Financial Management Coursework: Balance Scorecard and Annual Reports

This report provides a comprehensive analysis of the balance scorecard as a performance measurement framework and evaluates the information provided in annual reports to external stakeholders. The report begins with an introduction to financial management and the significance of the balance ...Read More

FINANCIAL
MANAGEMENT FOR
GLOBAL DECISION
MAKERS

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
(I) Balance scorecard as a performance measurement framework..............................................3
(ii) Annual report provides sufficient information to external stakeholders or not?...................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
The term financial management can be defined as a systematic process of making
planning, organising and controlling monetary activities of business entities. Basically, it is too
crucial for companies to manager their financial resources so that effective utilisation can
become possible (Khan and Jain, 2018). Main objective of project report is to demonstrate
understanding about role of balance scorecard for effectively measurement of performance.
Balance scorecard is a form of performance measurement too which assess overall progress of
business entities. Along with mainly focus on measurement of financial aspects of companies.
This tool has a significant affect on business entities as by help of it overall performance can be
measured and further steps are being taken. In the project report, British American Tobacco Plc
has been chosen. This company is listed in FTSE and headquartered in London, United
Kingdom. The company operates its operations in manufacturing of cigarette and Tobacco. The
report covers detailed information about term balance scorecard as a tool of performance
measurement. In addition, report discuss about role of annual report for external users in the
context of chosen company.
MAIN BODY
(I) Balance scorecard as a performance measurement framework.
Origin of balance scorecard- This was developed by Dr. Robert Kaplan of Harvard
University and by Dr. David Norton. In year 1992, both professor published their findings in a
Harvard business article which introduced the idea of balance scorecard. Throughout the next
ten years, they produced a vital range of articles and books in context of BSC. It has below
mentioned features such as:
 It is management framework.
 This is flexible.
 It is adaptable.
Detailed analysis of balance scorecard-
The term balance scorecard (BSC) can be defined as a management system which is used
for finding and enhancing different internal functions of business along with their external

outcomes (McKinney, 2015). This helps to business entities in order to provide feedback so that
managers can draw their futuristic policies and plans. In simple terms, this contributes in an
effective manner for measurement of actual performance. It includes measuring four key aspects
of a business which are as learning & growth, business processes, customers and finance. In the
context of above British American Tobacco Plc, they apply this framework in order to measure
their overall performance and for focusing on different types of aspects. Herein, below
description of these elements is done in such manner which indicates that it is integrated to
measurement of performance:
1. Learning & growth perspective – Learning and growth perspective focuses on capabilities of
human resources. In a business entity managers are responsible for improving capabilities and
skills of work force. Main measures for assessing managers' performance will be satisfaction of
employees, retention and productivity.
 Employee satisfaction- It identifies role of motivating employees for enhancing
productivity, satisfaction of customers. Managers can assess the level of satisfaction of
employees by help of organising different surveys, interviewing employees etc. In the
above company, the managers can find out satisfaction level of their employees by taking
their feedbacks and reviews.
 Employee retention- In organisations, employees can perform well if they are assured
that their job will be retained in any condition. This contributes in an effective manner to
achieve overall goals and objectives. In the British American Tobacco Plc, their
managers assure position of employees which leads to improved organisational
performance.
2. Internal business processes perspective- In the companies focuses on their internal business
process in that they are needed to be excellent. The business process enable businesses to:
 Satisfaction of stakeholders expectations of better monetary returns.
 Delivering value proposition which will help in retaining customers in targeted market
areas.
Such as in the above company, managers assure about their internal business process that it is
accordance of external stakeholders. Eventually, key to success of any business entity is to
control over its process to make reliable and consistent products and services. It becomes

essential to companies to implement right process in an accurate manner so that effectiveness of
products and services can be assured. Mainly, success of a business relays on their internal
process. It is so because if this process will be effective and accurate then external practices will
automatically improved. Hence, this is too crucial for above chosen British American Tobacco
plc to make focus on improving their internal process so that their performance can be enhanced.
3. Customer perspective- In this perspective, managers find out those market and customer areas
in that their company can perform well. It contains different core and generic measures of
successful outcomes from implemented strategies (Moutinho and Vargas-Sanchez, 2018).
Herein, this is important to know that customer perspective must include specific measurement
of value proposition which company will deliver to customers in targeted market segments. It is
the common goal of all business entities to gain profits and revenues which can become possible
only if customers will be satisfied. Like in the British American Tobacco Plc, their managers
focus on this perspective so that they can generate higher revenues.
4. Financial perspective- It is also a key element of balance scorecard which is essential to add
during measurement of performance (Matthew, 2017). This measures different things such as net
income, return on investment (R. O. I.) and many more. Different stakeholders who provide
financial assistance to business entities relay on the measured financial performance in order to
take decision whether they should make further investment or not. So this is also an important
perspective of balance scorecard. Such as in the aspect of above chosen company, British
American Tobacco Plc they measure financial performance of different segments which help to
stakeholders in order to take suitable investment decisions.
Impact of balance scorecard on business:
 It provides framework to the managers in order to take suitable actions.
 This enables managers in order to provide detailed information regards to each aspect's
performance.
 This framework contributes in an effective manner for preparation of strategic strategies
and policies.

