Importance of Accounting and Financial-related Activities in a Company

This research evaluates the significance of accounting and financial-related activities in a company. It includes a detailed analysis of Panini Ltd. and its financial ratios such as gross profit, operating profit, return on capital employed, current ratio, quick ratio, inventory turnover ratio, and debtor's collection period. The research suggests that the company needs to focus on reducing operational costs to improve its financial performance.

Financial decision
making

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Evaluate how important accounting and financial-related activities, operations, and duties are
in a company................................................................................................................................1
TASK 2............................................................................................................................................5
Calculate a number of different ratios and then describe your observations...............................5
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
The following research gives an outline of how finance and accounting functions in a
company (Al Ahbabi and Nobanee, 2019). It assists in identifying the most critical aspects,
functions, and obligations in a firm. After there, the examination moves on to Panini ltd, an
intermediate company that focuses in making bread for UK stores. As a consequence of its
existing situation, it plans to expand its operations and capacities in the coming years. It also
helps to understand the significance of the financial ratio listed below that provide a more
complete, precise, and cost-effective image of the company throughout period. It also helps in
the identification of other income streams which can be utilised to assist the business grow and
flourish in the near future.
TASK 1
Evaluate how important accounting and financial-related activities, operations, and duties are in
a company
Accountancy and financial aspects are ideas which deal with cash, commerce, and
administration, with a focus on technical positions in those fields. This is an element that is
linked to the data that is important for analysing the parts of the company that assist in the
exclusive issues of the firm and its financial finances (Aşcıgil, 2017). Accountancy and finances
are seen to be particularly effective in assessing a company's fiscal progress as well as its
budgetary viability. It is also thought to be the variables that assist management in creating good
investment decisions. The following is a list of Panini Limited's accountancy and financial
responsibilities.
 Evaluating fiscal results: This is thought to be the aspect that allows the organisation to
comprehend its effectiveness and advantages. This is often said to be the approach that
permits a company to succeed while simultaneously increasing market share.
 Contrast to rivals: The group's central emphasis is constantly on methods to achieve a
commercial edge. Accountancy and finances serve an important part in this since these
assist businesses in comparing their personal fiscal results to that of competitors. This is
useful to the company in terms of understanding the elements that are accountable for
overseeing the aspects that are important for the company’s development.

 Monitoring activities: Such entities are thought to be the driving force behind the
company's ability to keep track of dealings (Barua, Koh and Mitchell, 2018). Activity
monitoring is also thought to aid the firm in maintaining track of the inlet and outlet of
finances, goods, and other items. It is a highly useful approach for this company to
maintain information connected to consumers, vendors, and investors. Activity
documentation additionally aids the company in addressing issues that may occur amid
set of regulations challenges.
 Taxation Filling: A production company that deals with a variety of operations is bound
to have significant taxation obligations. It is critical to have accountancy and financial
skills in terms of paying taxation correctly. Those are all considered to be the most
important determinants for a company's ability to settle taxes effectively while avoiding
regulatory complications.
Each of these divisions are renowned for cooperating in addition to understanding the firm's
advantages, which assist in the administration of monetary activities (Cai, 2020). The elements
that are believed to be reasons that offer the firm with an improved teamwork of revenue and
spending that really is capable of ensuring conformity with laws and regulations in order to
present the shareholders with the necessary data to improve their understanding. The
accountancy and financial division's role in the production industry also includes identifying the
elements that contribute to the production of benefits which could aid in the administration of the
corporation's resources and obligations. The following are the different accountancy and
financial functions:
Financial Division: This is the corporate division in charge of receiving and handling funds
on account of the company (Esmail Alekam, 2018). The financial section employed to keep track
of revenue and expenses, allowing the company to run smoothly sans interruptions. The
division's primary task is to obtain funds in addition to run the company's operations.
 Payout function: A payout is the transfer of a portion of a business earnings to its
investors. If the corporation makes a gain in the present term, it tends to distribute
dividends. Once the division has been proclaimed, the company should reward its
investors, incentivizing investors to contribute further. For instance, if Panini Limited
makes a revenue in 2020, the earnings should be distributed to investors in proportion to

