Financial Management of Honeywell Plc : Report

Added on - 22 Jul 2020

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Financial Management
TABLE OF CONTENTS1. Preparing a report for BOD of Honeywell Plc in relation to evaluating financialperformance.................................................................................................................................1To,....................................................................................................................................................12. Calculating working capital cycle for Honeywell Plc.............................................................6PART B...........................................................................................................................................81. Calculating BEP and margin of safety for Thompson Ltd......................................................82. Critically evaluating the key assumptions that are associated with BEP model.....................8PART C.........................................................................................................................................101. Assessing the internal and external sources of finance that can be undertaken by business.102. Critically evaluating the investment appraisal techniques that are available for business....12REFERENCES..............................................................................................................................15APPENDIX....................................................................................................................................16
1. Preparing a report for BOD of Honeywell Plc in relation to evaluating financial performance
GP ratioOperating profit ratioNet profit ratio0%10%20%30%40%50%60%70%20162015From profitability ratio analysis, it is reported to the higher management team that gross,operating and net profit of the company declined in 2016 as compared to 2015. Graphicalpresentation shows that GP margin of Honeywell Plc declined from 64% to 57% respectively.On the other side, in 2016, operating and net profit margin of the business unit accounts for 38%& 23% significantly. It shows that profitability aspect of the company decreased in 2016 inagainst to the prior times. Thus, company is required to make focus on promotional aspectswhich in turn help in enticing the decision making aspect of customers and thereby maximizesales revenue. Besides this, manufacturing firm should also undertake budgeting tools which inturn helps in making control on expenses (Smith and et.al., 2017). By taking such significantaction or measure business unit can increase the level of both sales and profit.Liquidity ratio analysisRatios/ yearFormulas20162015Liquidity ratiosCurrent assets (CA)43003460Inventory22001220Quick assets (QA)21002240Current liabilities (CL)32702125Current ratioCA / CL1.311.63Quick ratioQA / CL0.641.05
2016201500.20.40.60.811.21.41.61.8Current ratioQuick ratioBy doing ratio analysis it has been assessed that current ratio of Honeywell Plc decreased from1.63:1 to 1.31:1. In accordance with the ideal ratio, business unit must 2 assets in against to onefinancial obligation. On the basis of this aspect, it can be said that liquidity position andperformance of Honeywell is not in line with the ideal ratio. Further, quick ratio of thecorporation declined from 1.05:1 to .64:1 significantly. It shows that Honeywell Plc is able tomeet obligation more effectually through the means current assets except inventory and prepaidexpenses (Tsai and et.al., 2016). Thus, for improving the liquidity position it is highly requiredfor Honeywell Plc to make focus on maintaining current assets.Gearing ratio analysisRatios/ yearFormulas20162015long-term loan capital80003895total capital employed(7330 + 8070 +8000) = 23400(7330+7000+3895)=18225Debt-equity ratioLong-term loancapital /Totalcapitalemployed * 10034.19%21.37%
201620150.00%5.00%10.00%15.00%20.00%25.00%30.00%35.00%40.00%Debt-equity ratioDebt-equity ratioOutcome of ratio analysis presents that debt-equity ratio of Honeywell Plc inclined from 21.37%to 34.19% respectively. It shows that debt level of firm increased in the year of 2016 incomparison to 2015. Besides this, debt-equity position of Honeywell plc is also in line with theideal ratio such as .5:1. Hence, it can be presented that solvency position and performance ofcompany is sound.Efficiency ratio analysisRatios/ yearFormulas20162015COGS12201050Average inventory orstock22001710Inventory turnoverratio (in times)COGS /Averageinventory0.550.61Fixed assets22,37016,890Net sales11,1509,700Fixed assets turnoverratio (in times)Fixedassets /net sales2.011.74
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