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Essay on Financial Management in Organization - Barratt Developments

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Added on  2020-06-04

Essay on Financial Management in Organization - Barratt Developments

   Added on 2020-06-04

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Financial Management in Organization
Essay on Financial Management in Organization - Barratt Developments_1
Table of ContentsINTRODUCTION...........................................................................................................................1Analyzing the financial performance of Persimmon Plc.............................................................1Justifying possible purchase price for Persimmon Plc by using business valuation techniques.5Alternative methods available to Barratt for financing the purchase..........................................8Dividend policies of two companies............................................................................................9CONCLUSION..............................................................................................................................10REFERENCES..............................................................................................................................12
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INTRODUCTIONFinance is considered as one of the most influential part of business. Financialmanagement means applying general principles in the organization in order to manage monitoryresources effectively (Muchapondwa and et.al, 2016). Present report is based on the Barrattdevelopments which is popular for building highest quality national houses. Current assignmentwill analyse financial performance of persimmon homes. It will justify possible purchase pricefor the target company by using several business valuation techniques. Furthermore, assignmentwill critically appraise alternative methods available to the Barratt for financing the purchase. Inaddition, it will discuss relevance of two company's dividend policies. Analyzing the financial performance of Persimmon Plc Ratio analysis is the most effectual financial tools which in turn help in evaluating andsummarizing the financial position of the business unit. By using such technique investors canmake idea about the extent to which profitability and liquidity position of Persimmon plc issound. On the basis of cited case situation, before taking purchasing decision Barrattdevelopment wishes to evaluate the financial position and performance of Persimmon plc. Ratio analysis of Persimmon Plc for the year of 2015Profitability ratio analysis RatiosFormulas2015Net sales2,902Gross profit737(FinancialstatementsofPersimmon Homesplc of2015, n.d.)Operating profit 615
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Net profit522Gross profit ratioGP/ net sales * 10025.40%Operating profit ratioOperating profit / net sales * 10021.58%Return on equity22.46%Net profit ratio Net profit / net sales * 10017.99%GrossprofitratioOperatingprofitratioReturnonequityNetprofitratio0.00%5.00%10.00%15.00%20.00%25.00%30.00%20152015Interpretation: By doing financial statement analysis, it has been assessed that GPmargin of Persimmon Plc was 25.40% at the end of 2015. The main reasons behind such lowerGP margin are that high direct expenses were incurred by the firm. Hence, to enhance suchfinancial performance business unit sis required to enhance sales revenue by placing emphasis onpromotional aspects. In addition to this, operating and net profit margin of the Persimmon Plcaccounts for 21.58% & 17.99% respectively. As compared to GP level, operating and net margingenerated by the corporation is good. It shows that effectual control exerted by the firm on thelevel of indirect expenses. By considering this, it can be stated that profitability aspect ofPersimmon Plc is moderate. Further, results of ratio analysis shows that return on equity ofPersimmon Plc implies for 22.46%. Hence, it can be said that company is required to makemodification in the existing framework which in turn enables them to generate high margin byusing shareholders fund. Liquidity ratio analysis
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