their acquired units. By paying the dividends on schedule, the firm would be able to
attract new investors (Goldstein, 2017).
 Function of working capital: Working capital is described as the quantity utilised by a
business to meet the shorter run obligations that must be paid inside a year. The balance
among current holdings and current debts is used to estimate working capital. This
financial component assists the corporation in purchasing goods, paying short-term
obligations, and covering minor expenditures. It can assist the organisation in
determining the short-term expenditures that must be paid in the present fiscal year. This
is the most crucial role because it aids the firm's seamless marketplace operation (He,
2016).
 Function of outlay: The link among the investments and the cost of borrowing is known
as the investing feature. There is a fundamentally unfavourable link among borrowing
costs and investing. As a result of this adverse association, the link between it tends to be
of a downward trend and therefore has a direct impact on the success of the firm in the
long run scenario. This financial activity assists the business in holding and managing
assets for the goal of investing. The stated organisation could engage in stocks,
investments, and temporal securities, among other things. However, occasionally the
organisation doesn't really make much money by engaging in any of these that has a
negative impact on the company's revenue.
 Funding function: This is a critical aspect of the finances division's role in managing the
company's finances (Kautsar and Asandimitra, 2019). The primary focus of this operation
is on the management and budgeting of monetary backing. For instance, if Panini
Limited does not have adequate financial activities, the business would not be able to
manage its assets well. By effectively handling the firm's resources, they can gain further
in the industry.
Accountancy Division: The accountancy section is responsible for keeping track of
payments for products and activities and ensuring that the company pays its bills on schedule.
This is mostly used to maintain track of the payments done by the organisation, which may
involve stock, wages, as well as other variable costs.
 Function of taxation: Taxations are described as mandatory contributions made by
organisations, as well as additional funds collected and specified by legislation. The

corporation should submit the payments on advance or face legal consequences for not
paying the taxation on deadline (Kirbiš, Vehovec and Galić, 2017). The taxation function
assists the firm in comprehending the consequences and shortcomings associated with
accounting. That also isn't a positive idea because paying taxation to the authority reduces
the corporation's financial performance. Panini Limited, for instance, should respect the
taxation function and submit property amount whenever due; else, the business will have
to suffer a fine.
 Auditing Functioning: The auditing functions are the primary accountancy function
which assists the organisation in examining and verifying its accrual transactions. This
assists the firm in determining whether the funds are appropriately and properly reported.
Domestic and outside examiners have to be present in order for the corporation's fiscal
documents to be audited. This aspect aids the organisation in detecting financial
misconduct perpetrated by corporate employees. This is good in certain ways, but still it
necessitates a great deal of adherence to laws and standards so as to have audits in the
firm.
 Monetary accountancy function: The major role of any organisation is monetary
accountancy (Koto and Pulungan, 2017). This assists the corporation in properly
collecting information, monitoring, keeping, evaluating, summarising, and disclosing
commercial activities. Monetary accountancy is employed to perform a variety of tasks,
one of which is to create the finest information for the organisation. This data aids the
firm's executives in making the best choices, budgeting, and measuring results. The
referenced organisation, for instance, should maintain adequate accounting in order to
take sound judgments in the foreseeable.
 Managerial accountancy function: It assists the firm's executives in making the optimal
choices possible. This accountancy role entails locating, evaluating, and understanding
data for executives in order to assist people in achieving their objectives. The basic goal
of managerial accountancy is to continue the firm running at profits. Administrative
personnel, who once had immediate influence over the activities of the organisations, are
in charge of such (Kroos, Schabus and Verbeeten, 2018). However, if the auditors do not
plan adequately, the organisation could have difficulties in providing decent managerial
accountancy elements.

