BM 414 Financial Decision Making: Panini Ltd Ratio Analysis & Report

This report provides a comprehensive financial analysis of Panini Ltd, a bread-making company, operating in a competitive environment. It examines the importance of finance and accounting functions within the business, including management accounting, financial accounting, tax, auditing, investment, financing, dividend, and working capital functions. The report calculates and interprets key financial ratios such as gross profit margin, operating profit margin, return on capital employed, current ratio, quick ratio, inventory turnover days, debtor's collection period, and creditor's collection period for the years 2018 and 2019. It also discusses various sources of finance available to Panini Ltd for expansion purposes, including loans, advances, and crowdfunding. The analysis provides insights into the company's financial performance and offers recommendations for improvement.

FINANCIAL
DECISION MAKING
REPORT

EXECUTIVE SUMMARY
The report above sums up the working of Panini ltd organization in aggressive climate.
IT further considers the calculation of proportions like stock days, leasers and borrower's
assortment period. It additionally gives specific proposals based on present working did in
related climate. Numerous estimations are being performed for contrasting related brings about
connection with organization's exhibition over a specific time frame.
INTRODUCTION
The report prepared as under takes in account what could be functions related to finance
and its roles, duties as well. There are many duties performed in accounting related areas and
they would help the company to grow and work in a competitive environment. It also takes in
account computation of ratios and also how the data and results can be interpreted for better
working and functioning of firm in a competitive marketplaces. It is necessary for every business
to understand where it is lacking and lagging behind and how it can improve its performance for
better results (Asmara and Situanti, 2018).
TASK
1.1 Examine the importance of finance and accounting related functions, duties and roles that
exist within a business.
Management accounting: It is helpful for carrying out an overview about purposes and
roles being carried out to its relative operational work and activities related to it. It focuses on
maintaining efficiency and effectiveness in the work being carried out and facilitated over the
business cycle of organisation. Some of them are discussed as under:
 It helps in carrying out better decision making: Accounting can be explained as useful in
being effective and efficient against selecting which one is the best alternative among
other prospects available with Panini Ltd (Dong, Chen and Wan, 2018). It would further
be useful in selection of organisation which would serve the purpose in best manner and
understand what are the requirements of a organisation over a certain period of time
duration and what policies can serve as a advantage in reducing as well as cutting down
the cost and increasing the profitability status of company in a specific time duration.
 It also maintains a systematic track record of expenses done and income earned: It helps
to manage a record which would reflect balances which are being generated by a

company. It would also help Panini to find reasons behind revenues that are being
generated and income by related functions and which operational activities can be
monitored helpful in improving expenses being incurred over the life cycle of business .
(Dawson, A., 2021).
Accounting: This term can be explained as compiling, collecting and sorting of data all together
at one place and recording money related dealings which are important. Processing finance
related statements and records that would also be helpful for providing guidance as well as
assisting them in such a way which would serve as a guide for managing cash and funds
collected so far in a business. It can be defined as a process which would keep proper
management of books of accounts and adapt data for various uses in related areas. The main
purpose is to examine the performance ascertained and given to staff persons working in a
company and that too in relative environment. Hence, it can also result to be fruitful for
evaluating profitability and positioning in economy and business of a organisation. It is further
observed and noted that it can used as a technique for people who are connected with the firm or
planing to get connected in companies which are being run in a competitive environment.
Functions of accounting: There are various kind of functions that could be said as important and
necessary for Panini ltd. Company. Some of them are described as under:
 Assessment of performance: Accounting is needed in every field and on every scale as
well, whether small or large, whether specific or extended over a large border and which
would help business to manage its life cycle for a specified time period that is treated to
be beneficial in fighting a competitive market in futuristic situations.
 Examination of valuable transactions: It is important for Panini Ltd. To record
transactions which are related and would be giving a clear, transparent and needed
outcomes which are taken in account after consideration of working situations in a
economy (Fichter, 2018).
Duties in Accounting:
 Monitoring and controlling budgets being prepared and developed: Accounting can be
explained as a tool and method which would help in planning and development of
budgets. It would also provide advantages and benefits in searching and finding areas in
which money is being invested without proper guidance and would go waste.

