Managing Financial Resources: Ratio Analysis, Costing, Investment Appraisal

Managing Financial
Resources

Table of Contents
INTRODUCTION ..........................................................................................................................3
SCENARIOS 1................................................................................................................................3
How does Ratio Analysis and Sources of Finance improves organisational performance?.......3
SCENARIOS 2................................................................................................................................4
How does Costing and Cost volume profit analysis help in improving performance?...............4
SCENARIOS 3................................................................................................................................6
How does cost of capital and investment appraisal participate in the firm's growth?................6
CONCLUSION ...............................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Management of the financial resources is an essential function of the management which
resolve the complicated problems of finance planning and control (Ait-Laoussine and Gault.,
2019). XYZ PLC is a holding organisation which consist of three different department such as
X-Square Financial LTD, York Manufacturing Ltd and Zebra investment Ltd. Where X-square
Financial LTD is deals in financing innovations and start-ups and York Manufacturing Ltd is
manufacturing washing machines. Understanding ratio analysis and sources of finance help
company to enhance financial performance. This report consider the costing and Cost volume
profit analysis which help company to manage overall cost of the operations. Further, Zebra
Investment Ltd is thinking to set three mutually exclusive projects with the help of investment
appraisal methods and cost of capital tool.
SCENARIOS 1
How does Ratio Analysis and Sources of Finance improves organisational performance?
Ratio analysis is a quantitative method to have an idea about the company's i.e. X Square
Financial LTD. Liquidity, efficiency and the profitability by evaluating the financial statements
like the balance sheet and income statement. Investors and stakeholders use ratio analysis to
examine the financial health of the business by comparing the past and future performances. By
comparing the data, X squares past performance can be seen and the future performance can be
interpreted. The ratios can be calculated easily as all the information needed to calculate is
provided in the financial statements (Amata and et.al., 2022).
The ratio analysis categories can be divided into six categories and they are:
 Liquidity Ratio: It helps in measuring the company's potential to pay off its short term
debts as and when they are due.
 Solvency ratios: They are also called as financial leverage ratios, can be used to compare
a firms debt with its assets, equity and earnings in order to find the company's capability
to survive long term.
 Profitability Ratios: These ratios tells about how much potential does a company have
to generate profits from its everyday operations.
 Efficiency Ratios: They are called as activity ratios, they are used to analyse how well a
company utilizes its assets and liabilities to generate maximum profits.