(Solution) Financial Decision Making - PDF
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Added on 2020-01-28
(Solution) Financial Decision Making - PDF
Added on 2020-01-28
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Financial decision making1
Table of ContentsExecutive summary..............................................................................................................................4TASK1 Business performance analysis................................................................................................41.1 Interpretation of the statement of profit or loss.........................................................................41.2 Statement of financial position..................................................................................................51.3 Statement of cash flows.............................................................................................................61.4 Limitation of financial statements.............................................................................................8Task 2 Investment appraisal analysis ..................................................................................................92.1 Assessing viability of business expansion through investment appraisal techniques................93.2 Advise board of directors about non-monetary factors which company needs to undertake before entering in international market..........................................................................................123.3 Sources of finance available to Elton PLC for business expansion project.............................13CONCLUSION .................................................................................................................................14REFERENCES...................................................................................................................................152
Index of TablesTable 1: Profitability ratios...................................................................................................................5Table 2: Liquidity ratios.......................................................................................................................6Table 3: Solvency and efficiency ratio.................................................................................................6Table 4: Revised ratio analysis.............................................................................................................9Table 5: Investment appraisal techniques...........................................................................................113
EXECUTIVE SUMMARYFinancial decision making is an instrument which helps business in order to take financialdecisions by proper analysing the financial statements. There are different forms of financialstatements such as statement of profit or loss, balance sheet and cash flow statements. Thesesstandard forms of financial statements are prepared by every business in order to stay ahead in thecompetition. Elton PLC has been selected for this project report which is a manufacturer ofcomputer hardware and accessories. This company was based in United kingdom which deals inwide range of products such as all type of digital devices with different kinds of accessories toattract young generation. This project report states the performance analysis of a business bydetermining different ratios and evaluates the financial efficiency of a project using variousinvestment appraisal techniques. Further, it can be inferred from the investment appraisal tools thatcompany will not enjoy high level of financial benefits by expanding business in Asian, African,South eastern and North American. It involves all type of ratios, profitability, liquidity andefficiency ratios. It also helps to identify different sources of finance an individual use in order tosource all its future projects.TASK1 BUSINESS PERFORMANCE ANALYSIS1.1 Interpretation of the statement of profit or lossIt is a document showing all the income and expenses for the company. It shows how betterthe business performs over a certain period (Gamble and Boyle 2014). It states figures of grossprofit and gross loss. Amount of revenue, sales and cost of goods sold are also defined in thatperiod. It has recognised with several of names such as income statement, profit and loss account,profit and loss statement, revenue statement, statement of financial performance, earningsstatement, operating statement and statement of operations. It indicates the correct picture of theprofitability of the business by determining net profit and gross profit of the organisation. It is astatement which helps to evaluate all expenses as well as income in the business in order to improvethe figure of profitability of the firm and able to control the expenses in the business.Profitability ratios- Profitability ratios are class of financial metrics which is used to assess abusiness's ability to generate high amount of earnings as compared to its expenses. It is thattechnique which helps to evaluate the strong position of the business in its external environment interms of profitability (Lakew and Rao 2015). The primary aim of every business owner to generatehigher earning in order to maximize the wealth of the shareholders. The different ratios of theprofitability are gross profit ratios, net profit ratios, return on equity, return on assets, asset turnover4
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