Financial Decision Making: Importance of Accounting, Funding Options, and Financial Ratios

This study provides an overview of financial and accountancy work in a business, followed by an analysis of Panini ltd's funding options and financial ratios. It examines the importance of accounting and financial-related tasks, duties, and jobs in a company, and describes various options for funding a company's growth and expansion. The study also includes the calculation of financial ratios and an explanation of why they vary over time.

FINANCIAL
DECISION MAKING

Contents
FINANCIAL DECISION MAKING..................................................................................................1
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Examine the importance of accounting and financial-related tasks, duties, and jobs in a
company.......................................................................................................................................3
Describe the various options for funding the company's growth and expansion........................5
TASK 2............................................................................................................................................6
Calculation of ratios.....................................................................................................................6
Explain why the financial indicators calculated in the last two years have varied......................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
The study that follows provides an overview of how financial and accountancy work in a
business (Abdel-Basset, Mohamed and Smarandache, 2019). It aids in determining which
activities, positions, and responsibilities are most vital in a company. The investigation then
continues on to Panini ltd, a medium-sized firm that specialises in baking bread for UK retailers.
It intends to increase its activities and capabilities in the coming years as a result of its current
performance. It also aids in comprehending the relevance of the proportions calculated beneath,
which offer a more comprehensive and economical picture of the firm through time. It also aids
in the identifying of new sources of capital that can be used to help the company expand and
prosper in the ahead.
TASK 1
Examine the importance of accounting and financial-related tasks, duties, and jobs in a company
Accountancy is the process of gathering, arranging, and summarizing information in a
centralized location, as well as the documenting of major financial activities. Accounting
statistics, publications, and investigations help businesses provide adequate asset and constrained
wealth administration assistance (Ahmed, F., Manwani, A. and Ahmed, S., 2018). It could also
be thought of as a method for maintaining accurate accounting records and managing financial
matters. Accountancy's primary goal is to evaluate both individual and company productivity. As
a result, it aids in determining the business efficiency of the sector, and also money intake and
outflow during the institution's operating time. This is used by traders to determine whether or
not it is profitable to offer commodities. Panini ltd has access to a comprehensive variety of
accounting services. Here are only a few examples:
 Measure the consequences: Accountancy aids in the right evaluation of Panini ltd., which
is vital in ensuring a prolonged firm operational lifespan in a dynamic global economy.
 Document vital processes: Panini ltd must keep financial documents as well as provide a
comprehensive and exact image of how the firm performs in the sector.
Accountancy performs a range of purposes that aid in the fiscal and efficient functioning of a
company. Here are a few more examples:
 Establishing a track of revenue and expenses: Accountancy aids Panini ltd in tracking the
flow of revenues and expenses throughout the course of business. It also elucidates the

structural origins, justifications, and concerns that underpin unauthorised claims and
prices.
 Accountancy aids in the choosing of approved features by allowing Panini ltd to choose
the optimum option from a variety of options. It assists in discovering the finest
alternative between options available to businesses, as well as determining which appears
to be more lucrative than competitors (Ameen and Ahmad, 2017).
The below are some of the bookkeeping obligations:
 Costs must be kept informed of in the following ways: Investment is critical to a
corporation's success. Accountancy aids budgetary teaching and preparation. It also
assists in the execution and continuing assessment of the finest viable option for Panini
ltd.
 Financial, in comparison to accountancy, is a larger notion that encompasses
responsibilities, loans, investing, and financial units. The administration of earnings and
finances that will be required in the years ahead to perform the operational necessary for
a company's survival and development is referred to as financial administration
(Ghesquiere, McAfee and Burnett, 2019).
 Evaluating Threats and Monetary Projections: In a Panini ltd organisation, there seem to
be a variety of tasks that must be completed, and accountancy is the finest way to do it. It
aids in determining the company's level of volatility as well as how funding for the
company's future development and success could be generated.
To help people comprehend how crucial funding is in each organisation, the following
essential activities are mentioned:
 Managing the commercial surroundings of exterior of the organisation: Some aspects,
like exterior forces, are unavoidable in any firm, and could only be handled, not
regulated. In the instance of Panini ltd, it is vital to pay particular attention to any factors
that could obstruct the company's effective operation (Gomez-Mejia, Patel and
Zellweger, 2018).
 Every corporation's choice on execution is critical because it assures that its initiatives are
followed out towards the appropriate moment. It shows Panini ltd's method of putting
alternatives to the appropriate places and continuously analysing them. The outcomes
witnessed throughout the development of a grouping are the product of decision-making.

