Financial Analysis of Metro Products Ltd.

This assignment delves into the financial performance of Metro Products Ltd., examining its financial statements and conducting a stakeholder analysis. It emphasizes the importance of understanding financial resources in business and explores how various stakeholders, such as suppliers and investors, are impacted by financial decisions made by the company. The analysis aims to highlight the interconnectedness between financial health and the success of Metro Products Ltd.

MANAGING FINANCIAL
RESOURCES

Table of Contents
Introduction................................................................................................................................3
Task 1.........................................................................................................................................3
1.1...........................................................................................................................................3
a) Explain the difference between the legal requirements between a limited company and a
non-limited company and state the requirements for Metro Products for the end of the
financial year (500)................................................................................................................3
b) Analyse the difference between management accounts and financial accounts (300)......4
1.2 Explain the Cash flow, Profit and Loss account, Retained Earnings account and the
Balance sheet and state the importance for Metro Products Ltd (500)..................................5
1.3 a) Identify the Metro Products Ltd’s various potential stakeholders...............................6
b) Analyse their relative interests and influence, and options available to Metro Products
Ltd in managing the interest of the stakeholders...................................................................8
Conclusion..................................................................................................................................9
References................................................................................................................................10

INTRODUCTION
Finance is regarded as important resource in upgrading the performance of an entity
which needs to be managed. This report is based on defining legal requirements of limited or
non-limited companies along with difference between management and financial accounting.
It includes different financial statements along with various stakeholders’ needs and
expectations.
TASK 1
1.1
a) Explain the difference between the legal requirements between a limited company and a
non-limited company and state the requirements for Metro Products for the end of the
financial year (500)
 Meaning- A limited companies is that firm which is registered under the legal law as
it is registered within the companies act and on the other hand, non limited companies
that is private company which is registered entity solely owned and controlled by
single individual.
 Minimum person- The person requirement is mentioned legally in the legal rules and
regulations which need to be comply in order to open limited or private limited
enterprise (DaDalt and Coughlin, 2016). The legal requirement of minimum person in
public limited organisation is 7 and unlimited members. In the private limited firm
minimum 2 and maximum 50 members can incorporate this private entity.
 Paid up capital- An entity are required to meet the legal paid up of capital
requirement in order to add the word limited after the name of the business and to
enjoy all the rights of limited company. The paid capital of limited cum public limited
company is 500000 whereas in private company it is of 100000.
 Directors- The administration of the business will be done by the managing directors
of the company who will handle all business operations of an entity. The reliability of
the legal actions will be maintained by the directors of the company (Evans and
Porter, 2010). It is mentioned in the legal act to have minimum 3 directors to start the
limited company and at the same time minimum 2 directors are required to write up
the memorandum of association.
 Statutory meeting- The annual general meeting organised by an entity is to convey
all important rules and the regulations currently framed by an entity for the betterment
of their business. There is compulsion on limited company to conduct statutory

meeting in government officials will launch new policies for improving social welfare
activities to gain trust of all the society members. On the other side, private limited
company is optional as they don’t require organising this kind of meeting.
 Prospectus issue- Prospection is a document issued as an invitation to all the
shareholders in order to take up the equity shares of an entity. There is obligatory for
the limited company in order to issue prospectus in financing their business according
their requirements of an enterprise.
There are various ways in which metro Ltd need to fulfil as they are public limited
organisations (Ehrhardt and Brigham, 2016). The word attached as suffix after the name of
company Metro products Ltd showcases the status of limited company. The basic requirement
of having paid up capital of 500000 of Metro Ltd in order to enjoy the status of limited
company. Apart from this paid up capital provisions the quorum requirements need to be
fulfilled in the case of limited company is at least 5 members to be present in the meeting in
order to convene the overall shareholders meeting. The members present in the meeting
include proxy of member, official representatives of government such as state and central
government. The limited companies are unrestricted in order to transfer all their shares but at
the same time private limited companies are restricted in transfer their shares.
b) Analyse the difference between management accounts and financial accounts (300)
 Meaning- Management accounting that kind of system which provides important
information related to cost and various policies framed by the top management for
improving the overall performance of the business (Hira, 2016). On the other hand,
financial accounting is done to ascertain the financial performance of an entity by
ascertaining the profits or loss earned by an entity in a particular financial year.
 Mandatory accounting- The financial accounting is compulsory in nature as without
recording of transactions of business an entity will not able to determine its loss or
profit incurred in a financial year in order to take future opportunities. There is
compulsion on management is to conduct management accounting systems in their
daily routine as this is not regarded as first priority work for the business enterprise.
 Information- The information recorded in the books of accounts of Metro Products
ltd is of quantitative in nature that includes numerical data and facts and figures. For
example, sales earned by an entity in a particular year are 20000 and Expenses
incurred in the business are 50000. On the other hand, management accounting
practices depicts both monetary as well as non-monetary information to be supplied

