Financial Decision Making: Importance of Accountancy and Monetary Tasks in Business

This article discusses the importance of accountancy and monetary tasks in a business and how it affects financial decision making. It also includes a case study of Panini Ltd and computes various financial ratios such as gross profit, operating profit, return on capital employed, current ratio, quick ratio, inventory turnover ratio, debtor's collection period, and creditor's payment period to understand their implications.

FINANCIAL
DECISION MAKING

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Assess the importance of accountancy and monetary tasks, processes, and responsibilities in a
business........................................................................................................................................1
TASK 2............................................................................................................................................3
Compute several various proportions and then explain the findings...........................................3
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
The study that follows provides an overview of how finances and accountancy work in a
business (Ahmed, Manwani and Ahmed, 2018). It helps to recognise the much more crucial
characteristics, responsibilities, and tasks of a corporation. The investigation then continues
forward with Panini ltd, a transitional business which specialises in producing flatbread for UK
retailers. It intends to grow its activities and capabilities in the upcoming decades as a result of
its current condition. It also aids in comprehending the relevance of the following accounting
analysis, which offer a more comprehensive, exact, and cost-effective picture of the organisation
over time. It additionally aids in the discovery of other revenue sources that may be used to allow
the industry expand and thrive in the coming years.

TASK 1
Assess the importance of accountancy and monetary tasks, processes, and responsibilities in a
business
Accounting and finance elements are concepts that manage the money supply, trade, and
management, with a concentration on professional jobs within these sectors. This is a component
connected to information which is crucial for evaluating the sections of the business which help
with the organisation's unique difficulties and fiscal concerns. Financial accounts of a company
are also developed in order to make the business more flexible and effective. It is key role of a
business to develop importance of understanding responsibilities and key methods which are
effective in overall development. The business should also play a major role in increasing
financial strength of whole company in order to gain competitive edge. Finance department is
considered as backbone of a business which helps in increasing business strength. The role of a
company should be to increase overall performance of financial professionals who are engaged
in development based practices. The accountancy and finance department are also responsible
for increasing the chances of maintaining financial accounts with key functioning. Accounting
and financial are thought to be especially useful in evaluating a firm's financial success and
financial sustainability. It's also regarded to be the factors that help executives make sound
investing selections. Panini Limited's accounting and fiscal obligations are shown below-
 These organizations are regarded to be the motivating factor behind the firm's
determination to maintain record of transactions (Ghesquiere, McAfee and Burnett,
2019). Activities tracking are supposed to help the company keep control of the inflow
and outflow of funds, products, as well as other objects. It's a great way for this
organisation to keep track of data about customers, suppliers, and shareholders. Activities
paperwork also assists the business in fixing problems which could arise as a result of
regulatory concerns.
 Completing necessary paperwork as a manufacturing firm which handles a range of
activities is going to have a lot of taxation requirements. When it comes to repaying taxes
appropriately, having accounting and fiscal abilities is essential. All of these factors are
thought to become the most critical predictors of a firm's capacity to properly pay
taxation whilst minimizing governmental issues.

 Assessing financial outcomes as this is regarded to be the part which helps the company
to understand its efficiency and benefits. This is frequently referred to as the strategy that
allows businesses to flourish whilst still expanding customer base. The financial
outcomes of a business are achieved with the help and support of major tasks and
opportunities which are helpful for whole organisation.
 In opposed to competitors, the firm's main focus is always on ways to gain a competitive
advantage. Accounting and financial play a crucial role in this because they enable firms
to compare their own financial outcomes to those of rivals. This is valuable to the firm in
order to decide who is responsible for monitoring the crucial components of the business
in the long run (Khemakhem and Boujelbene, 2018).
All of those departments is known for collaborating and comprehending the company's
benefits that aid in the management of financial operations. The aspects that are thought to be
causes for the company's better income and expenditure cooperation, which is competent of
assuring compliance with the rules in addition to provide the critical information to the investors
to increase their knowledge. In the manufacturing sector, the accounting and finance firm's job
involves recognising the variables that result in the creation of advantages that might assist in the
management of the company's assets and responsibilities. The various accounting and fiscal
functions are as follows:
The Finance Department- It is the business department in responsibility of collecting and
managing resources on the corporation's behalf. The finance sector is responsible for keeping
record of earnings and expenditures so that the business can operate effectively. The team's
principal responsibility is to raise finances as well as administer the firm's financial performance.
 Funding component as it is the connection between expenditures and lending rates is
called as the spending attribute. Lending rates and investment have a basically negative
relationship. As a consequence of this negative relationship, the connection among them
likely to be on a declining trajectory, this has a significant effect on the company’s long-
term performance. This monetary operation aids the company in retaining and controlling
resources in order to reinvest. Amongst various items, the indicated company might deal
in shares, bonds, and periodic assets. Yet, there are times when the firm does not produce
enough cash from either of those activities, which has a detrimental influence on earnings
(Killins, 2017).

