Case Study: Financial Analysis and Improvement in Business Finance

This report provides a detailed analysis of applied business finance, focusing on financial statements and ratio analysis. It defines financial organization and its importance, discussing key monetary statements like the profit and loss statement, financial performance statement, and cash flow statement. The report explains the utilization of financial ratios in assessing profitability, effectiveness, and liquidity, using a case study to illustrate these concepts. It includes a business review template, income statement, and balance sheet completed in Excel. Furthermore, the report identifies processes that the business can use to improve its financial presentation, such as enhancing transparency and managing costs effectively. The analysis covers key metrics like gross revenue margin, net revenue margin, asset turnover ratio, stock turnover ratio, accounts receivable days, accounts payable days, current ratio, and quick ratio, providing a comprehensive overview of the company's financial health and potential areas for improvement.

Applied Business Finance

Table of Contents
INTRODUCTION...........................................................................................................................3
Section A: Introduction: Define & discuss the idea and meaning of financial organization...........3
Section B: Describe and discuss the major monetary statements & give explanation for the
utilization of the ratios in monetary organization............................................................................4
Section C: BY USING THE TEMPLATES PROVIDED:..............................................................6
I. Complete the details on the ‘Business Review Template and also Ensure that you display
your calculations for this detail..............................................................................................6
ii. by means of Excel produce an profits Statement for the Sample administration (see Case
Study). This should be built-in within your appendices.....................................................7
iii. Using Excel complete the Balance Sheet..........................................................................7
iv. Using the Case study information explain the profitability, flow & effectiveness of the
company based on top of the results of relation study............................................................9
Section D: by means of examples from the case study explain and talk about the processes this
commerce might use to improve their monetary presentation.......................................................10
CONCLUSION:.............................................................................................................................11
REFERENCES..............................................................................................................................12
Appendix:.......................................................................................................................................13

INTRODUCTION
Financial organization is one major aspects of running the company and it also assures that
the activities in the organisation can run smoothly with the proper allocation of funds. This
respective account will be described as the significance of monetary power, some of the
concepts of monetary statement and the use of ratio in the operations in an organisation. This
further discusses the certain rations that include effectiveness; liquidity and competence ratio
by analysing various examples as of the given case revise which includes the income
statement & balance sheet. The overall business presentation review is being completed to
evaluate the financial presentation of the business. Certain strategies, the firms are needed to
demote for enhancing the overall presentation of the enterprises. As from the given case
study, there are some of the things which help in analyse the presentation as well.
Section A: Introduction: Define & discuss the idea and meaning of financial
organization
Financial organization I the concept that can be defined as the direct, controlling and
planned as well as the organising the overall financial transactions in an organisation.
This is likewise businesses are applying the principle of management to financial
resources of a company and also having significant impact in financial administration.
 Make sure investor of the organization to get the more profits from the organisation.
 They make real and safe course of action freedoms which helps in to put their capital in
the right place.
 Keep up with the sufficient inventory of resources for the organization.
 Right and effective usage of assets.
Importance of Financial Management:
 Financial Decision: This is the major factors which take into the account while taking
critical money- choices of the company. Decisions can be taking down so that all the
function can be work together. This also tells about the various risks and the integrated
choices while analysing the choices of investor's in term of acquired assets and the
capital.

 Funds allocation: This ensures the share of the financial capital as the profitability of
the business and it will assist the financial ratio & also helps in dropping the cost &
raising the financial state of the organisation.
 Profitability: When the book of financial records & the capital are effectively
manages, and then it enhanced the overall output of the company. This also ensures in
analysing for developing opportunities & efficiency of the business.
 Capital structure formation: For calculating the required capital, the design must e in
proper manner. Any business that sets upon the measures of assets an organisation has
& the respective quantity must be raise as of the external sources.
 Financial Stability: it basically proves the immovability to any organisation because it
addresses the effective financial framework & also keeps the commerce activities
which can be demeaning for the organization and also helps in maintain more profit.
Section B: Describe and discuss the major monetary statements & give
explanation for the utilization of the ratios in monetary organization.
 Monetary statements are the accounts that are required for each listed corporation in
order to uphold their reserve and it also show the financial task of the business. They
are the statement that give the monetary data & also show the economic physical
condition of the corporation. They can be checked or audit throughout the inner and
exterior sources. This also sure that the report that is being in print by the corporation is
authentic. The statement is given below:
 Statement of profit & loss: It tells regarding the profits, revenue & the expenditure
and that accrue and exceptional expenses that contain been generated or accrued in
monetary era. This similarly show the deal which can be completed in the phase of time
& the which also shows that what were that cost and wages in the particular period of
time which is showing the net profits in the completing year and this is the last
component in income statement.
 Financial performance statement: this one is the generally vital monetary declaration
in an organisation because this also gives the complete thoughtful to the customers of
financial information related to firms. They shows that property and liability that the
enterprises is dedicated to shell out in upcoming days. In addition, the apparent as
financial evidence that is basically the main worry for the company. This also helps in