by the management to all of its employees (Jorgensen and Rotter, 2016). New policies
framed by an entity are quantitative information conveyed to the top management
which in turn form as motivation technique which showcases the qualitative
information of motivating all the employees.
 Objective- The primary objective of financial accounting is to facilitate its variety of
users by offering financial information to all its users of the business. On the contrary,
management accounting systems are developing in order to convey information
related to the cost incurred in the business enterprise. The practices of the
management accounting help in assisting management in planning and taking
important decisions for the betterment of the business. It emphasises on various
matters of the organisation which in turn improves overall all performance of an
enterprise owner in attaining all the goals and the objectives.
1.2 Explain the Cash flow, Profit and Loss account, Retained Earnings account and the
Balance sheet and state the importance for Metro Products Ltd (500)
 Cash flow statement- It is one of the important financial statement prepared by an
entity like Metro Products Ltd in order to ascertain the movement of cash flow in their
entity. The position of cash can be evaluated using this particular statement (Tsai,
2016). Owner of metro Ltd will easily recognises the expenses incurred in cash by
meeting all of them with the available income received in cash. Cash is essential
component for an enterprise as this helps in maintaining good liquidity position of an
entity. The liquidity is important for an entity in order to pay off all kinds of short
term obligations of an entity.
 Profit and loss account- Another name of this kind of financial statements of Metro
products is income statements that evaluate the income earned by an entity in a
particular financial year. The current turnover of an entity is 4 Million which will be
determined by preparing profit and loss accounts which will record sales and the
revenue (Parker and Swanson, 2016). The expenses incurred by an entity for
conducting their business operations are further deducted from the sales and the
revenue earned by the firm. The net profit is recognises in the corporate world as final
profit in ascertaining the ability of the firm.
 Retained earnings account- This is clear difference between profits earned by the
firm after paying dividends to all the available shareholders of the business. This is
that profit retained by an entity owner as savings which can be even used as financing
resources in meeting their business requirements. It is recorded in the balance sheet

under the head reserves ad surplus as this is basic reserve of the business. The profit
remained after paying off all kinds of obligations of an entity are used for the
betterment of the firm in meeting business obligations.
 Balance sheet- The financial position of the business can be determined using
financial positional statements which are regarded as important financial statement
(Kostova and Nell, 2016). It has two important components prepared by an entity
owner in their business involves assets and liabilities. Assets of an entity showcase the
ability of the firm in paying off their obligations and on the other hand, liabilities ae
all kinds of obligations and burden of debt to be pay off by the owner within a
prescribed limit. This positional statement is prepared at the end of financial year.
Importance of financial statements for metro products
Financial statements are regarded as important statements for metro products Ltd in
order to record their overall business transactions in order to determine their overall financial
performance. The purchases made by an entity should be recorded as this will deducted from
the total saeles earned by the firm in order to determine its available profit. Special product
purchase ledger will be formed that helps an entity owner in order cross check the total
purchase made by them in a particular year.
1.3 a) Identify the Metro Products Ltd’s various potential stakeholders
Stakeholders are considered to be the most important group of people to look after by
the organization. It is essential for the business unit to satisfy needs of all groups of
stakeholders. Distinct set of stakeholders have their own preferences and expectations from
the corporate. The following group of stakeholders do possess interest in operations of Metro
Products Ltd.
 Shareholders: They are real owners of the organization and possess high level of
interest due to their stake in equity. They do own voting rights for participating in
decision making process. They do invest their money to earn sufficient amount of
profitability. Further, they expect an adequate amount of growth for the business unit.
Many-a-times business unit faces a conflict of interest among shareholders and
employees (Davies and Drexler, 2010). Being a publically listed company, Metro
Products Ltd. has its group of shareholders who have invested in equity of the
business unit. The high level of investment on part of shareholders increases their say
in decisions of the organisation. As a publically listed organisation, it is essential for
Metro Products Ltd. to meet shareholders' expectations.

