Comprehensive Financial Management Report for Airdri Company

This report provides a comprehensive analysis of Airdri's financial management practices. It begins with an introduction to financial management and its importance for Airdri, a manufacturer of hand dryers. The report explores both formal and informal approaches to decision-making within the company. It then delves into key financial principles such as accountability, transparency, integrity, and the importance of managing spending and understanding risk. The role of management accountants in providing financial data for decision-making is discussed, including their responsibilities as controllers, financial data managers, and participants in the management information system. The report further examines accounting control techniques, including cost control methods and the use of budgets to ensure accurate financial reporting and safeguard assets. The report concludes with a discussion of how Airdri can use these principles and techniques to achieve long-term financial sustainability.

Financial Management

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1: ..............................................................................................................................................1
P2: ..............................................................................................................................................2
P3:...............................................................................................................................................3
P4. ...............................................................................................................................................5
TASK 2............................................................................................................................................7
P5: ..............................................................................................................................................7
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
Financial Management means efficient and effective administration of funds in proper
way to complete the objectives of the organisation. It deals with money and investment for an
individual or a business that assist in making decision. The main objective is to manage all
essential requirement that are primary for increasing profit of an administration(Higgins, 2012).
Airdri is a manufacture and supplier of various luxury, highly reliable, energy efficient and
beautifully designed hand dryer that suit every wash room. It was founded in Oxfordshire (UK)
in 1974 by two partner peter Philipp and peter Allen. Airdri requires proper management sytem
that help them in formulation of effective financial strategies through which long term financial
sustainability is attained.
This report provide important information about various formal and informal approaches
used for decision-making in Airdri. Various operative financial management principles use to
achieve financial sustainability for an organisation in long term. Importance of accountant to
Airdri and various control system are discuss below. Important accounting ways that help in
business decision making are explained in the report.
TASK 1
P1:
Financial management refers to the economic and impressive administration of money in
such a manner that helps the organisation to achieve its objective. This is obsessed with planning,
raising, controlling and administering of funds used in the business by company. In general
manner, finance means examination of funds and their vital flow to operate a new business in
effective manner. It is concerned with procurement and utilization of fund in proper manner.
Application of management accounting system is important concept as this will aid better control
of departmental activities. It help in effective decision-making, some of its approaches are
discussed below:
Formal approaches: It is an accounting method/approach in which payments are
recorded during the period they are received and expenses are recorded in the period in which
they are actually paid. So Airdri should use this formal approach in recording revenue and
expenses when cash is actually received and paid.
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Informal approaches: Under this approach resolution will be sought through informal
means. Organisation may approach to their employee's without giving any information. Airdri
many time adopt these approach to resolve issue between employee, analyse internal
performance and determine skills of an organisation. Here are some ways of informal approaches
explained below:
Accural accounting approach: It is an accounting method when transaction are recorded
in the books of account as they occur even if the payments for that particular product or services
has not been received or made.
Advantages Disadvantages
Formal approach It provides useful information
to employees and stakeholders.
Meeting are conduct after a
specific time period. It doesn't
work under emergency
situations.
Informal approach It helps in making decision on
the spot by conducting urgent
meeting.
Distract employees from their
activities at workplace.
P2:
Financial principle help companies to achieve their objective and help them in making
financial strategies that help in long term financial sustainability. Rule of finance helps manager
and investors to make good use of these information in making financial strategies.(Michalski,
2012). So, it is necessary to find out positive key principle in cause of developing a financial
system. Airdri uses some accounting rules for financial decision-making and achieving long
term sustainability . Some of the basic principle are mentioned below:
Accountability: It is an authority that a firm or a business system will be evaluated on
their presentation or action related to operation. Accountability is desirable in finance and
economic because it promotes efficiency. Airdri should use this principle to attempt to strengthen
lines of accountability so as to achieve improvement in the job performance of their employee's.
Thus, it help in performance reviews and provide continuous feedback to employee that will help
in formulation of effective financial strategics.
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Transparency: This principle state all relevant information is fully and freely available
to the public basically investor. This appear to be more impressive rule of business firm. The
outcome of this principle. is that Airdri would have enough data that is transparent as possible.
Which attract more number of investor toward company and help Airdri to achieve financial
sustainability.
Integrity: This principle means all information collected by finance manager must be
real and being honestly recorded in the final account book. Managers of Airdri may stored or
transmitted data that is free from any unauthorized change. Through this principle Airdri sould be
able to provide accurate information to their customer that help in making strategies for long
term financial sustainability.
Spend less than earning: It means a company must know to track and budget their
spending that help in taking step to achieve its long term goal. Airdri should follow this principle
to learn to track its finances and know about its spending that help to control company money.
Due to which they will be able to make proper strategies to finance their fund that help in long
term financial sustainability.
Consistency: There is always seen lack of consistency in management policy, so this
principle help Manger to make consistence financial management policy. Management of Airdri ,
should follow this principle while creating information, as they are embodiments of the
enterprise. This will help to make them proper financial strategy that help them to grow.
