Financial Decision Making, Analysis, and Ratios for BUPA PLC

This report provides a detailed analysis of financial decision-making within the health and social care sector, using BUPA PLC as a case study. It begins with an examination of BUPA PLC's financial statements, including income statements, balance sheets, and cash flow statements, and evaluates their role in informing strategic decisions. The report then explores various financial ratios, such as liquidity and efficiency ratios, and their relevance to long-term financial health. Furthermore, it delves into short-term and long-term business finance factors specific to the health and social care industry, as well as available sources of finance. The report also covers the importance of cash flow forecasts and budgets, and it includes a practical application of net present value and payback period calculations for investment projects, concluding with recommendations for optimal project selection. The report highlights the impact of the COVID-19 pandemic on BUPA PLC's financial performance and offers insights into the company's financial strategies.

Financial decision
making for health and
social care

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1. Detailed examination of the financial statement of the above mentioned firm in an
appropriate manner......................................................................................................................1
2. Identification, analysis, and evaluation of the financial information’s role in decision
making.........................................................................................................................................2
3. Description of various ratios that can prove beneficial from the firm’s prospective in the
long run........................................................................................................................................3
4. Detailed explanation and analysis of all the factors that are related with short term and long
term business finances that are required in an organisation that is working in a sector of health
and social care..............................................................................................................................7
5. Examination, analysis, and evaluation of the different sources of finance that are available
for health and social care company.............................................................................................9
TASK 2............................................................................................................................................9
1. Detailed examination and explanation of the importance of the cash flow forecasts and
budgets in health and social care enterprise................................................................................9
2. Calculation of net present value and payback period of Westside Care Home as it is
planning to consider two projects for the company...................................................................10
2. Appropriate recommendations for the project that Westside Care Home must choose in
order to be profitable in the market...........................................................................................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................14

INTRODUCTION
Decision making is one of the most important as well as crucial aspect for each and every
firm that is operating in the market irrespective of the industry in which it is operational and if it
is related to financial part then it becomes a lot more important as compared to other because it is
related with the most valuable part that is finance (Abadie, Brown and Fisher, 2019). Financial
decision making in health and social care unit is an essential part as it helps in taking decisions
that can prove beneficial for the firm as well as for the citizens of the nation too and it affects
everyone as a whole. BUPA PLC is a firm that is an international healthcare group that deals
mainly in health insurance and is geographically located in the UK with its headquarter in
London and is operational since a pretty long time in the market as thus has captured a
considerable amount of share in the industry too. In this report there is a detailed description,
analysis, as well as evaluation of the financial statements of the company in an appropriate
manner so that true position of the firm can be evaluated. Apart from that the report also covers
different analysis regarding the role of financial information in decision making. Further the
report also covers description of various ratios that can be used by the enterprise to grow and
prosper in the long run.
TASK 1
1. Detailed examination of the financial statement of the above mentioned firm in an appropriate
manner
Financial statements possess a lot of importance for each firm and for a company like
BUPA PLC it becomes much more important as it is a huge firm and financial statement helps in
determining the performance of the organisation so that necessary measure can be taken that can
help the enterprise to improve its position as well as performance in the market that can
subsequently help it in growth and development. It includes balance sheet which shows a clear a
fair picture of the company’s performance as well as other aspects that are very crucial for a
business. Since BUPA PLC is a huge firm that is operating in almost each and every part of the
world and enjoys a loyal customer base too because of the quality that it provides to its
customers all across the globe. Thus financial part of the company is very strong as compared to
other firms that are operating in the similar market conditions (Boggio, Moscarola and Gallice,
2020).

As the whole world is battling with the pandemic that started in China which is COVID-19
and it also impacted the performance of BUPA PLC as it caused it revenue to come down so as
profits which can be seen in the financial statements of the company. The main revenue that it
generated was in Australia and New Zealand which was £2238m in which it generated a profit of
£49m, in Europe and Latin America the revenues were £1827m which fetched a whooping profit
of £73m. While its Global and UK revenues were £1532m which generated a profit of £22m,
whereas in other businesses it generated revenues of £243m which fetched a total profit of £34m.
The impact of COVID-19 was that its incomes fell by 7% that resulted in steep decline in profits
that was around 57% and that main cause of that was countrywide lockdown. The structure and
format of it is that firstly an income statement is prepared and with the help of it balance sheet as
well as cash flow statements is formulated while its requirements are also the same. Since the all
the firms are dealing with heavy losses BUPA PLC still managed to generate enough incomes
that can help it to sustain in the market without facing much issues (Islam and Awal, 2020).
2. Identification, analysis, and evaluation of the financial information’s role in decision making
Financial information possesses a lot of value in the current scenario as it helps the firm to
analyse its performance so as to improve it if there are some loop holes in that and correct facts
and figures are needed in it which makes it much more crucial as well as critical for each one of
the firm to evaluate all the aspects that are involved in it in detail so that it can add to the value of
the company in the long run (Keyser and Duvenhage, 2019). It is very essential factor in decision
making as important nature decisions are taken according to the values that it shows in the
balance sheet of the company. As BUPA PLC is a firm that is operating on a large scale and thus
requires all the things to be structured accurately according to the requirements of the
organisation so that it can prove beneficial from the firm’s point of view. There are various
things in which it helps in taking decisions of the company that is BUPA PLC and all of them are
explained below in detail-
 Realistic- It is highly realistic and provides true and clear picture about the company’s
performance that further helps in analysing the deviation by comparing it with the
standards that have been set at the starting of the firm. It is a well developed process that
provides all the related information and that too within a limited period of time that helps
the firm to grow in the market that is highly competitive as well as dynamic in nature.

