Financial Management Report: Financial Strategies for Ryanair DAC

This report provides a comprehensive overview of financial management principles, techniques, and processes, using Ryanair DAC as a case study. It explores management accounting techniques supporting facilities management, financial systems, and processes for effective budget management. The report delves into financial auditing principles, corporate ethics, and transparency, including how to present a true and fair view of financial data. It examines revenue and capital budgeting, including techniques for setting, reviewing, and managing budgets, alongside financial appraisal tools. Furthermore, it covers cash-flow projections, their application in managing cash flow within the business cycle, and the preparation of financial cases to secure required approvals. The report integrates these concepts to provide a holistic understanding of financial management practices within a real-world context, offering insights into decision-making and operational efficiency.

Financial
Management

INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................4
LO 1.................................................................................................................................................4
1.1. Describe management accounting techniques which support the facilities management
process and the financial systems and processes used for the effective management of facilities
management budget within your company..................................................................................4
1.2 Financial systems and processes used for the effective management:.................................5
LO 2.................................................................................................................................................6
2.1 Explain the principles of financial auditing and describe how these principles are deployed
within your own area of responsibility........................................................................................6
2.2 Describe how these principles within own
area of responsibility...................................................................................................................6
2.3 Review the financial implications of using codes of ethics within in the context of
corporate responsibility................................................................................................................7
2.4 Explain how you would make suitable adjustments to improve good practice and
transparency ................................................................................................................................8
2.5 Explain ways in which a true and fair view of assets, liabilities, profits and costs can be
presented .....................................................................................................................................9
LO 3...............................................................................................................................................11
3.1 Explain how organizations would prepare, review and manage revenue budgets .............11
3.2 Review and manage budgets................................................................................................13
3.3 Set out how to apply the techniques used by facilities managers to set, acquire, review and
manage capital budgets..............................................................................................................14
3.4 Set capital budgets...............................................................................................................15
3.5 Review and manage capital budgets....................................................................................17
3.6 Explain the tools of financial appraisal and how these are used to inform financial
management and budgetary decisions ......................................................................................17
LO 4...............................................................................................................................................18
4.1. Apply the principles, techniques and processes of cash-flow projections to manage the
flow of cash within the facilities management business cycle, including how this impacts on
contracts and projects.................................................................................................................18
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4.2 Apply the principles, techniques and
processes in the management of cash flow
for contracts and projects..........................................................................................................18
LO 5...............................................................................................................................................21
5.1 & 5.2 Identify and apply the principles and techniques to prepare financial cases and
prepare a financial case to secure the required approval...........................................................21
CONCLUSION..............................................................................................................................22
REFERENCES .............................................................................................................................23
2

INTRODUCTION
Financial management involves the planning, implementation, coordination, management
and regulation of business operations, such as the acquisition and use of company funds. It
involves identifying general accounting management concepts to the company's financial capital.
It contains a list of types of decisions, such as investment decisions, including spending on fixed
assets (called capital budgeting). Invested capital is also part of financial decisions referred to as
decision making on working capital. Financial decisions relating to the increasing of funding
from different resources, that will focus on the form of source, the length of financing, the
expense of funding and the returns (Aman, 2016). Dividend decision is taken by the financial
manager who has to make decision on the allocation of net profits. Net profits were also broadly
divided into two dividends for shareholders where even the dividend as well as the rate of the
dividend has to be determined. Retained earnings are the proportion of retained earnings to be
determined, that will depend on the company's growth and diversifying plans.
For the better understanding of this financial management concept, Ryanair DAC is selected
which is Ireland based airline corporation. Ryanair DAC (Designated Activity Company) is an
Irish low cost airline established in 1984, headquarter based in Swords, Dublin, with its
principal operating base at Dublin and London Stansted airports. It is the biggest chunk of
Ryanair Holdings' airline community, and Ryanair is the UK, Buzz, Malta Air and Lauda 's sister
airlines. Ryanair was the biggest scheduled airline budgeted airline in Europe in 2016, carrying
more foreign passengers than just about any other carrier. The organisation has been criticised
for the treatment of its workers and the extensive use of additional charges. It was also
remembered for its deliberate exploitation of conflict as a way of creating free ads and terrible
customer service. This assessment covers several topics such as management accounting
techniques which facilitates the management process and also implement such techniques to
improve their management practices. Principles of financial auditing help the managers to
improving their own area of responsibilities. Also review the code of ethics within corporate
responsibility and further management need to done some adjustment for better practice and
transparency. In addition, also evaluate that how manager review and manage the revenue budget
and some techniques which facilitates the managers to manage capital budget.