Understand risk: This principle help an organisation to understand the risk related to
investments. Since no one sure about future, company can not be 100% sure about any
investment. So Airdri, follow this financial management principle to make effective financial
strategies that help in identifying and understanding risk related to any operation of company.
P3:
Management accountant explain financial information to ease the process of decision
making. (Roles of management accountants, 2018). They are qualified person and have
knowledge about bookkeeping, auditing and analysis of accounts. The main role of them is to
provide analysis data to managers within organisation to assist in business decision-making and
control. They also work to analyse cost and revenue. Accountant of Airdri should provide
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monthly management accounts and budgets to manager that help in forecasting business
performance and planning. There are certain role of management accountant that are as follows:
Controller to the management: Accountant help management to make an adequate
financial report for the control of business operation (Mullen and Heap, 2012). In Airdri,
accountant should perform the function like business cost standard, expenses budgets, sale
forecasting, profit planning and program for capital investments.
Financial data management: It is one of the main role of businessperson that is related
to grouping and and managing of financial data. So accountant of Airdri should check that
business economic records are well-kept in agreement with laws and policies build at firm level.
Processing management information system (MIS): This is consider one of the most
important role as Airdri accountant uses these reports for making important decision related to
performance of department, product quantity etc. They usually make regular reports for long
term financial decision-making (Boyer and Hammersla, 2013). These reports are handover to
decision maker to make disciplinary activity at the right time.
Spot accounting: Administration controller design the frame-work of price and business
relationship that help in maintaining reports. Accountant of Airdri should prepare report on
regular basis from data collected from various departments during the time of decision-making.
Good working capital composition: Finance controller has a leading part to perform in
increasing and managing funds within a company. So Airdri accountant maintain a proper mix
between debt and equity. They raise fund to the company through debt as it is a cheaper because
of tax benefits. It help them to maintain an optimal capital structure to the firm.
Involved in Establishment Activity: In Airdri, accountant should do a faculty function
and also act as a line of control over another worker. This is advice to the accountant of Airdri to
participate in management process and help them to provide useful information that help in
growth of company. This is the primary area where an accountant has to work to identify
and manage risk. Accountant in Airdri, should set basic rules and policies to perform their duties
in more specific manner to identify and secure risk that will be helpful for company (Menifield,
2017).
Expenditure prediction: Business person exercise to worth cost of product, value of possession
that may arise in an business system. Airdri produces Hand dryer, so accountant should forecast
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and take into account of all possible future cost incurred on production. That help company to
evaluate every cost related to its operation.
P4.
Techniques and process which an business structure direction use to measure assets,
record transaction and assure the quality and validness of business record is known as accounting
control or internal control. Accounting control are the series of processes a company undertakes
to check accuracy in it financial reporting. It should be advised to Airdri that required adopt
internal control system to follow rules and procedure, protect the company for any risk and
provide timely report. It is said to be an effective accounting and auditing process used by
management of Airdri for achieving goals and increase maximum profitability in the given
period of time. Internal control give prime sureness and support an receptor on imperfectness in
business activity that allows to finish problem in business operation of company (Kasdan, 2014).
It give answer for the business system, making sure that every thing is employed in a right way
or not. The control system is based on a budget plan that is compared to actual result, with
difference being reported to responsibility centres through out the organisation. This particularly
system is basically related with:
Develop reliable and timely financial reports: Management accountant keep number of
all essential information which is certain earlier billing it into final administrative division. It
also focus to make timely statements so that decision-making process keeps on going. This will
be valuable part of organisation as help to retain the knowledge about different important aspects
which are continuously happen within the organisation regarding their accuracy as they depicts
information in true sense.
Safeguard assets: Management control helps Airdri to determine their assets. It help in
formulation of security plans of action to protect and handle its assets. This will aid in controlling
of assets in more reliable manner as they optimally utilised within the organisation trough which
maximum return should be attained in future period of time.
Techniques used in these management accounting system are explained below:
Cost control techniques: It generally means, management hunt for new ways of doing
business operation in effective and economical ways. Business firm aim at making more product
at the nominal expenditure. It is a pattern for finding and get rid of enterprise financial loss to
increase profitability for an organisation. Airdri use this technique to compare actual outcomes to
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the budget exception. If in cause, real value are high than budget than formed action are
followed to reduce cost. Cost control may also help company in reducing price of product and
maintain a stable and reasonable price. It help in higher sales and give more profit to Airdri.
Mainly two type of standard are established to control costs:
Internal and external standard: Manger always make use of data for the purpose of controlling
both internal and external departments of an organisation. By using various costing techniques
such as job costing Airdri control internal standard such as cost of material and labour. On the
other hand external standard are applied for comparing performance with other organisation.
Such as, financial report in respect to analyse and compare current position of company with
other company.
Various types of cost controll system are their to control cost of Airdrie that help in making
financial strategy for future growth these are explained below:
Budgets: Company form budgets to control extra costs and expenses those are going to
be incurs on the production of products and services. This is consider to be most common tools
for controlling cost for Airdri.
Internal and external audits: This tool help company to measure interior as well as
outer audit of institution operation through its financial statements. This will help in building
powerful relation among different department and ease the work of employee.
