Financial and Business Performance Information

This report provides information on financial and business performance, including the calculation of performance indicators, analysis of financial performance, strategies to overcome inventory turnover issues, signs of liquidity problems, cost minimization strategies, customer policies, cost of capital, and dividend policy.

Provide financial and
business performance
information

Table of Contents
INTRODUCTION.........................................................................................................................4
TASK 1..........................................................................................................................................4
Calculation of performance indicator of apple & pear..............................................................4
Analysis financial performance for decision making purpose...................................................5
TASK 2..........................................................................................................................................6
Explanation of main reason for decrement in inventory turnover rate and use of management
policies to overcome this problem.............................................................................................6
Brief description regarding signs which show that business experience liquidity problem......7
TASK 3..........................................................................................................................................8
Given advice to Arctic, ways through which they can minimise their cost...............................8
TASK 4..........................................................................................................................................9
Customer policy use for encourage cash sales...........................................................................9
TASK 5..........................................................................................................................................9
Brief description regarding cost of capital.................................................................................9
Calculation of weighted average cost of capital......................................................................10
TASK 6........................................................................................................................................10
Advice regarding with opting dividend policy to attract customer..........................................10
Advantages of imputation system for residents individuals....................................................10
CONCLUSION............................................................................................................................11
REFERENCES............................................................................................................................12

INTRODUCTION
Finance is essential part of any organization. It is necessary for personal to manage their
financial resource in effective way. This report has been formulated to define the relevance of
tools of financial management for managing and controlling as well as recording and measuring
business performance in systematic way.
TASK 1
Calculation of performance indicator of apple & pear
Performance indicator: This indicator is used by organizations to measure their
financial position for specific time period. Which will useful to find out or evaluate
performance of business entity for specific period of time. There will be various method used
in financial management approach through which manager can interpret their financial perforce,
however most of organization use ratio to calculate and measure their organization's
performance (Agrawal and Smith, 2019).
Ratio, this tool is apply for measuring ration between two variable of financial
statements. Following are calculation of some specific ratio through which investor can
determine which organization is beneficial for the purpose of investment.
Ratio Apple Pear
Particular Formula Amount Ratio Amount Ratio
Liquid ratio Liquid asset /
Current
liabilities
3900/ 4200 0.92 6500/ 10000 0.65
Inventory
turnover
Cost of goods
sold/ Average
stock
25296/ 4000 6.3 22280/ 5660 3.93
Average
collection
period
Average
account
receivable /
Net credit
sales*365
3,900 /
38,000*365
37.46 6,500/
34000*365
69.77

Ratio Apple Pear
Debt to equity
ratio
Total
liabilities/
Total
shareholders
equity fund
7200.../
16000..
0.45 16000.../ 6000 2.66
Return on
shareholders’
funds
Net profit/
Shareholder's
equity
3377.../ 6000.. 0.56 2408 / 2800 0.86
Interest
coverage
EBIT /
Interest
4824..../ 80... 60.3 3,440..../ 680. 5.05
Earnings per
share
Net profit/
Shareholder's
equity
3377.../ 6000.. 0.56 2408 / 2800 0.89
Price/earnings
ratio
Market value
per share/
Earning per
share
$2.80/0.56 5 1.95 / 0.86 2.26
Analysis financial performance for decision making purpose
From the calculation of liquidity, profitably ratio it has been identified that Apple is
comparatively in better position for the purpose of investment. Following are the main reason ,
which describe the main cause of selection of Apple
Liquidity ratio: This ratio is use for calculate the liquidity position of organization.
This ratio help in identifying availability of liquid assets through which organization can fulfil
their current liabilities. In case of Apple liquid ratio is measure at 0.92 and on the other side
Pear's liquid ratio is measure at 0.62 which means that management department of Apple use
their assets in effective manner thus they have sufficient liquid asset for fulfil their day to day
business liabilities (Amalia, Fadjriah and Nugraha, 2020).