 The financial team's job in handling the business earnings includes a crucial fundraising
component. This firm's principal concentrate is on financial support administration and
planning. Panini Limited, for example, will be unable to effectively handle its resources if
it had proper fiscal activity. They could advance in the sector by efficiently managing the
company's assets.
 A dividend is the distribution of a part of a company's performance to its shareholders. If
a company produces a profit in the short run, it usually pays out payouts. The corporation
must compensate its shareholders after the split has indeed been declared, enticing them
to give more. If Panini Limited generates a profit in 2020, for example, the profits must
be dispersed to shareholders in accordance to their purchased shares. The company will
be important for attracting shareholders if the payouts were paid on time.
 Working capital is defined as the amount used by a company to pay short-term
commitments which should be repaid within a year. It is calculated using the difference
between current assets and current liabilities. This monetary element aids the company in
making purchases, fulfilling short-term commitments, and absorbing small expenses. It
could help the company determine the short-term expenses which should be covered in
the current financial season. This has been the most important position since it
contributes to the company's smooth business functioning (Li, Kou and Peng, 2016).
 Risk associated with the the financial aspects and dimensions of a business is also
majorly calculated with the help of effective tools and techniques. The key role of a
company is to analyse major importance of functioning of finance department to
conclude major practices. The business should increase potential growth and expansion at
the marketplace with the help and support of regular development based activities and
approaches.
Accountancy Division: The accountancy division is considered as key department of a business
which helps in maintain financial accounts of the company. It is essential for the company to
focus on its accountancy division which helps in increasing the overall value of company. This is
one of the major role of a company to hire professional accountancy experts who are able to
maintain regular accounts of the firm. The accountancy division is also one of the major
divisions which is responsible for providing major solutions to maintain financial records of the
company. The accountancy division is concerned with the following functions:

 The accounts department of a business is responsible for maintaining financial accounts
with more focus on daily transactions. Routine transactions are recorded by accounts
department in a precise manner and it is also helpful in providing key solutions to
developing major records.
 Financial statements in a business are also maintained with the help and support of
accounts department. It is also one of the key function of accounts department to provide
development of final accounts like balance sheet, profit and loss and trail balance.
 The ethical and integrity based functions are also performed by accounts department
which helps in development of functions and activities. In the recent times, it is also
major role of a business to develop key concerns related to management which helps in
improvement of financial strength of company.
 Main business organisations also take support of experts in finance department who are
engaged in business development. The company should also play a key role in increasing
financial strength of a business with the help of financial department. Key role of an
organisation should be to determine causes and reasons of financial growth. The
company should also increase chances of financial growth by taking assistance of
strategic choices in the finance department.
TASK 2
Compute several various proportions and then explain the findings
Gross Profit:
Gross profit margin = Gross Profit / Net sales * 100
Year 2018,
= 3500 / 10000 * 100
= 35%
Year 2019,

= 3265 / 11500 * 100
= 28.39%
The gross profit ratio in 2019 fell from 35 percent in 2018 to 28.39 percent in 2019.
Increasing operating expenses, it can be claimed, have led to reduced profits. The company's
earnings have increased throughout this time, but the cost of the goods given has increased faster
than the increase in earnings. Operational expenses should be lowered to boost the company's
gross profit ratio (Nurcholisah, 2016).
Operating Profit:
Operating profit margin: operating profit / Net sales *100
Year 2018,
= 2765 / 10000 *100
= 27.65 %
Year 2019,
= 2305 / 11500 *100
= 20.04 %
As operating expenses have risen, the corporation's aggregate profit has decreased over
time. It additionally shows that the efficacy of the groups is limited. To cut operating expenses,
administration should concentrate on its operating processes. In order to reduce production and
operating expenses, the corporation should make the best use of its resources (Phan, Rieger and
Wang, 2019).
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 %
In 2018, firms used a 31.58 percent ROCE, but this has reduced to 22.57 percent in 2019.
The change in revenue is due to an increase in spending. It affects the operation of the institution

