Significance of Accounting and Finance Functions in Panini Ltd

This report examines the significance of accounting and finance functions, roles, and responsibilities inside a company, and discusses available sources of finance for expansion purpose. It also includes the calculation of financial ratios and the reasons for changes in financial ratios observed during the past two years for Panini Ltd.

PROJECT

Table of Contents
INTRODUCTION.......................................................................................................................3
TASK........................................................................................................................................3
1.1 Examining the significance of accounting and finance functions, roles, and responsibilities inside
a company.........................................................................................................................................3
1.2 Discuss available sources of finance for expansion purpose.........................................................5
TASK 2:....................................................................................................................................6
A. Calculation of ratios :.....................................................................................................................6
B) Give causes for the changes in financial ratios that are being observed during the past two years:
...........................................................................................................................................................8
CONCLUSION.........................................................................................................................10
REFERENCES..........................................................................................................................12

INTRODUCTION
1. The file prepared considers working and operating of Panini ltd, that will help in the
process of decision making. There are various financial instruments that evaluate the
advantages and disadvantages of certain financial related decisions. Different types of
business decisions, such as economics, assets allocating and distribution of dividend will
serve as guidance for the near future in decreasing costs (Al Nasser, 2021). The company
that is selected for the file manufactures bread for retailers in UK. Quantitive ratios are
used with the financial data of the company to measure its growth and stability in the
market. The usage of financial ratios is an effective way that helps in process of decision
making, forecasting and allocating of budgets.
TASK
1.1 Examining the significance of accounting, financial functions and responsibilities of a
company :
Accounting: It is the process of recording financial proceedings along with categorization,
acquisition, sum-up and presenting results in the analysis reports. Accountancy refers to the
process of collecting and presentation of financial that that is easy, effective and fast to read
which is useful for the shareholders and some other related people. The major aim of accounting
is the recording and reporting of business related transaction, cash flow and commercial
preceding (Atkins and Macpherson, 2022).
Accounting functions - There is a variety of operations that might prove to be beneficial for
Panini ltd. Some of these are discussed in the following :
 Analysation of financial transactions: it is important for the company to record
financial operations properly so that it can be easily understood by the shareholders
and managing people. The data is useful in creating financial statements that include
P&L account, trial balance and balance sheet.
 Measuring performance: The subject of accounting is beneficial and essential for the
chosen company in managing the business operations. Through its ratios and
stamens the Panini ltd would also achieve a competitive advantage.
Accounting role: The roles that a company is serving must be understandable so that the
operations are done efficiently and effectively. Some of these are discussed in the following :

Keeping a well maintained financial record : It maintains the expenditures that the company
incur and the income earned by it .It would assist Panini in identifying the factors that lead to the
generation of revenue and income by related functions, as well as which activities must be
regulated in order to reduce expenditures incurred throughout the management and operation of
the firm (Baker and et.al., 2018).
 Assists in well decision making: Accounting aids in efficient and positive decision-
making by enabling Panini Ltd to choose the best possible approaches possible. It helps
in determining the wants and needs of a company that can help it in achieving growth
over a period of time.
Duties of Accounting:
 Assumption of what may happen in the near future – It works in analysing the areas and
factors that can provide risks and threat for the company that can have a negative effect
on it.
 Forming and execution of the budgets – It is the duty of accounts to form budget by
considering its financial factors. It also helps in analysing the sources in which the firm
can invest their money.
Finance: Finance plays an important role in business operations. It travels throughout all the
areas of a business. It helps to determine the amount and source of money which can provide
beneficiary and best results to the firm when money is invested in them. (Blix and et.al., 2021).
Role of finance:
 Planning of funds in particular ways : The funds are one of the most important asset of
company. It is the role of finance to acquire these funds and utilize them in such a way
that they provide maximum returns.
 Rising of funds: Finance concentrate on the areas which would impart the generations of
money and incomes which will be helpful in relative firm’s operations.
Role of finance:
 Handling external functions of business: It works in analysing the external sources that
have impact on the company. These external sources can not be fully avoid but can be
minimised through efficient planning and its implementation.