BUPA PLC checks the reliability of data several times to ensure that the decisions that
will be taken must be realistic without the influence of other person or firm.
 Cuts cost and increases sales- As it provides with the facts and figures about the
performance of the organisation which helps to reduce and cut unnecessary expenditures
in a sequential manner so that it will result in increased sales within a short time frame.
BUPA PLC analyse its financial statements in an accurate manner and after that takes
appropriate decisions regarding cutting down of costs in a systematic way (Killins, 2017).
 Increases profitability- As it helps in taking appropriate decisions that are beneficial for
the working of the company and thus because of it profitability level of the firm also
increases many folds as compared to other rivals that are operating in similar market
situation. BUPA PLC has increased its profits drastically by taking appropriate and
necessary decisions that can help the firm grow in the long run.
 Helps in allocation of duties- Since it helps in analysing as well as evaluating the
performance thus decisions regarding allocation of duties becomes easier with the help of
it. BUPA PLC allocated roles and responsibilities after a detailed evaluation of the
performance so that the task can be performed in an effective and efficient was and that
too within a limited time frame.
3. Description of various ratios that can prove beneficial from the firm’s prospective in the long
run
There are different types of ratios that can be used by firms in different ways according to
the needs, requirements, and demands of the company and below are all of them explained in
detail with the context of the firm BUPA PLC-
Liquidity ratios- These are the ratios that measures short term paying capacity of the firm
and there are many sub parts of it that are explained in detail below-
 Current ratio- It is a ratio that helps in analysing that the company is able to pay off its
liabilities with assets where both are of current nature (Lloyd-Sherlock, Penhale and
Ayiga, 2018). BUPA PLC’s current assets are much more than that of liabilities of the
company which it can uses to evaluate that it is well placed in the market and further can
be used to compare performance of its current assets and liabilities in long run.
 Quick ratio- It is a ratio that helps in identifying the value of current assets that are more
liquid in nature with respect to the current liabilities of a firm. BUPA PLC can use to

analyse the performance of these aspects which possess a lot of value in the current
market scenario.
 Liquid ratio- It is a ratio that evaluates cash and its equivalent with liabilities that are
more liquid in nature and BUPA PLC can uses it that the cash of the company is constant
in years or not.
Efficiency ratios- It is a ratio that helps in measuring the efficiency of the company that is
how the resources of the firm are use so as to generate sales (Rajkarnikar, 2020). There are other
aspects included in it which are briefly explained below-
 Capital turnover ratio- It helps in evaluating the return that is fetched by capital
employed of the firm with context to the sales that it have done in a particular period.
BUPA PLC can use it to analyse that return on capital that has been put in the business is
giving proper return or not.
 Fixed asset turnover ratio- It is a ratio that helps in identifying the return that fixed
assets are generating with respect to the sales of the company. BUPA PLC can use it to
make addition or subtraction of fixed assets according to the results that can be evaluated
in detail afterwards (Rathus, 2018).
 Working capital turnover ratio- This ratio helps in analysing the return that working
capital can fetch with context to sales where working capital can be calculated as current
assets less current liabilities. It can be used by BUPA PLC to compare its assets and
liabilities with respect to the sales of the organisation that can prove beneficial in the long
run so as to maintain an effective ideal ratio.
 Total asset turnover ratio- In this ratio sales is compared with reference to total assets
so that all necessary measures can be studied in detail. BUPA PLC can use it to increase
its sales by improving the value of total assets of the firm (Sanzo González, 2020).
 Debtor turnover ratio- It is a ratio that helps in determining the period of the amount
that is struck in the market with debtors of the company. BUPA PLC can use it to
decrease the time taken from debtors to recovering the funds that are outstanding so that
it can help in improved supply chain.
 Creditor turnover ratio- This ratio helps in identification of the time amount of
creditors is remained with the firm. BUPA PLC can use it to increase this aspect so that

