Faith Limited Financial Performance Analysis

This assignment evaluates the financial performance of Faith Limited by analyzing sales, profit, and cost data using both thematic and statistical methods. It also assesses two proposed investment projects (Project A and Project B) based on their Internal Rate of Return (IRR) and Net Present Value (NPV). The analysis concludes that Faith Limited's financial performance is poor and neither project is financially viable.

BUSINESS DECISION
MAKING

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INTRODUCTION
In the corporate world, it is important to take effective and beneficial business decisions
which help the entrepreneur to earn higher profit. Further, for making effective business
decision, research is to be required as well as there are another tools also available which used by
researcher. In the present report, there is a Faith limited company which is going to launch a new
mobile phone in the London market. For doing research in the present case primary as well as
secondary data are to be used. It shows different statistical tools and techniques which can help
the Faith limited in taking beneficial business decisions. Beside this, the report presents various
graphs and charts on the basis of sales, cost and profit variables. At the last, it focuses on project
management tools such as network diagram as well as different financial tools for taking
effective investment decisions.
TASK 1
1.1 Plan for primary and secondary data collection
Background
In the technological sector, there are various techniques are came up with new and
innovative features which are helpful for the people. In the mobile world, there are numerous
smartphones launched by the firms with the highly innovative features. The present research is
conducted by the scholar to know demand of customers and to analyse that which features are to
be added in the new mobile phone (Schulam and Saria, 2015). In the present research, primary
data are collected from the questionnaire and survey while secondary data are derived from
annual report of Faith limited enterprise.
Rationale
Research is to be conducted for analyzing the needs and wants of consumers. In the
present case, the management of Faith limited doing the research in order to know that the new
smartphone will be beneficial for the local community or not after launching it. Further, due to
this, the firm can know about wide opportunities which are available in the industry of
telecommunication.
Objective of research
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Due to conducting respective research, the main objective is to know the demand of local
community of London in terms of features of smartphones. Further, another objective is that, to
identify that the new mobile phone will be beneficial and useful for the customers or not.
1.2 Presenting survey methodology and sampling frame
Survey methodology
In order to do present research, both qualitative and quantitative techniques are used.
Qualitative research is based on thematic data where questionnaire, interview survey etc. are
considered. Further, another method i.e. quantitative is based on secondary data where different
mathematical and statistical tools are used (Indiveri and Liu, 2015). In the present case for doing
research, questionnaire will be framed and will be distributed among the 50 people of London
using online survey. Feedbacks from the people are also taken through online because it is time
saving method and provide clear data set. Sample of 50 people is derived from local community
of London with help of simple random sampling method. In order collect secondary data, annual
report of Faith limited is used.
Data analysis
For doing the primary research, thematic analysis is used which is appropriate for the
Faith limited. Further, for analysing secondary data various statistical tools or measure of
dispersion are used like as mean, median, mode, standard deviation, correlation etc.
Time frame
With the time frame management of Faith limited, it is able to know that how many days
will be taken for completing the overall research (Anderson and Whitcomb, 2016).
Activities / duration in days 3 5 7 6 9 11 16 18
Analysis of the contextual
Preparation of objectives for
the present research
Making the plan for research
Collection of data from
primary and secondary
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sources
Application of statistical
tools and analysis of the
results
Estimation of budgets
Present the whole report
Budget section
It helps to the Faith limited in order to know total expenses which will be incurred for
conducting the present research.
Total expenditures Amount (in £)
Collecting facts and figures from secondary
sources
500
Collecting facts and figures from primary
sources
900
Stationary expenses 600
Salary to researcher 1200
Fuel expenditures 350
Miscellaneous costs 250
Total Expenditures 3800
1.3 Designing a questionnaire for business problem
Questionnaire
Demographic factors:
Name _______________
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Gender ______________
Age _________________
Que. 1 Do you use smart mobile phone ?
 Yes
 No
Que. 2 How frequently do you consuming mobile phones ?
 Half an hour
 1-2 hours
 4 hours
 more than 4 hours
Que. 3 Which type of features you want in smartphones ?
 Clarity of camera
 RAM storage
 Internal memory
 Model
 Battery
Que. 4 Which factor do you consider while making decision to buy smartphone ?