Inventory turnover ratio: This ratio consider part of efficiency ratio. It is used for
measuring efficiency and capabilities of organizations to convert their investor into final
products and then sell it. Operating cycle is run for specific period of time. longer duration for
completion of operating cycle showcase that organization is not able to manage their inventory.
In this case Apple's inventory turn over ratio was 6.3 and on the other side Pear took 3 which
means that Pear is in good position in case of measuring efficiency of company.
Price earning ratio: This ratio is calculated for measure relation between market price and
organization's share value. On the basis of that investor recognize which company's share are
more profitable. The rate of price earning ratio of Apple was able Pear was 2.8 which means
that Apple's market price of share is higher thus it is much more beneficial for investors to
invest their capital.
Average collection period: This ratio is calculated for recognize time require for collect
money from debtors. Higher ratio showcase lower efficiency and financial position of company.
Apple 's value of average collection period was 37 days and on the other side Pear require 70
days for collect money from their debtors. Which mean that management department of Pear
not use effective policies and they don't have sufficient amount of cash due to longer time
period of collection debtors money (Benlemlih, 2019).
On the basis of hat it is find that for the purpose of investing portfolio investor need to
go with Apple as compare with its rival company financial performance of this organization is
much better.
TASK 2
Explanation of main reason for decrement in inventory turnover rate and use of management
policies to overcome this problem.
Following are the reason of decrement in stock turnover ratio:
Product life cycle: Rate of stock turnover directly related with the stage of
organization's life cycle. Especially their products,at the time when products launch for first
time, the rte of stock turnover is decrease due to the reason of demand and in case of stage of
boom this ratio is increase which showcase that organization able to generate profit by selling
their stocks.

Buying in bulk: This is also consider as main reason of declining in the rate of stock
turnover , in case of bulk of products demand of theses tools is comparatively low thus cost of
storing these products and maintain is getting high which will adversely impact on the stock
turnover rate.
High cost of products: Most of organizations; inventory cost is high due to the time
and cot required for maintain of inventory , thus organization face issue related with decrement
in tock turn over rate.
Mismanagement of inventory: This is consider as main reason that business entities
face reduction in stock turnover ratio. Due to not applying effective tool of managing stock,
they face problem related with high cost, issue of Wastage of stock thus they face turnover
related problems.
Manager to overcome issue related with stock turnover can apply following strategies:
They need to use ABC , VED, EOQ and other technique of managing stock which help in
recording and manage as well as control the cost of maintaining stock which help in generate
profits by stock.
By using proper forecastle tool and use of LIFO, FIFO method manager can find
requirement of sector and demand of their product, it will useful for measuring maximum,
minimum level of demanding stock which useful for control wastage of products.
By applying effective pricing strategy manage able to increase their inventory turnover ratio.
By motivating and encouraging customers for pre-order to organizations products they able to
overcome their stock related problems (Feranecová, and Krigovská, 2016).
Brief description regarding signs which show that business experience liquidity problem.
Following are the signs through which manager can recognize that their organization
financial problems. Even theses sign are helpful for investor to find out which organizations is
in better liquid position.
Decrease of profits: When financial performance of an organization has been decline
over past few years and thy are not able to generate profits due to reduction in sales rate then it
is symbol which showcase that organization's liquidity position in getting down.
Problem in fulfil debt liability: Manager by measuring organization's capital to paying
their debt liability can recognize that their entity is face liquid position. Organization generally

not able to pay their current debt liabilities at the time when they face financial problem. Thus it
is the symbol which directly sign that business suffers from lack of liquid assets problem.
No access of cash items: When the rate of cash inflow activities has been decline and
organizations not able to generate cash then it is also symbol which directly showcase that
organization is face liquid problem as the rate of access of cash outflow activity is higher then
cash inflow activity.
TASK 3
Given advice to Arctic, ways through which they can minimise their cost.
Calculation of EOQ
√2SD/ H =
S = Annual demand = 32000
D = Cost per order = 200
H = Annual holding cost per unit = 0.20 = √2*32000*200/0.20 = 8000
Calculation of minimum number of bags =
Average weekly sales = 32000/50 = 640
Re order period = order time + stock of safety = 6 week
Minimum number of begs = 2560+1280 = 3840
Calculation of saving money by ordering EOQ.
Computation of EOQ when 16000 order sold = √2*16000*200/0.20 = 5657
Cost of purchase = 200*16000 = 3200000
Ordering cost = 16000/50 = 320
200*32000
holding cost = 0.20*5657/2 = 566
3200000+566+640 = 3201206
Purchase cost = 200*32000 = 6400000
Computation of EOQ when 32000 order sold
Computation of annual ordering cost = Order per year/ ordering cost = 32000/50 = 640
Computation of annual carrying cost = Carrying cost * EOQ/ 2 = 0.20*800/2 = 320