3

MAIN BODY
LO 1
1.1. Describe management accounting techniques which support the facilities management
process and the financial systems and processes used for the effective management of
facilities management budget within your company
Management accounting techniques that support the management process:
Management accounting also called cost accounting or managerial accounting which is an
accounting division dealing with the recognition, calculation, review and evaluation of
accounting data because it can be seemed to help managers or management process to make the
required decisions and managing their operational performance efficiently (Antonopoulos and
Hall, 2016). With exception of financial accounting, which focuses mainly on the proper
coordination and disclosure of the firm's financial situations to stakeholders ( e.g. investors,
lenders), management accounting focuses on decision-making process which is taken by the
internal people of management for effective operational process. Management accountant have
to evaluate different incidents and organisational metrics in required to persuade data into
valuable knowledge that can be used by the management of the organisation in their decision
making process. The goal would be to provide comprehensive details on the operation of the
business by evaluating each specific product line, operational activity, facility, etc. There are
several management accounting techniques which are followed by the managers of Ryanair
Airline Corporation and these are discussed below:
 Margin analysis: The marginal analysis is mainly associated with the incremental effects
of improved output. Margin analysis is among the most basic and important strategies in
management accounting. It involves the measurement of the breakeven point that defines
the optimum selling price for the firm's products.
 Constraint analysis: This analysis is used for company's production lines that identify
the key inefficiencies, the shortfalls generated by such obstacles, and their effect on the
firm's capacity to produce sales and profits.
 Capital budgeting: Capital budgeting is involved with the review of the details used to
make sufficient capital spending decisions. In this analysis, managers measure the
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NPV and the IRR to allowing management to make future capital budgeting decisions for
effective management process.
 Inventory valuation and product costing: Inventory assessment involves determining
and assessing the real expenses involved with the goods and inventories of the business
(Anwar, Marliani and Gunawan, 2016). The method usually includes the measurement
and distribution of overheads, as well as the evaluation of specific costs associated with
the cost of goods sold.
 Trend analysis and forecasting: This technique is mainly concerned with the detection
of commodity cost trends and patterns, and also the identification of significant variances
from anticipated values and the explanations for such variances.
1.2 Financial systems and processes used for the effective management:
The financial system is a collection of several institutions which provide money lending
options to the organisations such as banks, insurance firms and stock exchanges, which facilitate
the exchange of funds. Financial processes operate at the business, domestic and international
levels. Borrowers, creditors and investors exchange current earnings to fund ventures, either for
usage or profitable investment, and to repay their financial assets. The financial system also
contains a set of policies and procedures that creditors and lenders are using to determine the
projects are funded, the projects are funded, and the conditions of financial transactions. With the
help of financial system, organization such as Ryanair able to fulfil their financial needs or
achieve their business goals & objectives by performing their daily basis operational activities.
Facility budget management is one of the most dynamic systems currently facing by
the facility managers. This is far more than a periodic analysis of needs and the distribution of
funds. Based on the size of the organization, handling the budget may be the primary
responsibility of thousands of staff, and any divergence from the budget may have disastrous
consequences. Instead of giving into the uncertainty of modern budgets and putting stuff on the
back - burner, Facilities Administrators need to learn a few stuff about the fundamentals of good
budgeting (Arianti, 2018). While preparing budget for the organization, management need to
ensure that which financial systems helps in resolving their financial needs with minimum
expenses and risk.