 Competitors: In present scenario, every industry is exposed to the risk of
competition. Every organization needs to review the competitors' strategy so as to
gain prominent position in the market place. Metro Products Ltd. needs to produce
auto accessories that meet customers' expectations. Further, the organization needs to
adopt competitive pricing strategy so as to gain an edge over competitors. Moreover,
it is essential for the business unit to produce products that meet have higher technical
specifications and quality standards as compare to that of competitors. This in turn
would help the business unit in meeting customers' expectation and gain sufficient
market share (DaDalt and Coughlin, 2016). Further, the organization has corporate
customers who are highly rational and possess high level of bargaining power. It is
therefore essential for the organization to understand competitors' strategy and design
future moves accordingly.
 Employees: As an integral part of organization, they do have huge interest in business
operations. It is essential for the business unit to satisfy employees' requirements so as
to keep them motivated. The higher level of motivation in turn results in increasing
productivity (Tsai, 2016). This in turn helps the business unit in meeting requirements
of large number of customers. Employees can be considered as a connecting tissue
that bridges the gap between customers and top level management. It is the higher
capabilities of employees through which the business unit is able to meet customers'
requirement in a customized manner. Metro Products Ltd. is a manufacturing unit that
produces auto accessories and mechanical security products to retailers. Being a
manufacturing unit, it is essential for the business unit to train and develop skills of
employees. The skilled labour and trained personnel will help the business unit in
meeting customers' requirements (Mayers, 2005). It is therefore essential for the
organisation to ensure the employees' satisfaction.
 Government: As a part of an economy, the organization is always reportable to
country's government. The government possess power to intervene within business
operations. It is essential for the business unit to meet all legal and political
obligations so as to conduct operations smoothly. The organisation is expected to
conduct operations in co-ordination with macro and micro environmental factors.
Further, the government tends to provide various monetary and non-monetary benefits
to the organization for conducting operations. In order to get advantage of
government schemes, the business unit needs to abide by all legal and ethical
obligations within an economy.

 Suppliers: As a manufacturing unit, Metro Products Ltd. is required to purchase
adequate amount of raw materials to support the production process. In order to meet
regular requirements of raw materials at reasonable price, the organization is required
to maintain long-term relationship with suppliers (Hira, 2016.). They form an
important part of external group of stakeholders since the entire production process is
dependent on quantity of raw materials supplied on their part.
b) Analyse their relative interests and influence, and options available to Metro Products Ltd
in managing the interest of the stakeholders
It is essential for the business unit to understand relative interest of different group of
shareholders. Further, the organization needs to meet stakeholders' expectation with the
available resources. This in turn would help the organization to earn sufficient amount of
profitability and high level of growth in long run. The relative interest of shareholders and
their influence on business operations are discussed underneath in detail.
 Shareholders: They are highly interested in increasing profitability of the
organization in short and long turn. It is with increasing profits that the shareholders
are able to increase return on their investment. They do have voting rights and can
impact managerial decisions at any point of time. It is essential for the business unit to
understand shareholders' requirements (Ehrhardt and Brigham, 2016.). Metro products
Ltd. needs to focus on creating shareholders' wealth. It is in the form of dividends and
capital appreciation that the business unit is able to generate monetary benefit for its
shareholders. The organization should formulate its strategy in accordance with
shareholders' expectations. It is through satisfaction of shareholders' interest that the
business unit is able to sustain its growth in ling run.
 Employees: It is seen that employees form an important part of the business
operations. They are interested in the monetary and non-monetary benefits provided
to them. They do provide a concrete support to the production process within Metro
Products Ltd. In the absence of efficient and skilled workforce, the business unit
would not be able to meet customers' deliveries on time. It is therefore essential for
the organization to ensure satisfaction of employees at all the levels.
 Government: As a country's government, they are interested in overall welfare of the
economy. In order to meet their expectations, Metro Product Ltd. needs to pay of their
taxes on time. Further, the organization should support development of economy at
whole

. It is through creation of jobs, abidance by legal obligations that the organization is
able to meet government's expectations. The organization's contribution to overall
economic development is counted for and repaid in long term.
 Suppliers: The group of suppliers are interested in testing credit worthiness of
business unit. It is essential for the organization to make timely payments to them.
Further, no long term credits should be availed since they create a burden of
repayment. The business unit needs to ensure that orders are made well in advance so
as to avoid difficulties on part of suppliers. Further, a long-term and sound
relationship should be maintained with them so as to achieve business goals.
It is seen that the distinct set of stakeholders are interested in business operations. The
organization should ensure that interest of all stakeholders is met. Further, an adequate level
of transparency is maintained so as to inculcate sense of belongingness among them.
CONCLUSION
It can be concluded from the above assignment that financial resources are regarded
as important resources in the business enterprise. This project emphasises on financial
statements prepared by Metro Products Ltd. The stakeholder’s analysis will be conducted in
order to determine the needs and the expectations of various stakeholders of the business.

REFERENCES
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