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Financial Management of Nestle UK

   

Added on  2020-01-06

23 Pages8255 Words1052 Views
FINANCIALMANAGEMENT

Table of ContentsIntroduction:...............................................................................................................................1Background of the Company:....................................................................................................1A.C 1.1:-.................................................................................................................................2A.C 1.4 Review and Question financial data.........................................................................4A.C 1.2:-.................................................................................................................................5A.C 1.3 Comparative analyses of financial data of Nestle:...................................................8A.C 2.1:-...............................................................................................................................10A.C 2.2:-...............................................................................................................................11A.C 3.1:-...............................................................................................................................12A.C 3.2:-...............................................................................................................................13A.C 3.3:-...............................................................................................................................14A.C:3.4:-...............................................................................................................................15Conclusion:..............................................................................................................................15REFERENCES.........................................................................................................................16

Index of TablesTable 1: Financial data of Nestle and its competitor..................................................................6Table 2: Financial ratios for Nestle UK for 2014.......................................................................7Table 3: Horizontal analysis of the Profit and loss statement..................................................10Table 4: Cash Flow Statement..................................................................................................10Table 5: Horizontal analysis of the Balance sheet statement...................................................11Table 6: Variance calculation ..................................................................................................11Table 7: Budgeted income statement.......................................................................................12Table 8: Expansion Proposal information ...............................................................................16Table 9: Pay back period calculation ......................................................................................16Table 10: Net present value calculation ..................................................................................161

Introduction:This task has been designed with the purpose of assessing the financial management of acompany. In this study, Nestle UK has been used as a case study. The financial managementof Nestle UK is assessed for the years 2013 and 2014 and their financial data is compared andanalysed. To understand the financial management in a better way, the researcher has madean effort to identify methods for procuring budgets and analyse the impact of budgetconstraints. In this study, the criteria on which proposals are judged for managing finance isassessed and the outcomes of the mentioned proposals on objectives of Nestle UK areevaluated.Background of the Company:Nestle UK is a subsidiary company of Nestle SA. It is the world’s best company on nutritionas well as health. Nestle UK is a major player in the food industry of UK and Ireland and hasemployed around 8000 employees across the 23 sites (About us., 2016). The most popularfood brands that Nestle UK provides its customer base include KitKat, Nescafe, Smarties,Buxton, Go Cat and Shreddies (Nestle.co.uk, 2015).Figure 1: Logo of the company(Source: Nestle.co.uk, 2015)In addition to their immense popularity, Nestle UK is one of UK and Ireland’s majorexporters of food products. They export over £346 million worth of food products every yearto over 70 nations globally (Nestle.com, 2015).2

A.C 1.1:-According to Brigham and Houston (2014, p.221), financial data availability ishelpful for analysts and all the stakeholders to assess the financial performance and viabilityof the company. There is greater importance of the financial data for the organization indrawing conclusion not only for decision making purpose but for overall strategic decisionmaking of the firm. The decision making quality to a significant level is dependent on thefinancial data quality. It is important that financial data are being gathered from authenticsources in right manner in order to make sure that it offer suitable information andknowledge. Any individual or an organisation can obtain financial statement of a particularcompany through external sources and internal sources. Bull (2013, p.215) opined that theinternal sources that can help in collecting financial data include books of accounts, internalaccounting systems and sales representatives’ reports. Van Horne (2013, p.115) added thatthe external sources that can be used for collecting financial data are through companywebsites, suppliers, Company houses and financial statements released by the company.The supplier’s reports provide data about the amount spent in procuring materials and theexpenses incurred in transactions. There is greater responsibility of the manager to maintainthe accounts of expenses so that it can pass such data to the organization's accountingdepartment. The main sources of financial data that is available from within and outside thecompany include the financial statements that present the financial accounts statement,balance sheet and the cash inflow. Nestle is relying Companies House website for thepurpose of getting financial data in order to monitor financial activities of its competitors. In order to assess the validity of the financial data gathered from internal and externalsources Nestle makes sure that it has audited both auditors that is internal and external. Theauditors present outside makes assessment of the financial statement in relation withreliability, accuracy and timeliness. In case of Nestle it is necessary for organization to ensurethat the financial data being undertaken is valid. Further, with the motive to ensure reliabilityof financial data main focus must be on controls along with the central transactionprocessing. This system can directly assist in reducing the chances of errors which are beingpresent in the financial records of Nestle. It can directly assist company in meeting its desiredgoals and objectives. Moreover, internal auditing is also one of the most appropriate waywhich is generally self consulting activity and in turn improves the effectiveness of riskmanagement. Main role of internal auditor is to provide support to external auditor where indepth analysis of financial statements take place during financial audit. On the other hand to3

ensure validity of the data external auditor is also appointed by shareholders to verify thatfinancial statements are true and fair. Along with this, it is known whether the funds ofbusiness are utilized in proper manner or not. Therefore, it is also fruitful in case of Nestlewhere business can assess the validity of the data. The benefits of divulging financial data is extremely important as it assists theprocesses of audit and allows the necessary party to assess the financial viability of thecompany. The financial data can be assessed in terms of possibilities of internal checks orwhether it is based on the culture of the organisation.The external sources of financial data that can be obtained are generated fromcompany websites, suppliers’ reports (Cheng, 2013). This information is beneficial to thecompany to review their performance in years and allows the owners to make decisions forimproving output. It also assists auditors to prepare audit reports of the company. The datasources from outside the company are helpful for investors and stakeholders to assess theperformance of the company.In the context of entering into a partnership, the financial data is beneficial forcompanies to judge the performance of the other organisation before deciding on finalisingthe deal. Sole proprietorship, joint ventures and partnerships all provide varied structures ofworking ethics and financial statements provide the financial performance of the company.The validity of the data can be verified by looking into their annual reports, financialstatements and auditor reports (McCafferry, 2014). These present a firm idea of thecompany’s actual performance. Different types of investment decision needs to made forentering new business environment. Firstly, financial investor needs to decide where to investand how to invest. For a careful investment decision considered the country’s GDP rate,exchange rate and government policy regarding foreign investment. The higher the GDP rate higher the return from investment. Good GDP rate indicatesthe developed market which consists of largest and most industrialised country which islawful and unwavering government properly maintained that’s why developed market isconsidered as the safest investment decision with a stable economic growth and profitability,which are G8 countries and others European countries. Countries exchange rate influencesthe financial investment decision as the share values increases and company can make profits.Countries with different types trade restrictions with international body is risky forinvestment decisions as they got low liquidity which affect the future return during periods.4

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