 Applying decisions being prearranged: When a firm builds and execute strategies, it need
funds to figure out the amount of money it require to carry out related functions in
meanwhile, that helps in delivering excellent performance.
Duties of finance:
Providing direction in creation of strategies: It is the responsibility of finance to ensure that
strategies and policies are planned and developed in such a way that provide I with all the
requirement and demands. It also aids in identifying the policy which is best for a particular
business (Brodmann, Danso and Ngo, 2021).
 Forecasting tax and related events well in period: Taxation has a significant impact on the
brand goodwill and competition in the market. It is vital to recognize that the company
can sustain in a similar environment.
1.2 Discuss available sources of finance for expansion purpose.
There are numerous methods that organisations can use to generate revenue in order to
expand and grow business-related operations and activities. Panini ltd has only objective is
to extend its operations on an international level and on a larger scale. It would also help in
the development and operation of the firm throughout time. The following are some tools
that could be useful :
 Equity: Such shares assist in connecting people of the environment who wants to be
stakeholders of the company and exercise the powers afforded to them. It aids the
company in generating money which can be invested in related places for better
operating and functioning.
Retained revenues : Retained earnings are another options to carry out finance-related activities,
as they can be utilised in emergency to help in the growth. It is also considered as one of the best
method for producing chances because it does not include any chances of risk (Dong, Xu and
McIver, 2020).
 Debts: It is considered as a way for obtaining funds for investment purposes, such
as bonds, bank and business institution borrowings. It's the money that must be paid
back in a period of time and with the amount of interest agreed. It is a source for
fundings.

TASK 2 :
A. Calculation of ratios :
1. GP (Gross Profit) margin – It is the amount of income that surpass the cost of
goods sold (COGS) (Goldberg, Graham and Ha, 2020).
Gross profit/ Net sales * 100
2018: 3500/ 10000 * 100 = 35%
2019: 3265/ 11500 * 100 = 28.39%
2. OP (Operating profit) margin: The operating margin focuses on measuring the
effectiveness of a company to make profit through its main activities.
Operating profit/ Net sales * 100
2018: 2765/ 10000* 100 = 27.65%
2019: 2305/ 11500* 100 = 20.04%
3. Return on capital employed: ROCE is a financial ratio that measures the
amount of return earned on the capital employed in the business.
Earnings before interest and tax/ Share equity + Long term liabilities *
100
2018: 2765/ 6755 * 100 = 40.93%
2019: 2305/ 8111* 100 = 28.41%
4. Current Ratio (CR) : The current ratio is a calculation that analyses current
assets and liabilities of a company (Hon, Moslehpour and Woo, 2021). It is
the amount of money that will be accumulated in a year or less divided by the
amount of liabilities that should be paid in less then a year.
Current assets / Current liabilities
2018: 1175/ 970 = 1.211: 1
2019: 2110/ 512 = 4.12: 1
5. Quick Ratio: The quick ratio assesses a company's ability to meet financial
liabilities without selling goods or obtaining additional funds.

Current assets ; Inventory/Current liabilities
2018 - 1175 : 350/ 970 = 0.85: 1
2019 - 2110 : 675/ 512 = 2.80: 1
6. Inventory turnover days: Inventory turnover refers to the period of time in
which a company accumulates its sold products / inventory. (Hutchinson and
Bernacchi, 2019).
Inventory / Cost of goods sold * 365
2018: 350 / 6500 * 365 = 19.65 days
2019: 674 / 8235 * 365 = 29.87 days
7. Receivable collection period (RCP) : It is the length of time a company takes
to collect its amount of receivables. Organisations use the receivable collection
period to assure that they have enough money to pay the financial obligations.
Average account receivables / Net credit sales * 365 days
2018: 760 / 10000* 365 = 27.74 Days
2019: 1340 / 11500* 365 = 42.53 Days
8. Payable payment period (PPP) : It is the calculation of the number of days a
organisation needs to pay its invoices. Business entities that have a high
payable payment time can delay their payments and use additional funds for
doing short-term investments or to increase their amount of working capital.
(Shi and Ding, 2022).
Average account payable / Cost of goods sold * 365 days
2018: 920 / 6500 * 365 = 51.661 Days
2019: 495 / 8235 * 365 = 6.010 Days
B) Give causes for the changes in financial ratios that are being observed during the past two
years:
(i) Reasons behind lowering gross profit margins:
 Increasing expenses selling expenses of Panini ltd Company,
resulting in a decrease in the related firm's gross profit margin.