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LO 2
2.1 Explain the principles of financial auditing and describe how these principles are deployed
within your own area of responsibility
Financial auditing is an impartial review and assessment of an entity's financial statements
to ensure that the accounting records are a true and correct reflection of the expenditures they
appear to represent. Financial auditing recommendations to the accounting procedure used in the
corporate sector. The method requires the use of an independent entity to analyse the financial
activities and the company's statements. The main aim of the financial audit is to provide an
accurate estimate of the company's operational transactions.
2.2 Describe how these principles within own
area of responsibility.
There are various principles of financial auditing which can be followed by the
management of Ryanair and these are discussed below:
Planning and accountability: Until beginning their job, the auditor must prepare for their
work. In preparation, the auditor shall settle on the accounting of the organisation and the
internal management protocols. The auditors should behave in the preferences of the key
stakeholders, taking into account the broader public interest.
Honesty and Integrity (Probity): Probability is the attribute of possessing good moral
values, i.e. fairness and integrity. Probity requires more than preventing unethical or unethical
conduct. Probity guarantees that all complicated procedures are performed in a manner that is
equitable, unbiased, and transparent and always in the best interest of the organizations. This
process includes the several activities such as procurement, disposal of assets, sponsorship,
marketing, administration of grant etc.
Impartiality, Objectivity, and Independence: The auditor’s approach must be unbiased.
Specific opinions would not be included in the investigation report (Banerjee and et.al., 2016).
The auditors must be seen as impartial in all their interactions with the clients. They express
view should be independently of the company and its management. Objectivity creates a
reasonable description of the whole article, i.e. content and expression. The integrity of the report
is greatly improved as it addresses facts in an objective manner.
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Conformance: The function of the independent auditors must be conducted out in
compliance with the standards of the accounting bodies as well as the legislative criteria. The
internal audit work is carried out during compliance with the International Guidelines for the
Professional Practice of Internal Auditing which adopted by the Institute of Internal Auditors
(IIA).
Above discussed principles should be in auditor and they need to understand their
obligations and accountability towards organization and their work. In context of Ryanair airline,
organization appoints internal as well as external auditors and make sure that these people are
aware about the principles of financial auditing. Auditor need to be honest, integrated, should be
independent for their activities and accountable for their actions. In addition, financial auditor of
Ryanair has to follow each and every accounting standard and keep important information
confidential from others (Brusca, Gómez‐villegas and Montesinos, 2016). During the auditing
process, auditor needs to keep evidences from others and give their final opinion or review on
the basis of it. This is the auditor's ability to perform a professional role with great experience,
competence and precision. The auditors must have expertise based on gained skills, training and
practical knowledge. Auditing needs an understanding of financial reporting and business
concerns, along with experience in collecting and analysing facts required to form an opinion.
2.3 Review the financial implications of using codes of ethics within in the context of corporate
responsibilit
The Code of Ethics is a guideline of standards meant to help businesses operate with
dignity and fairness. The Code of Ethics should describe the mission and values of a company or
company, the manner in which staff are required to solve problems, the moral principles focused
on the company’s values, and the requirements which the practitioner is bound. The Code of
Ethics also related to as the Code of Ethics, which covers areas such as corporate ethics, the
Code of Professional Practice and the Code of Conduct for employees. In relation to Ryanair
airline, organization needs to follow such code of ethics in order to fulfil their corporate
responsibilities (Darwanis, Saputra and Kartini, 2016). The financial implication of Code of
Ethics is important for Ryanair airline because it allows workers or representatives of the
corporation to make effective decisions that are compatible with company principles in the
absence guideline or direct oversight. The Code of Ethics will improve decision making
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process in an organisation and make things easier for workers to be self-employed. There is some
most effective and essential code of ethics which required implementing and these are as follow:
Honesty: Ethical leaders are honest and fair throughout all their activities, and therefore do
not knowingly mislead or manipulate others by falsehoods, overgeneralizations, half-truths,
systematic omissions, by every other way.
Integrity: Ethical managers show the integrity and strength of the principles and doing
what they believe is the truth even though there is massive pressure to do anything else. They are
trustworthy, honest and upright and they will struggle for their values. They would not betray the
concept of opportunism, be dishonest or opportunistic.
Fairness: Ethical management have to be honest and equitable in all involvements, they do
not wield power unfairly but don't use over-arching or immoral means to achieve or retain any
benefit or take unfair advantage of the errors or problems of someone else (Dennis, 2018).
