Role of Accounting and Finance in Aston Martin

Financial Decision Making

Contents
INTRODUCTION...........................................................................................................................1
Critically evaluating the role of accounting and finance within Aston martin............................1
Calculating the five ratios of ALPHA LTD. and commenting on its performance by
mentioning possible causes and effects for the changes in two year’s ratio results....................5
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Financial decision making is process of analysing a situation by evaluating its benefits and
demerits which are related to finance and then a suitable decision is made which can assist the
functioning of that business organisation. This process is based upon a concept which states
every business should use their data before making any decisions (Aren and DİNÇ AYDEMİR,
2014). The main aim of this report is to build an understanding regarding management
accounting techniques and main accounting ratios.
This report is divided into two sections; the first section will be focused upon analysing the
role of finance and accounting in a real life organisation which will be Aston Martin. Aston
Martin is a large scale car manufacturer which is based in United Kingdom. This company was
established in 1913 by Robert Bamford and Lionel Martin. The key operations of this company
include manufacturing and marketing of automobiles (Aston Martin, 2020). In the second section
of this report, five key ratios including return on capital employed, net profit margin, current
ratio, debtor’s collection period and creditor’s collection period are calculated of Alpha Limited.
This company is a manufacturing organisation which is also based in United Kingdom and was
established in the year of 1954. In second section, performance of Alpha Limited will be
analysed using the trend and comparative analysis.
TASK 1
Critically evaluating the role of accounting and finance within Aston martin
Accounting and finance functions are the paramount to any organisation as these functions
allows a business to manage their finances and earn a relevant amount of profit which can help
gain desired position in market. Finance is a collective term which is associated with monetary
transactions of an organisation. Finance of an organisation includes managing an organisation’s
monetary aspects which can be managerial and financial accounting (Beaudoin, Cianci and
Tsakumis, 2015). On the other hand, accounting is a sub concept of finance which is concerned
with recording of all monetary transactions and develops statements of finance. Both of these
concepts play an important role in any organisation including Aston Martin. These roles are
analysed below including real life examples of Aston Martin:
Creating financial statements:
1

Financial statements are the records which are developed by an organisation at the end of
their accounting year in order to summarise all the transactions which are been done in that year.
These statements include profit and loss account, balance sheet and cash flow statement (Fraczek
and limontowicz, 2015). All these three statements are mandatory to be developed by every
company. Finance and accounting has few certain guidelines and regulations which assist in
development of these statements. These guidelines are called IFRS and are provided by IASB.
These guidelines have certain principles and regulations which ensure that the financial
statements developed by every company have a similarity of format so that these statements can
be understood easily by everyone.
Finance and accounting helps Aston Martin to develop their financial statements at the end
of the year. These statements are then published by the company for public. In absence of the
concepts of finance and accounting, the company would be unable to develop financial
statements. For example, Aston Martin is a publically traded company and following the
financial and accounting concepts, this company develop a vertical balance sheet so that it can be
universally accepted.
Development of business strategy:
Another role of accounting and finance in Aston Martin is development of their business
strategy. Every large organisation such as Aston Martin is required to develop a business strategy
on which all their organisational functions and operations are based on. This type of business
strategy is developed by considering the financial and accounting information of a company.
Financial data are used by Aston Martin’s executives and then priorities of all the operations are
determined and this collectively is known as a business strategy.
For example, Aston Martin is a high revenue generating company but due to current
market influence, the revenues of this company are continuously decreasing. In order to
overcome with this issue, the company has used their financial data to identify the reasons for the
low revenues. These low sales were the result to innovative electric vehicles by their competitors
due to which sales of Aston Martin are declining and sales of their competitors are increasing. To
fix this issue, Aston Martin has re developed their business strategy in which they are making
efforts to develop their own electric vehicles to gain high revenues.
Fulfilment of legal obligations:
2