Financial Managing Resources: Role of Management Accounting, Ratio Analysis, Costing, Cost of Capital, Investment Appraisal Method

This report covers the role of management accounting in financial management, ratio analysis, sources of finance, costing, cost volume profit analysis, cost of capital, and investment appraisal method. It also discusses the liquidity ratios, commercial loans, venture capital, payback period, net present value, discounted cash flow method, and internal rate of return. The report is based on LFBM203 Financial Managing Resources.

Financial managing
resources

Contents
INTRODUCTION...........................................................................................................................1
1. Explained the role of the management accounting that helps the organization for their
improvements...............................................................................................................................1
2. Discussed all the topics of each scenario that is given for the purpose of attaining the
primary objective of the XYZ plc................................................................................................1
CONCLUSION ...............................................................................................................................4
REFERENCES................................................................................................................................4

INTRODUCTION
Financial management consists planning, monitoring, directing, organizing the financial
practices such as acquisition and usage of the funds of the firms. It means utilizing the principles
of general management to financial communicator of the corporation (Laguir and et al., 2021). In
this report, there describes the role of the management accountant that assists to the enterprise in
their growth as well as improvement. It also defines the ratio analysis, sources of finance,
costing, the analysis of cost volume profit, cost of capital and investment appraisal method as
well.
1. Explained the role of the management accounting that helps the organization for their
improvements
Management accountant aids in the planning of strategic through furnishing exact,
appropriate data and information that associated with financial and non financial to the manager
of the company on time and helps in the decision making for growth of the organization. The
managerial accountant has number of responsibilities and roles that helps to the organization to
achieve their aims and the objectives in appropriate and effective manner. It helps in planning: Management accountant aids to the firm in short term planning as
well as long term. They plays very crucial roles in predicting the future position of the
firm and economic events for making the upcoming plan such as strategic management
bookkeeping, long term plans, developing corporate strategy, market study and so on.
 Managing and maintaining the optimum capital structure: They have play the major
role in raising the finance and their application. He has to manage a proper mix among
the debt and the equity (Marigi, 2019). The arrangement of the funds with the help of the
debt is cheaper because of their tax benefits. Although, it is very risky because of the
interest on debt. They all have to done the payments of the interest whether the
corporation will be able to generate the profit or not.
2. Discussed all the topics of each scenario that is given for the purpose of attaining the primary
objective of the XYZ plc
Ratio Analysis
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It refers to the examination of several pieces of information and data of the financial in
the financial statements of the corporation. They are basically utilized by the outsider analysts to
fix several type of aspects of the enterprise like liquidity, profitability and solvency.
Liquidity ratio: The liquidity ratios are contemplated the current ratio and quick ratio. The
higher ratio indicates the better position or status of the business firm for meeting their compel
and showing that the company is not consuming their assets in proper way (Menz, 2020). It helps
to the organization to improving their position by analysing their level through the ratios. Current ratio: It is also called the working capital ratio because it contains the current
assets and current liabilities to measure and analyse the capacity of the firm for the
purpose of meeting their obligations and compel within an specific time period. It
presents the financial health of the corporation and how it can increase the liquidity of
their current assets to fix down the debts of the firm. It is calculated by current
assets/current liabilities.
 Quick ratio: It helps to measuring the capabilities of the company to do the payments of
their liabilities or obligations that are for short term over a particular time period with
their assets. In general words, it refers to the accounting ratio that indicates the liquidity
of the firm. It is also called the acid test ratio. It is calculated by the quick assets / current
liabilities. The quick ratio is evaluated by current assets – (stocks + prepaid
expenditures).
Finance sources
There are two types of sources short terms and long term that helps to the organization to
availability of the fund for better operation of the business. Some of them are discussed below: Commercial loan: It considered as most reliable, safe and worthy resources of finance
for the organization. The firm can get several type of loans and focus the specific
