EduQual Diploma in Business Management: Strategic Financial Management

EduQual Diploma in Business
Management (SCQF Level 11)
STRATEGIC FINANCIAL
MANAGEMENT
TABLE OF CONTENT

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INTRODUCTION...................................................................................................................................1
TASK 1....................................................................................................................................................1
Background of company......................................................................................................................1
Evaluation of the impact of three key resource decisions assessing the internal as well as external
performance of an organisation and also evaluate its risks along with the tools and techniques........2
Analyze the financial statements of an organization to determine the financial viability...................4
Various strategies in monitoring and evaluating the organization’s intangible and tangible resources
of the organization.............................................................................................................................10
Importance of costs in pricing strategies and recommend improvements to Sainsbury’s existing
costing system. Explanation of various kinds of costing and selection of suitable costing system. 11
Task 2.....................................................................................................................................................11
Evaluation of investment appraisal techniques and alternative source of finance available to
business..............................................................................................................................................11
Application of investment appraisal techniques................................................................................13
Explanation of risk related to expansion in international market......................................................16
CONCLUSION......................................................................................................................................18
REFERENCES......................................................................................................................................19

INTRODUCTION
The present study is bifurcated into two parts. The first part of the study is about the
evaluation of the monetary and non-monetary performance of the selected company for this
study. Sainsbury has been selected for this assignment, and its financial statements are
evaluated under this study to determine its overall performance. This study emphasizes on
various concepts such as examining different kinds of resources, assessing the financial
information from the financial statements, identifying tangible and intangible resource and
focusing on the costing system used by an entity. Further second part of the study is based on
an evaluation of investment appraisal techniques that can be used by the organisation while
making an investment in the international market. Along with this different technique for risk
recording, measuring and monitoring will be explained.
TASK 1
Background of company
Sainsbury is a public limited company which is listed under FTSE 100 index which is a
supermarket which provides all the grocery stuff along with all other stuff under a single roof.
The foundation of this company started in the year 1869 in the centre of the United Kingdom
is London. John James is a founder of this company as a single supermarket which now
transformed into a long chain of supermarkets. It is ranked as a second largest owner of a
supermarket in the UK after Tesco (Sainsbury, 2018). Tesco is the biggest competitor of this
company that provides quality oriented services n satisfying all its customers. The increasing
competition imposes by Tesco will increase the overall difficulty of Sainsbury in modifying
its business practices to steal the attention of most of its buyers.
This company is listed on the London stock exchange to enjoy the benefits of the external
market due to fluctuations takes places in the market volatility. Entities who maintain its
position in the highly fluctuating market will able to beat all its market rivals easily
(Asgharian, Christiansen and Hou, 2018). Increasing or decreasing changes takes places in
the market will reflect the position of an entity to guide its investors before investing in
Sainsbury when various competitive options available in the market that generates a higher
return to the investor.
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Evaluation of the impact of three key resource decisions assessing the internal as well as the
external performance of an organisation and also evaluate its risks along with the tools and
techniques.
There are three kinds of resources required in an entity as these three resources act as a basic
pillar in bearing the load of the overall business. A business is a mixture of various elements
which includes the generation of the end products by processing all the raw materials feeds
into the system. Sainsbury is a supermarket retailer which provides both raw as well as
finished products under its single roof to satisfy all its customer’s visits in its supermarket
which require all these three resources such as human resources, financial resources, and the
information resources (Cooke, 2018). Human resources are one of the important types of
resources required by an entity so as by Sainsbury in presenting all its products in front of its
customers as meeting the needs of its customers is the basic motive of the Sainsbury as it
exists in a service industry.
Human resource management system is a separate concept which explains the selection of a
candidate as per the existing requirement of the firm. A human resource manager appointed
by every organization is to hire employees for an entity after judging the eligibility of a
candidate as according to the organization culture and its requirements (Cascio, 2018).
Human resource manager bridges the communication between employee and employer by
conveying all the information announced by an employer which is essential in retaining all
the personnel with the organization for a longer time (Ansong and et al., 2018). Just in the
case of the Sainsbury, various kinds of employees required by an entity such as store
supervisors for taking care about the products stored in warehouses, billing department for
handling the daily selling of the products in a supermarket by all the customers, customer