Using financial management to detect and secure fraud: Financial accountant prepare
proper auditing reports to detect fraud and error. They make definite plan of action and rules
connected with accounting of information so that law-breaking can be easily detect and secured
impressively. Airdri use this tool to find out new types of mis statement and also some long-
standing frauds and resolve them (Joseph and Abraham, 2014). The special role of manager is to
apply correct system and processes to detect frauds at the first stages earlier it happen in the
company. These frauds can be identify by using two important method such as:
Data preprocessing: This method is used by Airdri for perception, establishment, error
rectification and flow up of lacking or wrong data.
Non-automatic and automated: Under this techniques, crime discovery is done by
production manual analysis of financial evidence by using appropriate tools. Where as automated
frauds are those which are found with the involvement of any individual or parties.
Value of control system as a part internal departments of company.
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It is very important from organisation point of view either large or small in size, to detect
fraud and develop strategies for prevention against fraud in effective manner. Some of these
strategies are discussed below:
Know each employee: Observing and listening to employee cab help firm to identify
potential fraud risk. That mean an attitude change in employee may be a clue of fraud. So, it is
imperative to know employee and involve them in conversation.
Use of accounting practice: Setting of necessary accounting rules and regulation for
recording of all financial transaction. This help accountant of Airdri to overcome any mistake
recorded in statements.
Internal audit: Proper internal audit help to reduce fraud. Accountant analysis all
statements to analyse any benign of risk or frauds those can develop in an administration.
TASK 2
P5:
(1):
Manager has to make decision in their everyday business operation so, these decision
are must be effective that help in growth of company. To make these decision director would
have all data on present deduction rate. Collecting information by Airdri Manager is an essential
request, as it can make big impact during the time of operating business like production, sales,
etc. during the period of time. There are lot of operational information those are gather to
manager operation on regular basis. All critical decision made by managers are as per the nature
of business and position of company. Collected information is provided and displayed to
managers that support their daily basis decision-making requirement. It is necessary to make use
of financial statements of Airdri to check its present position
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Ratios analysis:
It is clear from the above ratio calculation, that gross profit margin is 23% and 22%
respectively in the mentioned two year. While net profit margin is 0.051% and 0.14% that is not
so effective in term of total earning in given two year. It has been seen that liquidity of the Airdri
is also not so effective to meet their short-term obligations. As they are much below from the
ideal ratio. The return company are getting is only 3% to 4% of their total capital employed. The
total return they are getting out of total assets out of sales during the time is more effective in
both given year.
(2): Investment appraisal techniques
In the above calculation, various investment appraisal or accounting techniques are
shown. These are essential for an organisation to manage their project in more effective manner
during the period of time. Some of these techniques are discussed below:
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IRR(Internal rate of return): It is the interest rate at which the net present value of all
the cash flows either negative or positive form a project or investment is equal to zero (Stewart
and et. al., 2018). These rate of return is used to measure the quality of a project or any other
investment plan. In the above assumption taken for Airdri, the total initial investments they are
able to earn is 26.57% of total return. That is more favourable for the company.
Payback period: It is known as the number of years needed to recover the overall cost
from the total initial investments. In general, shorter payback period is preferred while
comparing two projects. In the above example, total time of 2 year and 33 days is taken to
recover that particular investments by Airdri.
NPV(Net present value): It is known as the difference between the present value of cash
inflows and the present value of cash outflow. It is used in capital budgeting to calculate the
profitability of an investment or projects. From the above data taken as on assumption basis, it
has been found that total of 255245.32 is generated during the time.
(3):
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On the basis of Airdri cash flow statements following cash flow ration have been
shown. It has been seen that cash generated from operating activity is about 26.85% in 2017,
which is much higher than last couple of year. Cash flow growth percentage is 56.76% in 2017
which is much higher. Total cash percentage obtain during in 2017 is 22.31%.
Break-even analysis: It is a point at which cost or expenses and revenue are equal.
Basically, it is a situation in which position of company would be determine by calculating total
sales and total revenue incur during the time. Company would pay all cost that need to be paid
but the profit remain zero. There is no net loss or no net gain to the company.
(4):
Financial report are considered one of the important tool that help in growth of company
like Airdri. These reports are prepared by the company during an accounting period to keep
record or every transaction. This help management and CEOs of Airdri to make decision in order
to increase growth and long term sustainability of company business. It can only be achieve in
case management are regulating and using appropriate tools and techniques to make financial
statements. The duty of management is to evaluate all statements in more specific manner before
presenting it to the investor. So that investor would have a clear picture of company position and
their return on investments. They would be able to decided, whether to invest in future project of
Airdri.
(5):
Management accounting is the act of making sense of financial data and translating that
data into useful information which help managers and officers in decision-making process. It is
useful to improve financial sustainability of a business and helps to achieve business goal. Thisd
is advice to the management of Airdri to uses various tools and techniques to improve financial
sustainability such as:
 They should properly analyse Return on investment.
 Wide ranging or expanding funding portfolio.
 Stabilising the base.
CONCLUSION
In this project report, it has been concluded that financial management is an essential
aspect for the company. It uses various formal and informal approach of accounting that help in
effective decision-making. Companies accountant play number of roles in achieving business
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