Applied Business Finance Report: Financial Management Analysis

This report provides a comprehensive overview of financial management, beginning with a definition and discussion of its core concepts and importance. It delves into the main financial statements, including the income statement, balance sheet, and cash flow statement, explaining their individual ro...Read More

FINANCIAL REPORTING
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Table of Contents
1.0 Introduction................................................................................................................................3
2.0 The concept of Financial Management......................................................................................3
3.0 The financial statements............................................................................................................4
3.1 Income statement...................................................................................................................4
3.2 Balance Sheet.........................................................................................................................5
3.3 Cash Flow Statement.............................................................................................................6
3.4 Ratio Analysis........................................................................................................................6
4.0 Profitability, Liquidity and Efficiency of the company.............................................................7
5.0 How the company can improve the performance......................................................................9
6.0 Conclusion...............................................................................................................................10
7.0 References................................................................................................................................11
Appendices....................................................................................................................................12
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1.0 Introduction
Large trading organizations need to collect assets from multiple sources and use these assets to
their advantage. Better asset management and significant productivity gains require difficult cash
practices and planning. Emergency financing can lead to organizational disorganization with
failed components, duty-free marketing or high creative costs.
In addition, adequate and reasonable funding can provide a variety of benefits to the center.
Corporate representation is generally limited to the way capital goods are collected, used and
distributed. In today's cash-based economy, the importance of cash has again increased due to the
scale of resource development and the way capital is created and developed.
2.0 The concept of Financial Management
Financial management can be characterized as organizing, classifying, coordinating and
managing the financial transactions in society. According to Gutman and Dougal, financial
management means "an organization that organizes, attracts, manages and manages the assets
used in the business." He is concerned about legally acquiring and using assets.
Financial management itself means the proper understanding and management, distribution and
receipt of an organization's resources and liabilities, including oversight of things like
consumption, revenue, sales and accounts payable, revenues and benefits.
Critical financial management includes all of the above as well as ongoing evaluation,
organization and coordination to focus and focus on long-term goals. As soon as the organization
becomes aware of the oversight, it handles temporary business in a way that does not destroy the
long-term vision. Key financial management includes the review and review of the company's
capital structure, debt combinations, and value accounts used to secure the company's long-term
liquidity.
3.0 The financial statements
A budget overview is a report summarizing important financial information for a company.
There are three main types of financial statements: financial statements, wages and income
statements. In terms of a marketing strategy for providing financial reporting to external
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customers (e.g. sponsors or loan sharks), you need to develop a budget overview according to
one of the important accounting structures. Because these systems allow some tax exemptions,
other companies' declarations may differ significantly in similar industries. You can check the
accuracy and fairness of budget reports provided to third party meetings.
3.1 Income statement
The most important place to find a bank or reviewer is often to call in installments. Paid
currencies show industry results for each period and show the highest level of contract revenue.
Currently, Cost of Goods Offer (COGS) cases are deducted against the net benefit. From then on,
all the benefits of other operating costs help you get the most out of the “reality” benefits of your
business, as the business has pointed out.
The reward value depends on four major components: wages, costs, benefits and barriers. It does
not report cash and cash income (real cash transactions for advance payments) or cash for
installment/non-cash payments (real cash purchases versus MasterCard purchases). Start with a
business tone, then measure your total revenue, and finally your earnings per share (EPS).
Essentially, it provides a diagram of how the perceived net gain at a meeting becomes a net
advantage (advantage or disadvantage).
Registered communities follow a step-by-step income statement that differentiates guaranteed
wages, labor costs, and benefits from non-profit wages, non-labor costs, and non-profit
government costs and provides a much more subtle definition. Essentially, different levels of
efficiencies are introduced into different tiered payrolls using four distinct business levels:
overall, operational, preliminary and follow-up estimates. As you can discover almost
immediately by examining the structure, these results will help you understand how salaries and
benefits move from one level to another. For example, higher gross salaries with lower wages
mean higher costs, while higher salaries compared to wages and less salary after salaries indicate
lost wages and other non-recurring costs.