People manifest a dedication to fairness, equal rights of persons, empathy and appreciation of
differences. They are open-minded and able to recognise that they are incorrect and, where
necessary, they will change their positions and convictions.
Law abiding: Ethical leaders comply with the statutes, laws and guidelines applicable to
their business practises.
Accountable: Ethical managers and management should be understand and take personal
responsibility for the ethical consistency of their actions and omissions against themselves, their
employees, their businesses and their societies.
2.4 Explain how you would make suitable adjustments to improve good practice and
transparency
In order to improve good practice and transparency, management of Ryanair airline need to
do some modification for the effective results. They need to improve their communication with
the entire staff and it should be in flow on regular basis and managers of Ryanair also need to
manage individual performance by use of effective appraisal system. In addition, they need to
motivate people to perform better which helps in boosting their performance as well as employee
efficiency. These are best ways to improve their good practices and further for transparency,
managers need to make this a part of company’s policy which has to follow each and every one
in their work. Managers or leaders most of the time face lot of difficult situations and should
have such competencies to resolve such issues or conflict at workplace. In addition, management
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and managers need to provide a chance to their subordinates to ask anything through conducting
proper session (Hope, Thomas and Vyas, 2013). This activity will give
staff member’s opportunity to ask a question that they would not otherwise have the opportunity
to say. Leader of a larger company such as Ryanair airline, this kind of practice may be
especially important, as workers can never had an opportunity to meet them and ask anything.
2.5 Explain ways in which a true and fair view of assets, liabilities, profits and costs can be
presented
True and fair view of assets, liability, profitability and cost will be possible
through auditing of each account. That means, financial statements of a company is free
from material misstatement and accurately represent the financial condition and performance of
the organisation.
True view of accounts suggests that the financial reports are completely accurate and have
also been ready in accordance with the relevant accounting principles, such as IFRS, and
therefore do not encompass any fraudulent activities that may manipulate users of financial
reports (Karadag, 2017). Misstatements can arise from material mistakes in the accounts of
transactions and balances.
Fair view of accounts ensures that the overall financial reports present the details
accurately without any aspect of prejudice and represent the accounting treatment of the
activities instead of just the legal type.
In relation to Ryanair Airline, in order to identify the ways of presenting true and fair view
of several components. Organizations need to produce different financial statement for it, such as
balance sheet for the fair and true view of assets and liabilities. On the other side, profit and
expenses of the organizations will be evaluated with the help of income and loss statements.
Balance sheet: It is one of the financial statements which help the organization to identify
their financial position in terms of their resources and obligations. This statement is the way
which provides true and fair view of assets and liabilities (Kourtis, Kourtis and Curtis, 2019).
Amount of each item recorded in this account for the purpose of analysis and to make future
decisions. In addition, any realistic gain or loss also recorded in this will be beneficial for
stakeholders to analyse before making any investment decisions. There are several items
recorded in this financial statement which provide true and fair view of total liabilities and total
assets. These are as follow:
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Income and loss statement: With the help of this statement organization able to identify
their actual profit or loss (cost) of business. This is the way of identifying true and fair view of
their activities (Lawrence, 2013). All the unrealised profit or loss recorded in this profit and loss
statement. Since reasonable expectations are constantly increasing, some suggest that the
acknowledgment of net income profit and losses is deceptive. In an attempt to address this
dilemma, a framework of comprehensive income has been implemented. Comprehensive income
covers income and sales, expenditures and losses recorded in net income, plus any gains and
losses that circumvent net income but influence the equity of the shareholder.
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In the case of fair and true view of accounting, the declaration of sales is the residual
indicator of the balance sheet (Loke, 2017). The statement of income indicates adjustments in the
fair value measured on the balance sheet, and no independent definition of income guides the
statement of income.
The details given by the true or fair value of balance sheets and the income statement does
have the following characteristics:
 The balance sheet is a total value accounting and the purpose of the assessment is
fulfilled in the balance sheet.
 The income statement measures 'financial income' since it is essentially a shift of price
over a period of time.
