financial management

Financial Management

Contents
INTRODUCTION.......................................................................................................................................3
SCENARIO A.............................................................................................................................................3
1. Evaluation range of approaches, techniques and factors contribute to effective decision making.......3
2. Stakeholder management and the management of conflicting objectives of various stakeholder
groups......................................................................................................................................................5
3. Value of management accountings in cost control and maximizing shareholder value.......................5
4. Techniques for fraud detection and prevention approach for ethical decision making.........................6
5. Reflection on understanding................................................................................................................7
SCENARIO B.............................................................................................................................................7
1. Data obtained that help to inform operational and strategic decisions.................................................7
2. Compare and contrast of three investment appraisal techniques that helps in maximize return on
investment...............................................................................................................................................9
3. Value of techniques helps in decision making procedure..................................................................12
4. Financial decision making supports long term sustainability.............................................................12
5. Make recommendations for management accountant supports for financial sustainability................12
CONCLUSION.........................................................................................................................................13
REFERENCES..........................................................................................................................................14

INTRODUCTION
Financial management relates to efficient and productive corporate finance (money) to
meet the corporation's goals. It is the unique role which is closely connected with upper
management. The sense of this role is not only in the 'section' but is also in fact in the total fact
of the business's 'workers.' The distinct researchers in the field define this separately. Financial
management is an important part of the organization at large. It concerns the roles of the
business advisors in the company (Antonopoulos and Hall, 2016). Financial management of
every company is a critical task. To accomplish corporate priorities and objectives, it is the
method of preparing, coordinating, managing and tracking financial capital. It is an excellent
method for managing a company's monetary activities including such fund acquisition, fund
management, accounting, payments, risk assessment and everything else based on income. This
report has been categorized into two scenarios. In first scenario make a pitch for potential
customer in order to define value of management accounting and their techniques. Along with,
maximize efficiency to assure for the long term growth in business practices. In second scenario,
select Tesco Plc which is British multinational company that conducts activities in groceries and
general merchandise retailer. In this report consist of calculation of ratio and analysis of data and
use investment appraisal techniques. Moreover, analysis financial decision making supports for
long term sustainability then make recommendations.
SCENARIO A
1. Evaluation range of approaches, techniques and factors contribute to effective decision making
There are several main factors affecting decision taking. Significant factors include prior
interactions, a number of cognitive distortions, enhanced engagement and lowered results,
individual variations like aged and social class, and a confidence in personal meaning. People are
overwhelmed with choices each day, big as well as low. Recognizing how people are coming to
their decisions is a concentrated field of cognitive science (Banerjee, 2016). Theories were
created to understand how decisions are made by people, and what types of variables affect
policy making in the good and the bad. Additionally, heuristics were studied to explain the

mechanism of decision taking. Typical choice-making process entails describing the issue,
collecting data, finding a solution, selecting options and evaluating / supervising the outcomes.
Supervisors have used a lot of various techniques that supports them select among the alternative
options and reach a choice. In certain cases it could be a mixture of a variety of
various approaches that will help them obtain the best outcome. Decision making is the method
of selecting a courses of action from a variety of options. Like preparation, judgment-making is
still all-pervasive, and choice-making is also an essential part of organizing like predicting.
Policy papers aid in organizational decisions taking for every company. There are following
most common approach such as:
 Rational analytic approach
 Intuitive analytic approach
 Political behavior approach
 Administrative approach
There are discussed various techniques which are related with the organizational decision
making procedure Such as:
One of a director's most significant tasks is making a decision within the company. An
institution's continued existence largely depends on the standard of judgment the leaders
undertake throughout all grades. Every strategic move, whether it be about planning, scheduling,
hiring or guiding, is about the decision-making process (Yulihantini and Wardayati, S2017).
Marginal analysis: Often recognized as 'marginal costing' this strategy. In this approach it
measures the extra income from added costs. At the stage where operating profits and capital
costs are equivalent, the earnings are deemed optimal. "This approach is also used to compare
variables apart from expenses and profits.
Quantitative technique: Quantitative approaches supports a manager boost the consistency of
decision-making ultimately. These methods are most frequently used throughout the reasonable /
sensible decision framework but they can also be used in some of the other systems. Decision
tree algorithm, repayment assessment, and experiments are amongst the most popular methods.