 Price of phone
 Quality
 Brand name
 RAM and internal memory
Que. 5 Do you agree that, brand has more influence on purchasing decision of smartphone
rather than price factor ?
 Strongly agree
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 Agree
 Neutral
 Disagree
 Strongly disagree
Que. 6 From the below following factors for which element you purchase the smartphone ?
 Calling
 Gaming
 Texting
 Internet surfing
 Any other
Que. 7 Please provide your valuable feedbacks and suggestions
______________________________________________
TASK 2
2.1 Informations in order to make business decisions
In the research analysis there are various kinds of informations are required which helps
to take effective and better business decisions. In the present case for doing research about
launching new mobile there are different statistical tools are used which are mentioned below: Mean: Very first and the most widely used tool or technique is mean which provides
clear and reliable informations to the analyst. This tool is used in both descriptive and
continuous type of data set. It helps to the researcher for derive average value of the
overall data set which is available (Measures of Central Tendency, 2017). In the present
case, the mean value helps to the scholar in order to know average amount which is spent
by the customers for consuming its products and services as well. Mean is the advances
tool among the overall statistical techniques and it can be apply in every type of data set.
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 Median: Another technique of statistical for doing effective research is median which
helpful for the management in order to divide the data and analyse business performance.
If in case the data is too much large and the investigator cannot divide these in small or
two parts then median helps to him. According to this the scholar and entrepreneur easily
able to know that within specific period of time company is performing in which
direction.
 Mode: The above mentioned both the tools derives average value and business
performance but these not shows frequent data (Witten and et.al., 2016). Further, the
mode is a statistical which shows that a particular value of data is how much time occurs
in the overall data set. Most of the analysts are use the respective technique to know that
which one variable is often arises.
2.2 Analysis of data and results
Table 1: Raw data for analysis
Spending
Amount (in £)
Number of consumers
(F)
Middle Point
(X)
Cumulative
Frequency F * X
0-10 6 5 6 30
10-20 7 15 13 105
20-30 9 25 22 225
30-40 12 35 34 420
40-50 13 45 47 585
50-60 16 55 63 880
60-70 14 65 77 910
70-80 11 75 88 825
80-90 7 85 95 595
90-100 5 95 100 475
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Total 100 5050
Table 2: Computation of mean, median and mode
Formula Value
Mean ∑FX/∑F = 5050/100
= £50.5
Median Lower limit + (∑F/2-
Cumulative Frequency of
previous CI)/Frequency * i
50+(50-47)/16*10
= £51.9
Mode lower limit + (F1 – F0) / (2 *
F1 – F0 – F2) * Class Interval
= 50+(13-16)/(2*13-16-14)*10
= £51.8
Analysis Mean: It can be analysed from the above mentioned calculation that at the shop of Faith
limited there is average amount spent of worth £50.5. At the respective amount there are
only 16 customers are purchasing its goods and services. After this number of buyers is
continuously reducing i.e. 14, 11, 7 and 5. Hence, it can be said that the management of
Faith limited needs to offer attractive discounts and offers for increase sales and number
of consumers (Varmuza and Filzmoser, 2016). Median: According to the median tool it can be interpreted that in the business of Faith
limited there are middle value is £51.9. At this level there is 16 customers are spending
on it and consuming products and services offered by the respective entity. Above the
middle level customers are increases from the start. On the other side after this attraction
of buyers is continuously reduced. In order to overcome such situation management
requires to use effective strategies which lead to increase customers and sales as well.
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 Mode: On the basis of value of mode it can be interpreted that there are only 16 number
of users are frequently purchasing goods and services which are offered by the Faith
limited. Moreover, most frequent amount spent by these 16 customers is of worth £51.8
in its firm (Sprent and Smeeton, 2016). The company needs to take corrective action in
order to improve its performance in the industry.
