Financial Accounting & Management Analysis

This assignment requires a comprehensive analysis of financial accounting aspects of Metro Products Ltd. It delves into the differences between management and financial accounting, highlighting the significance of financial statements for evaluating the company's monetary health and performance. The report analyzes cash flow statements, identifies profit generation and growth trends, and examines how Metro Products Ltd. can leverage these insights for strategic decision-making regarding future expansion while considering stakeholder interests.

Managing Financial
Resources

Table of Contents
INTRODUCTION......................................................................................................................3
TASK.........................................................................................................................................4
1.1 Differentiating legal requirements in the context of limited company and a non-limited
company.................................................................................................................................4
1.2 Explaining the importance of financial statements for business organization.................4
1.3 (a). Identifying various stakeholders of Metro Ltd..........................................................6
b. Analyzing the influence of stakeholders on the options available to Metro Products Ltd
for expansion..........................................................................................................................7
CONCLUSION..........................................................................................................................9
REFERENCES.........................................................................................................................10

INTRODUCTION
In the business organization, management of financial resources is highly required to
implement the project plans or activities. Moreover, now firm places more emphasis on
expanding the business operations and functions. For this purpose, business organization
requires enough funds for purchasing equipments and targeting more customers. Hence, by
making proper management and monitoring of cash flows company can control on
unnecessary spending. Continuous monitoring or review helps in assessing the deviations that
take place in financials and thereby helps in taking corrective action. The present report is
based on Metro Products Ltd which is one the leading British manufacturing company of UK
in the sector of auto accessories. It offers or supplies high quality accessories through the
means of retail including Halford, Agros, A1 Motor and Motorworld outlet. The main focus
on such study is to highlight the legal requirements which are associated with both limited
and non-limited companies. Besides this, it will provide understanding about the stakeholders
of Metro’s stakeholders and their influences.
TASK
1.1 Differentiating legal requirements in the context of limited company and a non-limited
company
There is a significant differences take place between the limited and non-ltd business
organizations in legal terms. In accordance with the given case situation, Metro Product ltd is
the private limited organization which was established by an entrepreneur. On the other side,
companies in 51% stake held by government are known as public or non-Ltd firm. Hence,
legal aspects which differentiate both the companies are as follows:
Shareholders: Ltd companies can start venture with 2 people, whereas in the case of
public firm 50 shareholders are must.
Legal formalities: Non-limited or public business unit has to follow specific rules and
process. Hence, public firms are obliged to hold regular meeting and file report to registrar on
regular basis (Lin and et.al., 2016). On the basis of this aspect, it can be stated that public unit
has to follow strict norms and regulations. Unlike public companies, Metro Products Ltd is
free from such kind of obligations. Along with this, Metro Products Ltd must have 2 directors

who will take strategic decisions regarding the business operations. On the contrary to this,
in the case of non-limited companies must have 3 directors. Along with this, non-limited
companies are obliged to prepare and publish financial statements at the end of accounting
year. Further, it is compulsory for the firm to conduct audit of accounts at the end of
accounting year. In contrast to this, ltd companies like Metro Product Ltd are not obliged to
do the same in accordance with public firm. However, Metro Products Ltd prepares all the
statements with the aim to make evaluation of financial health and performance. This in turn
enables them to develop sound framework for the near future (Zsidisin, 2016). Further, with
the aim to provide information to the investors and for developing faith among them Metro
Products Ltd publishes audited financial statements at the end of accounting year.
Difference between management and financial accounts can be presented in the following
manner:
Objective: Management accounting or accounts provide high level of assistance to
the firm in setting and evaluating goals. On the other side, by practicing financial accounting
system business unit can assess its financial condition in an effectual way (Finkler and et.al.,
2016). Hence, by considering such aspect firm can develop sound financial framework.
Focus: Managerial accounting places more emphasis on evaluating current
performance and thereby helps in making proper forecast about near future (Management v/s
financial accounting, 2017). Hence, by considering the outcome or variance analysis Metro
Products Ltd can frame suitable budget. In comparison to this, financial accounting places
emphasis on evaluating history and thereby assists in preparing reporting for the current
quarter or year.
Rules and regulations: Managerial accounting reports are not the subject of legal
requirements. Hence, rules and regulations are not specific, so they are prepared and followed
on the basis of the instructions of higher management. In comparison to this, financial
accounts are prepared by Metro Products Ltd in accordance with GAAP and IFRS.
1.2 Explaining the importance of financial statements for business organization
On the basis of cited case situation, Metro Products Ltd is planning to expand its
business operations and functions with the motive to enhance profit margin. In this regard, by
making evaluation of financial statements firm can ass its current financial position and
performance in the following way:

 Income statement: This statement of firm provides deeper insight about the income
and expenses. Hence, by making evaluation of income statement Metro Products Ltd
can identify the profit level generated during the year over expenses. This in turn also
offers opportunity to business unit to identify the growth takes place in sales revenue.
By this, firm can identify the extent to which customers have positive attitude
regarding the auto accessories offered by it (Martin, 2016). In addition to this,
profitability statement offers opportunity to firm to analyze the level to which
expenses are increased as compared to before years. Income side of profitability
statements renders information about sales revenue, gross and net profit as well as
other income. On the other hand, expenses include both indirect and direct which
business unit incurs for the smooth functioning of business operations and functions.
Hence, income statement also enables firm to conduct profitability analysis through
the means of ratios. In this way, by evaluating GP and NP margin, expense %
business entity can take suitable action for further improvement.
 Cash flow statement: Operating, investing and financing activities are the main
elements of cash flow statement that furnishes information about cash inflow or
outflow. Such statement and its elements are highly significant which in turn helps
Metro Products Ltd in making suitable framework for the near future. Operating profit
section entails profit earned by firm in against to expenses (Nieman and Fouché,
2016). On the other side, investing activities contain information regarding purchasing
and selling of fixed assets. On the contrary to this, financing activities entails issuance
and redemption of shares as well as debentures. Hence, cash flow statement is highly
significant which in turn helps company in identifying the extent to which it has funds
for expansion purpose. In this way, by evaluating cash flow statement Metro Products
Ltd can assess the funds which it needs to raise from other sources. Further, such
statement also enables firm to identify the area of expense which requires high
control.
 Statement of financial position: Balance sheet summarizes information regarding
assets and liabilities. Metro Products Ltd prepares such statement at the end of
accounting year with the aim to get information about liquidity and solvency position
or aspect (Picker and et.al., 2016). Assets side of balance sheet includes both fixed
(land & building, plant & machinery etc) and current (stock, debtors, cash, prepaid
expenses etc). On the other side, liabilities can be distinguished into three parts such

as shareholders equity, non-current and current obligations (creditors, bank overdraft
etc).
Such statement is highly significant which in turn helps Metro Products Ltd in
assessing the extent to which it has enough current assets for meeting monetary
obligation. Along with this, balance sheet also enables firm to assess profit margin
generated by making use of fixed assets. Further, such statement also helps corporation in
assessing the level of financial structure. Thus, by analyzing debt-equity ratio business
unit can identify the fund which it has generated from debt instruments or equity sources.
Hence, by making evaluation of such aspect higher authorities of Metro Products Ltd can
assess the extent to which it needs to raise fund by taking loan from financial institutions
(Atrill and McLaney, 2016). Hence, statement of financial position analysis provides high
level of assistance to company in making competent framework for upcoming period.
 Changes in equity or retained profit account: Retained profit account entails the
amount of funds which business unit has secured for meeting the contingent situation.
In the present times, each business unit places more emphasis on retaining profit
rather than distributing the whole amount among shareholders. Hence, by making
evaluation of such statement Metro Products Ltd can assess the amount of funds
which is available within the firm for expansion purpose (Perin and et.al., 2016).
Thus, such account helps company in determining the funds which it needs to
generate from other sources.
Hence, by making evaluation of all such aspects it can be stated that income and cash
flow statements as well as balance sheet has high level of importance for Metro Products Ltd.
Thus, financial statement analysis provides high level of assistance to the business unit in
making suitable decision for expansion in relation to the selection of source etc.
1.3 (a). Identifying various stakeholders of Metro Ltd
Cited case situation presents that Metro Products Ltd is offering Stoplock products
and mechanical security devisees that can easily be fitted on steering wheel of car. Such
product offers high level of security to the customers. Hence, by using such equipment Metro
Products Ltd can avoid theft related activities to the significant level. List of major
stakeholders of Metro Products Ltd includes following:

 Investors: Shareholders are the main stakeholders of business organizations who are
highly concerned with the financial health and performance of firm. Moreover, in the
business units, shareholders are considered as an owner to the extent of funds invested
by them. With the motive to generate high return investors take decision in relation to
investing money in the firm’s venture.
 Customers: In the competitive business environment, firm can attain success only
when it has sound customer base. Thus, it is the accountability of Metro Products Ltd
to provide customers with the products which in turn satisfies their need to a great
extent.
 Employees: Human resources are the one who plays a vital role in manufacturing auto
accessories and delivering quality products to the customers. Thus, it can be stated
that company needs to frame strategies by considering the expectation level of
personnel.
 General public: Business unit has responsibility towards the general public in relation
to the environmental aspects (Ndungo, Tobias and Florence, 2016). On the basis of
this aspect, Metro Product Ltd is required to perform business activities and
operations in an eco-friendly way.
 Suppliers: Company also owes responsibility towards the suppliers in relation to
making payment on time. Suppliers are the major stakeholders because they are the
one who supplies raw material to the firm. Hence, for the smooth functioning of
business operations and function Metro Products Ltd is required to build effective
relationship with suppliers.
 Financial institutions: It is also the main stakeholders because for meeting monetary
needs and requirements business unit raises fund from monetary institutions. Thus,
financial or banking institutions are the one which are highly concerned with the
monetary performance as well as ability of firm.
 Outsourcing firm: Given case situation entails that business unit is planning to
outsource services from others. From getting high economies of scale and making
control on cost level Metro Products Ltd has taken decision in relation to taking
services from other firm which will manufacture Stoplock. Hence, outsourcing firm is
another main potential stakeholder of firm.
b. Analyzing the influence of stakeholders on the options available to Metro Products Ltd for
expansion

From assessment, it has been identified that interest level of stakeholders in the firm’s
operations closely influences the strategies of Metro Products Ltd. In this, by taking strategic
action or measure business unit can manage the interest level of stakeholders to the
significant level in the following manner:
In the business unit, investors are highly interested towards the financial health and
performance. Moreover, value addition in the money is the main objectives of investors when
they take decision about investment. Further, investors have voting rights which in turn offers
opportunity to them in relation to participate in the decision making process (Kim and et.al.,
2016). Hence, interference aspect of shareholders closely influences the decision making and
overall framework of Metro Products Ltd. Hence, for managing the shareholder’s interest
business unit is required to provide detailed information to them about expansion plan. In this
way, by maintaining the stakeholder’s interest business unit can execute its plan more
effectively and efficiently.
Along with this, now awareness among the customers towards environmental
sustainability is increased with the very high pace. Hence, customers consider eco-
friendliness at the time of making purchasing decisions. Thus, such aspect has high level of
impact on the manufacturing operations of firm. In this, by assessing and undertaking suitable
ways as well as technologies business unit can reduce the impact of manufacturing operations
on environmental aspects significantly.
Further, suppliers prefer to supply products or services to the business unit which
makes payment on time. If suppliers do not supply raw products on time then it may result
into delay in the manufacturing operation. Thus, by making continuous monitoring of
expenses business unit can maintain effective control on cash (Dobrzykowski, McFadden and
Vonderembse, 2016). This in turn enables firm to ensure proper balance in the stakeholder’s
interest by making payment within the stipulated time frame.
Financial institution also has an impact on the growth and success of business unit.
Moreover, if banking institution does not grant enough loans then firm faces difficulty in the
effective execution of business plan. Thus, by making payment of interest and installments on
time Metro Products Ltd can develop high faith among the monetary institutions.
Outsourcers closely impact the productivity and profitability of firm. Moreover, cost
at which outsources offer products closely impacts the pricing policy of firm. In this regard,

