Financial Decision Making: Importance of Accounting and Funding Avenues for Company Growth

This study provides an overview of financial and accountancy work in a business, evaluating the importance of accounting and financial-related activities, operations, and duties in a company. It also describes the funding avenues that have contributed to the company's profitability and growth. The study includes the calculation of different ratios and observations. Subject: Finance, Course Code: NA, Course Name: NA, College/University: NA

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
Describe the many funding avenues that have contributed to the company's profitability and
growth..........................................................................................................................................3
TASK 2............................................................................................................................................4
Calculate a number of different ratios and then describe your observations...............................4
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
The study that follows provides an overview of how financial and accountancy work in a
business. It aids in determining the processes, roles, and responsibilities are also most vital in a
company (Abadie, Brown and Fisher, 2019). The investigation then goes on to Panini ltd, a
medium capital firm which specialises in creating bread for UK retailers. It intends to grow its
activities and capacity in the foreseeable future as a result of its current position. It also aids in
comprehending the relevance of the accounting ratios hereunder, which offer a more
comprehensive, accurate, and cost-effective picture of the organisation over time. It additionally
aids in the discovery of extra revenue sources that may be used to help the company develop and
prosper in coming years ahead.
TASK 1
Evaluate how important accounting and financial-related activities, operations, and duties are in
a company
Accountancy is the process of gathering, arranging, and presenting information in a core
location, as well as the recording of big financial activities. Accounting information, papers, and
inspections assist businesses in delivering sufficient funds and unrestricted fiscal advice
(Andarsari and Ningtyas, 2019). It could also be thought of as a method for maintaining accurate
financial records and managing funds. Accountancy's primary goal is to evaluate both individual
and business effectiveness. As a result, it could be employed to calculate productivity
improvements in the sector, and also money influx and outflow during business operations. This
is used by traders to determine whether or not selling things is profitable. Panini Limited exposes
you to a variety of accounting alternatives. Here are a few examples of this:
 Accountancy aids in the appropriate evaluation of Panini ltd., which is vital in ensuring
the firm's long-term viability in a shifting global marketplace.
 Panini ltd must keep financial records and offer a precise and detailed image of the firm's
management in its sector.
Accountancy performs a number of activities that aid in the smooth management of a
company. Here are many more examples:
 Accountancy supports Panini ltd in tracking the change of revenue and costs throughout
the company lifetime by establishing a revenue and spending schedule. It further

examines the causative factors, reasons, and issues that behind unchecked claims and
declarations (Boggio, Moscarola and Gallice, 2020).
 Accountancy aids Panini ltd in determining appropriate features by allowing Panini ltd to
choose the right strategy from a variety of options. It assists in determining the optimum
option amongst some of the options available to businesses, as well as that appears to be
more lucrative than competitors.
Accountancy obligations include the accompanying:
 Since a firm's capacity to operate determines its success, traditional techniques must be
employed to maintain accurate accounting records. Accountancy aids budgetary learning
and preparation. It also helps with the execution and continuing assessment of Panini ltd's
finest possible option (Cardoso, de Oliveira Leite and de Aquino, 2018).
 Financial, as opposed to accountancy, is a wider term that encompasses accountability,
obligations, investing, and financial subdivisions. Financial planning is the administration
of earnings and funds that will be required in the coming years to accomplish the
activities required for a company's sustainability and success.
 Evaluating Concerns and Monetary Forecasts as in a Panini ltd firm, there seem to be a
variety of tasks that must be fulfilled, and accountancy is the preferred approach for
doing so. It aids in the identification of the company's pricing variations as well as the
acquisition of funds for the company's prospective development and profitability.
The following essential procedures are provided to help people realise how crucial funding is
in each business:
 Managing instead of governing the institution's exterior competing situation, as many
aspects, like exterior impacts, are unavoidable in any company. In the situation of Panini
ltd, it is vital to pay special attention to any elements that could obstruct the company's
capacity to run smoothly (Galeazzo, Ortiz-de-Mandojana and Delgado-Ceballos, 2020).
 The operational choice taken by every firm is critical because it assures that its goals are
met on schedule. It explains how Panini ltd assigns alternatives to the appropriate regions
and evaluates them in timely manner. The outcomes visible throughout data aggregation
are the consequence of actions taken.
To keep the business on track, financial duties are allocated to each section. The foregoing
are some of the responsibilities of the financial framework:

 As the financial element acts as the foundation for developing plans, regulations, and
activities that will help the company's development and success, offer explicit directions.
Panini ltd also needs well-thought-out strategies to extend its development phase and
grow its activities into previously uncharted territory (Hastings and Mitchell, 2020).
 Taxation and charges which were not paid or managed on schedule are now harming the
firm's growth and activities, thus tax administration is critical. These characteristics are
also significant in the Panini ltd firm, as they assist shareholders and entrepreneurs in
determining the firm's long-term viability and prosperity.
Financial Activities: Listed below are a number of monetary jobs having a financial
component.
 A fiscal strategy can be regarded the administration of accumulated resources. It explains
how Panini ltd will engage its funds in the appropriate places and in the proper amounts
over time in order to get the intended goals (Henricks, 2019).
 Generate money because all firms, big or little, require to grow their essential
commodities and revenues. Panini ltd has stated that it aims to expand its activities and
offerings, which may necessitate additional expansion and regulation expenditures.
Describe the many funding avenues that have contributed to the company's profitability and
growth
There seem to be several solutions accessible to assist businesses in raising capital for
development and success (Islam and Awal, 2020). Panini ltd's goal is to extend its business on a
wider level, which necessitates the use of technology that can assist. Here are a few instances of
how it could be employed to achieve a competitive advantage in the industry:
 Liabilities are a low-cost form of financing that allows buyers to earn a greater rate of
interest on their investment. Debt by Panini ltd could be considered beneficial if it helps
in the establishment of additional resources and profits that could be used to further the
growth of the sector (Kalkavan and Ersin, 2019).
 A way of determining a corporation's fiscal sustainability as well as building the
foundation for future growth and accomplishment. This method can be used by Panini
Limited Business to generate money sans expanding its commitments or debts.
Companies might raise funds through finance that can then be employed to increase
revenue and put it to the greatest feasible usage. Companies are not as tethered as it might

be if they were financed by the industry or by financial entities. It also aids in increasing
customer and job involvement, which ensures the firm's long-term prosperity (Lloyd-
Sherlock, Penhale and Ayiga, 2018). Profits that could be utilised to pay payouts to
investors in the later are known as retained profits. It's also reasonable to consider of it as
a collection of financial documents kept for a fixed period of time. Panini ltd. may be
capable of supporting r&d, maintain fiscal soundness, and increase the price of its shares
as a result of this. As a result, it indicates the total number of things produced by a
company. This will be tremendously advantageous because the business will not be
required to seek alternative means of income or incur unfavourable costs during its
growth stage. It is often regarded as among the most effective means of giving financial
assistance to a company.
TASK 2
Calculate a number of different ratios and then describe your observations.
Gross Profit: After the firm's fixed expenses have already been subtracted, it is the sum of
monetary profit. It is the percentage of income generated by a corporation after overhead
expenses have been deducted (Mahalingam and Vivek, 2016).
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 profitability ratio dropped from 35% in 2018 to 28.39% in 2019. It
might be stated that growing production prices have decreased profits. The company's earnings
have increased throughout this period, but the cost of goods delivered has increased faster than
the increase in income. Production expenses should be lowered in order to increase the group's
gross profitability ratio.