analysing the overall functionality and also reflects anywhere the company stand at spot
of point in time.
 Statement of cash flow: It is the economic report that shows the net quantity of
coming & going of money and this has been generated in a specific time period. This
also shows the change in the money from invests, functioning and finance actions at a
particular point in time period. There are functioning task which show the fluctuations
completed in the present capital & the present liability comfort & duty expenses. There
is the financial exercise which shows the inflows and outflows emerging from the
various issues related to the shareholder's capital, debentures, advances and payments.
Uses of ratios in monetary organization:
 Monetary ratio is basically a strategy for the bookkeeping that also leads to the
management of the various financial data that may be updated throughout the course
and the completion of a fiscal year. this is the tool that has no limitations for the
administration while taking into the consideration the company’s resources. This
basically also aids the management in making the efficient decision by reviewing last
year’s profits. There are a variety of proportional employments available.
 Financial ratios that are basically aid to the management in making the sound
decisions. The monetary reporting patterns of return, the full capacity of the company’s
rehabilitation and acquisition and the advantages and the benefits in examining the
extend and influence of the actions. These actions contribute to a better understanding
of the future actions and objectives for their reward.
 Operational Efficiency: the ratio ads in maintain the liquidity productivity solubility
of a commercial firm, as well as the assisting the administration in keeping the
expenditure down so that they may reach their goals within the given time of frame.
 Comparative analysis: the monitoring of the information is offered with the
assistance of the proportionate analysis of the business, which also helps in measuring
the financial performance and the structural base to compare across the organizational
functioning in the same industry as well. (Kim and et. al., 2019).
Section C: BY USING THE TEMPLATES PROVIDED:

I. Complete the details on the ‘Business Review Template and also Ensure that you display your
calculations for this detail.
In the year of 2016, the net profit was £43,057. (2015: £18,987,000).
The main monetary and other presentation indicator throughout the time are as given below:
2016
£’000
2015
£’000 Change %
Turnover (continuing operations) 189711 179587 +5.6%
Profit for the financial year 43057 18,987 +126.77%
Shareholder’s equity 83802.75 63,057 +32.9%
Current assets as % of current liabilities 222 % 304.00% -82%
Customer satisfaction 4.5 4.1 +10%
Average number of employees 649 618 +5%

The overall earnings from operating operation rises by 5.6% in the time and
primarily because to the attainment of the extinguishers commerce on 1 May 2015 that
complete a fell year's payment in the year of 2016.
 Gross income = £81,125
 Net income = £43057
 Net income greater than before in 2016 by 126.77% during the year.
 Shareholders’ equity enlarged by 32.9% by £20,745.75.
 The organisations “quick ratio” (Current Assets (excluding stock) divided by Current
Liabilities) is 1.47:1
 The organisation’s “current ratio” (Current Assets divided by Current Liabilities.) is
2.22: 1.
 (The estimate are given in appendix)
ii. by means of Excel produce an profits Statement for the Sample administration (see Case
Study). This should be built-in within your appendices.
 This is included within appendix

iii. Using Excel complete the Balance Sheet

iv. Using the Case study information explain the profitability, flow & effectiveness of the
company based on top of the results of relation study.
 Profitability relation: It is the group of monetary parameter that is used to analyse the
abilities of company in command to ear better overtime in context to the various
fundamentals of profits report and equilibrium of financial year. Through analyse the
overall presentation of business. There are a number of of the productivity ratio that
are: Gross income margin, net income edge returns on resources and return on capital.
 Gross revenue Margin= (Revenue – cost of Sales) / Revenue * 100
= (189,711 – 108,586) / 189,711 * 100 = 42.76%
 Net revenue Margin = (Net profit/ Revenue) *100
= (43,057/189,711) * 100 = 22.70%
understanding: the overall ratio which also gives the proportion of the revenue in
context of the profits generate in view of the functioning & non-functioning charge.
Gross revenue margin is the given amount of money remaining as of the overall profits &
the net revenue margin is the proportion of profits reserved after price as of the income.
Gross income is 42.76% & the net increase is 22.7 so as to show the income is reducing
by 20% around. Thus, an organisation wants to go down their transparency cost that in
interfere in earn more net profits. This will be vital in support of the company to evaluate
the overall income with the various organisations belonging from the similar business to
understand the market position.
 Effectiveness Ratio: It is the ration which shows how the business is taking in use its
resources & liability. This also measured how does the company is having the firms to
collect its payments from the respective customers.
 Asset turnover relation= Total Sales/ Total assets = 189,711/153,647 = 1.23
 Stock Turnover relation = Cost of Sales/ Stock = (108,586/28,571) = 3.8
 Accounts receivable time = 365/ Debtors Turnover Ratio
=365/ 7.19 = 50.77 days
 Accounts Payable Days = 365/ Creditors Turnover Ratio = 365/7.04 = 51.84 days
understanding: The assets turnover is 1.23 that shows the company is performing
well & produce sufficient and stock turnover ratio is 3.8 which shows the entire asset
store is around 4 times in the year. Accounts payable days of the company is approx. 51