2.3 Analysis of data with help of measures of dispersion
Amount spent
(in £)
Number of
consumers (F)
Middle
Point (X) F*X
Cumulative
Frequency X^2 F*X^2
0-10 6 5 30 6 225 900
10-20 7 15 105 13 225 11025
20-30 9 25 225 22 625 50625
30-40 12 35 420 34 1225 176400
40-50 13 45 585 47 169 342225
50-60 16 55 880 63 3025 774400
60-70 14 65 910 77 4225 828100
70-80 11 75 825 88 5625 680625
80-90 7 85 595 95 7225 354025
90-100 5 95 475 100 9025 225625
Total 100 31594 3443950
Table 3: Computation of Standard deviation
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Formula Value
Range Higher value – lower value = 100-0
= £100
Standard deviation (S) √Variance = ∑Fx2 – ((∑Fx) 2 /
n) / n – 1
= √32211.36
= £179.46
Analysis Range: It is a tool which shows different between the highest as well as lowest value
from the overall amount spent by customers. In the present case difference of highest and
lowest value (100-0) is £100.
 Standard deviation: The tool which shows difference among the actual value and mean
or average value is known as standard deviation. The tool is mostly used by the
researcher in order to analyse gap among the mean as well as final outcome of the data
set. Lower the value of standard deviation lead to reduce performance of the firm such as
Faith limited because it declines difference among both the values (Weise and Chiong,
2015). In the present case standard deviation value is £179.46 which is far from the
average value that is £50.5. It shows that there is higher difference and deviate up to
greater extent from the mean value. It can be said that customers of the business entity
are increases and their level of purchase as well.
2.4 Quartiles, percentiles and correlation coefficient
In order to do research there are different measure of dispersions are helpful for the
scholar in order to do effective analysis. The measures are such as quartile, percentile and
correlation are calculated as below:
Table 4: Computation of quartile
Quartiles Value
Lower Quartile (Q1) = £32.5
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Inter-quartile Range (Q2) (Q3 – Q1) = £36.07
Upper Quartile (Q3) = £68.57
Table 5: Computation of percentile
Percentile Value
25th Percentile = £32.5
50th Percentile = £36.07
75th Percentile = £68.57
Table 6: Correlation between cost and profit
Particulars Cost (in £'000) Profit (in £'000)
Cost (in £'000) 1 0.25
Profit (in £'000) 0.25 1
Table 7: Correlation between sales and profit
Particulars Sales (in £'000) Profit (in £'000)
Sales (in £'000) 1 0.97
Profit (in £'000) 0.97 1
Analysis Quartile: Respective tool is helpful for the researcher for divide whole data set in four
equal parts. There is high degree of similarity among quartile as well as median because
both are divide the data into equally four and two parts respectively (Narain, 2016). Here
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at the lower quartile total amount spent by the customers is worth £32.5 and at the upper
quartile amount is worth £68.67. It shows that the Faith limited is able to attract more
customers and enhance sales as level of quartile increases. Inter-quartile range: Value of inter-quartile range is difference of lower and upper
quartile level. It is denoted by Q2 and formula of the tool is Q3-Q1 (Upper quartile –
lower quartile). In the present case value of Q2 is £36.07 (£68.67 - £32.5) which is not far
from lower quartile.
 Correlation coefficient: As per the respective measure of dispersion the management of
Faith limited is able to know that among two inter related variables which type of
relations is there. It can be denoted by 'r' and value of this is always between -1 to +1.
Negative value means there is very weak relation among both the variables and lower
impact on each other (Hemeimat and et.al., 2016). On the other side positive value shows
that among two data set there is strong and direct relation. From the above table it can be
interpreted that between cost and profit there correlation value is 0.25 which indicate that
it has better relation but not strong as compare to sales and profit.
Furthermore, it can be depicted that among sales and profit there is very strong
relation as it is 0.97. It shows that if one sales will increase with high or low growth rate then
profit will also enhance by high and low rate respectively and vice-versa.
TASK 3
3.1 Producing graphs and conclusions on the basis of information
In the present case various financial data of Faith limited such as sales, profit as well as
cost from the accounting year 2004 to 2014 are shown with help of column graph which are as
follows:
Year Sales Cost Profit
2004 160 110 50
2005 170 110 60
2006 210 130 80
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2007 220 120 100
2008 300 115 185
2009 280 150 130
2010 240 140 100
2011 230 120 110
2012 210 140 70
2013 250 130 120
2014 290 140 150
Column graph
Sales
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
0
50
100
150
200
250
300
350
Illustration 1: Column graph for sales
Analysis
It can be analysed that sales increases from 2004 to 2007 and in 2008 it highly increases
and reaches up to 300. After that sales of Faith limited is consistently decreases up to the FY
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S ales

2012 i.e. 210. It shows that organisation unable to attract more number of customers in such
period of 2008 to 2012 (Hwang and et.al., 2015). Further, in the year 2014 it raises and total
sales is worth of 290 GBP. The consistently fluctuating trend shows that the management of firm
is not better which lead to reduce sales compare than enhance.