 Income records management stewardship of value-added owners.
 Incomes are unspecific about potential income and valuation; earnings are increases in
valuation and do not forecast future values, nor do they notify regarding this value.
 Although the income statement doesn't really disclose value, it tracks frequent price
movements and therefore communicates about risk.
 Whereas the report is prepared for annual basis. The time series of income volatility
shows the risk of the company.
LO 3
3.1 Explain how organizations would prepare, review and manage revenue budgets
Revenue budgets are projected sales profits and expenses of a corporation, including
capital spending. It is important that business decide whether they have sufficient financial
resources to function, expand business, and eventually make money (Michalak, 2016). Without
such a preparation, the future of the business will be unclear; since they may not know how often
money should take or spend. Revenue budgets will ensure that a company distribute capital
efficiently and therefore save time, effort as well as money. There is an example of revenue
budget which mentioned in the below table. It will provide better understanding that what kind of
items mentioned in this budget which helps the organization to estimate their sales revenue.
Similarly, Ryanair airline prepare their revenue budget to perform their further activities
accordingly and ensure to maximise their earnings and minimise the expanses.
Facilities Budget
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Rent - 6205 01 257,000
Rates on Buildings - 6205 03 1,233,450
Ref Coll/Water Charge - 6205 04 10,045
Electricity - 6210 01 568,800
Heating Fuel :Gas - 6210 02 198,000
Heating Fuel : Oil - 6210 03 2,420
Cleaning Materials - 6215 01 965
Cleaning Contracts - 6215 02 126,715
Waste Disposal - 6215 03 98,000
Buildings-Structural - 6220 01 1,175,551
Repairs - Facade - 6220 03 500,000
Furniture - 6220 04 50,000
Machinery - 6220 05 1,600
Painting - 6220 06 50,000
Pur.Minor Plant Etc - 6220 08 12,000
Bldg Services Maint - 6220 09 764,000
Minor Works - 6220 10 624,000
Survey Services - 6220 11 248,000
Stationery - 6310 01 3,300
Travel-Internal - 6410 01 12,290
Subs-Internal - 6420 01 2,900
Telephone Charges - 6450 02 300
Use Dublin Pabx Call - 6450 05 3,500
Mobile Tel Charges - 6450 09 2,500
Membership-Prof.Org. - 6460 10 1,400
Incidental Payments - 6460 15 3,000
Total Non-Pay Costs 5,949,736
Revenue budget prepared after identifying each and every activity which required
performing for the success of project goals & objectives. The budgets are meant to be optimistic
12

but practical. Don't project a budget that they didn't fulfil but just don't underestimate the
potential. This is how to get started. Next, list the two to six goals that organization plan to
accomplish over the duration that company is budgeting for (Miller and Oldroyd, 2018). There
are some essential steps which required to follow when managers of Ryanair going to prepare
revenue budget. These are as follow:
 Review the company's environment assumptions which are used as the foundation over
the previous budget, and modify as required.
 Determine the adequacy of the main bottleneck that prevents the business from
producing additional revenues and identify how it would influence any extra revenue
success of the firm.
 Evaluate a most probable level of fund that would be accessible during the budget cycle
that will restrict development plans.
 Copy the planning stage guidelines from the instruction booklet used in the previous
year. Review it by providing the real cost accrued in the current year and also sneezes
this data for the entire current year. Add a statement to the package, defining phase
costing detail, bottlenecks, and projected funding limits for the next budget year.
 Get the sales estimate from the sales manager, verify this with the CEO, and then
allocate to the other department heads. They use sales details as a basis for the creation
of their own budgets.
 Get budget plan from all agencies, check mistakes, and compare bottleneck, funding,
and stage cost constraints. Change the budgets as needed.
 Justify all capital budget proposals and forward ideas and questions to the management
team for the further analysis.
3.2 Review and manage budgets
In order to review the revenue budget, senior management team need to discuss the budget.
Highlight potential restriction concerns and any constraints created by difficulties with funding.
Note down all suggestions which made by the team of management and communicate this
information to the budget makers, asking them to change their budgets accordingly.