service cell deal with the queries and the suggestions of its existing or potential customers by
announcing new offers to attract the attention of its users towards the newly launched
products (Agnihotri and Agnihotri, 2018). All these kinds of employees are required by
Sainsbury for its business operation as an entity is not run by a single person as this requires
the support of all the users such as internal as well as the external users associated directly or
indirectly with the company in inducing the performance of the firm (Han, Chen and Li,
2018).
Finance is considered as the heart of the business without which the existence of the same is
not possible just like an individual can’t survive without its heart (Sull, Turconi, Sull and
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Yoder, 2018). The heart is considered as the main component behind the life of a person just
like in the case of a business where an enterprise requires initial capital to start its own
business as operating of an entity requires funds to meet the expenses incurred in the business
lifecycle. Current business is run on credit which requires working capital to meet the routine
daily expenses of a business concern which requires the fund to meet the uncertain
difficulties takes places in an enterprise (Banerjee, Sing, Chowdhury and Anwar, 2018).
There are three kinds of financial resources used by an individual in meeting its monetary
requirements such as short term, medium term, and long-term financial resources. Sainsbury
can use variety of financial resources according to its requirements as they can take bank loan
in which they have to pay principal along with specific percentage of interest for the finance
taken from the lenders Disadvantage of the bank loan is that an individual has to give
collateral security before taking loan and also to pay higher amount of interest on the loan
taken by an entity. For the new start-up entity, existing investors provide venture capital in
the form of seed capital to start the business by an entrepreneur on its own by utilizing its
skills and knowledge. Sainsbury can issue equity shares and can take the help of debentures
for meeting the long-term requirement of an entity. Several benefits of equity shares and the
debentures will guide Sainsbury to consider the most desirable approach which meets all its
needs and the expectations (Aviso and et al., 2018). Debenture can use by an entity to raise
the fund where an entity needs to pay the principal amount taken by a business from its
lenders along with the coupon interest rate attached with the debentures issued by a business
as this will reflect as a liability in the financial statements of the company. On another hand,
equity shares raised by the company will show as equity in its financial statements as the
equity shareholders will become the owners of the company and also possess a share in the
firm by getting voting rights in accordance with the amount share held in an entity.
The last type of resource which also plays a significant role in an entity is the information
resources which an entity required before crafting any strategy for generating fruitful results
for an entity. An entity requires information about it existing performance by assessing its
overall financial performance with the help of the preparation of the financial statements and
all the financial ratios (Su and Hildreth, 2018). Important information used by the firm about
the existing or the potential market competition which helps in forming a novel and unique
strategies to curb the current competition and also to attract the customers towards its
products (Ghobakhloo and Azar, 2018). Sainsbury tries to search the information about its
competitors such as Tesco and Adi about its existing product’s prices and then create its
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product catalogue to bring the attention of loss of its buyers. A marketing manager of
Sainsbury will seek information about the population of the area in which the firm has
located its supermarket to know the interest about the customers to offer quality oriented
services to all the users.
As a retailer, Sainsbury will use budgeting method for the planning and the resource
allocation of all these resources mentioned above. Identifying and selecting of the resource in
an entity is not enough as allocation on the same play a significant role as this helps on
accomplishing all the goals and the objectives of an entity within a short span of time. An
entity prepares the budget to keep track of all its resources used in a business. The expenses
and the income earned by Sainsbury can track by preparing budgets to know the ability of an
enterprise in producing the overall results (Thanuskodi and Kalyani, 2018). Different kinds of
budgets prepared by an entity such as sales, purchases, expenses, master budget, cash budget
in fulfilling various needs and the expectations of its business. The results of the budgets are
compared with the standard criteria’s develops by the firm to make the corrective action
when the actual result is less than the standard returns and also to know about the deficiency
incurred in a business.
It is essential to know the consequences of meeting the strategic objectives of business due to
inadequate resources available with an enterprise. When Sainsbury requires human resources
for the vacant post in the firm will affect the firm badly as the strategic aims, and the
objectives of the firm will not get achieved with on a stipulated deadline as the firm did not
find the suitable candidate according to the current requirement (Kuroki, Hirose and
Motokawa, 2018). Due to inadequate resources identified by the firm will show its inability
in searching for different candidates as their motive is to select the best suitable candidate for
the current enterprise (Gupta and et al., 2018). This action will bring down the image of
Sainsbury in the external market as investors will not invest in an enterprise that is not able to
meet its goals as compared to all its rivals existing in a similar line of business.
Analyze the financial statements of an organization to determine the financial viability
Assessing of the financial information will help in determining the actual picture of
Sainsbury by presenting the financial position of an entity as against to its competitors in the
retail industry. It is essential to know the position of an entity in the UK retail industry before
adopting any opportunity by testing the calibre of the firm to know its overall importance. A
researcher will find different sources of collecting monetary information reflecting the
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