Cost
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
0
20
40
60
80
100
120
140
160
Illustration 2: Column graph for cost
Analysis
In terms of cost it can be interpreted that it is raises from 2004 to 2009 from worth 110 to
150 GBP. In the next year i.e. 2012 it reduces and reaches up to 140 and then again fluctuating.
At the end of accounting period 2013 to 2014 cost of production in Faith limited is increases
(Jarvis, 2016). From the overall analysis it can be observed that the management is not having
effective strategies to control over the cost which lead to increase.
Profit
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Cos t

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
0
20
40
60
80
100
120
140
160
180
200
Illustration 3: Column graph for profit
Analysis
It can be visualised from the above graph that, Profit of Faith limited is consistently
enhances from the FY 2004 to 2007. At the end of financial period 2008 profit is suddenly raises
from 100 to 185 due to increasing sales with higher growth rate. Moreover, it highly declines
from the year 2008 to 2012 and reaches up to worth of 70 GBP. The main reason behind
reducing profit by such amount is reducing sales and increasing cost of production. At the end of
FY 2014 profit of Faith limited is 150 GBP and overall level of profit is fluctuating (Salgado,
Guvenen and Bloom, 2015). Hence, the management requires to take corrective actions and
formulate effective strategies to continuously enhance profit and sales.
3.2 Trend line for assessing future business information
The line which shows that respective variable in business is increasing or decreasing and
helps to forecast future performance as well is identified as a trend line. Here such graph of sales
and profit for Faith limited is shown as below:
Trend line on the basis of sales
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Profit

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
0
50
100
150
200
250
300
350
f(x) = 8.4545454545x + 182
Illustration 4: Trend line for Sales
Analysis
From the above trend line it can be analysed that sales of Faith limited has increasing
trend from the accounting period 2004 to 2014. It shows that sales is consistently raises but with
higher growth rate than profit. On the basis of this it can be forecasted that in the future sales of
respective entity will be increase with the higher growth rate in comparison to profit.
Trend line on the basis of profit
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
0
20
40
60
80
100
120
140
160
180
200 f(x) = 5.8636363636x + 69.8181818182
Illustration 5: Trend line for Profit
Analysis
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Sales
Linear (Sales)
Profit
Linear (Profit)

As per the level of profitability trend of the Faith limited is upward from the end of
financial year 2004 to 2014. It can be analysed that profit is continuously increases with the low
growth rate compare than above mentioned variable sales (Gorard, 2015). It can be predicted that
in the upcoming financial years profit will be increasing year by year but with the lower rate of
growth in comparison to the revenue of sales.
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3.3 Business presentation
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3.4 Formal business report
Formal Business Report
To,
Board of director,
Faith Limited,
Date: 17th February 2017
Introduction
In the present business report there are different financial variables are to be presented with help
of column graph as well as trend line. Financial data which are analysed in current report are
such as sales or revenue, cost as well as profit from the end of accounting period 2004 to 2014.
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Data analysis and findings
From the respective financial variables it can be analysed that the Faith limited business entity
is not able to perform well in the industry. As per the sales and profit of the organisation the
highest is in the financial year 2008. On the other side according to the cost the lowest expenses
are in the year 2004 and 2005. It can be said that revenue, expenses and profit are consistently
fluctuating from the FY 2004 to the 2014. The company has to take effective steps in order to
overcome such fluctuations and enhance financial performance in the industry.
Conclusion and Recommendation
It can be concluded from the report that due to fluctuating all the variables year by year
financial performance of the Faith limited is not well. The management is not able to control
over the direct and indirect expenses by which performance hampers. Along with this it not has
better and effective consumer attraction strategies.
It can be recommended that the management needs to take effective steps for enhancing
attraction of customers towards consuming its goods and services. Further, it should allow
various discounts which lead to influence buying decisions of local community of London.