and the business. The corporation should minimise expenses to enhance its productivity,
resulting in a higher return on spent assets (Roychowdhury, Shroff and Verdi, 2019).
Current 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 since the prior year's numbers. The business's current
assets had nearly doubled, whilst the current obligations had been split in half. The company's
current ratio represented the outcome of all of this. The firm's current ratio is 2 times the optimal
proportion, indicating that the company is currently meeting short-term requirements adequately
and that no more increases in the current ratio are needed (Valizadeh Larijani and Behbahaninia,
2019).
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
The quick ratio proportion significantly increased in comparison to the previous year due
to the clear decrease in indebtedness. The corporation's inventory has increased in price over the
last few years; this might be reduced in order to enhance the acid test proportion.
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 company is entitled to utilise its inventory on a recurring schedule and therefore was
12 times yearly 2018, and 16 times in 2019. This was calculated using the corporation ratio.
Increasing sales of the business and its products may aid in increasing the percentage.
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 average time to collect debtors significantly reduced over the prior year, as per
expected ratio. It has a negative impact on the firm's management.
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
According to the estimates, the number of days in 2019 declined from 56.6 in 2018 to 21.94
in 2019, implying that the borrowed period is worsening even more than the prior term. This
year's aim is to raise a firm's work effectiveness (Yuniningsih, Pertiwi and Purwanto, 2019).
Because a greater number of transaction stages suggests stronger operational efficiency, while a
lower number of payment periods implies worse operational efficiency.

CONCLUSION
As the statistics provided show, accountancy and financial processes are critical to a
company's success. It has been allocated a range of occupations, activities, and responsibilities in
order to improve firm production over period. It also aids in the evaluation of current activities
and the prediction of possible dangers. Several of the pre-built metrics are performed to examine
current firm performance to previous years' achievement. As a consequence, it serves as a
standard for shareholders and businesses to judge whether the company is on course to meet its
goals and, if not, what changes are required to increase productivity. It contributes substantially
to the organization's earnings and progress. It's a way to help with the advancement of new
methods of generating and acquire wealth.

REFERENCES
Books and journals
Ahmed, F., Manwani, A. and Ahmed, S., 2018. Merger & acquisition strategy for growth,
improved performance and survival in the financial sector. Jurnal Perspektif
Pembiayaan Dan Pembangunan Daerah, 5(4), pp.196-214.
Ghesquiere, A.R., McAfee, C. and Burnett, J., 2019. Measures of financial capacity: A review.
The Gerontologist, 59(2), pp.e109-e129.
Khemakhem, S. and Boujelbene, Y., 2018. Predicting credit risk on the basis of financial and
non-financial variables and data mining. Review of Accounting and Finance.
Killins, R.N., 2017. The financial literacy of Generation Y and the influence that personality
traits have on financial knowledge: Evidence from Canada. Financial Services Review,
26(2).
Li, G., Kou, G. and Peng, Y., 2016. A group decision making model for integrating
heterogeneous information. IEEE Transactions on Systems, Man, and Cybernetics:
Systems, 48(6), pp.982-992.
Nurcholisah, K., 2016. The effects of financial reporting quality on information asymmetry and
its impacts on investment efficiency.
Phan, T.C., Rieger, M.O. and Wang, M., 2019. Segmentation of financial clients by attitudes and
behavior. International Journal of Bank Marketing.
Roychowdhury, S., Shroff, N. and Verdi, R. S., 2019. The effects of financial reporting and
disclosure on corporate investment: A review. Journal of Accounting and Economics.
68(2-3). p.101246.
Valizadeh Larijani, A. and Behbahaninia, P.S., 2019. Investigation of Effective Items on Stock
Return: Different Aspects effecting on Decision Making. Journal of Financial
Accounting Knowledge. 5(4). pp.69-102.
Yuniningsih, Y., Pertiwi, T. and Purwanto, E., 2019. Fundamental factor of financial
management in determining company values. Management Science Letters, 9(2),
pp.205-216.