The above description of different perspective of balance scorecard shows that it plays a key role
in aspect of measurement of overall performance of business entities. It becomes possible
because this tool is not limited to any specific perspective, this is based on analysing overall
performance in an effective manner (Finkler, Smith and Calabrese, 2018). In the aspect of above
chosen British American Tobacco Plc, they implement this tool with an objective of
measurement of overall performance. They focus to analyse a detailed performance of various
segments. As a result their external and internal stakeholders become aware about their
performance.
On the other hand, implementation of any other performance measurement framework
can not be so effective like balance scorecard. It is so because under this both monetary and anti
monetary performance are measured. As well as this tool is not limited to any specific
perspective for measuring performance but also it evaluates performance in a 360 degree way

which assures that performance is evaluated completely by covering all aspects (Parola, Penco
and Profumo, 2013). In addition, this plays a significant role in the context of satisfying different
stakeholders who have relation with business entities. Such as internal and external stakeholders
who involves in all practices and functions.
(ii) Annual report provides sufficient information to external stakeholders or not?
Stakeholders of companies need vital range of monetary and non monetary information.
In this aspect, external stakeholders are too crucial because they want to know actual financial
position of companies (Lahra and Enriquez, 2017). Basically, the term external stakeholders can
be defined as those who do not involve into day to day activities of business but want to know
about financial condition of companies. For this purpose, annual reports are too important. This
is so because it is a type of report that consists both monetary and anti monetary information. As
well as by help of annual report, different aspects of balance scorecard gets fulfilled. Such as in
the aspect of British American Tobacco plc, this can be find out that their annual report provide
both monetary and anti monetary information to the stakeholders. Herein, below some key
information which are provided by annual report are mentioned such as:
 Financial information- This is one of the key information which is provided by annual
report. Such as in the annual report of British American Tobacco plc vital range of
information of monetary aspects is included. Mainly, it consists information regards to
profit & loss account, balance sheet and cash flow (Sobhani, Amran and Zainuddin,
2012). Such as the annual report of above company consists information about gross
profit, net profit, value of assets and liabilities etc. It indicates that this aspect of annual
report is satisfying financial perspective of balance scorecard. This is so because under
financial perspective of balance scorecard, monetary performance of business entities is
measured and by help of annual report it becomes easier to gather key information. As
well as external stakeholders can also become aware about financial condition of
companies and they can aware about taking decision whether investment needed to do or
not.
 General description of business- It is essential for external stakeholders to know about
nature of business in which they deal (OzFoodNet Working Group, 2012). This
information is being provided under annual report of companies. Such as the annual

report of above British American Tobacco plc includes information regards to overview
of their business like about their products, services etc. On the basis of this, stakeholders
can become aware about nature of business entity. In accordance of this information,
internal business process perspective of balance scorecard is being fulfilled. As well as
stakeholders also get aware about nature and information regards to business entity.
 Director's report- This can be defined as a type of report which is needed to produce by
larger companies at the end of a financial year. Basically, small and micro business
entities do not need to produce this report. Only large business entities needed to prepare
this report. Purpose of this report to aware shareholders about company's financial health,
company's capacity to know whether this can be expanded or not (Santopuoli, Marchetti
and Giongo, 2016). As well as providing information about whether company is
complying with financial regulations, accounting standards or not. Such as in the aspect
of above British American Tobacco plc, this report is being produced because their size
of business is larger. This aspect of annual report is similar as financial information.
Along with the financial information, under this information regards to directors is also
included. Herein, below some types of informations are mentioned which are included in
this report such as:
*Name of each director who operated during the accounting year.
*A brief summary of business entities' trading activities during a specific financial year.
*Summary of futuristic prospects (Morden, 2016).
*Any major changes in the company's fixed during the financial period.
*The company's main activities and, if applicable, the main activities of its subsidiary
companies.
*Any financial events that took place after the balance sheet date if all these events could impact
the financial situation of the firm.
 Corporate governance information- This can be defined as collection of processes and
mechanism through that companies are controlled and operated (Lee and Seo, 2016). As
well as governance structure and principles find the distribution of roles and
responsibilities. It becomes essential for companies to include information regards to
corporate governance so that stakeholders can become aware about policies of
companies. Corporate governance involves the mechanisms that set and follow corporate

