Financial Decision Making

FINANCIAL DECISION
MAKING

Table of Contents
INTRODUCTION...........................................................................................................................3
Task 1..............................................................................................................................................3
Importance, duties and role of financial function........................................................................3
Task 2..............................................................................................................................................7
Ratio analysis...............................................................................................................................7
CONCLUSION.............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Financial management is defined as managing financial resources associated with the
business entity. This report is based on the case study of Skansa Plc initiated business operations
in the year 1984. Company is associated with the construction sector. Currently the business
entity providing employment opportunities to approximately 33585 employees. Company is
owning an income of £ 6.054 billion. Company own a market share of approximately 2% that is
very impressive due to the presence of healthy market competition. Business entity contain
positive brand value, diversified resources, efficient employee base and well-structured
organisation hierarchy are the strengths associated with the business entity. Certain weaknesses
like less focus over innovation, technological advancement and inflation in economy is the
major weakness associated with the business entity. Opportunities such as global expansion,
product development, technical advancement and innovation is also associated with the business
idea hold by business entity. Competition is considered as the key threat associated with the
business operations company functioned in market. This project will discuss the financial
management related practices in respect to the business entity. Henceforth, report will emphasis
over different functional roles and responsibilities company channelise in order to manage its
finances in the best way possible. Furthermore, report will discuss the overall performance of
business entity for the two financial years based on comparative assessment.
Task 1
Importance, duties and role of financial function
Financial management practices are allocated to finance and accounts teams in the
organisation hierarchy of the Skansa Plc. Account and finance department both the areas allow
the business entity to establishes smooth control over the financial resources undertaken by the
business entity. Management has segregated different roles and responsibilities related to the
financial management in between account and finance department based on the skills and
abilities of the employees associated with individual department (Al Muhair and Nobanee,
2019). The basic segregation into the role both the departments play is that accounts deportment
is mainly focused towards the projection of the accounting transactions company has entertained
and on the other hand finance team is more involved in analysing the financial position of
company and make the best level of decision based on the needs and requirements of the
business entity.

Accounts department
Management of Skansa Plc has allotted certain responsibilities such as financial
accounting, management accounting, tax functions and auditing functions to the accounts
departments. All these are the four primarily functions related to the accounting.
Finance accounting: Finance accounting is among the primary role and responsibility that
accounts department play in Skansa Plc. Financial accounting is more like utilising the series of
accounting principles and practices in order to represent the financial position of business entity
in the best way possible. Skansa Plc follow accrual basis when it comes to reporting the
financial position of the organisation. Accounts department classified financial data in certain
ways such as revenue, expenses, assets, liability and equity (Alkaraan, 2018). Revenue and
expenses are accounted and reported in the income statement of the respective financial year.
Assets, liability and equity accounts are projected under the balance sheet section of the
financial accounting. The basic aim behind the finance accounting is that to present or reflect the
accounting records associated with the respective financial year. Profitability is the main
element that accounting team try to identify against reporting transactions under finance
accounting.
Management accounting: Management accounting is all about taking financial decisions or
related to business operations undertaken by organisation. Management accounting techniques
further include ratio analysis, investment decision-making and other types of the assessment that
can empower the organisation to improve growth of company. Management accounting also
include cost accounting under which different costing methods such as job costing, batch costing
and other such techniques used by the Skansa Plc to take the best and profitable business
decision-making (Asandimitra and Kautsar, 2019). In context to the business growth and
development decision-making is a key tool that is used by organisation to maximise its growth
possibility. This part of operations include different roles and responsibilities such as forecasting
future growth, make or buy decisions, forecasting cash flows, understanding performance
variance and also to analysis the rate of return against a certain investment. This part of
accounting put a direct influence over the growth and development possibility of business
organisation. Skansa Plc also try to take competitive advantage with support of this technique
and accounting practice.