Managerial Finance Assignment Solution

   

Added on  2020-10-23

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``Managerial Finance
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``ContentsINTRODUCTION...........................................................................................................................3QUESTION 1...................................................................................................................................3a). CALUALTION OF RATIOS................................................................................................3b). INTERPREATAION OF RATIOS.......................................................................................5c). IMPACT OF NON FINACIAL INFORMATION................................................................5QUESTION 2...................................................................................................................................6A. Uses of budget........................................................................................................................6B. Difference between fix and flexible budgeting......................................................................7C. Difference between management and financial accounting...................................................8QUESTION 4...................................................................................................................................9a). CALCLUATION OF PAYBACK PERIOD..........................................................................9b). CALCULATION OF ACCOUNITNG RATE OF RETURN...............................................9c). RECOMMENDATION OF PROJECT.................................................................................9d). SOURCES OF FINANCE AVAILABLE...........................................................................10CONCLUSION..............................................................................................................................10REFRENCES.................................................................................................................................11
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``INTRODUCTIONManagerial finance is a field of finance which concern itself with the significance of financetechnique in managerial aspects (Gitman, Juchau and Flanagan, 2015). It is an approach whichis interdisciplinary which borrows from both corporate finance and managerial accounting. Ithelps the managers to take necessary decisions for the company to take competitive advantageover its competitors and improve its financial positions. It provides an aid to monitoring andimplementation of business strategies which help mangers to achieve its business objectives. Thefollowing report contains the financial ratios which help mangers to take decisions. This reportalso consists of the various budgeting techniques used by mangers to prepare the budgets. It alsoexplains the difference between financial accounting and management accounting. This reportsalso contains the details of the various financing methods and different sources of financeavailable with the companies.QUESTION 1a). CALUALTION OF RATIOSFinancial ratio: Financial ratio are the key indicators of the various financialperformance of the company which are usually derived from the company’s three statementswhich includes balance sheets, income statements and cash flow statements (Coles, Lemmon andMeschke, 2012). These ratios are used by the top level management to analyse company’sliquidity, profitability and its financial stability. Following are some financial ratios which helpcompanies to check their stability:Gross profit margin: It is a metric which is used by the company to assess its business model and financial health by showing the total amount of money which is earned by the company sales after deducting the cost which a company incurred in manufacturing that product.Net profit margin: Net profit margin is the profit which is generated by company’s operations. It shows the percentage of revenue generated by its operations after adjusting its both direct and indirect expenses. It is also called considered as a company’s bottom line. It is usually determined in the percentage form or decimal.3
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``Current ratio: The current ratio is a liquidity ratio which helps mangers to find out the company’s ability to pay off its short term liabilities which are due within the one year. It also tells the investors and analyses that how a company can maximize its current assets to satisfy their current liabilities.Quick ratio: It is an indicator used by the companies to find out the company’s shortterm liquidity position (Park and Jang, 2014). It helps managers to measure thecompany’s ability to meet their short term obligations which they can meet with its mostof its liquid assets. It indicates the company’s ability to quickly convert its assets intocash.Gearing ratio (Debt/equity): Gearing Ratio is considered as a broad category of financial ratios. Accountants, investors, lenders and company executive uses the gearing ratios in order to measure the relation between the debts and the owner’s equity. Return on capital employed: ROC is a financial ratio which measures the company’s profitability and its efficiency to which company uses its capital. Return on Capital Employed is a ratio which measures that how well a company can generate profit from itscapital which is employed by the business owners. It is considered as an important ratio in determining the profitability and is also used by investors while screening for suitable investments.Inventory turnover: Inventory turnover is a ratio which shows the company that in a given period of time how many times a company has replaced its inventory and sold its goods. It also helps the company to find out the average time required by a company to sell its inventory (Parkinson, 2012). It helps mangers to meaning full decisions on manufacturing, purchasing, marketing and pricing its new inventory.Asset turnover: This is a ratio which helps companies to find out the value of company’ssales which is directly relative to the value of its assets. Assets turnover is used as aefficiency indicators by company for the assets which is used to generate revenue.Following are the calculation of all the ratios of a H & M20162017Gross profit margin= Gross profit/revenue60.30%61.30%4
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