Financial Planning & Strategies | Assignment

Added on -2020-02-12

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Accounting for businessdecision-making1
Table of ContentsINTRODUCTION................................................................................................................................3TASK 1 FINANCIAL STATEMENT ANALYSIS...............................................................................3A. Calculation of ratios.....................................................................................................................3B. Qualitative information for enhancing business performance.....................................................4TASK 2 COS-VOLUME-PROFIT ANALYSIS...................................................................................4(A). Calculation of break-even point in dollar sales.........................................................................4(B). (i) Calculation of break-even point in units for each product...................................................5(ii) Calculation of overall profit of a company at BEP sales............................................................6(iii) Calculation of overall profit or sales at drop the Velcro and Metal products............................6(iv) Preparation of segmented income statement..............................................................................7TASK 3 SHORT-TERM DECISION MAKING..................................................................................7(A) Closing divisions decisions of Tiles...........................................................................................7(B). Qualitative factors required for decision-making purpose........................................................8(C). Impact of Tile’s shut down decisions on Blocks and Brick’s sales...........................................8TASK 4 STANDARD COSTING AND VARIANCE ANALYSIS......................................................9(A) Direct material variance.............................................................................................................9(B) Direct labour variance..............................................................................................................10(C) Actual cost of client application...............................................................................................10(D) Analysis of the variance...........................................................................................................10(E) Should the fertiliser services must be continue or not..............................................................10CONCLUSION...................................................................................................................................11REFERENCES...................................................................................................................................12APPENDIX........................................................................................................................................13Appendix: 1. Ratio analysis............................................................................................................132
INTRODUCTION Over the years, globalization increased the volatility and uncertainties in the externalmarket, as now-a-days, firms are operate at international level which rises up the level ofcompetition. In the corporations, top-managers have power and authority to devise different plans,strategies and policies in relation with proper and effective management of regular functioning.They use distinguish financial techniques and tools for making viable decisions like costing,budgeting, ratio analysis for the strategic financial evaluation, variance analysis and so forth. Thisreport is prepared to guide that how different tools can be used to construct smarter plans andstrategies for maximizing business performance and financial status. TASK 1 FINANCIAL STATEMENT ANALYSIS A. Calculation of ratiosRatio evaluation technique is the most often used way to analyze various aspects ofcompany’s performance and financial position i.e. efficiency, solvency, liquidity and so on. It is aquantitative analysis method that is helpful to evaluate the relationship in various components of thefinancial statements; income statement and balance sheet as well. Profitability ratios: This ratio provides a quick indication to the mangers about theeffectiveness of corporate functioning denoting that whether Senkyo Sdn Bhd has generatedpositive return or not on their sales. In 2015, GP an NP ratio dropped down to 48.73% and 11.83%shows that company needs to make cost-control and revenue maximization decisions throughmarketing, quality assurance techniques and others to improve net return (Jami and Bahar, 2016).ROSF and ROCE also came down to 30.93% & 18.77% which depicts that Senkyo Sdn. Bhd.generated less return on shareholder equity & total capital employed. Liquidity ratios: In 2015,Senkyo Sdn. Bhd’s CR and QR goes up to 5.50 & 1.26 times,although improved ratio is good, still, CR exceed the standard of 2.00 which is a sign of ineffectiveutilization of resources. However, quick ratio is around target of 1.00 to 1.26 due to very highinventory balance, therefore, company’s manager needs to create decisions in relation with theoptimum resource utilization (Goldmann, 2017). Efficiency ratios: Stock turnover ratio declined to 0.93, as a result, inventory holding daysgoes up to 391.07which is a poor sign and reflects slow movement of stock into sales. However,receivable turnover ratio goes declined to 14.20 which in turn increase collection days from 16.21to 25.70 indicates slow collection from debtors which affect cash management strategies in anadverse manner. Similarly, non-current assets turnover ratio came down from 6.76 to 5.07 timesreflects ineffective use of assets (Chiaramonte and Casu, 2016). Firm must make strategic decisions3
for enhancing the resource utilization efficiency for the growth and success. Solvency ratios: Debt to equity ratio came down from 1.65 to 1.86 because firm repaid theirshareholders fund to a great extent in comparison to the repayment of long-term borrowings. Itindicates higher risk because of heavy debt uses and also it goes beyond the industrial standard of0.50:1. Hence, first must minimize their debt use and maximize equity source for the effectivecapital structure decisions (Ratio analysis, 2016). B. Qualitative information for enhancing business performanceRatio analysis only helps to analyze quantitative information, however, corporations likeSenkyo Sdn Bhd also needs to evaluate their qualitative performance in order to make viabledecisions for the growth & success. In such regards, following information is helpful for takingbetter decisions, mentioned below:Customer satisfaction: Senkyo Sdn Bhd can examine the satisfaction level of their clients.It can be evaluated using customer compliant rate, satisfaction score and so on. Rising satisfactionof the customers is a good sign of delivery of quality services whereas ineffective services indicatenegative performance (Yoke Mui, Ahmad and Nabavi, 2016). Technological advancement: Using latest, new and upgraded technologies maximizecompetitive strength of the business. Therefore, business needs to make growth plans and strategiesusing latest techniques. Employee satisfaction: Satisfied workers works at a high level of efficiency and serve top-quality services to the customers. It is because; they are extremely motivated, inspired andencouraged to give superior quality goods & services to the public. Environmental performance: Senkyo offer their services in the society, therefore, it is asocial responsibility of the firm to minimize environmental hazards, like wastage and emission ofharmful gases by following environmental policies, standards and rules. TASK 2 COST-VOLUME-PROFIT ANALYSIS(A). Calculation of break-even point in dollar salesCost volume profit (CVP) analysis is a tool of marginal costing which is used to examine thecost and profit relationship at different sales volume. Break-even point is the critical and mostimportant aspect of CVP technique that is helpful to determine that level at where sales becomesequal to the cost at nil return (Bergo and et.al., 2016). In accordance with the stated scenario, LinenFasterners Sdn Bhd prepares three kinds of clothing fasteners, Velcro, Metal and Nylon in Klang atdifferent selling prices and variable cost. It is essential for the firm to identify the total sales volume4

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