priorities in the cultural, legislative and business climate. These include tracking of
corporations, their officials, and influenced stakeholders ' activities, initiatives, methods,
and decisions. Methods in governance can be seen as efforts to align shareholder interests
(Beaudoin, 2016). As well a it helps in minimising conflicts among stakeholders. Like in
the above, British American Tobacco plc they include this information in annual report so
that their stakeholders can become aware about internal governing system. In addition,
from this information internal business process perspective of balance scorecard is being
fulfilled. Apart from it, external stakeholders can make analysis about companies' overall
regulations and strategies. Thus, this element of annual report contributes in an effective
manner for external stakeholders as well as for fulfilling requirement of balance
scorecard.
 Other information- Apart from the above mentioned informations, in the annual report of
companies some other information are also included which are regards to non financial
aspects of business entities (Sterman, Oliva, Linderman and Bendoly, 2015). For
example about customer satisfaction, number of customers made transaction with
company and many more. By help of this information, it becomes easier for companies to
measure performance in terms of customer satisfaction. As well as this aspect helps in
fulfilling requirement of balance scorecard. In addition, external stakeholders also get key
information about companies goodwill in the external environment. Such as in the
context of above British American Tobacco plc they prepare annual report which consists
information about customers satisfaction level and many more. By help of this, it
becomes easier for external stakeholders to know about internal aspect as well as for
fulfilling requirement of balance scorecard.
So these all information are included under annual report of business entities which are
beneficial for internal and external stakeholders. As well as for fulfilling the requirement of
balance scorecard. Mainly, financial perspective of balance scorecard is being covered in the
annual report. Basically, annual report is crucial for the external stakeholders because by help of
this they can become aware about actual financial position and can take decisions accordingly
about investment and many more.

CONCLUSION
On the basis of above project report, it has been concluded that balance scorecard is too
crucial for business entities in order to measure overall performance. Under this performance
measurement framework different aspects' performance is measured in an effective manner. Such
as under the report, it has been concluded that balance scorecard covers perspective of finance,
internal business process, learning & growth and customers. The chosen company also
implement this framework with an aim of managing overall performance of above mentioned
perspective. As well as companies can take suitable actions in order to boost own performance.
The next part of project report concludes regards to content of annual report which helps
to external stakeholders and covers aspects of balance scorecard. The annual report includes
information regards to financial aspects, general aspects, corporate governance and many more.
Due to this, it becomes easier for business entities to manage overall performance as well as to
satisfy need of external stakeholders.

REFERENCES
Books and journal:
Khan, M .Y. and Jain, P. K., 2018. Financial Management: Text, Problems and Cases, 8e.
McGraw-Hill Education.
McKinney, J. B., 2015. Effective financial management in public and nonprofit agencies. ABC-
CLIO.
Moutinho, L. and Vargas-Sanchez, A. eds., 2018. Strategic Management in Tourism, CABI
Tourism Texts. Cabi.
Matthew, B .T., 2017. Financial management in the sport industry. Routledge.
Finkler, S. A., Smith, D. L. and Calabrese, T. D., 2018. Financial management for public, health,
and not-for-profit organizations. CQ Press.
Sterman, J., Oliva, R., Linderman, K.W. and Bendoly, E., 2015. System dynamics perspectives
and modeling opportunities for research in operations management. Journal of
Operations Management. 39. p.40.
Lee, S. and Seo, K .K., 2016. A hybrid multi-criteria decision-making model for a cloud service
selection problem using BSC, fuzzy Delphi method and fuzzy AHP. Wireless Personal
Communications. 86(1). pp.57-75.
Beaudoin, M., 2016. Issues in distance education: A primer for higher education decision
makers. New Directions for Higher Education. 2016(173). pp.9-19.
Morden, T., 2016. Principles of strategic management. Routledge.
Santopuoli, G., Marchetti, M. and Giongo, M., 2016. Supporting policy decision makers in the
establishment of forest plantations, using SWOT analysis and AHPs analysis. A case
study in Tocantins (Brazil). Land Use Policy. 54. pp.549-558.
OzFoodNet Working Group, 2012. Monitoring the incidence and causes of diseases potentially
transmitted by food in Australia: annual report of the OzFoodNet network,
2010. Communicable diseases intelligence quarterly report. 36(3). p.E213.
Sobhani, F .A., Amran, A. and Zainuddin, Y., 2012. Sustainability disclosure in annual reports
and websites: a study of the banking industry in Bangladesh. Journal of Cleaner
Production. 23(1). pp.75-85.
Lahra, M .M. and Enriquez, R .P., 2017. Australian Gonococcal Surveillance Programme annual
report, 2015. Communicable diseases intelligence quarterly report. 41(1). pp.E-E.
Parola, F., Satta, G., Penco, L. and Profumo, G., 2013. Emerging Port Authority communication
strategies: Assessing the determinants of disclosure in the annual report. Research in
Transportation Business & Management. 8. pp.134-147.