Financial Decision Making of Elton Plc
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Added on 2020-01-28
Financial Decision Making of Elton Plc
Added on 2020-01-28
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Financial Decision Making
Executive Summary Financial decision making refers to the framework which is undertaken by the analyst orpersonnel for framing competent strategies which aid in the growth of firm. The present report isdrafted on Elton Plc who manufactures and sells laptop, PC and tablet. From the financialstatements of Elton Plc it has been summarized that revenue of the firm increased from £2022 to£2630. Along with this, administration expenses of the business organization decreased in 2015 ascompared to 2014. Further, in the accounting year 2015, profit of the firm also increased from £145to £230 which shows that customer prefers to spend high amount of money in the products of EltonPlc. Besides this, by making analysis of cash flow statement it has been articulated that businessorganization needs to make control on its spending. In this, by framing competent strategies andpolicies Elton Plc can improve its cash position more effectively and efficiently. It also has beenarticulated that Elton Plc needs to make through and in-depth analysis of each and every aspectbefore investing money in the proposed investment. Thus, it can be said that investment appraisaltechniques help business organization in making most profitable business decisions.
Table of ContentsINTRODUCTION................................................................................................................................3Part 1 ....................................................................................................................................................3Analyzing the financial performance of Elton Plc by critically evaluating the statement of profit and loss through ratio analysis ........................................................................................................3Part 2.....................................................................................................................................................8Critically evaluating investment appraisal techniques by taking into account the benefits and limitations of each method...............................................................................................................8Advising the Board of Directors about the non-financial factors which Elton Plc need to considerwhile expanding business operations in international market ......................................................10Advising higher management in relation to the sources of finance which they need to undertake for raising finance..........................................................................................................................10CONCLUSION...................................................................................................................................11
INTRODUCTIONFinancial decision making is highly concerned with the proper allocation and use of money.In business organization, it is the responsibility of manager to frame competent strategies andpolicies which ensures optimum use of money. Moreover, in the present era, business organizationcan attain success only when they make effectual decisions by making thorough analysis offinancial statements and other factors which are highly associated with the business performance. The present report is based on Elton Plc which manufactures computer hardware and otheraccessories. It was found in 1980 and thereby, has become a well-established supplier in WesternEurope, North America. Company is also listed on the recognized stock exchange of London. In thiscontext, present report will highlight the financial health and performance of firm through ratioanalysis. Further, it will also shed light on the extent to which investment appraisal techniques helpin making suitable decision. Besides this, report will also lay down emphasis on the non-financialfactors which company need to consider while making decisions. PART 1 Business Performance Analysis Analyzing the financial performance of Elton Plc by critically evaluating the statement of profit andloss through ratio analysis Ratio analysis may be defined as a tool which provides assistance to the businessorganization in evaluating its financial health and performance in comparison to the previous years.It is the most effectual tool which offers opportunity to Elton Plc to make competent strategicframework for enhancing their financial, liquidity and solvency aspects.Analysis of the statement of profit and loss are:Profitability ratios: This ratio renders information about the growth aspect which takesplace in the profit before and after tax margin of the firm. Gross profit ratio: The above presents that GP margin of Elton Plc showed declining trend.In the accounting year, GP ratio of the business unit was 25.57%, whereas it reached on21.75% at end of 2015. Increasing cost of sales are one of the main aspects due to whichgross profitability aspect of the business declined. Due to this, gross margin of the firm notinclined irrespective the fact that sales revenue of the firm increased. Hence, company needsto undertake effectual measures for making control on direct expenses. By this, company
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