Financial Decision Making

Financial Decision Making

TABLE OF CONTENTS
INTRODUCTION......................................................................................................................3
TASK 1......................................................................................................................................3
Function/ Roles and responsibilities of accounting and finance within a Skanska Plc.........3
TASK 2......................................................................................................................................6
Part a: Calculation of the financial ratios for the two years...................................................6
Part b: Analysis and interpretation of the financial ratios......................................................7
CONCLUSION........................................................................................................................10
REFERENCES.........................................................................................................................11

INTRODUCTION
Financial decision making is that process within a company who is responsible for
all decisions with regard to liabilities and stockholder’s equity. Thus its main objective is to
maximize the firm’s value stock price and maximization of stock process as well. The present
study also shed a light upon the importance of accounting and financial system within a
company. It is based upon the study of Skanska Plc which is multinational construction and
development company, headquarter is in UK and established in 1984. The present report will
highlight the roles and responsibilities of accounting as well as finance team within Skanska
Plc along with appropriate examples. Further, with the defined financial statement, study will
calculate ratios and also comment upon the company’s performance.
TASK 1
Function/ Roles and responsibilities of accounting and finance within a Skanska Plc
Accounting and finance team plays an important role within SKANSKA PLC because
it helps to manage the financial report and indicate the performance level of a business as
well (Moray and Nargundkar, 2020). The importance of accounting reflects that it keep a
systematic record of organization’s financial information which in turn helps to compare the
financial information to historical data. Moreover, through such records, company is enabling
users to determine the performance of a company within a specific period. Therefore, the
functions are as mentioned below:
Function, roles and responsibilities of Accounting functions
Within SKANSKA PLC, management make various decisions for its smooth
running and also evaluated the past activities in order to make future decision. Various
functions are enlisted below:
Control of financial policy and formation of planning: it is the main function or
role that helps management to control over financial policies as well as formulating planning
with regard to future activities (de Castro, Salamat and Tabor, 2020). Through this, company
make decision for better development. For example, the financial performance of the
company is improving from last 3 years, and then it is beneficial for the company to planning
for offering new materials regard to construction.
Preparation of budget: It is considered another important managerial function that
helps to estimate the statements of income and expenditure based upon future activities
(Aggarwal and Gupta, 2020). Therefore, with the help of accounting, it provides necessary
financial information required by manager of SKANSKA PLC in order to prepare budget.

Further, it will also compare with budgetary elements in order to ensure that the budget is
correct for the company or not. For example, in order to introduce any new materials within
quoted firm accounting helps manager to prepare budget and this in turn causes positive
impact upon the business and make better decision as well.
Cost control: Companies always estimated cost for each product and for this, it is
necessary to collect information available within accounting records (Role of accounting in
business, 2020). Also, it is analysed that actual cost and standard cost can be compared for
evaluating efficiency of the company. Such that through effective cost control, company is
able to make effective control on cost and this in turn cause positive impact upon the
business.
Evaluation of employee’s performance: Through effective accounting, company is
able to evaluate the performance of employees within each department. Further, manager of a
company is also assigned the task of employees as per the capability and then evaluate the
performance. For example, within SKANSKA PLC, who hire experts and in order to
determine their performance, management evaluate the performance of that department in the
term of sales and profit.
Prevention of error and frauds: It is one of the important role played by the
accounting department within a company because through this, employees are able to
checked to prevent errors and fraud. It is completely based upon accounting for that different
software is used that helps to minimize the chances of error and decrease frauds as well.
Makes better decision for future: It is quite difficult for the company to run a
business with accurate data and this is possible by using accounting (Bawono, Arofah and
Ubay, 2020). Such that it plays an important role in evaluating the viability of investments as
well as consider the cash flows to make better decision. For example, in SKANSKA PLC,
management wants to invest £1 million within other companies and this is possible only
when the accounting standards are accurate and reflects that company do not have to face any
loss after investing the amount.
Overall, it is clearly reflected that with the help of accounting, stakeholder measures
as well as summarizes the activities if a company. Further, accounting assists to communicate
the same results to management as well as other parties so that effective results can be taken,
if the company’s financial performance is low.
Finance function