Review of budget is the best way to manage the entire budget properly because managers
need to monitor each and every activity and ensure that everything will be work according to the
budget (Mitchell, 2017). Team members perform their task accordingly and spend allotted
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amount which helps in completing project within project budget. Managers make sure that, all
the work completed according to the plan and for this, they need to review each activity of staff
members and further discussed with the entire management team for transparency and if any
changes they required doing. They can modify during the project which helps in achieving
business goals & objectives.
3.3 Set out how to apply the techniques used by facilities managers to set, acquire, review and
manage capital budgets
In this capital budgets, cost associated with long-term investments are referred to as capital
costs. These costs are mostly covered by capital investment that could be used to develop or
liberalise a business. It is mainly focuses on various information regarding buildings, appliances,
plant and fixtures that the organization needs to carry out its operations. Assessing what may or
cannot be spelled correctly is usually the responsibility of the finance manager. There are some
effective techniques which are used by the Ryanair airline managers to set, acquire, review and
manage capital budget. Some of the techniques are as follow:
Payback Method: This is the easiest way to estimate budget for new asset. This method of
repaying is to determine how long it would take for a business to repay an asset (Muneer, Ahmad
and Ali, 2017). The shorter the recovery period is define that faster the business is able to restore
their cost of a new device.
Net Present Value (NPV) Method: This system is like a system of repaying; apart from
one crucial aspect that money does not have the same long term value. This formula computes
the variation between the cost of the asset and the cumulative cash flows of the asset. The word
'current value' is used when potential cash flows decline in value. If the discounted potential cash
flows surpass the value of the product, the investment is projected to be sustainable. However, if
the expenses surpass cash flows, the plan is not projected to be profitable. The greatest advantage
of the NPV approach over the repayment method is that it allows for a drop in the value over
time. However, a big downside would be that the NPV approach is based on assumptions. If the
business encounters unforeseen problems after the capital has been spent, the figures might be
inaccurate, creating confusion in the profit margin.
Internal Rate of Return (IRR) Method: This method is perhaps the most complicated of
the three. This approach contrasts the yield on the asset with the expense of funding the project.
It is identical to, and contains, the NPV formula used to measure the rate of return. If the IRR is
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higher than the cost, the project is meant to be profitable. However, unless the cost exceeds the
return, the project is meant to have a loss.
Above of the capital budgeting methods are used to make decisions in context of the
organization (Schroeder, Clark and Cathey, 2019). These methods helps the managers of Ryanair
airline to review and manage capital budget and ensure that team members will perform their
work accordingly which helps in achieving their business goals & objectives.
3.4 Set capital budgets
Capital budgeting techniques are used by the managers for decision-making procedures
which are set of analyses that help organizations to determine that which plan is best. Managers
use capital budgeting strategies to determine which project can bring the most value to the
business.
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16
te
m Description Quantity An Post
1
Preliminaries and
Insurances
1.1 Insurances Item 400.00
1.2 Waste Disposal Item 500.00
1.3 As Built Drawings and O&M Manuals Item 150.00
2 Electrical Works
3 Architectural Works
3.1 Painting
Retail Area
Prepare and Paint FZ Wall m2 1.00 115.20
Prepare and Paint an Post Retail Area Walls m2 96.00 921.60
Prepare and Varnish Retail Wooden
Surfaces m2 16.00 182.40
Prepare and Paint all Doors and Skirting
Boards in Retail Space m2 4.00 151.20
3.2 False Ceiling
Retail Area
Replace Ceiling tiles in retail area &
dispose existing m2 57.90 1,531.20
Install new ceiling grid and tile in Lobby
area & dispose existing m2 10.66 528.00
3.2 Floors
Retail Area
Prepare Floor and Install Orange Carpet
Tile to FZ m2
Prepare Floor and Install Resinous flooring
system to FZ m2
Install Associated Transition Strip toFZ Item
Prepare Floor and Install Resinous flooring
system to Retail Floor m2 49.60 8,408.00
Prepare floor and install new Carpet tiles
behind counter m2 25.15 2,236.00
3.4
Other Architectural
Items
Retail Area

3.5 Review and manage capital budgets
There are several ways that managers or organizations can use to manage and review
capital budget through identifying and evaluating potential opportunities, estimating operating
and implementing cost, estimate the entire cash flow from the different stages, identify potential
risk and further formulate strategies to mitigate such risk etc. These activities used to review the
entire process and further manage these things through communicating with senior management
for the valuable feedback. Adjustment will be modified in the current budget for effective
performance.