 Financing: It would be helpful to assess what cash and amount of fund being planned to
be invested in related acts which would further help to manage cash inflow and outflow
which would be managed and maintained by a organisation over time duration (García-
Sánchez, García-Díaz, Gómez-Berbís and Valencia-García, 2018).
 Predicting finance related activities and forecasting risks and threats: It is basic function
and necessity of accounting related elements which would help to assess and forecast
what would be threats and risk which can affect the growth and expansion of business in
competitive environment and hinder its growth as well.
Auditing function: Finance departments of the organisation is observed to focus more on current
assets. The companies working capital must be controlled in a effective and efficient way which
would prove to be more profitable when connected to the quantity of funds tied up and affects
the liquidity and solvency of a company.
Tax function: Payment of tax can be explained and described as a duty which must be followed
and monitored by every department dealing in finance related areas. It further focuses on
building good relations with government authorities by remittance of amount to be paid to
relevant authority and also would try to assure that tax must be paid and worked with policies
developed in a systematic manner.
Functions carried and followed in Finance:
 Raising funds: It would be focusing on areas which would be contributing in generating
income, revenue and cash that could also be used in managing operational work.
 Planning funds well in advance: It defines that the funds which are limited in nature must
be planned in a way which would help to reach aims and objectives set in a right manner
(Gatchair, 2018).
Types of finance:
 Working capital functions: It can be computed by deducting the current assets from
current liabilities. It is a certain portion of money which is helpful for daily expenses of
organisation and would be requiring the organisation short term expenditure, which are
needed to be paid before the completion of financial year.
 Financing functions: This function is built on the concept as how the company is able to
manage its funds and put them to better uses which would be useful for better decision
making skills. It also reflects how funds can be utilised for specific areas and for carrying

out operations in a efficient manner. Finance is considered as necessary part in a
company which would help business to run and work in a organisation and providing the
money and funds as well in the hour of need (Hacioglu and Aksoy, 2021).
 Investment functions: It is used for gaining profit or interest in a limited time period
being set by a company and how it can be used for further development and expansion of
a business. It also explains how such functions would serve as a opportunity for firm to
plan its actions as well as budgets. Investment related functions are helpful in maximising
the income and output level whereas reducing the costs being prevailing around the
business.
 Dividend functions: It can be described as distribution of profits being earned and which
are important for every shareholder. Dividend functions mainly indicate the payment
which is being made by companies which hold strong brand image and are able to sustain
in tough competitive environment as well.
1.2 Define different ways which would prove to be helpful in companies dealing with finance
based areas and their growth and expansion related functions as well.
In every business is important and play a vital role. It is also says that it a key factor of
business management. The organization always consider and try to opt the sources of finance for
performing the task in the department of finance. The Panini limited, which is a medium sized
company is also uses the source of finance for growth and expansion of the business in the
market. There are several types of source of funds like loans. In the following few types of funds
are described:
Loans and advances: Loans is the major factor in every organization, business or even on
households. Loans are the need and wants of client and business in different time of interval or
situation based. The loans are generally used as purpose of long term source of finance because
minimum time of the loan is 1 year but advance cover short period of time which generally repay
in less than financial year (Koech, 2021). Advance are the term which indicates the rate of
interest charged on the amount is lower and less then the loan interest. These funds of finance are
described into two parts are as follows:
 Secured Loans: Secured loans are the loan are the type of loan which realise after taking
some fixed assets. It is because if the firm is not capable to pay the amount at the time of
deadline then the bank or lender acquire the fixed assets as a loan amount.

 Unsecured Loans: These types of loans are not take any types of assets or anything on
behalf on the loan. These loans are risky for the lender because they don't have any type
of assets (Kostini and Raharja, 2019).
Crowdfunding: It is the type of fund which collects from the public. It perform the task by
raising the money in population for investing in business capital. This task is done with the help
of social networking sites, media, newspaper, radio and television then the people who are
interested in crowdfunding invest the amount on this particular business.
TASK 2
Calculate the ratios.
1. Gross profit margin: Gross profit/ Net sales * 100
2018: 3500/ 10000 * 100 = 35%
2019: 3265/ 11500 * 100 = 28.39%
 Lessening costs that connected with pace of good and
administrations with practically no declining cost of products
being presented by the business may be considered as an
explanation for declining net revenue of Panini ltd organization.
 One more explanation that can be expressed behind such decrease
is existing increase arrangements adjusted by Panini ltd
organization.
 Increasing costs that are connected with merchandise being sold by
Panini ltd organization which could act as an issue prompting
declining Gross overall revenue of related business.
2. Operating profit margin: Operating profit/ Net sales * 100
2018: 2765/ 10000* 100 = 27.65%
2019: 2305/ 11500* 100 = 20.04%
 Fall in deal scale held by association throughout some stretch of
time: It is additionally considered one of the explanation, for
example, decrease in deals execution served by the organization in

