Importance of Accounting and Finance Functions in Skanska Plc

FINANCIAL DECISION-
MAKING

Table of Contents
INTRODUCTION...........................................................................................................................3
Task 1...............................................................................................................................................4
Importance of accounting and finance functions........................................................................4
Importance of finance function...................................................................................................6
Task 2...............................................................................................................................................8
Ratio Analysis.............................................................................................................................8
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
The study is about accounting and finance functions importance in an organisation named
Skanska Plc. The company Skanska is a multi-national construction company founded in 1984
and having its presence in Nordic region, Europe and USA. It has been ranked as fifth largest
company in the world according to the Construction Global magazine. The ratio analysis of the
company is done through financial statements and a comparison of the company's performance is
done along with causes and reasons discussed for the change in ratios.
Task 1
Importance of accounting and finance functions
Every organisation whether big or small, has given importance to accounting and finance
functions. There are transactions which take place in every organisation and thus it becomes
important for organisations to record those transactions. Thus comes the accountancy function to
play its role. The points for the same can be listed as below:
a) It helps in maintenance of records of transactions happening of the company's products and
services. The cash flow coming and going out of the operational activities can be recorded easily
through accounts and following accounting terms (Syed, 2017). Skanska has many construction
activities going on around the world and thus following a sound accounting policy becomes
necessary to count in the daily transactions happening over raw material, labour and other
activities.
b) It helps in evaluation of business performance. The investors can see the accounts to judge the
standing of the company financially. This also gives an insight into the working capital, its
current assets, liabilities thus focusing on the operational aspect of the company. Investor is able
to assess the liquidity and solvency of the company. The expenses of the company can also be
judged with the accounting records (Cockcroft and Russell, 2018). As Skanska is a big company,
the business performance evaluation is required by investors through the annual report generated
of the company. The investors look forward to the financial statements released and thus make a
decision according to the current and past performance.
c) Statutory Compliance: Laws and regulations of accounting terms help ensure compliance and
thus company is saved from penalties in external audit.

Skanska has appointed its own team of internal audit which do the monitoring of
accounting reports and thus save the company from errors in financial statements.
d) Accounting helps in budget creation and projections of the company. The budget creation
helps to assess the right demand of goods and services which can help by giving the data in
production. This will help in saving costs for the company. The accounting measures also helps
in calculation of right amount of inventory (Syed, 2017). Company is saved from extra costs by
ordering the right amount of inventory. Economic order of quantity achieved through
management accounting can help organisation order the right amount of inventory. Accounting
also helps in forecasting projections which can help company in decision-making.
e) Financial Statements filing like the business registering with Registrar of Companies can be
done through accounting. The entities or organisations are required to file themselves with stock
exchanges with tax filing purposes.
f) Legal hassles are avoided by following accounting rules properly. If a minor detail is left out it
can have an effect financially as well as legally. The tax matters are also looked after so that tax
matters do not arise.
g) Performance analysis: The company can look at the records of assets and liabilities and judge
the performance in financial terms of the company.
h) External communication: Communication of financial information with external parties is
made simple by accounting. The accounting reports can be helpful in influencing in getting loan
from banks as they assess the reports and then decide on the amount of loan (Cockcroft and
Russell, 2018).
The accounting statements reflecting profits are useful for investors to make the right
investment decisions.
I) Internal communication: The financial reporting helps owners to communicate with internal
stakeholders. The information is helpful for employees who own stake in the company and also
get dividends as investors. This record helps in communicating strengths and weaknesses of the
company to the internal stakeholders of the company and used for internal purposes.