Financial Decision Making: Functions of Finance and Accounting Departments, Sources of Finance, and Ratio Analysis

This article discusses financial decision making, including the functions of finance and accounting departments, sources of finance, and ratio analysis. It also includes a calculation and analysis of eight ratios to determine the company's profitability and liquidity. The article provides recommendations on how to improve the company's performance in the future.

FINANCIAL
DECISION MAKING
Table of Contents

Contents
INTRODUCTION.....................................................................................................................3
TASK.........................................................................................................................................3
Identify the functions related to finance and accounting departments........................3
PART B.....................................................................................................................................6
Calculate the ratios..............................................................................................................6
CONCLUSION.......................................................................................................................11
REFERENCES.......................................................................................................................12

Introduction
Financial choice making is a choice made with the aid of using the Finance
Manager to be able to recognise approximately the finance matrix of the
management. Financial choice making specially makes a speciality of borrowing and
allocation of funds. Funds may be organized with the aid of using an employer with
the aid of using reasserts specifically its very own capital and from out of doors the
employer. In the subsequent it explains approximately the responsibility and
obligations of Panini. Ltd. It additionally gives diverse accounting features executed
and responsibilities of the management. It additionally allows in figuring out the goal
and desires of the management. Further diverse ratios are calculated to recognise
the overall performance of Panini Ltd. And additionally, recommendation at the
diverse techniques which allows in enhancing the overall performance of the
company (Afshar and Zenozi, 2021).
TASK 1
Part a: Accounting and Finance departments
For each of the below two departments, you need to provide a brief
introduction, before you proceed to the analysis of each function.
The following two departments along with their functions should be covered:
1. Accounting department:
a) Financial accounting function: The detail of bookkeeping the
economic activity. This device allows in handling the beyond facts
of the management. It similarly allows in arranging the beyond facts
for the destiny plans and goal’s purpose. It additionally aids in
coping with the costs and economic figures. There are few factors
of bookkeeping: It allows in maintaining the economic transactions
of the organisation: This technique allows in retaining the affiliation
with the bills and bookkeeping for you to understand the facts of the
firm.
b) Management accounting function: Management facilitates manager
to realize the real affiliation among the control and affiliation. It
facilitates in breaking, deciding, decoding the facts and bring the
information. Association facilitates in accomplish the dreams of the
control (Barth, 2018).
c) Tax function: This feature allows in understanding the implication
and results of the transactions and file the ones transaction to the
stakeholders which allows them to recognize what goes withinside
the organization.
d) Auditing function: Audit characteristic is performed with the aid of
using the auditor of the organisation and guarantees that everyone
the economic statements are correct and truthful.
2. Finance department:

A) Investment function: Investment is associated with the acquisition of stocks
and stocks, dentures, equities and authority’s bond. This funding most
effective consists of economic funding and now no longer the actual funding.
b) Financing function: This characteristic is associated with the control which
enables in imparting budget which is wanted through the corporations so that
you can budget the commercial enterprise sports of the businesses.
c) Dividend function: This characteristic aids in distribution of income to the
shareholders of the corporation. The quantity of dividend is decided through
the board of administrators of the corporation. Dividends are the bills made
through the corporation to its shareholders for making an investment
withinside the corporation (Israel, Lahav, and Ziv, 2019).
d) Working capital function: Working capital is the quantity of budget wanted
through the company so that you can decide the desires to budget to fulfill the
short-time period debt responsibility of the firm. If an company has sufficient
running capital, then it is going to be capable of repay its providers and
personnel of the company.
Part b: Sources of finance
Source of finance is used to finance interest for strolling and dealing with the
commercial enterprise sports. In the subsequent case, Panini Ltd. Uses numerous
reasserts of finance that's to be had to the company to control the commercial
enterprise operations. This supply of finance consists of equity, debt, operating
capital loan, time period loan, etc. those budgets are used to finance the commercial
enterprise sports and improvement of the commercial enterprise operational sports.
It additionally performs a critical function withinside the advertising and marketing
and monetary sports of the commercial enterprise. These sports assist the
innovation, nice of proprietor and economic assist. There are reasserts of finance:
long time period finance: long time supply of finance is used to finance the
commercial enterprise sports and operations which might be associated with the
long-time period profitability of the commercial enterprise. Long time period finance
is especially used for the undertaking which the commercial enterprise goes to adopt
so that it will growth the profitability of the organization. Short Term finance are taken
to repay the debt duties that's taken into consideration for paying the short-time
period debt of the company. It allows in dealing with fantastic coins go with the drift
withinside the management. Short time period finance consists of operating capital
loans, alternate credit, operating capital loan (Kamaluddin, Ishak, and Mohammed,
2019).
TASK 2
Part a: Calculation of the 8 ratios below using the correct formulas
(i) Gross profit margin: Gross profit/ Net sales * 100
2018: 3500/ 10000 * 100 = 35%
2019: 3265/ 11500 * 100 = 28.39%

