INTRODUCTION TO ACCOUNTING & FINANCE

INTRODUCTION TO
ACCOUNTING AND
FINANCE

Table of Contents
Introduction......................................................................................................................................1
PART A...........................................................................................................................................1
PART B...........................................................................................................................................8
Explanation of objective of a budgetary control system.............................................................8
Concept of participating style of budgeting in terms of objectives.............................................9
CONCLUSION..............................................................................................................................10
REFERENCE................................................................................................................................11

Introduction
A financial accountant is responsible to run the financial activities an accounting activities of the
organisation. they are responsible to analyse the economic stability of the company and provide
financial information to the all Department of organisation and enable this departments to make
budgeting an investment decisions.
This report will cover the two different scenarios one will be based on Gray’s financial statement
And it will explain the profitability ratio including the returns on capital employed operating
profits and gross profit margin. this report will discuss on the efficiency ratio including the
inventory turnover days, account payable days and also the account receivable day. according to
the financial data it will also identify liquidity ratio including the current ratio and acid tests
ratio. In the end of this report will conclude investment ratio earning per share an price ending
ratio and it will also discuss on financial structure ratio including the interest cover and gearing
ratio. The other scenario of this report will cover the study ofGreat Manor plc We just car
manufacturing company. This report will identify explain the objectives of budgetary control
system and it will also discuss the concept of participative style of budgeting in terms of
objectives that have been identified.
PART A
Performance of Gray plc on the basis of ratio calculation
Profitability ratio:
These ratios are used for measuring the profitability of the company (Husain and Sunardi,
2020). These are important ratio for Gray plc because through these ratios it can evaluate its
profitability and thereby its performance too that whether it is moving towards the direction of its
objective or not. It includes:
Return on capital employed:
As per this ratio the return can be measured on the overall capital employed or it can be
said that through this ratio the efficiency of the company in terms of employing capital is
analysed.
It is calculated as:
Particular Formula Calculation
ROCE ROCE = Profit before
interest, Tax and
Capital employed:
1

dividend/Capital
employed*100
Capital employed= Total
assets- Current liabilities
For 2019: 1054-291
=763
For 2020: 1266-432
=834
ROCE:
For 2019:
=243/763*100
=32
For 2020:
=47/834*100
=5.63
Thus, from the comparison of the above ROCE between 2019 and 2020, it would not be
wrong to said that the efficiency or the performance of the company is decreased at a high
percentage. This can also mean that the company is not efficiently working and utilizing its
assets in order to generate adequate return.
Operating profit:
As per this ratio the company can analyse its total earning that is being raised from its
business functions but it excludes deduction of interest and taxes.
It is calculated as:
Particular Formula Calculation
Operating profit Operating profit: Net profit+
interest + tax
For 2019:
= 165+18+60
=£m 243
For 2020:
= 11+32+4
= £m 47
2