TASK 2
Calculate a number of different ratios and then describe your observations.
Gross Profit:
Gross profit margin = Gross Profit / Net sales * 100
Year 2018,
= 3500 / 10000 * 100
= 35%
Year 2019,
= 3265 / 11500 * 100
= 28.39%
In 2019, the gross income margin decreased from 35% in 2018 to 28.39% in 2019. It
could be argued that rising operational costs have resulted in lower earnings (Pelekh, Khocha
and Holovchak, 2020). During this time, the corporation's profits have climbed, however the
price of products provided has risen quicker than the rise in profits. To improve the firm's gross
income margin, operating costs must be reduced.
Operating Profit:
Operating profit margin: operating profit / Net sales *100
Year 2018,
= 2765 / 10000 *100
= 27.65 %
Year 2019,
= 2305 / 11500 *100
= 20.04 %
The company's net income has declined over the years as running costs have increased. It
also demonstrates that the organizations' effectiveness is restricted. The management must
focus on its operational practises in order to reduce operational costs (Perçin and Aldalou, 2018).
The company must take optimal usage of its assets in terms of reducing manufacturing as well
as operational costs.
Return on Capital Employed:
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 %
The ROCE used by businesses was 31.58 percentage in 2018, but it has dropped to 22.57
percentage in 2019. The rise in expenditures is responsible for the shift in income. It has an
impact on the facility's and company's performance (Quijano-Sanchez and Liberatore, 2017). To
improve its efficiency, the company must cut costs, leading to a better yield on invested
resources.
Current Ratio:
Current ratio = Current assets / Current liabilities
Year 2018,
= 1175 / 970
= 1.21:1
Year 2019,
= 2110 / 512
= 4.12:1
The ratio of this company has increased from the previous year's figures. The current
assets of the company had almost increased, while the current debts had already been cut in two.
The current ratio of the corporation reflected the consequence of all this (Roychowdhury, Shroff
and Verdi, 2019). The current ratio of a corporation is 2 times the ideal percentage, meaning that
the business is already operating effectively in terms of short-term needs and that no additional
improvements in the current ratio are required.
Quick Ratio:
Quick ratio = Current assets – stocks / Current liabilities
Year 2018,
= 1175 – 350 / 970
= 0.85:1
Year 2019,

= 2110 – 674 / 512
= 2.8:1
Because of the obvious drop in debts, the acid test ratio has risen in compare to the past
term (Samo and Murad, 2019). The company's stock gone up in value over the preceding term,
that could be decreased in an effort to improve the quick ratio.
Inventory turnover ratio:
Inventory turnover ratio = Cost of goods sold/ Average inventory
Average inventory= opening stock + closing stock/2
Year 2018,
= 6500 / 512
= 12.6 times
Year 2019,
= 8235 / 512
= 16.08 times
The corporation is permitted to use its inventories on a rotational basis and thus was 12
times annually 2018, and 16 times in 2019 (Simpson and Clifton, 2017). This was based on the
corporate proportion. Increased selling of the company and its goods could help to boost the
proportion.
Debtor’s Collection Period:
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
The mean duration to recover receivables has decreased over the previous term, as per
projected ratio. It has an adverse effect on the functioning of the company (Sunder, 2016).
Creditor’s payment period:
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 calculations provided, the number of days in 2019 decreased from 56.6 in 2018 to
21.94 in 2019, indicating that the borrowing duration is doing worse than even the previous year.
This year's goal focuses on a company's complete productivity (Valizadeh Larijani and
Behbahaninia, 2019). Since a higher number of payment phases indicates a higher level of
performance in a business, whilst a lesser number of payment intervals indicates a reduced level
of performance.
CONCLUSION
Finance and accounting systems are important to a firm's performance, as the data above
illustrate. In terms of enhancing company productivity throughout time, it has been assigned a
variety of jobs, functions, and duties. It also assists in the assessment of existing efforts and the
forecasting of potential risks. Many of the pre-built indicators are meant to compare present
company success to that of past years. As a result, it acts as a benchmark for investors and
companies to determine if the firm is on track to accomplish its objectives and, if not, what
improvements are necessary to boost efficiency. It significantly adds to the revenue and growth
of the organisation. It's a means of assisting in the development of innovative ways to generate
and obtain funds.

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