(ii) Operating profit margin: Operating profit/ Net sales * 100
2018: 2765/ 10000* 100 = 27.65%
2019: 2305/ 11500* 100 = 20.04%
(iii) Return on capital employed (ROCE): Earnings before interest and
tax/ Share equity + Long term liabilities * 100
2018: 2765/ 8755= 31.58%
2019: 2305/ 10211* 100 = 22.57%
(iv) Current ratio: Current assets/ Current liabilities
2018: 1175/ 970 = 1.211: 1
2019: 2110/ 512 = 4.12: 1
(v) Quick ratio: Current assets – Inventory / Current liabilities
2018: 1175 – 350/ 970 = 0.85: 1
2019: 2110 – 675/ 512 = 2.80: 1
(vi) Inventory turnover days: Cost of goods sold / average inventory
2018: 6500 / 350 = 13.57 times
2019: 8235 / 512 = 16.08 times
(vii) Debtor’s collection period: sales on credit / accounts receivable *
365
2018: 10000 / 760 * 365 = 27.74 days
2019: 11500 / 1340 * 365 = 42.54 days
(viii) Creditor’s collection period: cost of sales / trade payable * 365
2018: 6500 / 920 * 365 = 51.6 days
2019: 8235 / 707.5 * 365 = 31.36 days
Part b: Individual analysis of each ratio based on the numerical results from
part a

(i) Gross profit margin
A. Gross earnings is calculated with the aid of using subtracting the fee
of products offered from the sales of the organization.
B. What does the ratio imply approximately the business enterprise’s
performance: This ratio states the profitability of the organization after
deduction the prices incurred with the aid of using the organization.
This ratio is calculated with the aid of using dividing the gross earnings
with the aid of using income to decide the share of earnings earned
with the aid of using the organization (Kim, 2021).
C. Compare 2018 figures with the 2019 figures calculated above: The
extrude in earnings of the business enterprise is due to the lower
withinside the gross earnings and growth withinside the income of the
business enterprise. Increase withinside the income have decreased
the profitability of the business. The earnings margin has decreased
due to the fact manufacturing of more unit has brought on to growth the
fee of the operation of the business enterprise.
D. Ways to enhance the fee of the ratio withinside the future: The
business enterprise can enhance the ratio with the aid of using
reducing their fee of operations taking corrective degree to lessen the
operations which incurs greater costs. Further the organization can use
its present assets to optimise the fee of manufacturing. These sports of
the in-addition desires to reveal for the right functioning of the
management.
(ii) Operating profit margin
A. Operating income decide the income earned through the working hobby
of the management.
b. What does the ratio imply approximately the company’s performance:
This ratio shows the income earned through the corporation from working
hobby of the firm.
c. Reasons for modifications withinside the ratio among 2018 and 2019:
working income of the organization have decreased that have lessen the
profitability of the company (Lan, Yang, and Tseng, 2019).
d. Ways to enhance the fee of the ratio withinside the future: The
commercial enterprise desires to paintings upon its operating and coping
with the value of manufacturing to growth the working income of the
commercial enterprise. It allows in right using the to be had assets to its
exceptional use which makes it value effective.
(iii) ROCE
A. This ratio enables in calculating the income earned from the capital
hired withinside the enterprise. It enables in understanding how a whole lot
income are earned with the aid of using the control from the quantity
invested withinside the sports of the company.

