Towards financial management of Nyota Minerals Ltd

   

Added on  2020-06-05

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Financial Management
Towards financial management of Nyota Minerals Ltd_1
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................11. Assessing financial position and providing recommendation............................................1TASK 2............................................................................................................................................21. Need for working capital and long-term requirements of funds........................................22. Sources of funding and advantages and disadvantages......................................................33. Justified recommendation related to cost and risk.............................................................6TASK 3............................................................................................................................................71. Significance of cost accounting..........................................................................................72. Costing tools and systems to evaluate financial health of Nyota Minerals Ltd.................73. Recommendation................................................................................................................84. Assess budget and budgetary process.................................................................................95. Design targets and formulate master budget....................................................................10CONCLUSION..............................................................................................................................10REFERENCES..............................................................................................................................11
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INTRODUCTIONFinancial management plays a crucial role in the business to accomplish desired results.The present report deals with Board of Investhical which is planning to invest in Nyota MineralsLtd engaged in mining and gold exploration sector. Sources of finance are discussed along withadvantages and disadvantages of the same. Moreover, importance of costing is described alongwith recommendation to use adequate source of finance. Costing systems are provided toimprove financial health of company and master budget is prepared as well. TASK 11. Assessing financial position and providing recommendationDalata Hotel Group Plc ParticularsFormula20162015Profitability ratiosGross profit ratioGross profit / Revenue * 10062.20%61.50%Net profit ratioNet profit / Revenue * 10012.02%9.73%Return on capital employedEBIT / Capital employed0.07%0.05%Return on Equity (ROE)Net income / Shareholders'Equity6.03%5.34%Liquidity ratiosCurrent ratioCurrent assets / Current Liabilities1.44 : 12.84 : 1Quick ratioLiquid assets / Current Liabilities0.83: 12.72 : 1Efficiency ratiosDebtors Turnover ratioNet credit sales / Average accounts receivable 42.0447.96Stock Turnover ratioCost of Goods Sold / Average inventory69.489.5Creditors turnover ratioSuppliers purchases / Average accounts payable42.3338.58Solvency ratiosDebt to Equity ratioDebt / Equity0.430.471
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Debt to assets ratioDebt / Assets0.370.37Financial health and recommendation-Financial ratios have been computed from the financial statements of Dalata Hotel GroupPlc for the year 2015 and 2016 respectively. Organisation is listed on LSE (London StockExchange) and is engaged in hospitality sector. It can be interpreted that financial performanceof company is good but needs to be enhanced by implementing well-structured strategies so thatperformance may be increased up to high extent. This can be seen that gross profit ratio in 2015was 61.50 % which increased to 62.20 % in the year 2016. In the same way, net profit ratio isalso maximised in subsequent year. This implies that it is able to control its expenditures in abetter way. Return on equity and return on capital employed is also maximised which is goodsign of company (Renz and Herman, 2016). On the other hand, current and liquid ratios have been decreased at the end of 2016 year.It is recommended that current ratio can be increased by using sweep accounts. This type ofaccounts help to transfer funds into higher interest carrying rate when business does not utilise it.This will help Dalata Hotel Group Plc to have enough of liquidity and it may be able to easilypay-off liabilities with much ease. Moreover, liabilities should be paid as early as possible. Apart from this, efficiency ratio such as stock turnover ratio is also decreased. It isrecommended that inventory must be ordered only when it is needed. Moreover, properinventory management report should be provided to managers so that they may order the same toreduce wastage and as such, stock may be easily utilised and ratio may be increased. On theother hand, solvency ratio such as debt to equity ratio is less than 0.4 % which is good asrecommended by market analysts. All above discussed ratios should be increased so thatcompany may be able to improve its financial position in effective manner. TASK 21. Need for working capital and long-term requirements of fundsFinance is quite essential need for business so that it may be able to perform well withappropriate funds invested in it. It is the basic requirement of Board of Investhical so that it mayinvest funds in good organisations so that adequate returns may be garnered in the best possibleway (Bergh and et.al, 2016). There is need for finance for carrying out short-term and long-termfunds in effective way. Working capital is required in highly liquid form so that organisation can2
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