the amount can be further reinvested at a higher return which can prove beneficial for the
firm in the long run.
 Stock turnover ratio- In this ratio stock is compared with sales or cost of goods sold so
as to analyse the return that they are generating in the competitive market. It can be used
by BUPA PLC to influence the level of stock that the company possesses so that it can
maintain a satisfactory stock well in advance which can help it to grow and prosper in the
industry in which it is operating (Walczak and Pieńkowska-Kamieniecka, 2018).
Profitability ratios- It is a ratio that helps in measuring and determining the profitability of
the company so that it would help it to grow and prosper in the industry in which it is working.
There are many ratios in it that are explained in detail below-
 Gross profit ratio- This ratio evaluates the quantum of gross profit while taking sales as
a base and it helps in analysing the overall performance of the company. BUPA PLC has
maintained a good gross profit margin in the market and thus proved beneficial for the
firm in increasing its sales.
 Net profit ratio- This ratio helps in evaluating the net profit that is got after deducting
other expenses and adding other incomes from gross profit and after comparing it with
sales and thus helping the enterprise to examine the performance of the company. BUPA
PLC has a net profit ratio much higher than other of its competitors that are operating in
the similar market.
 Operating profit ratio- It is a ratio that identifies the operating profit that a firm
generates as compared to its sales as it can be find out after deducting operating expenses
from gross profit. BUPA PLC is not that good in this aspect but still it is very well placed
in the market as compared with its rivals (Tessaromatis, 2018).
 Operating ratio- This ratio helps in examination of the operating cost of the firm taking
its sales generated as a base and thus helping it to evaluate the expenses that it generates
over a period of time. BUPA PLC operates on a low cost that helps it to generate more
amounts of profits so that it can sustain in the market for a longer period of time.
 Return on capital employed- It is an aspect that evaluates the earnings before interest
and tax while taking the firm’s capital employed as base and thus it helps in identifying
the amount of return that the capital is generated within a given period of time. BUPA

PLC has employed a capital much higher than others and also it fetches a good return
making the firm profitability in the market (Tasri and Tasri, 2020).
 Return on equity- This helps in analysing the earnings after tax or net profit taking
equity as its base so that it can be examined that how much return it is giving on the
equity of the company. BUPA PLC gets a considerable amount of return as its net profits
are higher which helps it in doing so.
 Return on equity share fund- This helps in identifying the amount company’s equity
shareholders get by analysing the earnings after tax taking equity shareholders fund as
base as it helps in evaluating the performance of the firm in the long run. BUPA PLC
gives a satisfactory return to its equity shareholders that make this enterprise more
profitable (Kudrna, 2016).
 Return on total assets- It is an aspect which helps in analysing and evaluating the return
that the firm’s assets are generating as compared with the profits that it is getting after
deducting taxes of the government that are levied on it. BUPA PLC’s assets are
generating higher return and all are working towards achievement of the goals of the
organisation.
Investor ratios- These are ratios that helps in analysing and taking decisions about the
investment so that it can become profitable for the investor in the long term. There are a number
of sub parts that are involved in it and all are examined below in detail with reference to the firm
that is BUPA PLC-
 Earnings per share- It is an aspects that is related with the earnings that equity
stakeholders generate on per share held with them and it is also a sign of growth of the
firm if a company is giving higher returns on the shares of the enterprise. BUPA PLC
gives an increased as well as improved return to the shareholders because of higher
profitability of the firm (Tamir and Davidson, 2020).
 Dividend per share- This helps in evaluating the dividend that the company distributes
to its shareholders from the profits that it generated during the course of operations of the
business. BUPA PLC gives dividends to its shareholders on a constant basis which helps
in maintaining its position in the market and also in the eyes of the potential investors.
 Earning yield- This aspect helps in comparing the earning per share with the market
price that is prevailing in the market on per share basis as it is an important factor in

