Financial Decision Making: Business Performance Analysis and Investment Appraisal of ABC Consulting LLP

Running head: FINANCIAL DECISION MAKING
Programme MSc Management
Module name Financial Decision Making
QAA Level 7
Schedule Term Summer Term 2018
Student Reference Number (SRN)
Report/Assignment Title CASE STUDY – ABC CONSULTING LLP
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1FINANCIAL DECISION MAKING
Financial Decision Making
[FIN 7040]
Author’s Note:

2FINANCIAL DECISION MAKING
Table of Contents
Executive Summary:..................................................................................................................3
Part 1: Business Performance Analysis......................................................................................4
1.1 Statement of Profit or Loss:.............................................................................................4
1.2 Statement of Financial Position:......................................................................................6
1.3 Statement of Cash Flows:...............................................................................................11
1.4 Segmental Analysis:.......................................................................................................13
Part 2: Investment Appraisal and Sources of Finance.............................................................14
2.1 Investment Appraisal:....................................................................................................14
2.1.1 Management Forecast:............................................................................................14
2.1.2 Investment Appraisal Techniques:..........................................................................14
2.1.3 Payback Period:.......................................................................................................15
2.1.4 Accounting Rate of Return:....................................................................................15
2.1.5 Net Present Value:...................................................................................................15
2.2 Sources of Finance:........................................................................................................16
2.3 Non-Financial Factors:...................................................................................................16
References:...............................................................................................................................17

3FINANCIAL DECISION MAKING
Executive Summary:
The current report deals with evaluating the financial condition and investment
appraisal policy of ABC Consulting LLP, which is an UK based organisation providing
consultancy services in UK, US and Australia. From the various financial ratios computed, it
has been found that the organisation has experienced a decline in its performance and
position in 2018 compared to the previous year due to the significant fall in market revenue
owing to declining market demand. However, performance improvements could be observed
in its US subsidiary, due to which it has planned to make an expansion plan in the project.
In order to conduct the expansion plan, the management of ABC Consulting LLP has
made certain forecasts, which are subject to certain limitations. The most significant
limitation is that since forecasts are based on assumptions, any decision taken might not be
irreversible in future. By using the various investment appraisal techniques, it has been
advised to the management of the organisation to accept the project, as the assumptions made
would help in maximising their overall return on investment and profitability. Moreover, in
order to raise funds for the expansion program, it is advised to raise maximum funds from
equity and lower funds from debt. Finally, ABC Consulting LLP needs to take into account
certain non-financial factors for arriving at the final decision before undertaking the
investment proposal.