b. What does the ratio imply approximately the company’s performance:
The ratios have declined due to the use greater fairness for the reason of
funding which has induced it to lessen the profitability of the enterprise.
c. Reasons for modifications withinside the ratio among 2018 and 2019: In
the subsequent step the enterprise earns income however the quantity
earned with the aid of using the enterprise is decrease that he income
earned with the aid of using the enterprise in 2018. The difficulty for the
control is that the enterprise wishes to boom the profitability as the quantity
invested does now no longer offer sufficient income for the organisation.
d. Ways to enhance the cost of the ratio withinside the future: It will
increase the income and reduces the costs incurred with the aid of using
the company to boom the profitability of the company (Mittal, 2019).
(iv) Current ratio
A. This ratio allows in decide the short-time period paying capability of the
firm, which allows in understanding how plenty the enterprise is capable of
repay its overall contemporary liabilities. This ratio indicates the
connection among the contemporary belongings and contemporary
liabilities.
b. What does the ratio imply approximately the company’s performance:
This ratio measures the short-time period paying capability of the
enterprise which allows in de terming the short-time period paying
capability of the enterprise (Mosteanu, 2019).
c. Reasons for modifications withinside the ratio among 2018 and 2019:
Current ratio of the enterprise has expanded due to the growth withinside
the contemporary belongings of the enterprise and additionally the
contemporary legal responsibility of the business enterprise have reduced.
d. Ways to enhance the cost of the ratio withinside the future: Further it
could be stepped forward with the aid of using growing the contemporary
belongings and reducing the contemporary legal responsibility of the firm.
These sports consist of numerous ratios which includes contemporary
ratio and want to indicates the contemporary duty of the company.
(v) Quick ratio
A. This ratio facilitates in figuring out the liquidity function of the company.
Liquid property is calculated with the aid of using subtracting the pay as
you go fees and inventories of the management.
b. What does the ratio suggest approximately the company’s overall
performance: it facilitates in figuring out the overall performance with the
aid of using dividing the modern property and modern liabilities of the
company.
c. Reasons for modifications withinside the ratio among 2018 and 2019:
The purpose in the back of the alternate withinside the short ratio is lower

withinside the modern liabilities and boom withinside the liquid property of
the company (Schwab, Gold, and Reiner, 2019).
(vi) Inventory turnover days
A. In this ratio it determines the range of instances inventory is turned
around in a year.
b. What does the ratio imply approximately the company’s performance: it
enables in de terming the income which the agency might be capable of
carry out in a particular length of time (Wang, Liu, and Mao, 2019).
c. Reasons for modifications withinside the ratio among 2018 and 2019: In
the subsequent case the ratio calculated determines the boom withinside
the price of products offered of the commercial enterprise concern.
d. Ways to enhance the fee of the ratio withinside the future: The agency
can select to lessen the stock to be had withinside the control to boom the
rotation of the stock.
(vii) Debtor’s collection period
A. This ratio determines the term wherein the enterprise can confirm the
quantity of series from its debtors.
b. What does the ratio imply approximately the agency’s performance:
Increase withinside the income of the enterprise have precipitated boom
withinside the income of the commercial enterprise concern.
c. Reasons for adjustments withinside the ratio among 2018 and 2019:
Account receivables of the agency has improved withinside the agency.
d. Ways to enhance the price of the ratio withinside the future: The ratios
have improved due to the boom withinside the range of days of the
enterprise has improved and the range of days additionally improved due
to the boom withinside the income (Zhang, Khurshid, and Băltăţeanu,
2021).
(viii) Creditor’s collection period
A. This ratio determines the quantity of days taken with the aid of using the
control a good way to pay the quantity because of its creditor’s. This
additionally decide s the quantity of days it takes to repay its lenders.
b. What does the ratio suggest approximately the company’s performance:
this ratio shows that the time taken to repay its lenders has decreased this
means that that the quantity pays greater frequently (Zhang, Xu, and Jia,
2020).
c. Reasons for adjustments withinside the ratio among 2018 and 2019: the
ratio has reduced due to lower withinside the alternate payables and
growth withinside the price of income of the company.
d. Ways to enhance the price of the ratio withinside the future: This ratio
facilitates in figuring out the performance of the paintings done with the aid

