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Financial Decision Making- Case Study

   

Added on  2020-02-03

18 Pages5374 Words180 Views
FinanceEconomics
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FINANCIAL DECISIONMAKING
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EXECUTIVE SUMMARYHealthcare Holdings Plc is a public limited company with active status located in GreaterLondon. On analysing the Financial statements it can be said that Revenues and profits haveincreased in 2015 as compared to 2014. Various Accounting ratios are analysed and evaluatedfor 2014 and 2015 which depicts overall growth and development of Healthcare Holdings Plc.Examining the Profit and loss statement for the current and previous years it can be said thatoperating profits and net profits have improved in positive manner therefore increasingshareholder's wealth and raised level of satisfaction(Hoskin, Fizzell, and Cherry 2014). Balanceshowing the financial position the company depicts that there is good sign of increase in thefixed assets to the company therefore adding the value to the company also reduction in theliabilities signals the better working capital position and liquidity(Healy, and Palepu, 2012).As the company is considering expansion of business internal sources of finance are agood choice as it avoids extra cost and risks associated are negligible as compared to loan frombanks. However, before finalising the project it should be evaluated on financial parameters ofCapital budgeting such as Net present value, Accounting rate of return and Payback periodwhich will depict the clear picture of deciding whether to accept the project or reject it.Simultaneously emphasis is to be laid on the non financial factors present in the environmentwhich will critically impact the success of expansion decision.
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TABLE OF CONTENTSEXECUTIVE SUMMARY.............................................................................................................1INTRODUCTION...........................................................................................................................1PART 1............................................................................................................................................1Interpretation of the Statement of Profit or Loss....................................................................1Interpretation of Statement of Financial Position...................................................................3Interpretation of Statement of Cash Flows.............................................................................4Interpretation of Market Segment Analysis...........................................................................5PART 2............................................................................................................................................6Investment Appraisal Techniques..........................................................................................6Non-Financial Factors considered regarding the expansion in US........................................7Sources Of Internal Finance...................................................................................................8CONCLUSION................................................................................................................................9REFERENCES..............................................................................................................................10APPENDICES...............................................................................................................................13
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INTRODUCTIONPART 1Interpretation of the Statement of Profit or LossProfit and loss statement is one of the important financial statement of a company. Profitand loss statement can be introduced as an income statement of a business entity. Profit and lossis a statement which shows the financial performance of the firm and prepared quarterly oryearly. For present case study a firm is selected where statement of profit and loss is to beinterpreted. The selected firm is Healthcare Holding Plc which is UK based organization andoperating in service industry. The company is a public limited company and raise fund throughonly equity share and other internal sources (Agarwal and Mazumder, 2013). The statement ofprofit and loss can be interpreted on the basis of financial ratios. In this among all the financialratio's profitability ratios are considered to know about the financial performance of thementioned company. Profitability ratios are those which measures financial performance of thefirm in order to profit or loss of company. Profitability ratios are various such as net profit ratio,gross profit ratio etc. There are another ratios also which helps to interpret profit and lossstatement of relevant plc company. Interpretation of income statement on the basis of financialratios is given as below:Operating Profit Ratio: Operating profit of a firm presents company's net revenue minusoperating costs of production. Under this all the operating costs such as administrationcost, selling and distribution cost and other cost associated with production are deductedfrom the net sales of firm. Another name of operating profit is earning before interest andtax where interest and tax amounts are not considered. In the financial year 2014 and2015, the healthcare holding company is generating good operating profit which is14.15% and 15.43% respectively. The operating ratio is increases due to properly manageand reduce the operating cost of the services in the company. From this it can beinterpreted that the firm is performing well in comparison to previous year whichindicates that the firm manage operating cost effectively to produce goods and services.Net Profit Ratio: Net profit indicates company's final outcome where all the productioncost as well as tax and interest amounts are deducted from net revenue (Dalal-Claytonand Sadler, 2014). Here all the costs and expenses are covered and then net profit of the1
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