To preserve the corporation's objectives, financial responsibilities are given to each
department (Höchtl, Parycek and Schöllhammer, 2016). The below are some of the
responsibilities linked with the financial framework:
 Give detailed directions, as the financial element is the foundation for developing plans,
regulations, and activities that will aid the group's development and progress. Panini ltd
also needs well-thought-out strategies to extend its development phase and extend its
activities into previously uncharted territory.
 Taxation planning is crucial. Taxes and charges which have not been paid or
administered on schedule now have an impact on the corporation's growth and strategy.
These characteristics are also crucial in the Panini ltd firm, as they assist shareholders and
owners in determining the firm's stability and economic success (Kumar, Jindal and
Velaga, 2018).
Financial Activities: Listed beneath are a number of financial duties that involve financial
components.
 The administration of accumulated resources may well be regarded as monetary strategy.
It explains how Panini ltd will spend its funds in the proper places and in the appropriate
amounts to achieve the intended outcomes over time.
 Generate money because all companies, no matter how large or minor, require the growth
of critical resources and earnings. Panini ltd has made it obvious that it wants to develop
its business and activities, which might also necessitate additional funding for
development and governance (Oboh, Ajibolade and Otusanya, 2020).
Describe the various options for funding the company's growth and expansion.
There seem to be a number of possibilities to assist businesses in raising capital for
development and business advancement. Panini ltd's goal is to extend its sector on a wider level,
which necessitates the use of technology which can assist with that. Here are some instances of
how you can use it as an instrument:
 Liabilities are a low-cost kind of funding that allows shareholders to get a better yield on
their investment. If Panini ltd's loan contributes to the firm's overall success, it could be
considered beneficial because it will assist create additional resources and profits that
could be used to further the firm's growth (Peng, Dai and Garg, 2018).

 An ownership approach for determining a corporation's commercial competitiveness as
well as a foundation for allowing future growth and expansion. Panini Limited Business
might therefore employ this strategy to obtain funds sans adding to its debt and
commitments. Companies can produce revenue through investing that can then be
employed to create more revenue and put it to the highest suitable usage. Businesses are
really not bound to the similar degree as if companies obtained funds from the industry or
from financial entities. It also aids in increasing customer and worker involvement,
assuring the organization's long-term viability (Quijano-Sanchez and Liberatore, 2017).
Profits that could be utilized to provide payouts to investors at a later period are known as
retained profits. It could also be regarded as financial statements that have been kept for a
period of duration. This could assist Panini ltd. finance r&d activities, maintain economic
sustainability, and enhance the price of its shares. As a result, it denotes the total number
of units owned by a company. This will be highly helpful because the business will not
have to look for other ways to earn money or suffer negative costs during its growth
period. It is widely acknowledged as among the most effective ways to provide financial
assistance to a company.
TASK 2
Calculation of ratios
Gross profit margin: Gross profit/ Net sales * 100
2018 : 3500/ 10000 * 100 = 35%
2019 : 3265/ 11500 * 100 = 28.39%
Operating profit margin: Operating profit/ Net sales * 100
2018 : 2765/ 10000* 100 = 27.65%
2019 : 2305/ 11500* 100 = 20.04%
Return on capital employed: Earnings before interest and tax/ Share equity + Long term
liabilities * 100
2018: 2765/ 6755 * 100 = 40.93%
2019: 2305/ 8111* 100 = 28.41%
Current Ratio: Current assets/ Current liabilities
2018: 1175/ 970 = 1.211 : 1

