Financial Analysis, Appraisal, and Decision Making Reflective Essay

This essay provides a comprehensive financial analysis of several companies, including Samsung, Volkswagen, and Royal Dutch Shell, utilizing their financial statements to assess performance based on turnover, profit, and total assets. The analysis further delves into ratio analysis, comparing companies like Tesco and Marks & Spencer to evaluate their financial positions and liquidity. The essay emphasizes the importance of understanding annual reports and relevant costs in decision-making, particularly in capital investment decisions. It explores techniques such as Net Present Value (NPV), Payback Period, and Internal Rate of Return (IRR) to evaluate potential investment projects. The essay concludes by highlighting how these analytical methods help in comparing companies and making informed decisions for business growth and expansion, supported by references from academic journals and books.

FINANCIAL
ANALYSIS AND
DECISION MAKING

TASK
The essay as under takes in account financial statements which helps to understand the
performance served by various companies such as Samsung, Volkswagen and Royal Dutch shell
(Robson, J. and Peetz, J., 2020). It further takes in account Assessment of Financial ratios which
would help to form a comparison between the chosen organisations. It has been observed by me
that Volkswagen is the biggest company when compared with the two as it has a valuation in
Total assets resulting as 528.609 billion, revenue being 250 billion and operating income as
20.126 billion. It further can be said that investors must opt for making investment in
Volkswagen and it is further recommended that both the companies must find out where they are
lacking behind and improve the process as well. Turnover explains how much the business is
able to produce through its products and services as well. Profit helps to understand the amount
which is being earned by the company after cutting down the costs and expenses as well. Total
assets explains the amount of physical machineries and assets that are being acquired and
possessed by the companies over a duration of time. Ratio analysis helps to understand in what
ways financial position can be examined, what could be its related effectiveness and efficiency.
It also serves as a guide in utilising the funds which are available with the business for investing
them for better purposes. Ratio is computed for giving insights that relates with liquidity,
profitability and solvency as well. Current ratio considered best for any company is 1.5 to 3
which can be calculated by dividing current assets with current liabilities. It is a liquidity ratio
which helps in assessment of capability to pay off short term liabilities or which are due within
one year. Current ratio in case of Tesco company is .73:1 and for Marks and Spencer resulted
as .86:1. Thus it can be said that current assets available with Marks and Spencer is more
compared to Tesco. Annual report are helpful as it is developed such as a document which would
be helpful for public companies would provide data on a annual basis for shareholders that
would explain financial circumstances and operations. General data provided to corporate world,
management related discussions and examination (Zhang and et.al., 2021). It also includes

financial records, statements, balance sheet, cash flow statement and income statement. Relevant
expenses can be described as a managerial accounting which explains costs that are avoidable
and will incur only when thinking of precise decisions which relate to business. The relevant cost
perception would be used in eliminating irrelevant data from a particular decision making
process. These are the costs which would be impacted by a manager's decision. Irrelevant
expenses can be explained which won't change in futuristic course of action for carrying out
decision making. It includes selecting among alternatives. It helps in carrying out decision
making process for identifying all information which are related in case of every alternative.
Relevant data is any information would be having impact on the decisions. Capital investment
decisions include the judgement which is made and carried out by a team in management in
relation to in what ways funds would be used in procuring of capital assets. There are three
decisions which are related to capital investment such as approaches Net present value, Payback
period and internal rate of return. NPV is used for computing the current total worth of a future
stream of paybacks. If the result is positive it states that the discounted present price of all
future related cash inflow and outflow. The payback period is helpful in determining how longer
it would result if the organisation would take enough time for recovering from the investment
made originally. The IRR can be explained as the expected return from a project invested into
(Zhu and et.al., 2018). It also helps in evaluation of projects and plans as well, it is estimated as a
breakeven discount rate of a project or rate of return which reflect how potential a project hold in
case of generating revenues and profits as well. Based on such methods a company is able to
decide whether it would be accepting r considering the project. Hence it would be helpful in
examining if it would be able to generate desired profits or not for carrying out operational
activities and functions in a related company and business for better growth, opportunities and
expansion as well. It further can be said that such methods and approaches are helpful when one
needs to facilitate a comparison between various companies.

REFERENCES
Books and Journals
Robson, J. and Peetz, J., 2020. Gender differences in financial knowledge, attitudes, and
behaviors: Accounting for socioeconomic disparities and psychological traits. Journal of
Consumer Affairs, 54(3), pp.813-835.
Zhang and et.al., 2021. Corporate financial risk assessment and role of big data; New perspective
using fuzzy analytic hierarchy process. Journal for Economic Forecasting, (2), pp.181-
199.
Zhu and et.al., 2018. The Impact of the Global Financial Crisis on the Efficiency and
Performance of Latin American Stock Markets. Available at SSRN 3208090.