TASK 4
4.1 Information processing tools which are appropriate for business
In the corporate world there are some important information processing tools which are
used by the organisations are described below: Transaction processing system: One of the most important tool is TPS in which the
management able to record daily transactions such as incomes as well as disposals in the
firm. With helps of the respective system the company can generate disposal report and
can know cost of production easily. Management information system: Another tool of information processing is MIS which
helps to the firm for get report of operational and each functional level of the organisation
(What is MIS?, 2017). Here the manager record all the data which are important related
to the firm and then he easily able to run the business in smooth way.
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 Decision support system: According to the DSS information techniques the manager is
very helpful in order to take complex as well as very typical business decisions. Here the
firm able to develop a simulation model for taking an effective business decisions
(MacDonald and Gray, 2016).
4.2 Preparation of project plan and determining critical path
Series No. Description Activity Preceding activity Duration (in days)
1 Physical preparation A - 2
2 Organisational planning B A 5
3 Personal selection C A 30
4 Equipment Installation D B 15
5 Training and Development E D 4
6 System design F E 9
7 Formatting of files G F 9
8 Establishment of standards H C 2
9
Preparation of software
/programs I B 10
10 Testing of programs J D 9
11
Compilation and completion
of documents K G, H, I, J 20
12 Follow Up L K 15
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Illustration 6: Network diagram
Illustration 7: Gantt chart
Analysis
The network diagram and Gantt chart are most widely used project management tools
and techniques which help the project manager up to the greater extent. It shows all the activities
very clearly and in the horizontal way which aids to analyse every activity by the scholar.
Further, by the Newark diagram critical path is to be derived where the management able to start
to or more activities simultaneously (Rossi, 2015). Further the techniques is helpful fot reduce
the overall duration of project completion.
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Critical path of the current project is 2+4+6+9+3+5+7 where duration for completing
overall project will be 5+15+9+10+30+4+9 = 82 days.
4.3 Financial tools for making business decisions
For every business entity, it is necessary to make an investment decision in different
project if it is going to expand the firm. For selecting one project from two or more mutually
exclusive projects, different financial tools are used such as NPV, IRR, ARR, payback period
etc. Among them, for taking better decisions Faith limited considers internal rate of return and
net present value which are calculated below:
Table 8: Computation of IRR
Year Cash flow of Project A Cash flow of Project B
Initial investment -250000 -250000
1 45000 118000
2 70000 10000
3 95000 10000
4 75000 4000
5 10000 10000
Internal rate of return 6.22% -24.48%
Analysis
Internal rate of return helps the management to derive real return of potential investment
after completing the project (Chittenden and Derregia, 2015). From the above calculation it can
be seen that, project A gives positive return i.e. 6.22% and return of project B is negative i.e. -
24.48%. Hence, it can be recommended that the Faith limited should invest in the project A
which provides better return in comparison to another project.
Table 9: Computation of NPV
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Year
Cash flow of
Project A
Discounting
factor @
12%
Present
value of
Project A
Cash flow
of Project
B
Discounting
factor @
12%
Present
value of
Project
B
Initial
investment -250000 -250000
1 45000 0.893 40179 118000 0.893 105357
2 70000 0.797 55804 10000 0.797 7972
3 95000 0.712 67619 10000 0.712 7118
4 75000 0.636 47664 4000 0.636 2542
5 10000 0.567 5674 10000 0.567 5674
Total 216939 128663
Less:
Initial
investment 250000 250000
Net
present
value -33061 -121337
Analysis
Net present value (NPV) is the widely used tool which shows value of initial investment
after completion of the whole project years. It can be analysed from the above table that, both the
projects provides negative return by which loss will be incur in the future (McNeil, Frey and
Embrechts, 2015). NPV of project A and B is -33061 and -121337 respectively, so the
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management should not put money in any of the projects. Further, it needs to focus on another
avenue which is available for making investment.
CONCLUSION
By considering the above carried out project it can be concluded that thematic as well as
statistical both are the most important tool for doing effective research and take better business
decisions. In terms of the statistical tool and financial variables i.e. sales, profit and cost,
business performance of Faith limited is poor in the industry. It can be summarized that as per
the financial tool IRR the project A is better and on the basis of NPV both the projects are
making loss. It can be recommended to Faith limited that it needs to make effective strategies for
attracting more number of customers. Further, it needs to focus on another investment projects
because project one is gives very lower rate of return and future value of both is negative.
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