2019: 2110/ 512 = 4.12 : 1
Quick Ratio: Current assets – Inventory / Current liabilities
2018: 1175 – 350/ 970 = 0.85 : 1
2019:2110 – 675/ 512 = 2.80 : 1
Inventory turnover days: Inventory / Cost of goods sold * 365
2018: 350 / 6500 * 365 = 19.65 days
2019: 674 / 8235 * 365 = 29.87 days
Receivable collection period: Average account receivables / Net credit sales * 365 days
2018: 760 / 10000* 365 = 27.74 Days
2019: 1340 / 11500* 365 = 42.53 Days
Payable payment period: Average account payable/ Cost of goods sold * 365 days
2018:920 / 6500 * 365 = 51.661 Days
2019:495 / 8235 * 365 = 6.010 Days
Explain why the financial indicators calculated in the last two years have varied
A few of the factors for a decrease in gross profit margin include:
 Increasing expenses involved with Panini ltd's goods might be to blame for the firm's
declining gross profit margin (Sitara, Akram and Riaz, 2021).
 Another factor that might affect the gross margin is Panini ltd's marketing methods.
 One reason for Panini ltd's lower gross profit could be a drop in component sales prices
sans a corresponding decrease in the company's manufacturing costs.
A fall in operational profit % can be caused by a number of circumstances, including:
 Rising operational costs as the charges and expenditure associated with Panini ltd's
business increase, operational income will deteriorate noticeably. It is critical for
businesses to maximise profits whilst lowering expenses, resulting in higher overall
income (Tambingon, Yadiati and Kewo, 2018).
 A drop in a corporation’s revenues over time, as there seems to be a variety of factors that
can contribute to a situation where operational productivity is diminishing. It's likely that
Panini ltd will make lesser revenues the very next year.
The following are just some of the causes behind the diminishing return on capital employed:

 As a firm's obligations and creditors grow, increasing debts might become an issue; this
can be an issue for Panini ltd since it will have a negative impact on its return on capital
employed.
 One of the reasons for Panini ltd's declining return on capital employed could be
inefficient utilisation of financial assets. This could be enhanced, and funds could be
directed toward the most accurate and appropriate initiatives for increasing efficiency and
financial performance (Ul-Hameed, Mohammad and Shahar, 2018).
The following are some of the reasons behind the rising current ratio over the last two years:
 Panini ltd is required to handle its debtors and commitments in a consistent manner,
allowing it to improve its metrics over the preceding two years.
 Panini is most likely recovering its obligations and taking out its contracts faster this year
than last year that could explain why the ratio is expected to rise the following year.
As a consequence of the following reasons, the company's acid test ratio has accelerated:
 Lowering inventory turnover is likely one of several criteria indicated in the Panini ltd
example, and it could be the source of a rise in quick ratios.
 Efficiency of selling is increasing. Because there are circumstances that might cause a
rise in a company's selling efficiency over term and Panini ltd is no exception. Increased
revenues the subsequent year will have an impact on the quick ratio.
Increased stock turnover days are caused by the following factors:
 Manufacturing quantity control is critical for Panini ltd's advancement and governance in
the industry since it affects the future performance and operation (Wong, Holmes and
Schaper, 2018). As a result, this could be among of the reasons for the current increase in
stock turnover days estimations.
 Cutting prices, as the firm's expenditures and charges have indeed been cut in the
past that appears to have had an impact on Panini ltd's stock issue. As a result, it could be
found responsible for higher stock turnover.
 As Panini ltd updates inefficient and antiquated processes with technological advances,
stock turnover days may be boosted by upgrading outdated stock numbers.
A few of the causes for the extended accounts receivables time are as follows:

 Lower payback term administration, since it is critical for any business to properly handle
its payback plan, will aid in increasing the firm's income collecting duration, allowing
Panini ltd to expand and prosper.
 Reduced attempts to recover funds have decreased as Panini Company's attempts to
recover money have declined, resulting in a longer receivables collecting time. As a
result, circumstances like extending the duration of trade collection have arisen.
The following are some of the reasons why a company's payable repayment term is
shortening:
 The degradation of lending laws and business circumstances is another aspect adding to
the impact of reduced payback periods. It is critical for Panini ltd that is centered on
longer run success and advancement, to enhance its economic status including its
sustainable development issues (Zachariadis, Hileman and Scott, 2019).
 Panini ltd's bad accounts payable settlement term is attributed to late remittances to
inventory and technological providers and partners.
CONCLUSION
As the foregoing facts demonstrate, financial and accountancy operations are critical to a
company's growth. It has been given a range of tasks, roles, and responsibilities in order to
improve company efficiency over time. It also aids in the evaluation of current actions as well as
the prediction of possible risks. Several of the previously generated statistics serve as a
foundation for evaluating current business performance to those from previous times. It therefore
serves as a reference point for shareholders and companies to judge whether the corporation is
meeting its goals and, if not, what changes need to be made to improve effectiveness. It also aids
in determining the development and profitability of the company. It's a manner of helping in the
creation of new methods to produce and receive money.

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