Ratio analysis: Assessment of ratios contributes to making decisions based on the details given
in such financial reports. Thus, correct use of financial accounting enables managers to convey
information which is important and meaningful for decision-makers to maintain management's
efficacy within the business.
Cost benefit analysis: A cost-benefit analysis is a method that companies are using to examine
policy making. The company or researcher adds up the advantages of a circumstance or
intervention and then removes the risks of taking an action. This review is a method used mainly
by organizations that measure the amount of the advantages of the activity, including monetary
gain, of an intervention against both the drawbacks, and expenses. CBA is a simple tool to
decide which choice could create the most economic sense for the organization or person.
Financial analysis: Financial reports are the basis for business decision-making details. Because
of the present judgment, administration of the business focuses on the interpretation of potential
occurrences, whereas reporting is ex point driven. Financial analysis is used to evaluate the
friendships among financial statement.
Break even analysis: Analysis of break-even is important as an instrument of preparatory
decision-making. The core premise underlying break-even analysis is that all expenses are
dynamic (meaning they differ with outcome), constant (meaning they are fairly stable over time)
or a mixture of the both.
2. Stakeholder management and the management of conflicting objectives of various stakeholder
groups
Stakeholder management is the way of establishing good connections with the
individuals most impacting on job. Interacting for each one in the correct way will play a crucial
portion in holding them "on track." This article explores how stakeholders will interact easily. A
stakeholder is anyone who has an equity stake in particular project and its result, or is influenced.
This can comprise both internally and externally organizations including management team
leaders, project managers, managers, clients, vendors, investors, and administration. Stakeholder
management is the method of balancing certain investors' preferences and needs. It includes
approach for managing investors, and preparing to interact and connect with them regularly
(Brusca, Gómez‐villegas and Montesinos, 2016).

Various parties have different priorities. Different participant groups may have
competing interests. For instance:
 Companies usually want high margins, and thus may be unwilling seeing the businesses
pay high salaries to employees.
 A plan to change factories abroad will reduce the cost of staffing. Hence, it will help
owners but operate against all the wishes of current workers who will lose their jobs.
Even, consumers struggle if they get substandard service.
 When a business has various groups of stakeholders so every person has different interest
and perception in regard of business that become the reason of conflicts. The
management of stakeholders offers us with guidance on how to treat conflicts of interest
issues. In reality, each company has to function within a vast network of varying views
and beliefs. Furthermore, there are rules, regulations, ethical codes, regulations and
ethical standards to be addressed when designing ways of coping with opposing views
and opinions.
Conflicts objectives: It is happy to induce administration to recognize the same need to
address the needs in different participants and financial officers invested in maximizing
profits and revenue thus going to get a good performance on investor expenditures. The
financial consultant is attempting to achieve the assignment with much less preparation in
order to maximize its productivity. Through enterprise as well as majority shareholder seem
to have their own objectives, and their ambitions and expectations must be developed by the
management. Such as, Many times in board meeting most of the shareholders are not agree
on particular topic like increase rate of interest on bonds.
3. Value of management accountings in cost control and maximizing shareholder value
Accounting for management includes presenting sufficient information for decision-
making, preparation, controlling costs and assessment of results. Management accounting
transforms data into facts, expertise, and expertise about the activities of a corporate entity. That
is one move far beyond accounting for costs. The accountant of management applies the
instrument of budgetary control to schedule and monitor the different operations of the company.
Budgetary control is an essential technique for controlling business activities in a desired way,
i.e. achieving a sufficient return on investment. The business analyst uses the methodology of

