Financial Decision making

Financial Decision making

TABLE OF CONTENT
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Significance, functions and role of Accounting..........................................................................3
Significance, functions and role of finance.................................................................................5
TASK 2............................................................................................................................................7
Calculating ratios of SP...............................................................................................................7
Analysing performance of SKANSKA PLC. along with its impact and improvement actions. 8
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Financial decision-making is the process of analysing the pros and cons of any decision
that involve use of money. It is important to make decisions about when, where and how a
company should acquire fund. The present report is based on SKANSKA PLC (SP) that is a
construction based company in UK. The report will highlight the various duties, roles, functions
and importance of Accounting and finance. Accounting supports the decision making as it
provides financial information to the company. Finance is an integral part of any company as it
helps in investment and deciding capital structure of any company. The report will also deal with
the calculation of different financial ratios and their impact on the financial performance of SP
from investors point of view
TASK 1
Significance, functions and role of Accounting
Accounting is the process of recording and measuring the financial transactions and
involve analysing and reporting these transactions to the users. The various accounting reports
generated by various departments of cost and management accounting are helpful in taking
decisions of the organization (Cockcroft and Russell, 2018).
Importance Keeping records of business transactions -Accounting involves maintenance of
systematic records of the transactions of the business that can help users to compare the
current financial position of SP to the past accounting transactions. It enables the users to
analyse the performance of the company for a fixed period of time. Helpful in decision-making- Accounting is important for management of the
organization which enables in planning and organizing the operations of SKANSKA

PLC. The decisions may vary in terms of pursuing geographical expansion to improving
the overall operational efficiency. Meeting various legal requirements- Tax authorities use the financial statements to
assess SP's revenue and net profit. The system of accounting is helpful in ensuring that
financial statements of the company are legal and reported accurately. Preparation of budgets- Budgets are essential to run the business successfully and the
information that is required for preparation of budgets is supplied by accounting. Helpful in filing financial statements- SP is required to file statement of profit and loss
and financial position to Registrar of companies and for direct and indirect tax filing
purposes.
Functions- Business revenues and costs- Just like managing personal finance, business accountants
keep record of expenses and payments of SP which is an important accounting and
finance function of accounting as it involves tracking business spending with respect to
income (Schoenmaker and Schramade, 2018). Collection from accounts receivable- Proper accounting ensures that revenue is
continuously flowing into the bank account by ensuring that SP receives all the due
payment. Payrolls- Accountants are in charge of managing the employee benefits. Accounting
helps to decide how employees are paid or compensated for the work that is based on
how wages affect SKANSKA PLC 's profits. Accounts payable- Accounting function help to set due dates for payments so that SP can
manage its own funds based on inflows of money. Accounts payable functions to pay
SP's bills. Financial reporting- The company prepares both quarterly and yearly reports for
shareholders showing the assets, profits and losses of SP. They also use fiscal reports to
understand financial resources of their firm.
Role of accounting- Save money- The basic role of accounting is to save money by spotting tax deductions,
detecting and preventing internal fraud, and avoiding costly reporting mistakes.