3.6 Explain the tools of financial appraisal and how these are used to inform financial
management and budgetary decisions
There are several financial appraisal tools which are used by the organizations to inform
financial management and make budgetary decisions. These tools also used by the management
of Ryanair airlines when they are going to invest somewhere and they wanted to evaluate that
investment is beneficial for their organizations and not. These are discussed below:
Accounting rate of return (ARR): It compares the income they plan to make on
their investment to the sum intend to spend (Siminica, Motoi and Dumitru, 2017). It is typically
measured as the average annual benefit that expect and over lifetime of a capital budgeting
compared to the overall amount of invested by the organizations. Higher the ARR is beneficial as
well as promotable for the organization to invest money into particular project. In case of two
options, lower ARR is rejected due to low profitability.
Payback period: It is a straightforward method for measuring expenditure by the amount
of time it will take to be repaid. It is typically a default strategy for smaller companies and
depends on cash flow, not benefit. In this case, lower the recovery period is beneficial for the
organization because company able to recover their initial cost more faster in comparison to any
other project or option. Managers will make their investment decisions on the basis of recovery
period.
Discounted cash flow: It applies a discount rate to figure out the actual approximation of a
potential cash flow. There have been 2 types of discounting calculation methods such as net
present value (NPV) and the internal rate of return (IRR). In context of organization, NPV and
17

IRR both are need to be high in compare to any other project and it should be prefer because it is
more profitable for the organization.
Analysis of investment risk and sensitivity: It is important for a practical risk assessment
where it helps in identifying potential risk. In practise, the greatest risk too many investments is
the damage they can create (White, 2017). Managers of the organization identify the potential
risk with the help of this tools and it further helps in financial management and making
budgetary decisions in respect of the organization.
Above discussed financial appraisal tools helps the managers or management to select best
project which helps in effective financial management as well as, it also helps in making
budgetary decisions.
LO 4
4.1. Apply the principles, techniques and processes of cash-flow projections to manage the flow
of cash within the facilities management business cycle, including how this impacts on
contracts and projects.
Cash flow forecasting helps to anticipate deposit account peaks and valleys. It helps to
organize lending and informs how often excess funds are expected to have at a particular point.
Most banks need projections until accepting a loan. Cash-flow errors are some of the toughest
and most popular errors start-ups make, including such avoiding them or comparing them with
income. Sometimes, investors just look for earnings that equal revenue less expenditures. Cash
flow refers to the flows of cash respectively into or out of a company (Hall and Antonopoulos,
2017). Cash inflows are transactions from clients or other outlets through a business. Cash
outflows apply to payments that a company makes
Total cash flow = cash inflow – cash outflow
Cash flow reflects the quality of a company's desire to implement its debt responsibilities.
Free cash flow allows businesses to fulfill payroll, reimburse vendors, meet loan obligations and
make dividends to holders. Cash may be produced by activities, or given by lenders or owners.
4.2 Apply the principles, techniques and
processes in the management of cash flow
for contracts and projects.
Principles of cash flow:
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Cash flow should be measured on an incremental basis: In other terms, from the
viewpoint of how the whole cash flow process of the organisation would be impacted unless the
project is implemented, the cash flow source for a specific project should be measured relative to
how the stream would be influenced unless the proposal is not embraced. Consequently, any
improvements in the company's revenue source, expense channel, and tax stream that will arise
from of the approval of the project should have been included in report. Cash flows that the
expenditure does not modify should, on the other hand, be ignored.
For example, if a planned plant extension demands that capital investment be expanded
for the company world in general maybe in the context of higher cash reserves, inventory levels,
or accounts receivable the improvement in capital expenditures will be included in the invested
capital needed for the project.
