Financial Management and Analysis

FINANCIAL
MANAGEMENT AND
ANALYSIS
1

Table of Contents
INTRODUCTION ..........................................................................................................................4
MAIN BODY...................................................................................................................................4
TASK 1............................................................................................................................................4
Ratio analysis ..............................................................................................................................4
Analysis : -...................................................................................................................................6
Recommendations........................................................................................................................7
TASK 2............................................................................................................................................7
A. Payback period........................................................................................................................7
b. NPV assessment ......................................................................................................................8
C. Calculating IRR.....................................................................................................................10
d. Recommendation ..................................................................................................................11
TASK 3..........................................................................................................................................11
(a) Computation of the theoretical ex-rights price (TERP) of Düsseldorf Plc..........................11
(B) Value of the rights attached to each existing share.............................................................11
C)................................................................................................................................................12
TASK 4..........................................................................................................................................13
TASK- 5 ........................................................................................................................................15
A) Distinguished between systematic and unsystematic risk in the CAPM and factor that used
to monitor sensitivity if rte shares to the stock market..............................................................15
b) Difference between capital market and money market, and interest-bearing instruments and
discount instruments..................................................................................................................16
c) Difference between risk and uncertainty and possibility to qualify the risk and uncertainty
....................................................................................................................................................17
D) suitability of the bank drafts to finance the property purchase.............................................18
CONCLUSION..............................................................................................................................18
REFERENCES..............................................................................................................................20
2

INTRODUCTION
Financial management refers to the strategic planning, controlling, organizing and directing of
the financial of the company. It can also include applying the principles of the management. To
the financial asses of the company and the fiscal management of the company.
Each task in this report will cover the different case scenarios an in the task 1 this report
will cover the study of Sainsbury where report will critically analyse the change in the financial
performance of the company within 2 years. It will also explain the problems and implication
and recommendation for improvement. Task 2 is based on the investment decision of the
Brussels plc where investment decision will be taken on for the rolling programme. Task 3 will
be based ion the Düsseldorf plc in which report will calculate TERP , Value of right attached to
each existing shares etc. Task 4 scenarios will cover the study of Amsterdam plc, it will discuss
the market capitalization of the Amsterdam plc, their net asset value , price earning ratio of the
company, their average historic dividend growth rate and in the end it will provide advice to the
potential investors of Amsterdam plc. In the last task of the project report will provide discussion
on the Unsystematic risks and systematic risk in capital asset pricing model and it will
differentiate between the money market and capital market will the details and in the end of this
report will explain the reason weather the bank drafts is suitable to finance the purchase of the
property or not.
MAIN BODY
TASK 1
Ratio analysis
Profitability ratio analysis
Particulars Formula 2018 2019
Gross Profit 1882 2007
Net profit 309 219
Sales revenue 28456 29007
GP ratio GP / revenue * 100
6.61
% 6.92%
NP ratio NP / revenue * 100
1.09
% 0.75%
3

Liquidity ratio analysis
Particulars Formula 2018 2019
Current assets 7857 7581
Current liabilities
1030
2 11417
Inventory 1810 1929
Prepaid expenses 0 0
Current ratio CA / CL 0.76 0.66
Quick ratio
Current assets - (inventory + prepaid
expenses) 0.59 0.50
Solvency ratio analysis
Particulars Formula 2018 2019
Long-term debt 1602 950
Shareholder's equity 7411 8456
Debt-equity ratio
Long-term debt / shareholders’
equity 0.22 0.11
Efficiency ratio analysis
Particulars Formula 2018 2019
Turnover or sales revenue 28456 29007
Average total assets 22001 23541
Average fixed assets 14135 15952
Total assets turnover ratio 1.29 1.23
Fixed assets turnover ratio 2.01 1.82
Investment ratios
Particulars Formula 2018 2019
Price earning ration
Market value per share/ Earning per
share 20.87 135.24
Dividends per share
Annual dividends / Number of
shares 0.1 0.11
4