marginal costs, differential costs and breaks even cost containment, decision taking and benefit
maximization analysis. There are defined value of these techniques in regard of cost control and
maximizing shareholder value:
Marginal analysis: The study of margins deals mainly with the marginal effects of
increased output. Examination of margins is one of the most basic and fundamental techniques in
management accounting. It involves breakeven point measurement which decides the optimum
pricing strategy for the features of the product (Cantillon, Maître and Watson, 2016).
Historical cost: Historical cost accounting presents the administration with historic data
concerning the expense of each task, system and organization so that contrast can be produced
with the normal costs. This contrast can be useful for the controlling costs and future
development planning.
Standard costing: Standard costing is setting the standard costs even in the most
effective driving conditions, contrasting the real with the average, measuring and evaluating the
difference, in order to understand the causes and recognize the fault and take additional measures
so that abnormalities cannot occur anymore. In order to have cost control this element is
important.
For handling the investor interest maximization for daily or brief-term actions.
Additionally, steward’s auditors could use cost-volume - profit assessment, act only in the
shareholders’ best interests, and do not analyze financial performance and method inventory
management.
4. Techniques for fraud detection and prevention approach for ethical decision making
Detection and prevention of fraud should be about analyzing historical data bearing
documents over to prevent security dishonest conduct in the background. Within today’s digital
age, identifying and preventing cheating is mostly about avoiding fraud at the point or just before
it occurs. Automated fraud detection systems from today allow businesses to detect suspicious
additional item associated with potential fraud, and suspend the payment until it is performed. If
companies have vast volumes of data in motion and less than a second to identify and avoid a
possible fraud payment, it took a relatively effective fraud detection and identification approach
to effectively handle the activities. Fraud, whether it happens in the type of cleverly designed

Ponzi scams, misreporting financial statements or robbery of one's own employment contract,
reaches catastrophic proportions and wasn't without cost. Internationally, corporations and
government organizations are suffering trillions of dollars in lost and misapplied resources,
decreased importance, and permanent damage to corporation public image and user confidence.
For the data detection and prevention required to use data analysis techniques. To rapidly and
reliably detect and avoid a variety of fraud and criminal threats – whereas enhancing consumer
and citizen interactions – enterprises should take four crucial steps:
 Collect and unify all relevant information forms from throughout divisions or networks,
and integrate them into the predictive process.
 Track purchases, social networking sites, heavy-risk events, etc. on an ongoing basis, and
implement predictive analysis to facilitate true-time decision making.
 Instill a corporate data analysis society and via data analysis at all concentrations such as
enhancement of the investigatory work process (Tang and Baker, 2016).
 Protection strategies installed at the hire.
The software that decides for fraud detection and prevention must be capable of learning from
large data trends. It can use advanced judgment frameworks to handle faulty hypotheses better,
and identify network connections to provide a comprehensive perspective of fraudsters and
criminals' behavior. The combination of deep learning techniques, including deep cognitive
teaching channels, excessive gradation enhancing and parameter devices and also demonstrated
techniques including supply chain stagnation, auto-organizing charts, spontaneous woodlands
and orchestras has proved far more precise and efficient than rules-based strategies.
5. Reflection on understanding
As per the above four question it is understanding that management accounting important
part of the business because it is helping to business to control cost and maximize stakeholder
interest. To prevent from the fraud require to use data management techniques that helps to
supports all the business activities in proper manner and take all the essential decision in certain
period of time.
Problems: In this implementation process, the biggest barrier I presented was one of learning
allocated concepts and responsibilities. I used internet to seek essential information, because

