Financial Resources and Performance Management

Financial Resources and Performance Management

Contents
INTRODUCTION...........................................................................................................................................3
MAIN BODY..................................................................................................................................................3
1. Evaluate the impact of the decision on the organization’s financial statements and the relevance of
this impact on the decision......................................................................................................................3
2. Critically analyze the role and limitations of budgets in managing and controlling expenditure.
Approaches to driving value through better budgeting...........................................................................5
3. Appraise the role of activity based approaches and strategic management accounting in analyzing
the decision.............................................................................................................................................7
4. Assess the potential for and use of best-in-class benchmarking to support the decision process.......9
5. Appraise the role of treasury management in supporting the decision.............................................11
CONCLUSION.............................................................................................................................................12
REFERENCES..............................................................................................................................................14

INTRODUCTION
The term financial resources can be defined as those resources that consists all monetary
aspects such as cash, funds, loans and many more. These financial resources are too crucial for
companies in order to perform range of business activities (Salehi, Mahdavi and Tarighi, 2019).
In the absence of proper financial resources this may become difficult for companies to sustain in
competitive environment. Performance management is the process to ensure that the sequence of
functions and inputs meets the goals of the enterprise in an effective and timely way.
Performance management is focused on the performance of organizations, a unit, a worker, or
the procedures in needed to handle specific task. The project report is based on a company that
is Bentley Motors which is a British manufacturer and marketer of luxury cars. This company
was founded in year 1919 and located in London, United Kingdom. In the report, a strategic
option has been chosen by above company is “investment in new technology”. This can be
evaluated by help of different kinds of investment appraisal methods. The project report covers
detailed information about impact of decision on companies as well as limitations of budgets.
Along with role of treasury management is also explained in the report.
MAIN BODY
1. Evaluate the impact of the decision on the organization’s financial statements and the
relevance of this impact on the decision.
Financial accounting enables an enterprise to keep records of all money transfers. It is the
responsibility of the business documents and reviews all the financial information that goes into
and out of its operational activities (Bai, Satir and Sarkis, 2019). The financial reporting data are
collected on a series of financial declarations such as the balance sheet, assertion of revenue and
statement of cash flow. Companies adhere to a sequence of accounting standards in their
financial reporting. Most U.S. publicly traded companies’ follow the generally accepted
accounting principles (GAAP), a common set of auditors follow when completing their income
reports. Except the U.S. corporations typically adopt certain global standards which differ by

area and culture. Financial planning is a way for companies to track their operational activities
but also to include a picture of their economic condition. A company gives shareholders and
borrowers more authority in their decision-making by providing information via a wide range of
declarations such as the financial statements and statement of comprehensive income. Financial
statements relate to common procedures to give stockholders an accurate representation of a
company’s financial, such as their revenues, expenses, earnings, capital and working capital, as
structured documents that can provide in-depth insights into financial data. When analyzing the
financial statements, the most obvious feature is that it gives investors the opportunity to invest
about choosing to invest their money in a particular company. Analysis of financial results is
important for policy departments in determining the taxes owed to the business (Khan, Yang and
Waheed, 2019).
There are three main areas where financial accounting helps decision-making:
 It gives stakeholders with a base point of assessment for the fiscal viability of financial
assets-issuing corporations — and comparisons between them.
 It helps lenders evaluate corporate solvency, cash flow and financial health.
 It lets companies make choices on whether to distribute finite money, along with its
relative, administrative accounting.
Investing decision- Fundamental modeling is highly based on a company's balance sheet, cash
position and revenue statement. All financial reports for publicly listed enterprises are formed
and confirmed in accordance with the Financial Accounting Standard Board (FASB) norms.
Investors use the financial reporting details to make assumptions about a share profits and
financial health. Despite the details presented by the financial statements, creditors will have no
knowledge of the stock and bond issuers' past and overall financial performance. The FASB’s
responsibilities standardization phase in the scheduling and appearance of accounting records,
meaning investors are less susceptible to financial reports that has been processed depending on
the latest situation of a firm.

Lending decisions- Cost reporting also represents a key for lending institutions. Even though
financial reports outline all of its resources and short- and long-term debt, borrowers get a clearer
idea of the credit ratings of a corporation (Lee, Adbi and Singh, 2020). A number of major
financial ratio on which lenders rely, including the debt-to - equity (D / E) ratio and the quick
ratio reasonable alternative, are extracted from the financial statement. Even for privately run
enterprises that do not inherently fulfill the requirements of the FASB, no mortgage lender shall
be liable for a big company loan without the important information made by banks cost
accounting. Unquestionably, a borrower needed to understand how much risk involves loaning
money to a corporation, which can be dictated by analyzing the project financial reporting of the
corporation. The borrower will also be able to identify precisely how much to loan and at what
investment rates once this is ascertained.
Bentley motors takes effective lending decisions by computing different kinds of ratios which
are as follows:
Gross profit ratio- Gross profit / net sales * 100
2017 2018
Gross profit 43549 46350
Net sales 229550 235849
Gross profit ratio 18.97% 19.65%
Interpretation: The above calculated ratio is indicating that in year 2017, gross margin was of
18.97% that raised and became of 19.65% in year 2018. This shows that company was able to
reduce their cost of sales in this year 2018 compared to year 2017.
Net profit ratio- Net profit / sales *100
2017 2018
Net profit 11463 12153

Net sales 229550 235849
Net profit ratio 5.00% 5.15%
Interpretation: This table indicates that company’s net margin was of 5% that increased in year
2018 and became of 5.15% in year 2018. It shows the efficiency of company to produce higher
return in year 2018 after deducting all expenses.
Current ratio- Current assets / current liabilities
2017 2018
Current assets 160112 183536
Current liabilities 160389 167968
Current ratio 0.99: 1 times 1.09 : 1 times
Interpretation: From both years’ current ratio, it can state that company is not able to generate
ideal ratio that is of 2:1 times. In year 2018, the ratio was of 0.99:1 times that shows that
company had 0.99 assets to pay 1 times of liabilities. While in year 2018, this ratio was of 1.09:1
times. Therefore, company’s liquidity position is not good.
Quick ratio- Quick assets / Current liabilities
2017 2018
Quick assets 119697 137791
Current liabilities 160389 167968
Quick ratio 0.75:1 times 0.82:1 times