necessities of each and every loan. It includes bank loans, cash credits, credit unions and
so on.
 Venture capital: It is the another resources of the capital for the owner of the company.
But each and every owner of the corporation is not able or eligible for this sources of the
capital. This finance provides the loans for big scale enterprises for their techniques and
that have enormous growth. The firm has to do payments of the interest.
Costing analysis
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It is the procedure of computing the expected incomes or earnings from a particular
condition or projections then deducting the total cost that are related to completing of particular
situation or projection. It is also known as the cost benefits analysis (Paroda and et al., 2018). It
will help to XYZ plc to increase project management and assume expected advantages for the
firm. The professional of financials utilize their cost evaluation to compute the total money
which they can generate as compared to the over all costs of the projections.
Cost volume profit analysis
It is the way to figure out the fluctuations in the variable cost as well fixed cost that
influence the earnings of the profit. The business enterprise can utilize the CVP to observe the
units that are required to sell to the organization for the purpose of reaching at the break even
point and earn the specific fix margin of the profits as well. This procedure is totally based on
the assumptions. These prediction involve selling price but variable and fixed cost per unit are
fixed. From the help of the CPV formula, the firm can compute the break even point also. This
analysis involves the PV ratio, BEP, MOS and so on for getting the information about their sales,
profit, cost and helps to the firm to analyse their cost as well as their profits (Rena, 2021).
Cost of capital
It is the calculation of the minimum return of the firm that would be important in manner
to confirm undertaking a project of capital budgeting like creating a new factory (Williams,
2019). It states the return XYZ plc requirements to attain in the manner of justify the projection
of cost of capital like buying new equipment and cresting or building a new building an so on. It
helps to XYZ plc in decision making for their new projections that should always create a return
that transcends the cost of the capital of the organization utilized to finance the projections. The
investment will not able to create the money or return for the investors. It consists the cost of
debenture, cost of equity, return capital, preference share. The financial analyst or director of the
company utilize the cost of capital to fix if the monetary resources are being financed in
appropriate manner. If the return on the project or investment is higher than the WACC then
there will be higher chances to get higher profit for the company.
Investment appraisal method
It is the part of the financial management that includes the payback period, net present
value, discounted cash flow method and internal rate of return (Tatum, 2021). In general words,
it refers to the tools and techniques that are utilized by the organization and investors as well to
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taking the decision regarding the new investment or projections. The organization XYZ plc will
use techniques for better return from the investment and these techniques helps it to evaluate the
projections as well. By utilizing these method the firm would have less possibilities to having the
losses in future. It is utilized by the professionals but it is totally assumption based so there is no
surety of 100% return. The XYZ plc should use NPV method most because it is most popular
and valuable method which tells the advantages of the money on time.
CONCLUSION
As per the above discussion or report it has been concluded that the liquidity ratios are
most helpful for the organization to achieving their goals and objectives for the company's
growth. There has been analysed the sources of finance that provides the availability of the funds
for their better operation. It also evaluated the costing and cost volume method that helps in
better decision making for the growth of the organization in future. The cost of capital concluded
that it is very important part to get the information about the project in future. It helps in
determine the projection that will be good for the company to achieve their target irt mean
maximize their profits.
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REFERENCES
Laguir and et al., 2021. Managing corporate social responsibility in the bank sector: A fuzzy and
disaggregated approach. Corporate Social Responsibility and Environmental
Management, 28(4), pp.1324-1334.
Marigi, S.N., 2019. Hydrology and best practices for managing water resources in arid and semi-
arid lands in Kenya. In Hydrology and Water Resources Management in Arid, Semi-
Arid, and Tropical Regions (pp. 229-250). IGI Global.
Menz, M., 2020. Show me the money–managing politically exposed persons (PEPs) risk in UK
financial services. Journal of Financial Crime, 28(4), pp.968-980.
Paroda and et al., 2018. Agricultural policies and investment priorities for managing natural
resources, climate change and air pollution: Policy brief.
Rena, R., 2021. Managing Cooperatives in South Africa: An Economic
Perspective. Cooperatives in the Global Economy, p.175.
Tatum, J., 2021. Managing Volatility. Government Finance Review.
Williams, P., 2019. Managing for common purpose. In Middle Managers as Agents of
Collaboration (pp. 61-80). Policy Press.
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