there are a number of options that make it harder. This was because the time period was too
small to complete the work. I also perceived it a real problem, as well as a lack of supply of
websites offering directly applicable or valid data.
Solution: I am learning experience about excellent stuff as the challenges I encounter during the
same project motivate me to do more in the future. I have to learn where to minimum
computational information through online sites.
SCENARIO B
1. Data obtained that help to inform operational and strategic decisions
Calculation of Ratio of Tesco Plc
Net profit margin:
2019 (£’ Million) 2020 (£’ Million)
Net Profit 30000 45000
Revenues 650000 700000
Net Profit Margin (%) 4.62 6.43
Calculation above helps to determine the Tesco Plc's net profit margin improves from 2019 to
2020. The net profit margin ratio improves from 4.62 per cent to 6.42 per cent, that shows the
growth of the business.
Gross profit margin:
2019 (£’ Million) 2020 (£’ Million)
Gross Profit 250000 280000
Revenues 650000 700000
Gross Profit Margin (%) 38.46 40

It was exhibited in table that perhaps the gross margin ratio rose from 38.46 per cent in 2019 to
40% in 2020. It implies boosts in Tesco sales, maximizing the profit margin.
Current ratio:
2019 (£’ Million) 2020 (£’ Million)
Current assets 155000 165000
Current liabilities 80000 75000
Current ratio (times) 1.94 2.20
The figure above reveals that the ratio of the company in 2019 was 1.94 time which in 2020 it is
2.20 which will be more in favor of the ideal ratio of 2:1. In both cases Tesco's flexibility was
adequate to pay back its commitments
Quick Ratio:
2019 (£’ Million) 2020 (£’ Million)
Quick assets 65000 75000
Current liabilities 80000 75000
Quick ratio 0.81 1
The calculation above indicates that in 2019 the rapid ratio was 0.81 which is fine, but in 2020 it
is 1 which is better or meets the ideal ratio. It indicates the organization performs well and is
willing to meet its commitments in the brief period.
Return on Equity ratio:
2019 (£’ Million) 2020 (£’ Million)
Net profit 30000 45000
Shareholder's equity 435000 485000
Return on equity 6.89 9.28
This has been reported according to the above estimate that the earnings per share for the year
2019 were 6.89 and for the year 2020 is 9.28. It is clearly showing that the returns on equity
improve reflecting the efficiency development of the business.

Debt to equity ratio:
2019 (£’ Million) 2020 (£’ Million)
Total liabilities 165000 155000
Total Assets 600000 640000
Debt ratio 0.28 0.24
It has been interpreted from the above estimate that the debt ratio was 0.28 in 2019 and 0.24 in
2020, which indicates no decrease in relation. Organizations need to work on this or create plans
to boost it.
As per the above ratio analysis the performance of the business and analysis the position
of company at the market place. It helps to an organisation to take right decision at right time.
Most of the entities can use this ratio analysis to take operational strategically decision in regard
of business. After the analysis company know the business so accordingly prepare various types
strategy in regard of different business activities. Along with, to conduct various operations take
help from this analysis in effective manner.
2. Compare and contrast of three investment appraisal techniques that helps in maximize return
on investment
Investment valuation methods are repayment duration, intrinsic rate of return, net present
value, cost of exchange accounting and measure of productivity. They are primarily intended to
evaluate a different project's results. Growing methodology assesses the plan from a different
perspective and offers another insight. Expenditure evaluation is a way for an organization to
determine the value of financial growth or ventures based on results from much alternative
capital financial planning and funding strategies.
Payback period: The payback period technique is being used to objectively assess the
moment an entrepreneur must bring to get down the amount of money invested into a venture.
Many assets that do have earnings are determined by dividing the capital costs by the expected
yearly cash flow. This approach is a system of assessing a venture by calculating the time
required for the original investment to rebound (Engel and et.al., 2016).