examination of the performance of the company so as to analyse the position of the
company in the market which is highly dynamic and competitive in nature. BUPA PLC
gives higher returns as compared to the market and thus attracting various investors for
the enterprise making it profitable in the industry.
 Dividend yield- It is an aspect that compares the dividend per share that the company is
giving with the market price per share prevailing in the industry and it helps in analysing
the investors that the firm is profitable or not. BUPA PLC’s investors are increasing daily
as it is generating higher return and is also profitable in the industry for a pretty long
time.
 Payout ratio- This helps in analysing and examination of dividend per share distributed
by the company with the earnings that it is generating on per share basis so that investors
can see a true and fair view of the positioning of the firm. BUPA PLC has maintained a
satisfactory payout ratio which helps in gathering investors from all over the world
making firm more profitable (Roseman, Mathe-Soulek and Krawczyk, 2017).
 Retention ratio- It is an aspect that evaluates the profits that are retained by the firm so
that it can be used in tough times or in the future so as to increase the value of the
company. BUPA PLC retains a small portion of its profits with itself so that major
proportion can be distributed among shareholders which can help it to increase the level
of its investors in the market.
 Price earnings ratio- It is a ratio that helps in analysing and evaluating the price per
share of both that is market price per share as well as earnings that the company is getting
on per share so that a clear position of the firm can be identified. BUPA PLC is well
placed in the market and it is well ahead of all the market related concept and thus enjoys
investors in a large number as compared with other companies that are prevalent in the
similar market situation (Huang, 2020).
4. Detailed explanation and analysis of all the factors that are related with short term and long
term business finances that are required in an organisation that is working in a sector of
health and social care
Since both long term and short term business finance are very important as well as
essential for each and every firm that is operating in the current scenario as it helps the company
to expand and sustain in the market for a much longer time frame as compared to its competitors

that are prevalent in the market conditions that are highly competitive and dynamic in nature.
While short term finances are those which helps and carters the needs, requirements, and
demands of the company that are short in nature probably of one year or so whereas long term
finances fulfils the needs and requirements of long term aspect of the company that are more
than one year (Grohmann and Schoofs, 2018). There are a lot of differences among the two
aspects and both are crucial for an enterprise of health and social care as it possesses a lot of
value in the long run and all these differences are explained in detail below in a systematic and
sequential manner-
Long term business finance Short term business finance
It is a type of loan which has a comparative
longer time span period which is generally
more than 1 year.
This is a type of finance which is of 1 year in
nature and is considered of short in term
period.
Cost of raising the funds are higher and
includes many subsequent cost like floatation
cost (Henricks, 2019).
In this cost of raising the finances of the
company are not that much as compared with
long term finance.
These contain various restrictions as well as
there must be a collateral security or asset of
the company that it can mortgage on the behalf
of the raising funds for the firm.
It does not contain much restriction and also
there is no need of collateral security in it as it
is short term in nature.
It is not riskier for the enterprise as its rate of
return remains constant over a period of time
and short term inflation does not impacts its
operations.
It is highly riskier as it is of short term in
nature as there are fluctuations in its rate and
inflation also carriers a potential of affecting it
adversely (Demirguc-Kunt, Klapper and
Singer, 2017).
It can help in raising large amount of funds that
can help the firm to sustain in the market for a
longer time period (Schrand, Ascherl and
Schaefers, 2018).
With the help of it large amounts cannot be
raised as there are many limitations of it and a
company can raise only a limited fund.
A health and social care company can opt for both the ways to generate finance for the
firm so that it can add value to the enterprise in the long run so that it can fight with other
competitors in an effective and efficient manner. All the aspects must be taken into consideration

before taking steps so that it can increase the value rather than damaging and destructing its
image in the industry in which it is operational (Donald, 2016).
5. Examination, analysis, and evaluation of the different sources of finance that are available for
health and social care company
There are a number of different sources of finance for an organisation that is working in
health and social care sector like BUPA PLC and all of them are discussed below briefly-
 Out of pocket payments- These are payments that are made by individuals after using
the services of a company like BUPA PLC and it very important for the company as it
compromises a major part of the sales of the firm and thus it is a source of finance for the
organisation.
 Donor funding- In it funds are donated by a group or people so as to raise funds for the
organisation like BUPA PLC so that it can add to the capital of the firm in the long run.
 Voluntary prepayments- These are payments made voluntarily to the company like
BUPA PLC so as to raise funds for the firm in order to achieve growth in the market in
which it is operational (Galeazzo, Ortiz-de-Mandojana and Delgado-Ceballos, 2020).
TASK 2
1. Detailed examination and explanation of the importance of the cash flow forecasts and
budgets in health and social care enterprise
Cash flow is one of the most important aspect as it is related with cash that impacts the
working of the organisation and for health and social care units it becomes even more crucial
because major transaction of such kind of firms are on cash basis so it is very essential for the
company to analyse and evaluate all the factors in detail so that it can add to the value of the
enterprise. It also enables the company to track its finance allocation so that it can be utilised in
an appropriate manner so as to use the available resources in an effective and efficient way
which further results in improved performance in the long run (Hicks, 2019). Cash flow also
helps in analysing the profits of the company by identifying and examine the expenditure of the
firm so that unnecessary expenses can be reduces in a systematic manner so that it can prove
beneficial for a company of health and social care unit in an impactful way. In a similar way
budgets also carriers a lot of value in the industry of health and social care as it helps in
determining the expenditure that can be incurred in the future by analysing the past aspects in an