of using the control. The series of finances wishes to finished in fewer time
period which growth the quantity of finances available.
Conclusion
From the above record it may be concluded that Panini Ltd. Performance and
diverse capabilities which wishes to analysed. It additionally indicates the regions
wherein the enterprise wishes to paintings upon. These capabilities assist in destiny
profitability of the enterprise withinside the lengthy run. Further diverse ratios are
calculated to decide the monetary function of the enterprise and attempts to keep
and growth the profitability of the enterprise.

REFERENCE
Afshar, M.R. and Zenozi, H.A., 2021. Introducing a fuzzy MCDM model for financial
management in multiple project environments. Construction Innovation.
Barth, M.E., 2018. The future of financial reporting: Insights from
research. Abacus, 54(1), pp.66-78.
Israel, A., Lahav, E. and Ziv, N., 2019. Stop the music? The effect of music on risky
financial decisions: An experimental study. Journal of Behavioral and
Experimental Finance, 24, p.100231.
Kamaluddin, A., Ishak, N. and Mohammed, N.F., 2019. Financial distress prediction
through cash flow ratios analysis. International Journal of Financial
Research, 10(3), pp.63-76.
Kim, M., 2021. A data mining framework for financial prediction. Expert Systems with
Applications, 173, p.114651.
Lan, S., Yang, C. and Tseng, M.L., 2019. Corporate sustainability on causal financial
efficiency model in a hierarchical structure under uncertainties. Journal of
Cleaner Production, 237, p.117769.
Mittal, S.K., 2019. Behavior biases and investment decision: theoretical and research
framework. Qualitative Research in Financial Markets.
Mosteanu, N.R., 2019. Intelligent tool to prevent Economic Crisis–Fractals. A
possible solution to assess the Management of Financial
Risk. Calitatea, 20(172), pp.13-17.
Schwab, L., Gold, S. and Reiner, G., 2019. Exploring financial sustainability of SMEs
during periods of production growth: A simulation study. International Journal
of Production Economics, 212, pp.8-18.
Wang, W., Liu, M., and Mao, R., 2019, June. Financial numeral classification model
based on BERT. In NII Conference on Testbeds and Community for
Information Access Research (pp. 193-204). Springer, Cham.
Zhang, H., Khurshid, A., and Băltăţeanu, A.M., 2021. Corporate financial risk
assessment and role of big data; New perspective using fuzzy analytic
hierarchy process. Journal for Economic Forecasting, (2), pp.181-199.
Zhang, H., Xu, X., and Jia, Z., 2020. Green supply chain decision modeling under
financial policy, with or without uniform government emission reduction
policy. Managerial and decision economics, 41(6), pp.1040-1056.
Zhang, R., Xu, Z. and Gou, X., 2022. ELECTRE II method based on the cosine
similarity to evaluate the performance of financial logistics enterprises under
double hierarchy hesitant fuzzy linguistic environment. Fuzzy Optimization
and Decision Making, pp.1-27.