 Other cause for decline may be related to the chosen Company’s
present pricing policies.
 Reducing prices related to the price of goods and services without
any decrement in the price of goods offered by the business can be
a cause for the firm's declining margin of profit.
(ii) Reasons behind lowering operating profit margin:
 It has been observed that the company is experiencing a rise in the
amount and scale of expenses incurred in operational operations,
resulting in a decrease in profit margin.
 Decrease in sales volume is also a reason in the decrement of
company's sales performance. In the case of operating profit, this
results in reduction in the margin.
(iii) Reasons behind lowering Return on capital employed:
 Increasing liabilities is an issue that represents a declining Return
On Capital (ROC) employed is determined to be increment in the
company's debt and liability over time. It is also recommended that
the company analyse issues that affect business efficiency and
effectiveness.
 Capital resources are being used inefficiently and ineffectively. As
a result, the return on capital (ROC) employed is reduced. It is also
vital for businesses to find the ways to allocate finite resources for
potential options and locations in order to achieve desired
outcomes.
(iv) Reasons for an increase in current ratio status over a two-year period:
 An increase in current ratio can be related to the organization's
receivables and payables being correctly handled for more than
two years. It would also help companies in growing and
expanding, as well as developing a positive brand image.
 The increasing current ratio must be due to the company's debts
and liabilities being written off and settled off on time. As a result,
it would be a favourable position for the company.

(v) Reasons for increasing a company's quick ratio:
 Effective managing of stock available with the organization for a
specific period of time is one of the reasons for increasing quick
ratio in Panini ltd. Stock is required for the processing of raw
materials into final goods,
 Increasing sales revenue: An increase in sales results in an increase
in the business's quick ratio that may be related to more sales being
taped and observed in the respective enterprise. Each and every
firm must concentrate on actions that will aid in increasing the
related company's profit margin. Improving quantity or quality
would aid in increasing user interest with the company, which is
critical in the long run. (vi) Reasons after rising inventory turnover
days:
 It has been noticed that inventory turnover days have increased,
which might be related to better management of production-related
activities and operations.
 It is recommended that the corporation reduce or eliminate the use
and adoption of old or obsolete machinery and inventory, if ever
possible. It would help in decreasing the company's unnecessary
costs and expenses.
 It is also analysed that the expenditures and risks involved in the
business must be minimised. It promote the increase in inventory
turnover days.
(vii) Reasons against increasing the receivables collection period:
 Credit policy mismanagement is reason for the observed rising
receivable growth time is the lack of management of policies
formulated by companies in the market competition.
 Declining efforts in money collection is one other factor which can
be blamed for longer receivable collection period is the lack of
effort put forward in sorting and collecting money.
(viii) Reasons against decreasing the payable payment period:

 Weak financial conditions are main causes for the lowering
payable payment time and bad financial situations during a two-
year period. As a result, the amount of payable payment is
recorded as falling. It’s been reported that when payments made to
vendors are late or delayed, this can result to situations like
declining payable payment periods.
CONCLUSION
From the above report it is concluded that what related measure must be consider for
estimating current and future results of Panini ltd. This report considered the problems and
risk that has been faced by a firm in order to maintain its position in the market. Function,
roles and responsibilities are also discussed in above report to provide support for Panini ltd.
It help in determining the reason behind the changes between different companies. This file
provides the analysation of performance of the company in the market.

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