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Financial Management & Control Assignment

   

Added on  2021-01-03

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Financial Management& Control
Financial Management & Control Assignment_1
Table of ContentsINTRODUCTION...........................................................................................................................3PART A...........................................................................................................................................31. Board Report of Fridge-freezer Plc:...................................................................................32. Working Capital Cycle in Days for Fridge-freezer Plc:.....................................................63. Limitations of Using Ratio Analysis for both Cross-Sectional and Time-SeriesComparisons:..........................................................................................................................7TASK B...........................................................................................................................................91. Calculation of Break-even point and Margin of safety for the year 2017 and 2018 ofWashbug Ltd..........................................................................................................................92. Evaluation of key assumptions of break-even point model, assessing and analysing themodel within the context of today's global business environment.......................................10PART C .........................................................................................................................................111. Evaluation of single source of both internal and external finance: .................................112. Evaluation of benefits and limitations of different investment appraisal techniques:......13CONCLUSION..............................................................................................................................14REFERENCES..............................................................................................................................15
Financial Management & Control Assignment_2
INTRODUCTIONFinancial management means evaluating the efficiency and effectiveness of the moneymanagement. It focuses on ratio calculation, evaluating various investment proposals and takinginvestment decisions. For better understanding of financial statements of the company it is veryimportant to evaluate and analyse ratios. If company want to make investments then they have toevaluate various investments techniques like internal rate of return method, net present valuemethod, pay back period method, discounted pay back period method etc.PART A1. Board Report of Fridge-freezer Plc:In this report, evaluation of various ratios is required which is helpful for the company(Fridge-freezer Plc) for future planning of business. Which are as under: Profitability Ratio:Particulars20172018Gross Profit ratio (%)= 16040/29950*100= 53.56= 18760/38550*100= 48.66Net Profit ratio (%)= 9725/29950*100= 32.47= 5795/38550*100= 15.03
Financial Management & Control Assignment_3
Operating profit ratio (%)=10105/29950*100= 33.74= 7485/38550*100= 19.42Note: Gross profit ratio = Gross profit/sales*100Net profit ratio = Net profit/sales*100Operating profit ratio = Operating profit/sales*100Comments: In profitability ratios, which are calculated above for two years. By analysisof these, current profitability ratios are decreasing as compared to previous year. Fridge-freezerPlc has not capable of being earn higher profits in all types of profits i.e. gross profit, net profitand operating profits. It means that company incurred high costs as compared to income forearning revenue for the year. One of reason is that company (Fridge-freezer Plc) has moreinterest expenses in year 2018 as compared to previous year due to which its net profit is lessthan previous year 2017. Although, there is a more gross profit in year 2018 than in year 2017but it is not sufficient in context of revenue (Gatti, S., 2012). Liquidity Ratio:Particulars20172018Current Ratio= 8935/6375= 1.4= 12125/8480= 1.43Quick Ratio= 5060/6375= 0.79= 5900/8480= 0.7Note: Current ratio = current assets/current liabilitiesQuick ratio = quick assets/current liabilitiesNote: Quick assets is calculated after deducting closing inventories & prepaid expenses fromcurrent assets.Comments: In liquidity ratios, which are calculated above for year 2017 & 2018. Byanalysis of these, current ratio is increasing as compared to year 2017. This means company hasmore short term assets available to pay short term liabilities as compared to previous year (2017).This is a sign of better utilisation of short term assets in business of Fridge-freezer Plc. Butcurrent ratio of year 2018 is not equal or more than standard current ratio which is 2:1, thismeans company is not running in full efficiency to achieve this standard. The quick ratio of
Financial Management & Control Assignment_4

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