Financial Report: Accounting, Ratio Analysis, and Company Performance

This report delves into financial decision-making processes, highlighting the crucial roles of accounting and finance within organizations. It examines financial statements such as income statements, balance sheets, and cash flow statements to understand a company's financial health. The report includes an analysis of key financial ratios, including return on capital employed, net profit margin, and current ratio, providing insights into a company's efficiency, profitability, and liquidity. The performance of Alpha Ltd. is evaluated based on these ratios, revealing trends and potential areas of concern. The analysis covers debtor and creditor payment periods, offering a comprehensive overview of the company's financial standing. The report concludes with an assessment of Alpha Ltd.'s overall performance, highlighting potential challenges and impacts on revenue generation.

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Table of Contents
Task 1...............................................................................................................................................2
Role of Accounting and Finance.................................................................................................2
Task 2...............................................................................................................................................2
Ratios...........................................................................................................................................2
Performance of Alpha ltd.............................................................................................................4
Conclusion.......................................................................................................................................5
References........................................................................................................................................5
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Introduction
The following report demonstrated about financial decision making. Financial decision making
refers to the procedure which is used by organisation to make all the decisions which are related
to the Asset liability and stakeholder’s equity in the company (Cordeiro, 2018). Financial
decision helps the company to establish various financial goals and evaluate about the risk which
can be occurred in the future. This report describes role of accounting and Finance. Along with
this various ratios such as return on capital employed net profit margin and current ratio.
Task 1
Role of Accounting and Finance
Accounting and Finance plays a vital role operating the business because it assists the
management to track various income and expenses. Accounting and Finance is also responsible
for ensuring the status of compliance and give quantitative financial information to the investor,
management and the company so that they may further take various appropriate business
decisions. In this task role of accounting and Finance has been discussed for Unilever. In this
company there are three financial statements have been generated which is income statement,
balance sheet and cash flow statement so that the management of the company can know the
accurate cost of expenses and also income of the company as well. Income statement is useful
for providing all the information about profit and loss of the company (Northwood and et.al
2018). On the other hand balance it is responsible for providing snapshot of financial positions of
the business for a particular date. Apart from this cash flow statement bridges the gap between
income and balance sheet and provides all the necessary details about the cash generated by the
company for specific time duration. The main role of accounting department is to record all the
financial transactions of the company and assist the employees to know what is going on in the
business financially. Finance and accounting will help the company to use proper data and
records and also its keep an eye on the expenses gross margin and various debts. It is very
important for the company to follow all the statutory compliances. So finance and accounting
department is responsible for knowing that company must follow all the laws and regulations
which can vary from time to time, but proper accounting system and various procedures will help
the company to make sure that company must follow all the statutory compliances. The
accounting department is responsible for keeping track on sales tax VAT income tax and other
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taxation. Financial accounting also helps the company and the management to prepare proper
budget and make policies and Strategies for future projects as well.
Task 2
Ratios
Return on capital employed
Particular 2017 2018
Profit before interest, Tax and dividends 300 262.5
Total Assets 2235 4035
Current liabilities 1162.50 1110
ROCE 27.97% 8.97%
ROCE = Earnings before interest and tax (EBIT)/ Capital Employed
Capital employed = Total asset – current liabilities
2235-1162.50=2118.5
Return on capital employed calculated by the difference between total Assets and total liabilities
this ratio provides information about the efficiency and profitability of the organisation. In the
year 2017 return on capital employed is 27.9 7% which get decreased in 2018 and becomes 8.97
%.
Net profit margin ratio
Particular 2017 2018
Profit 300 262.5
Revenue 2400 3000
Margin 12.5 8.75%
Net profit margin shows the overall profitability of the company by knowing the total revenue. It
also provides detailed information about the cost of production and other expenses along with
this it also States about the surplus and revenue of the company (Paiva, and et.al2019). In the
year 2017 the net profit margin was 12.5% in 2018 it decreased to 8.75%.
Current ratio
Formula = current assets/ current liabilities
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For 2017
757.50/322.50= 2.34
For 2018
1035/1110=0.93
Current ratio it identifies the overall current assets of the company and it also demonstrated
about the efficiency and capacity of the company to use their current assets so that company can
repay credit liabilities. In the year 2017 the current ratio was 2.34 % and the other hand in 2018
it has decreased to 0.93%.
Debtor Collection period
Particular 2017 2018
Net credit sales 2400 3000
Average net receivables 450 600
Total amount of days in period 365 365
Debtor Collection period 68.44 73
It provides necessary information about the time Tekken by all the clients company to repay the
amount of credit sales. In the year 2017 Data Collection period was 68 days which is increased to
73 in the year 2018.
Creditor’s payment period
Particular 2017 2018
Payable trades 285 1050
Cost of sales 1950 2625
Total amount of days in period 53.34 146
Creditor’s payment period ratio of states about the time taken by the company to repay its current
liabilities and out standings. In the year 2017 the ratio was 53 3-4 days it is increased to 146
days.
Performance of Alpha ltd
The overall performance of Alpha Limited is not appropriate and up to the expectations. Return
on capital employed ratio was also decreasing of this company and it is showing that complete
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not capable and potential to generate revenue (Zopounidis and et. al2018). Net profit margin
ratio is also decreasing for this company. Apart from this data collection period is continuously
increasing and creditors payment period is also increasing so it can be stated that this company is
in loss. Apart from this company is not in the situation to generate proper way new. The main
reason behind this can be the situation of covid in different countries and due to the proliferation
of covid-19 because the overall profitability is not generated as per the Expectations of the
company.
Conclusion
After analysing the entire report it can be concluded that provides detailed information about the
role and responsibility of accounting and Finance Department for the company. This report also
shows various shows debtor collection period creditors payment period current ratio return on
capital employed as well. So that company can easily evaluate their overall performance. This
report provides detailed information about the performance of the company.
References
Books and Journals
Cordeiro, R.A., 2018. My family and friends are worth their weight in gold: consumer financial
decision-making in the context of Brazil.
Northwood, J.M. and Rhine, S.L., 2018. Use of bank and nonbank financial services: Financial
decision making by immigrants and native born. Journal of Consumer
Affairs. 52(2).pp.317-348.
Paiva, F.D., Cardoso, R.T.N., Hanaoka, G.P. and Duarte, W.M., 2019. Decision-making for
financial trading: A fusion approach of machine learning and portfolio selection. Expert
Systems with Applications. 115. pp.635-655.
Zopounidis, C., Doumpos, M. and Niklis, D., 2018. Financial decision support: An overview of
developments and recent trends. EURO Journal on Decision Processes.6(1). pp.63-76.
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