Financial Management and Analysis

FINANCIAL
MANAGEMENT AND
ANALYSIS

Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
1. Critically analysis of variations in financial condition and health during previous two years.
.....................................................................................................................................................3
2. Explanation of problem of analysis.......................................................................................11
3. Recommendation to above company in accordance of analysis...........................................11
TASK 2......................................................................................................................................12
Task 3.............................................................................................................................................15
Task 4.............................................................................................................................................16
(a) Difference between systematic and unsystematic risk and factors to monitor sensitivity of
market........................................................................................................................................18
(b) Difference between capital and money market, interest bearing instruments and document
instrument?................................................................................................................................19
(c) Difference between risk and uncertainty..............................................................................20
(d) Explain with reasons whether a bank overdraft is suitable to finance the purchase of this
property......................................................................................................................................21
CONCLUSION..............................................................................................................................21
REFERENCES..............................................................................................................................22

INTRODUCTION
Financial management can be interpreted as a planning, management, strategic planning,
and project management. The management's goal is to make good use of the financial capital
available in order to accomplish the goals (AREAS, 2018). Fundamentally, finance departments
are responsible for applying various approaches to improve financial accounting. One company
publicly traded exchange is chosen for the project study which is British American Tobacco plc.
This firm supplies tobacco and cigars and is based in London, England. It is the second biggest
tobacco maker in the world. The project report includes liquidity, viability etc. details about
financial stability of the above-elected organisation. In addition to the further section of the
study, readers will have suggestions for companies in poorer aspects.
MAIN BODY
1. Critically analysis of variations in financial condition and health during
previous two years.
Financial performance analysis- This is crucial for businesses to analyse financial factors
properly in order for internally and externally partners to be mindful of the financial wellbeing of
companies (Grennan and Michaely, 2019). There are a variety of considerations to be weighed in
order to analyse the fiscal conditions of companies. As for British American Tobacco plc, those
things below are protected for two years, for example:
1. Liquidity- Current ratio- Current asset / current liability
All data in
GBP million
except current
ratio
2017 2018
Current asset 13966 12655
Current
liability
15544 16329
Calculation 13966/15544 12655/16329

Current ratio 0.9 times 0.77 times
 Quick ratio (Acid test ratio) = Quick asset / current liability
All data in
GBP million
except quick
ratio
2017 2018
Quick assets 8102 6626
Current
liabilities
15544 16329
Calculation 8102/15544 6626/16329
Quick ratio 0.52 times 0.41 times
Analysis- In terms of liquidity ratio of above company this can be stated that company’s
performance is not so good. This is so because they are not able to maintain ideal ratio in both
years.
2. Profitability- Operating profit ratio- Operating profit / net sale x 100
All data in
GBP million
except
operating
profit ratio
2017 2018
Operating
profit
6470 9437
Net sales 20292 24492
Calculation 6470/20292*1 9437/24492*1

00 00
Operating
profit ratio
31.88% 38.53%
 Gross profit margin= Gross profit / net sale x 100
All data in
GBP million
except gross
profit ratio
2017 2018
Gross profit 15259 19942
Net sales 20292 24492
Calculation 15259/20292*
100
19942/24492*
100
Gross profit
ratio
75.20% 81.42%
 Net profit ratio= Net profit / net sale x 100
All data in
GBP million
except net
profit ratio
2017 2018
Net profit 37533 6030
Net sale 20292 24492
Calculation 37533/20292*
100
6030/24492*1
00
Net profit ratio 184.96% 24.62%

Analysis- as per above done profitability ratio analysis this can be stated that company is able to
manage effective profitability ratio in past year 2018 compared to year 2017.
3. Efficiency- A/R turnover ratio= Revenue/ average A/R
All data in
GBP million
except A/R
turnover ratio
2017 2018
Revenue 20292 24492
A/R 4053 3588
Calculation 20292/4053 24492/3588
A/R turnover
ratio
5.01 times 6.83 times
A/R turnover
days
73 days 53 days
 A/P turnover ratio= cost of sales/ A/P
All data in
GBP million
except A/P
turnover ratio
2017 2018
Cost of sale 5033 4550
Accounts
payables
8847 10631
Calculation 5033/8847 4550/10631
Accounts 0.57x 0.43x