Report on Financial Management & Control
Added on 2020-06-04
14 Pages4342 Words57 Views
Financial Management &Control
Table of ContentsINTRODUCTION...........................................................................................................................1PART A- Zurich Plc .......................................................................................................................11: Calculation of relevant ratio....................................................................................................12: Critical evaluation of limitation of ratio analysis....................................................................4PART B – Johnson Ltd....................................................................................................................61. Calculation by using investment appraisal techniques............................................................62: Critical evaluation of key benefits and limitation of every investment tools.........................83: Critical evaluation of best possible sources of finance........................................................10CONCLUSION..............................................................................................................................11REFERENCES..............................................................................................................................12
INTRODUCTIONFinance is said to be important aspect for every business organisation. It is acomprehensive system of internal controls that is put in accordance with formulating newbusiness plan. The responsibility of budget users heads by way of control risks that are arises inan organisation. Management is always trying to make valuable planned activities that aims toattain desired return on the total investment. Managers can use financial statement, operatingratios and other crucial aspects those are related with exercise financial control. This project report is providing vital information about two major companies such asZurich Plc and Johnson Ltd. Calculation of relevant ratios in five analytical areas. On the basis ofcomputed ratios, certain limitation is being done to make decision more effective. Evaluation ofinvestment appraisal techniques and make specific recommendation to determine feasibility foracquiring the machine. Benefits and limitation of every techniques are evaluated in moreeffective manner under this report (Brigham and Houston, 2012).PART A- Zurich Plc 1: Calculation of relevant ratioAccording to this particular company which is a public limited company deal inproduction and distribution of office equipment. The owner after making analysis has found thatthere are something which is lack which is making impacts on profitability and liquidity position.To remove those issues, they has appointed a new financial analyst to review and analyseperformance of the company by taking last two year data.Profitability ratio: It is known as financial measured that is use to assess a businessability to incur incomes compare to their expenses and other costs those are incur during thetime. It evaluate their ability to generate profit in accordance with the total earning, balancesheet, operating costs and shareholder equity. This seem to be an effective ratios which is used todetermine companies ability to generate profit for the company. Profit margin use to assessability to turn incomes into profit. Return on assets help to measure “Zurich Plc” to analyse theirnet income produce during the time (Higgins, 2012). There are various types of profitabilityratios those are discussed underneath:1
Gross profit margin: According to this particular ratio which is used to measureprofitability of product and services a company sells to their customers. It provide informationabout total cost a company need to make the product.Gross profit margin: Gross profit / Net sales *100 2015 : 7382/18920 *100= 39.01 % 2016 : 5825/16243 *100=35.86%Operating profit margin: This would take into account total cost of producing theproduct and services that are not associated to direct production process. Such as overhead andadministrative expenditure. Operating margin: Operating profit / Net sales *1002015: 2582/18920*100=13.64%2016: 1783/16243*100=10.97%Return on assets: It is used to measure about how effectively Zurich Plc producesincome from its assets (Chandra, 2011). This would dividing net income for present time throughthe value of all assets that a company keep with them. ROA: EBIT /Assets *100 2015: 2582/6503 *100=39.70% 2016: 1783/ 7006 *100= 25.44%Return on equity: According to this particular ratio, finance manager use to measurevital information about company that process of making each pound that investors put into it. Itis a corporations gains by revealing about total profit a company incur with total money investorshas invested in their projects.ROE: Net income / Shareholder equity *1002015: 2582/ 20108 *100= 12.84%2016: 1783/ 19635 *100=9.08%Liquidity ratio: It is use to analyse the ability of a company to make payment off bothcurrent liabilities as they are outstanding as well as their long term debts as become current.These ratio indicate total level of a company and their capability to turn other assets into liquid topay off debts and other short term obligation. It consists of various aspects such as:2
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