serious climate. It prompts decrease in edge being estimated in the
event of working benefit.
 More significant level of working costs: It is being seen that
organization is confronting expansion in level and size of costs
being caused in functional exercises that outcome in falling
productive edge.
3. Return on capital employed: Earnings before interest and tax/ Share equity +
Long term liabilities * 100
2018: 2765/ 8755= 31.58%
2019: 2305/ 10211* 100 = 22.57%
 Inefficient use of capital assets: It expresses that the capital assets
are being utilized inadequately and in a wasteful as well as
ineffectual way. It then, at that point, brings about declining return
on capital utilized too. It is further fundamental for organization to
comprehend the designation of scant assets in most ideal other
options and spots which would work with best results and results
also.
 Rising liabilities and obligation: Issue that thinks about falling
return capital utilized is seen to be expanding obligations and
liabilities related with the organization for a while. It is likewise
exhorted that the firm should investigate matter which influence
the proficiency and adequacy of business. It further is seen that
limiting the obligation event or finding related arrangement that
would help in controlling such circumstances would likewise help
in expanding productivity of association.
4. Current Ratio: Current assets/ Current liabilities
2018: 1175/ 970 = 1.211: 1
2019: 2110/ 512 = 4.12: 1
 Covering obligations and liabilities: Rising current proportion
should be on the grounds that obligations and liabilities are set off

and taken care of well on time by the endeavour. It accordingly
would act as a productive circumstance for the association too.
 Receivables and payables: Increasing current proportion can be
because of receivables and payable being overseen appropriately
by the association for a time of north of two years. It further would
assist business with developing and grow and acquire a decent
brand picture too.
5. Quick Ratio: Current assets – Inventory / Current liabilities
2018: 1175 – 350/ 970 = 0.85: 1
2019: 2110 – 675/ 512 = 2.80: 1
 Ascend in selling brings about expanding speedy proportion of the
business which can be because of additional deals being recorded
and seen in particular business. It is vital for each business to focus
on exercises that would help in expanding deal edge of related
organization. Further developing amount or quality would assist
expansion in commitment of clients with firm that is vital in
lengthy run of big business.
 Reasons which prompted rising fast proportion of related business
is legitimate administration of inventories and stock accessible
with the organization for specific length being recorded. Stock and
stock are important for changing over the natural substance in
completed products and working on the nature of merchandise and
administrations of business being advertised.
6. Inventory turnover days: Cost of goods sold / average inventory
2018: 6500 / 512 = 12.6 times
2019: 8235 / 512 = 16.08 times
It is being seen that the stock turnover days have been left which can be
because of legitimate administration of creation related exercises and tasks
too.
Dispose of use of old inventories: It is prompted that the organization
should diminish or wipe out, if conceivable, the utilization and reception

of old or out of date apparatus and inventories also. It would help in
limiting the undesirable expense and costs related with organization.
It further is expressed that there should be low consumptions and related
chances associated towards the working and working of organization. It
works with in rising stock turnover days.
7. Receivable collection period: 365 / sales on credit / accounts receivable
2018: 365 / 10000 / 760 = 27.74 days
2019: 365 / 11500 / 1340 = 42.54 days
 Strategies for working on the worth of proportion in not so distant
future: The above figured proportions of year 2019 it requests
improvement in their ways on the off chance that gathering obligation and
it would be consuming additional time which would diminish the
proficiency of organization too.
 Causes behind changes saw in proportions in year 2018 and 2019:
It expresses that in year 2019 additional time length is consumed for
assortment of obligation by the organization.
8. Payable payment period: 365/ cost of sales / trade payable
2018: 365 / 6500 / 920 = 51.6 days
2019: 365 / 8235 / 707.5 = 31.36 days
 Instalment handled towards seller is slow: It is likewise seen that when the instalment
made towards suppler picked turns out to be slow r gets deferred it could bring about a
circumstance, for example, declining payable instalment period. It further assists with
finding related reasons which would assist with overseeing such circumstances. The
postponed cycle accordingly prompts declining payable instalment span.
 Purposes for variance in proportions between year 2018 and 2019: The causes which
prompted declining payable instalment period is because of poor and awful monetary
circumstances related with the organization throughout a time-frame of 2 years. It
consequently prompts a condition where payable instalment is noted to decline.

CONCLUSION
From the above mentioned report of Panini Plc., it is concluded that there are various
methods used to improve the performance and profitability of the company. The report suggests
the importance of accounting and finance department in the company and the functions
performed by these departments are mentioned here. Finance is the basic requirement for a
company to run their business effectively and efficiently, the report describes the different
sources of funds available in the market and how companies can obtain those funds from
investors and financial institutions by paying off a particular interest rate. The sources of funding
which are available in the market are loans and advances, crowdfunding, overdraft and credit
cards etc. In the report, the performance of Panini Plc. is analysed with the help of financial
ratios for year 2018 and 2019 to find the areas of improvement and corrective measures will
taken according to them to improve the business operations.

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