days that means it become the limitations when the receivable days reduce the
functionality of business.
 Liquidity Ratio: This also determines the company capability to give the overall money
owing compulsion & show us about the present accountability & store. The major ratio
is the present proportion & the quick ratio.
 Current Ratio = Current Assets/ Current Liabilities
= 84,349/ 37,928 = 2.22:1
 Quick Ratio = (Current Assets- Stock)/ Current Liabilities = (84,349 - 28571)/ 37,928
= 1.47:1
understanding: The proportions also shows the liquidating place of the
commerce & the perfect proportion is 2:1 and this can be experimental that the present
resources to the accountability ration is 2.22.
Section D: by means of examples from the case study explain and talk about
the processes this commerce might use to improve their monetary
presentation.
 Financial Performance is the aspects which is the look for the commerce in the
transport into achievement the investor which can decide the investment in the
company. Thus, this is significant to get the right monetary decision at the same time as
substantiate the overall financial support decisions. For this, the monetary proportions
that help the director & the overall monetary organisation which can collect the
judgement. From analysing the calculation performed and these are given below:
 The present resources to the present liabilities ratio have been declined by almost 82
percent from year to year. However, the overall cash flow is comparatively much higher
and the company is losing the liquidity.
 The non- operating costs, which basically includes the administrative expenditures and
increased it by 126.77 percent which has also results in the rise of the net profits of
126.77 percent. In addition to this, the interest rates have been declined.
 Customer contentment as a result of the assistance in the comprehending investing and
also in providing the greater amount of investment and also to support the company
growth as well as the employer retention ratio has also been increased.

Improvements that can be done are as follows:
 Marketing techniques Can be utilized to improve the efficiency of the firm & also to
lower the overall costs by using the resources and also generating more amount of
revenue.
 effective and efficient use of the resources. This will basically help in assisting in the
lowering of the costs & also in leading to a rise in the pricing, resulting in the increased
profits and the incomes as well.
 By reducing the inventory & boosting the overall inventory turnover, then it is
possible to demonstrate the need for the working capital. (Bongomin and et. al., 2017).
CONCLUSION:
From the above report it has been concluded that the financial management plays a very
crucial part in the entire operation of the business. According to the above report, it aids in
their decision making process by demonstrating the profitability and the economic strategy
of the company by allowing them to devise the new growth strategies. Financial statements
also provides the summary of the company since every undertaking is required to maintain
and at the same time check the authorised member in both the internal as well as the
external environments. It also displays the assets and the liabilities and the profit equity of
the company. The ratios which are being used by the company to access a company’s
solvency and the efficiency has also been discussed in this report.
.

REFERENCES
Books and Journals
Khera, N. and et. al., 2020. Current practices for screening and management of financial distress at
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and financial stability. In 2018 International Scientific-Practical Conference Problems of
Infocommunications. Science and Technology (PIC S&T). (pp. 553-559). IEEE.
Kim, C. and et. al., 2019. Policy uncertainty and the dual role of corporate political strategies.
Financial Management. 48(2). pp.473-504.
Potrich, A.C.G., Vieira, K.M. and Kirch, G., 2018. How well do women do when it comes to
financial literacy? Proposition of an indicator and analysis of gender differences. Journal
of Behavioral and Experimental Finance. 17. pp.28-41.
Bongomin, G.O.C. and et. al., 2017. The relationship between access to finance and growth of
SMEs in developing economies: Financial literacy as a moderator. Review of
International Business and strategy.
Egginton, J.F. and McCumber, W.R., 2019. Executive network centrality and stock liquidity.
Financial Management. 48(3). pp.849-871.
Seifzadeh, M. and et. al., 2020. The relationship between management characteristics and financial
statement readability. EuroMed Journal of Business.
Saurabh, K. and Nandan, T., 2018. Role of financial risk attitude and financial behavior as
mediators in financial satisfaction: Empirical evidence from India. South Asian Journal of
Business Studies.
Lee, J.M., Lee, J. and Kim, K.T., 2020. Consumer financial well-being: Knowledge is not
enough. Journal of Family and Economic Issues. 41(2). pp.218-228.

Appendix:
Calculation perform for the above case study
 Net revenue of 2016= Revenue- Cost of goods sold- non-operating expenses
= 189,711 – 108,586 – 38,068 = 43,05
 Change in revenue %= (Current year– previous year profit)/ Previous year Profit
= (43,057 – 18,987) / 18,987 = 126.77%
 Shareholder's equity = 63,057*32.9% = 20745.75
= 63,057+20,745.75 = 83802.75
 Current assets as % of current liabilities = 324% - 82% = 222%
 Gross revenue = Net profit+ non-operating expenses
= 43,057+ 38,068 = 81,125
 Quick proportion = Current Assets - Stock/ Current Liabilities
= 84,349 - 28,571/ 37,928 = 1.47:1
 Current ratio = Current Assets/ Current Liabilities = 84,349/ 37,928 = 2.22:1
 Debtors Turnover Ratio = (Net Sales / Debtors) = 189,711/ 26,367 = 7.19
 Creditors Turnover Ratio = Cost of Sales+ Stock/ Creditors
= 108,586+ 28571/ 19,493= 7.03

Income Statement