratios
Gross profit margin: The gross profit margin is used to assess a company's profitability.
It depicts the amount of money left behind following spending for staff and basic materials in a
given period of time, often known as the cost of brands delivered.
Gross Profit Margin = Revenue – COGS / Revenue * 100
Year 2018
= 3500 / 10000 *100
= 35%

Year 2019,
= 3265 / 11500 *100
= 28.39%
The gross profit percentage is used to calculate a company's operating revenue once all
necessary adjustments have been completed. The higher the gross revenue margin, the further
efficient the management. The financial statistics of Panini Plc show that the company is
possibly more efficient in 2019 than what it was in 2018 (Keyser and Duvenhage, 2019).
Operating profit margin: This would be the revenue which stays after operating
expenses have been deducted from revenues, and it is critical to calculate it accurately and
precisely because it could add worth to the company in the extended run.
Operating profit margin: operating profit / Net sales *10
Year 2018,
= 2765 / 10000 *100
= 27.65 %
Year 2019
= 2305 / 11500 *100
= 20.04
A company's operating profit ratio shows its efficacy, or how well its operations
contribute to profit. It's used to figure out if a company's finances are sustainable. Panini Plc's
income in 2018 were greater than in 2019.
Return on Capital Employed- ROCE is a metric used to assess a company's efficiency
and profitability. It helps investors determine if a company is suitable for investing.
ROCE = Earnings before interest and tax / capital employed
Capital employed = Fixed assets + working capital
Year 2018,
= 2765 / 8755
= 31.58 %
Year 2019,
=2305 / 10211
= 22.57 %

A higher yield on assets invested is generally preferred since it indicates that the
organisation will make more money over the fiscal term. Panini Plc return on capital was greater
in 2018 than in 2019, implying that now the company's capital efficiency declined in 2019
(Killins, 2017).
Current Ratio: It is among the most important and vital aspects since it assesses a
company's ability to return short-term borrowing in a given fiscal process. This ratio is used to
calculate the current assets to current liabilities ratio.
Current ratio = Current assets / Current liabilities
Year 2018,
= 1175 / 970
= 1.21:1
Year 2019,
= 2110 / 512
= 4.12:1
A current ratio of 1 or greater is considered satisfactory, showing that the business can
meet its liabilities. In comparison to 2018, Panini Plc. has become more successful in 2019 by
fulfilling its shorter-term obligations. In 2018, company also kept an outstanding current ratio.
Quick ratio: The acid test percentage measures a company's ability to fulfil most of its
current debts using easily available speedy tools such as cash, generate profits, flexible assets,
shorter-term assets, and current assets that can be easily converted into actual funds. A company
with a quick proportion of one has current holdings equal to current obligations, meaning that it
might begin repaying off current debts without sacrificing longer-term holdings (Ljungqvist,
Richardson and Wolfenzon, 2020).
Quick ratio = Current assets – stocks / Current liabilities
Year 2018,
= 1175 – 350 / 970
= 0.85:1
Year 2019,
= 2110 – 674 / 512
= 2.8:1

Panini plc will not be able to pay its current debts with its current assets in 2018.
Nevertheless, the firm enhances its financial option to fulfil liabilities in 2019 with the help of
quick operations.
Inventory turnover ratio: The inventory turnover ratio reflects how successfully a
company maintains its stocks. Higher inventory turnover rates are beneficial because they
indicate cheaper storage and other holding costs. A lower percentage indicates high inventory,
poor sales, and inefficient inventory management.
Inventory turnover ratio = Cost of goods sold / average inventory
Year 2018,
= 6500 / 512
= 12.6 times
Year 2019,
= 8235 / 512
= 16.08 times
Panini Plc. becomes more effective at managing its stock as duration goes by. In 2018, it
was significantly lesser than in 2019 and thus by this analysis it can be said that the firm has to
take immediate measures so that it can help the company to sustain and survive in the longer
term so that it can stay well ahead of all its competitors in the market in which it is operational
and thus can subsequently grow as a firm overall.
Debtor collections period: This percentage determines how much it takes a business to
collect all of its collections. The smaller the receivables duration, the better the efficiency, or
vice versa. It assists in determining the profitability and efficiency of the company.
Debtor collection period = 365 / sales on credit / accounts receivable
Year 2018,
= 365 / 10000 / 760
= 27.74 days
Year 2019,
= 365 / 11500 / 1340
= 42.54 days

According to the preceding mentioned financial proportion for the years 2018 and 2019,
Panini Plc. required lengthier to collect collections in 2019 than in 2018, suggesting a decrease in
the company's performance throughout time (Mishra, 2021).
Creditor's settling period: This percentage represents the time it takes to pay off a
credit. It will be beneficial to the company if it took prolonged.
Creditor's collection period = 365 / cost of sales / trade payable
Year 2018,
= 365 / 6500 / 920
= 51.6 days
Year 2019,
= 365 / 8235 / 495
= 21.94 days
As per the stated ratio for the years 2018 and 2019, Panini Plc's creditor settling term has
substantially deteriorated in 2019, showing a drop in efficacy over 2018. As a consequence, the
company must improve its operating efficiency, which will benefit the company in the longer
run.
CONCLUSION
It can be concluded from the above that the firm which is mentioned above Panini Plc., as
per the data supplied in this study, uses a range of strategies to improve its operating
effectiveness. The paper details Panini Plc's accounting and finance department operations, and
also the different forms of financing it uses to carry out its business operations. The efficiency
percentage is used to assess the company's production in 2018 and 2019 in order to find
expansion opportunities and corrective actions. Panini Plc's remedial action aim to attract new
investors to the company, which helps to maintain income and solvency.

REFERENCES
Books and journals
Abadie, R., Brown, B. and Fisher, C. B., 2019. “Money Helps”: People who inject drugs and
their perceptions of financial compensation and its ethical implications. Ethics &
behaviour. 29(8). pp.607-620.
Andarsari, P.R. and Ningtyas, M.N., 2019. The role of financial literacy on financial behavior.
Journal of Accounting and Business Education, 4(1), pp.24-33.
Barr, M.J. and McClellan, G.S., 2018. Budgets and financial management in higher education.
John Wiley & Sons.
Chen, B., Tan, Z. and Fang, W., 2018, November. Blockchain-based implementation for
financial product management. In 2018 28th International Telecommunication
Networks and Applications Conference (ITNAC) (pp. 1-3). IEEE
Eichelberger, B., Mattioli, H. and Foxhoven, R., 2017. Uncovering barriers to financial
capability: Underrepresented students’ access to financial resources. Journal of Student
Financial Aid, 47(3), p.5.
Idris, F. H., Krishnan, K. S. D. and Azmi, N., 2017. Relationship between financial literacy and
financial distress among youths in Malaysia-An empirical study. Geografia-Malaysian
Journal of Society and Space. 9(4).
Keyser, N. and Duvenhage, C., 2019. Construct validity of a financial literacy instrument.
Journal of Psychology in Africa. 29(5). pp.460-465.
Killins, R. N., 2017. The financial literacy of Generation Y and the influence that personality
traits have on financial knowledge: Evidence from Canada. Financial Services Review.
26(2). pp.143-165.
Ljungqvist, A., Richardson, M. and Wolfenzon, D., 2020. The investment behavior of buyout
funds: Theory and evidence. Financial Management, 49(1), pp.3-32.
Mishra, S.K., 2021. GMFP Food and Products: Managing Financial Distress. SAGE
Publications: SAGE Business Cases Originals.