Computation of inventory cost = Ordering cost + Carrying cost + Purchase cost
=6400000+640+320 = 6400960 =3199754 can save by ordering at EOQ level.
Advantages of maintaining adequate inventory level.
Organizations able to increase their level of production by maximizing their efficiency
level (García-Sánchez, and Noguera-Gámez, 2017). Stock management useful for control cost
required for maintaining and managing orders which useful for generate more cash inflow
activities.
Maintenance of stock level help in create more organized warehouse which useful for
record each and every transaction related with stock level. Thus beneficial for saving time of
managers.
Maintenance of adequate level of stock help in control wastage of extra items of
products. They maintain accurate level which help in retain potential customer as goods deliver
at given time period.
TASK 4
Customer policy use for encourage cash sales.
Jasmine Ltd in order to encourage their debtors for cash sales need to apply 30 % cash
sales pay in one month policy. It is beneficial for them and organization will able to generate
more cash inflow activities by increasing their cash use over credit sales (Koo,
Ramalingegowda and Yu, 2017).
This is much better alternative among others as by applying this method manager of
Jasmine Ltd able to control their cost require for managing debtor account and time or cost
required for collection of credit money. When cash sales has been increase then the rate of cash
inflow activities has been increases. Which beneficial for growth of organization as well as it
reduce risk of default debtors. For encouraging cash sale manager need to use effective
promotion tool and change pricing strategy which help to influence customer for cash purchase.

TASK 5
Brief description regarding cost of capital.
Cost of equity
Dividend per share/ Market value / price per share+ growth rate = 3000000*8.4/100/8900000+5
% = 5.22 (1-.30) = 38.86
Cost of preference share
Annual reference share dividend/ Net proceed = 960/8000*70 = 8.4
Cost of debenture = Total interest incurred/ Total debt/ 0.70 = 100000/ 1000000 = 7
Cost of retain earnings = Dividend/ Retain earnings * (1- Tax rate) = 5.88
Calculation of weighted average cost of capital.
{WD ( Kd( 1-t) + We ( Ke) + Ep( Kp(1-t)+ Wr( Kr( 1-t) }
Weighted of financing debt = WD
Weighted of financing equity = 1*38.86+2*8.4+3*7+4*5.88 = 96
TASK 6
Advice regarding with opting dividend policy to attract customer.
Dividend policy is a document which define the way through which organization
distracted their dividend and rate at which dividend paid as well duration when organization
distribute dividend.
To attract young 25 years old investor organization ned to use progressive dividend
policy, as being youth expectation of investor is high and they select organization which
provides them high rate of dividend and work for speed growth rate (Nugroho, Nurdiansyah,
and Erviana, 2017).
For attract their senior citizen investor thy need to apply stable dividend policy as
investor are not interest in generate profit moreover they just want stable source of income with
low rate of risk thus organization need to use stable dividend policy in which they provides
dividend at fixed rate.

Advantages of imputation system for residents individuals.
Dividend imputation system has been introduced for reduce the drawbacks of tax system
for individual as well as business organizations.
It is beneficial for resident as will the implementation of this system, issue arises due to
double taxation system has been solve (Shen, Chan,Chow and Thoney-Barletta, 2016).
Process of calculating and paying tax liability is become more flexible which is
beneficial for saving time as well as cost.
In this system franking credit facility which help in set of credit by personal liabilities of
individual.
They can set of their tax liability in upcoming year and burden of tax is comparative
reduce.
Tax credit is given to individuals which is further beneficial to encourage them for pay tax
liability.
CONCLUSION
From the above analysis it has been concluded that manager by using financial ratio can
determine potion of their organization in market. They use effective inventory management
policy to control cost of wastage. By calculating cost of capital thy can find out worth of their
organization and to attract customers manager need to apply dividend policy according to the
expectations of their investor.

REFERENCES
Agrawal, N. and Smith, S. A., 2019. Optimal inventory management using retail
prepacks. European Journal of Operational Research. 274(2). pp.531-544.
Amalia, S., Fadjriah, N. E. and Nugraha, N. M., 2020. The Influence of the Financial Ratio to
the Prevention of Bankruptcy in Cigarette Manufacturing Companies Sub Sector. Solid
State Technology. 63(3). pp.4173-4182.
Benlemlih, M., 2019. Corporate social responsibility and dividend policy. Research in
International Business and Finance. 47. pp.114-138.
Feranecová, A. and Krigovská, A., 2016. Measuring the performance of universities through
cluster analysis and the use of financial ratio indexes. Economics & Sociology, 9(4),
p.259.
García-Sánchez, I. M. and Noguera-Gámez, L., 2017. Integrated information and the cost of
capital. International Business Review. 26(5).pp.959-975.
Koo, D. S., Ramalingegowda, S. and Yu, Y., 2017. The effect of financial reporting quality on
corporate dividend policy. Review of Accounting Studies.22(2). pp.753-790.
Nugroho, E. S., Nurdiansyah, D. H. and Erviana, N., 2017. Financial Ratio to Predicting the
Growth Income (Case Study: Pharmaceutical Manufacturing Company Listed on
Indonesia Stock Exchange Period 2012 to 2016). International Review of Management
and Marketing. 7(5). pp.77-84.
Shen, B., Chan, H. L., Chow, P. S. and Thoney-Barletta, K. A., 2016. Inventory management
research for the fashion industry. International Journal of Inventory Research. 3(4).
pp.297-317.