Advantage: There are mentioned some advantages of this method while using by the
Tesco plc for investment:
It is simple: A large number of firms are using workers of diverse backgrounds to assess
infrastructure improvements that are not only selective but also difficult to understand. Payback
approach at the other actually looks at the period of time that make it very clear and easily
understandable.
Disadvantage: There are mentioned some disadvantage face by the Tesco plc, as
follows:
Ignore time value of money: The technique disregards the value of money in moment. Cash
inflow to a project could be irregular. Investors are typically well-term and keep producing
revenue also soon since their initial installation-up funding has been paid back. But when a
venture has a prolonged period of payback it gets forgotten.
No ration basis of decision: There really is a reasonable basis for the minimally acceptable pay-
back time span to be set. Strategic move is random position that also generates so many
organizational problems.
Internal rate of return: Capital budgeting is a managing method which uses different
tool to understand in choice-making. Another such strategy of the capital money management is
the internal rate of return. This is the return on investment at which a proposal's current value is
nil. They request it 'ongoing' since it does not take into account any external factors. The internal
rate of return is a strategy of taking into account cash flow that provides a return on investment
received through a project. The rate of return is the rate of depreciation where the balance of
initial cash outflow and reduced financial ratios is equivalent to nil. In other terms, that is the rate
of depreciation with which the net value is equivalent to null (Ferguson and Morton-Huddleston,
2016).
Advantage:
Simple use: One of the benefits of using the expected rate of return is that the approach offers
the same rate of interest for every towards some to the capital outlay. Therefore the internal rate
of return helps the entrepreneur to have a quick glimpse into another project's future rewards

before anything continues. The IRR also perceives the opportunity costs, which is an indicator of
the money is probably potential for future earnings. That allows the returns evaluation system
more reliable and trustworthy. Eventually, the IRR definition is easy to comprehend and the
measurements are clear.
It offers a method to rank projects for profitability: The inner rate of return is targeted at
optimizing overall productivity. It is able to do so by enabling the negatively or positively effects
of all people involved in a project to be compared. They will then rate the data in order to
determine, from bottom to top, which ventures produce the best and most efficient prospects of
producing earnings which will increase in competitiveness. Even though the measurement
generates a proportion regimen, when contrasted to other aspects of operation assessment the
rating method is very quick.
Disadvantage:
This approach only gives preference to productivity but does not find recovering capital
spending as early as possible. The explanation for this is that often the Internal Rate of Return
approach supports a venture that takes a considerably longer duration to recover the capital costs.
Underneath the circumstances of future instability, sometimes it is impossible to pay back the
full capital spending if the Internal Return Rate accompanied (Lewis, 2016).
It ignores the overall size and scope of the project: While comparing ventures that use the
internal rate of return approach, it's essential to keep in mind that this approach may not aim at
the task scale or scope for contrast. It will equate the cash flow to the amount of resources spent
on generating those cash flows. Unless there are two big tasks needing very similar capital
expenditure, bigger projects appear to be underestimated by using IRR estimates when opposed
to big projects. If that's the only method used, a company may find itself ignoring lengthy-term
projects that can generate much stronger working capital through period.
Net present value method: Net present value method (also recognized as income
approach) is a famous form of financing which needs to take the opportunity costs into account.
It is using net present value of the financial proposal as a basis for accepting or rejecting a stock's
value in initiatives such as buying supplies, buying stock, expanding or adding available plant
resources and installing new seedlings etc. Because the current value of cash flows is higher than