by making contract with service provider business unit can get product at suitable price.
Along with this, firm is responsible to make payment to the concerned firm within suitable
time frame. Hence, by employing budgeting technique firm can exert control on expenses and
thereby would become able to meet obligations on time.
Hence, by adopting all such measures Metro Products Ltd can build faith among the
stakeholders. This in turn helps company in achieving success and meeting the goals and ob
objectives. Moreover, stakeholder’s satisfaction is highly required for building competitive
edge over others.
CONCLUSION
From the above report, it has been concluded that aspects of both management and
financial accounting highly differs. Besides this, it can be revealed from the report that
financial statements are significant which in turn helps in assessing the monetary health and
performance. By making evaluation of final accounts Metro Products Ltd can identify the
profit generated by it and growth level over the years. It can be seen in the report by
evaluating cash flow statement business unit can take suitable decision regarding future
expansion. Further, it has been articulated that Metro Products Ltd help in making suitable
decision by providing information about assets and obligations. It can be seen in the report
that Metro Products Ltd needs to keep in mind the interest level of stakeholders while taking
decision about expansion. By following such aspect business unit can build distinct image in
the mind of stakeholders and thereby attain success.

REFERENCES
Books and Journals
Atrill, P. and McLaney, E., 2016. Financial Accounting for Decision Makers 8th edn.
Pearson Higher Ed.
Dobrzykowski, D. D., McFadden, K. L. and Vonderembse, M. A., 2016. Examining
pathways to safety and financial performance in hospitals: A study of lean in professional
service operations. Journal Of Operations Management. 42. pp.39-51.
Finkler, S. A. and et.al., 2016. Financial management for public, health, and not-for-profit
organizations. CQ Press.
Kim, K. Y. and et.al., 2016. Multisource feedback, human capital, and the financial
performance of organizations. Journal of Applied Psychology. 101(11). p.1569.
Lin, C.H.V. and et.al., 2016. From Customer‐Oriented Strategy to Organizational Financial
Performance: The Role of Human Resource Management and Customer‐Linking
Capability. British Journal of Management. 27(1). pp.21-37.
Martin, L. L., 2016. Financial management for human service administrators. Waveland
Press.
Ndungo, J. M., Tobias, O. and Florence, M., 2016. EFFECT OF CREDIT ACCESS
FUNCTION ON FINANCIAL PERFORMANCE OF SACCOS IN KENYA.
International Journal of Finance and Accounting. 1(2). pp.35-47.
Nieman, G. and Fouché, K., 2016. Developing a regulatory framework for the financial,
management performance and social reporting systems for co-operatives in developing
countries: a case study of South Africa: original research. Acta Commercii. 16(1). pp.1-7.
Perin, M. G. and et.al., 2016. Network Effects on Radical Innovation and Financial
Performance: An Open-mindedness Approach. Brazilian Administration Review. 13(4).
p.1.
Picker, R. and et.al., 2016. Applying international financial reporting standards. John Wiley
& Sons.

Zsidisin, G. A., 2016. Robert J. TrentSupply Chain Financial Management: Best Practices,
Tools, and Applications for Improved Performance2016J. Ross PublishingPlantation, FL.
Online
Management v/s financial accounting. 2017. Online. Available through: <
http://www.diffen.com/difference/Financial_Accounting_vs_Management_Accounting >.
[Accessed on 19th March 2017].