Since the original cost produced on a venture involves the expenditure of after -tax
money dollars, the profits from the venture should be calculated in the same amounts,
specifically, post-tax cash funds.
Techniques of cash flow
Line of communication: The effects of an incorrect forecast can be serious. A business
might lend as much as it tries to raise circumstances that don't materialize. It could leave
resources excessively unused, on the other side. Training upper executives on the significance of
prediction, and also the dynamics of the operation, is the effective way to avoid some sort of
currency crisis inside the organisation (Karanović, Nikolić and Karanović, 2019).
Identify inflows and outflows: For every CFO, much of this is basic, but cash flow
forecast should be a study looking at firm's cash situation compared to its inflows and outflows.
To begin, how often cash will be taking in during the time of the incident because from what
subjects? This isn't a measurement of organization's ability to manufacture products and services,
but instead what would be received in exchange for goods.
Process of cash flow projections
Find business’s cash for the beginning of the period: To measure your money from of the
start of the year, you have to deduct the prior session's expenditures from wages.
Predict incoming cash for next period: Next, over the next cycle, you have to forecast
how often money will fall into your company. Inbound cash involves things including sales,
purchases trade payables, mortgages, and much more. They can predict the future money by
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gazing at patterns from previous times. Be sure to acknowledge for any shifts or causes which
vary from earlier cycles.
Estimate expenses for next period: Learn of all the costs that will be charged over the
next era. Take stuff like raw resources, rent, electricity, benefits and other bills into account.
Subtract estimated expenses from income: To compute the amount of cash flow les estimate
expenditure from estimate income.
Add cash flow to opening balance: After the all the calculation requires to add the
beginning balance after the carry over closing balance for following years.
As per the facility management of business cycles apply the techniques and principles
after tax prepare a cash flow on project basis such as:
Jan Feb March April May June
Cash inflows
€17,000 €18,500 €19,000 €19,800 €21,000 €18,900
Cash outflows
€14,300 €15,100 €24,900 €16,300 €17,800 €24,800
Net cash flow
€2,700 €3,400 (€5,900) €3,500 €3,200 (€5,900)
Opening balance
€2,200 €4,900 €8,300 €2,400 €5,900 €9,100
Closing balance
€4,900 €8,300 €2,400 €5,900 €9,100 €3,200
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LO 5
5.1 & 5.2 Identify and apply the principles and techniques to prepare financial cases and prepare
a financial case to secure the required approval.
Financial cases are based on the real life situation in which consider any financial
information in regard of any organisation.
Principles of financial cases
 Introduction: Firstly in this principle mention the main topic of the case study and focus
on those points that cover in the case study (Ross and et.al, 2017).
 Clarify need: After the present the actual situation and focus on all the problems in order
to apply the changes.
 Match need: Outline the ideas of proposal and describe all the alternatives that focused
and discarded and mention in the detail.
 State benefits: All the advantages flow with the ideas and say that they will do for mean
and quantify with the beneficial effect of the business entity.
 Summarise: In this condition mention all the features with the solutions and consider all
the benefits of the business in proper manner.
Techniques for prepare financial cases.
Organise the information: It is defined as a summary of main points and speed read first
to absorb main themes.
Diagnose the problem areas: Written down the problems of the company that related
with the financial activities. Along with recognise the problem and take right decision.
Generate alternative solutions: Find out all the possible alternatives and apply the
brainstorming method for mentally exercise.
Prioritise the options: All the alternatives are analysed as per the financial data and
select a particular solution for same.
Choose the final solution: Carry out all the advantages and disadvantages of all the
activities and comparing the alternatives (Valaskova, Kliestik and Kovacova, 2018).
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Communicate your choice: Avoid all the arguments and use good points to present all the
activities properly.
CONCLUSION
From the above discussion it has been concluded that financial management is used for the
procurement of the necessary financial capital for the company concerned. Acquiring the
requisite funds is a vital aspect of financial planning, which requires a potential source of
funding at a minimal expense. It includes the several methods, techniques, strategies and
principles which are used by the organization for the effective financial management or made
profitable decisions regarding their investment. With the help of several budgeting methods,
organization is able to perform their task or achieve their business goals & objectives.
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