that of the valuation of cash flows, it is claimed that the net value is favorable, and the
investment strategy is deemed appropriate. If another current cash inflow price is closer to the
current company's cash price, the valuation is said to have been zero, and the investment strategy
is deemed okay. Unless the current cash flow valuation are less than the current cash outflow
valuation, otherwise the net actual value is considered to be unfavorable and the investment
strategy is refused.
Advantage
Time value of money: The primary benefit in using NPV is that because of its earning
potential, it accepts the idea of the opportunity cost i.e., dollar money is worth as much as a
dollar yesterday. Within NPV, the estimate requires into consideration an investment's reduced
net cash funds to evaluate its viability. Comprehending how essential purchase price estimates
are in fundamental analysis.
Decision making: NPV system allows businesses to take decisions. Not only allows to
compare ventures with the same scale, but it also allows to determine how well a specific
expenditure is making any money or losing money (Muneer, Ahmad and Ali, 2017).
Disadvantage
No set guidelines to calculate required rate of return: NPV's overall equation relies on
taking into account investment returns to their current value using the necessary default rate.
There are no guidance on calculating that amount, nevertheless. This percentage value is left to
corporations' judgment, and there might be occasions where even the NPV was incorrect due to
an incorrect rate of return.
It cannot be used to compare projects of different sizes: The downside of NPV is that
it cannot be always had to evaluate projects of different scale. NPV is an actual number, rather
than a ratio. Consequently the NPV of bigger projects will necessarily be greater than a lesser
one. The larger project's gains can be lower in comparison to its expenditure than the NPV as a
whole.

3. Value of techniques helps in decision making procedure
There are discussed some techniques which are helping to Tesco Plc in financial decision
making procedure n appropriate manner such as:
Cash flow statement: The cash flow statement is a financial document which documents
inflow and outflow of cash at a particular time in a business. It is one of the most crucial
aspects in a firm's administrators because it is an accurate tool of the corporation's volatility. The
final figure displays the number percent change or fall in currency. Cash flow statements
decisions making by establishing a framework for decisions relating to a company's earnings,
economic position and financial planning (Munge, Kimani and Ngugi, 2016).
Break even analysis: A break-even analysis is a statistical tool that allows you decide
how competitive company, or a free service or item, would be at. In many other words, it is a
monetary measurement to determine the amount of goods or services a business can sell
(especially maintenance expenses) to pay its current liabilities. Usually, executives just use net
profit model to pay a limit and consider the financial effect of different scenarios of high sales
size. Determining how many products should be priced at a specific price to make one's
operating expenses is an easy calculation. The Break-Even Quantity (BEV) are usually
addressing.
4. Financial decision making supports long term sustainability
To analysis the business activities use various types of techniques that supports to longer
term sustainability. Financial sustainability is known as the willingness of government
organizations to maintain existing programs, now and for the potential, while triggering a
constant rise in borrowing. When company wants to invest money into other sector that time use
different tools that support to understand the return from the particular project. Accordingly take
right decision for the investment. As a result it impact on the longer financial sustainability in
positive as well as negative manner.
5. Make recommendations for management accountant supports for financial sustainability
There are providing some recommendations to management accountants of Tesco plc in
order to supports for the financial sustainability:

 Recognize the social and environmental factors which will influence the potential of the
business to generate purchasing power.
 Link viable business problems to the methodology, business model, sentence length and
operating permit of the organization.
 Clarify the effect of these environmental problems in detailed terms of business, namely
where and how the company could be affected.
 Establish KPIs can promote geopolitical and sustainability objectives.
 To further incorporate environmental problems into the choice-making process, introduce
development accounting methods and techniques, including as contingency preparation
of environmental asset availability, life cycle costing, and carbon foot printing.
CONCLUSION
As per the above report it has been concluded that to operate any business in effective
manner it is required to manager all the financial activities in proper manner. For this required to
use effective system, approach and techniques that helps to analysis all the internal as well as
external factors that impact on the business in positive manner. There are analyzing various
appraisal techniques of investment like net present value, payback period and internal rate of
return. For financial decision making use techniques of cash flow statement and break even
analyzing. At the end provide recommendations to accountant in regard of the financial
sustainability.

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Online
Stakeholder management. 2019. [Online]. Available through:
<https://creately.com/blog/diagrams/stakeholder-management-guide/>
Pay back period. 2019. [Online]. Available through:
< https://www.economicsdiscussion.net/capital-budgeting/pay-back-method/pay-back-method-merits-
and-demerits-capital-budgeting/13523>