Operating Profit: The amount of profit generated by the firm is determined by these
results (Roseman, Mathe-Soulek and Krawczyk, 2017). The overall profits of a corporation are
represented by this proportion. It also evaluates the efficiency of the firm.
Operating profit margin: operating profit / Net sales *100
Year 2018,
= 2765 / 10000 *100
= 27.65 %
Year 2019,
= 2305 / 11500 *100
= 20.04 %
Because the firm's operating expenses have risen over time, the corporation's operating
profits have decreased. It also shows that the groups' efficacy is limited. In an attempt to lessen
operating expenses, the organisation should concentrate on its operating procedures. In order to
diminish production operating expenses, the corporation should make effective use of its
resources.
Return on Capital Employed: This ratio is used to calculate profits and assess the
efficiency of a firm's investing management. This also influences how well a corporation
manages its assets.
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 %
In 2018, companies' return on capital employed was 31.58 percent; meanwhile, in 2019,
this figure has plummeted to 22.57 percent. The change in earnings is due to an increase in the
firm's expenses (Said, Kanzari and Bezzine, 2018). It has an influence on the efficiency of the
base and the management. To increase competitiveness, the organisation should bring down
expenses, resulting in a higher return on contributed assets.

Current Ratio: This percentage represents a corporation's ability to cover its short-term
obligations. The amount of current assets and current liabilities owned by the business is
examined in this ratio.
Current ratio = Current assets / Current liabilities
Year 2018,
= 1175 / 970
= 1.21:1
Year 2019,
= 2110 / 512
= 4.12:1
This firm's proportion has risen from the preceding year's numbers. It shows that the
corporation's current assets had roughly doubled whereas its current liabilities have been split in
half. The impact of this was visible in the company's current ratio (Schrand, Ascherl and
Schaefers, 2018). The company's current ratio is two times the optimal proportion, suggests that
a company is now running successfully in respect of shorter term requirements and that no
further increases in the current ratio are needed.
Quick Ratio: This ratio specifies the degree of quick ratio available to the firm, as
specified by this approach, which determines the firm's stability. It also affects the efficiency of
the business.
Quick ratio = Current assets – stocks / Current liabilities
Year 2018,
= 1175 – 350 / 970
= 0.85:1
Year 2019,
= 2110 – 674 / 512
= 2.8:1
The quick ratio has increased in contrast to the previous year owing to the clear decrease
in obligations. Throughout the previous year, the firm's capital increased in valuation, which may
be reduced in an attempt to enhance the acid test ratio.
Inventory turnover ratio: The inventory turnover ratio shows how fast a corporation's
merchandise changes during the period of a term.

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
As per the institutional percentage, the company was allowed to rotate its shares 12 times
per year in 2018, and 16 times in 2019. Higher sales of the corporation's products may aid in
increasing the ratio (Tasri and Tasri, 2020).
Debtor’s Collection Period: This percentage is employed to calculate the time required
to recoup a payments. The shortest time it takes to collect cash from debtors implies that the
business is competent of producing funds and completing the operating procedure in less time.
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 predicted proportion, the average time to collect receivables has reduced
over the prior season. It has a negative impact on the firm's efficiency.
Creditor’s payment period: This ratio determines how long it will need to pay back the
debt. It will be advantageous to the corporation if it took more. By accumulating assets, this ratio
also affects the administration's productivity.
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
According to the above calculation, the number of days in 2019 declined from 56.6 in 2018
to 21.94 in 2019, showing that the loan period is lower than the preceding term's performance.
Companies' total efficiency is the focus of this year's strategic plan. Because a larger quantity of
payout periods suggests a larger degree of efficiency in a company, whereas a lower quantity of
payout periods implies a lower standard of achievement (Walczak and Pieńkowska-
Kamieniecka, 2018).
CONCLUSION
As the above figures show, financial and accountancy processes are critical to a company's
success. It has been given a range of roles, activities, and responsibilities in order to increase
firm production over period. It additionally aids in the evaluation of current actions and the
prediction of possible threats. Several of the pre-built measures are being intended to evaluate
current firm performance to previous years' performance. As a consequence, it serves as a
standard for shareholders and businesses to judge whether or not the company is on course to
meet its goals and, if not, what changes need to be made to improve productivity. It also
contributes to the company's profitability and gains. It's a technique of contributing to the
creation of new methods to create and acquire money.

REFERENCES
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