3.2 Balance Sheet
Financial statements show the association's assets, liabilities, and profits over time. As you
know, assets must increase their value and accountability. The size of the asset starts in terms of
cash and its balance should be close to the salary limit. The statement of assets at this point
shows the progress of each critical table from one period to the next. The net increase in
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administrative payroll flow is passed to the sales register as payroll adjustments (adjusted for
benefits).
The asset report is a very quick dashboard to communicate the status of a community item.
Without help, he cannot find new cases over time. Therefore, the accounting ratio does not have
to be exactly the same as before. Similarly, the unions of different societies must be contrasted in
the realm of comparison. Few exercises have a better way of supervising grants.
Assets
In the resources section, end-to-end items are recorded depending on liquidity, i.e. how
efficiently you can convert them into cash. It is far from current resources and can be converted
within a year. You cannot create lost or delayed assets.
Liabilities
External collection obligations are a financial resource, from the costs owed to the supplier to the
undoubted level of obligations imposed on residents, offices, and the tax rates paid. Current
liabilities are recurring liabilities that are reported at a specific time. The agreement must be
suspended once next year.
Shareholders’ equity
Financial aid is a measure of the money owed by business leaders and means financial aid. It is
also referred to as a "net resource" given the fact that it has less obligations to non-financial
patrons compared to the total resources of society.
Withholding tax is the total revenue that society uses to reinvest in a business or focus on risk.
The rest is donated to the sponsor. Shares held are shares redeemed by society It's usually sold
later and you don't have too much time to think about collecting or storing cash to differentiate
collateral.
Many associations issue preferred shares, which are independently registered as common shares
below the value of financial assistance. (The typical cost is usually $0.01.) The "Common
Shares" and "Preferences" accounts are intended to expand the normal impulse force based on
the number of offers offered.
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3.3 Cash Flow Statement
In the income definition, the net result is deducted and reimbursed as a non-cash expense. You
can download and use pages and remove cash using sequences that have not yet been recognized.
Payroll announcements show real money adjustments in the long run, such as fundamental
balances and recent financial balances.
CFS allows money to see how social activities are carried out, where money comes from and
how it is used. CFS is important in that it helps banks choose whether or not their society's cash
balance is strong. The bank can then use CFS to determine the amount of cash (liquidity)
available to subsidize the association's operating expenses and fulfill its obligations.
3.4 Ratio Analysis
Ratio analysis is the study of an organization's cost reporting complexity. Standard validation
is used to evaluate various content dependent variables such as liquidity, business efficiency
and productivity. This type of expertise is especially important for non-business
professionals because the underlying knowledge of connectivity is a spending pattern.
Reasonable reports are less important to real clinics that better understand more detailed
information about society.
Integrated tax advice is the best way to understand the risks and benefits of your organization
by reviewing the financial information cited. It is very important to classify the review as an
intermediary in order to assess and review credit risk and handle hierarchical valuations. The
scholarship or remuneration is derived from the society's assessment report and is an item
showing the overall rating for the numerical merit chosen in these expense reports. This is
especially useful when used in two different ways.
1. Trend line: Go through each section in minutes to see if there are examples in the
information. This model is able to identify financial issues that would not have been
evident whether or not payments were observed over a given period. You can also use
the sample row to evaluate the future completion of your current scholarship.
2. Industry Expertise: Calculate matching payments for competitors in similar industries
and analyze the results of each analyzed collection. Given that these services tend to
operate with relative productivity relative to their underlying resources and have
equal capital development, the results of the scale analysis should be the same. If not,
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it reveals a common problem and vice versa. It is an organization's ability to reap
benefits that far exceed the rest of the enterprise. Business research skills are
commonly used in the industry to map the space for understanding important (and
least important) associations.
In any case, you can trust that the shared control will be issued later. A fertile audience tends
to attract everyone in areas where lack of space can fundamentally trigger stock market
closures. Banks can use payment inquiry appropriately, and all figures that determine the size
of the scholarship are presented in the consolidated expense report.
4.0 Profitability, Liquidity and Efficiency of the company
Profitability ratios
2016:
Net profit margin = 43.057
189,711 ×100
= 22.69%
Gross profit margin = 81,125
189,711 ×100
= 42.76%
2015:
Net profit margin = 18,987
179,587 ×100
= 10.57%
Gross profit margin = 80,612
179,587 ×100
= 44.88%
The above result shows that company has improved its net profit margin but gives bad
performance in terms of gross profit margin.
Liquidity ratios
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Current ratio = Current assets
Current liabilities
Quick ratio = Current assets−Stock
Current liabilities
2016:
Current ratio = 84,349
37,928 =2.22
Quick ratio = 84,349−28,571
37,928 =1.47
The result shows that company has maintained idol ratio in terms of current ratio and quick ratio;
this indicates proper utilization of funds by the company.
Efficiency Ratio
2016:
Sales to capital employed
= Sales revenue
Share capital +Reserves+non−current liabilities
= 189,711
115,719 =1.63׿
Sales per employee
= Sales revenue
Number of employees = 189,711
649 =292
From the above analysis, it can be concluded that the company is using its employees efficiently
and maintaining operational productivity. In addition, the company's sales revenue is 1.63 times
higher than the capital used. So, to get more money from your business, you need to increase
your sales.
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5.0 How the company can improve the performance
To build up a business show, he should consider assessing and assessing the association's present
show actually like the association's future objectives set by the association's system. Moreover,
the exhibition rating shows the organization's capacity to advance through its endeavors and
execution following depends on a proportion of advantages, call-to-stock pay or capital.
McLaney and Atrill (2013) contend that fundamental work in building up a business show
requires appropriate cash the executives procedure, which is likewise a critical piece of a
powerful business that aides elements. To decide the correct alternatives and increment the
benefit of the association, chiefs need to comprehend the business profitability and effectiveness
model through exchange and utilization.
Authoritative advantages ought to be expanded by expanding operational profitability while
diminishing expenses like materials, work and imaginative expenses.
6.0 Conclusion
In view of above examination, it tends to be inferred that; monetary administration is a
fundamental piece of each organization's bookkeeping report. It assists an association with
estimating its exhibition inside industry or past year points of view.
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7.0 References
Atrill, P. and McLaney, E., 2013. Financial accounting for decision makers. Pearson Higher Ed.
Jain, P.K., Singh, S. and Yadav, S.S., 2013. Financial management practices. In An empirical
study of Indian corporates (Vol. 3, pp. 265-278). Springer New Delhi.
Hunjra, A.I., Butt, B.Z. and Rehman, K.U., 2010. Financial management practices and their
impact on organizational performance. World Applied Sciences Journal, 9(9), pp.997-1002.
Fraser, L.M., Ormiston, A. and Fraser, L.M., 2016. Understanding financial statements. Boston:
Pearson.
Higgins, R.C. and Reimers, M., 1995. Analysis for financial management (No. s 53). Chicago:
Irwin.
Peterson, P.P. and Fabozzi, F.J., 1999. Analysis of financial statements (Vol. 54). John Wiley &
Sons.
Lessambo, F.I., 2018. Financial Statements. Analysis and Reporting.
Palepu, K.G., Healy, P.M., Wright, S., Bradbury, M. and Coulton, J., 2020. Business analysis
and valuation: Using financial statements. Cengage AU.
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Appendices
Income statement
2016
Turnover 3 189,711
Less cost of sales:
Material Cost 42,597
Production Cost 15,231
Labour Cost 50,758
108,586
Gross profit 81,125
Less Expenses:
Administrative expenses 13,751
Other operating overheads 22,374
Interest 1,943
Total Overheads 4 38,068
Profit/(loss) for the financial year 43,057
Calculations
The NetProfitfortheyear 2016,is£?(2015:£18,987,000).Comparatives
TheCompany’skeyfinancialandotherperformanceindicatorsduringtheyearwereasfollows:
2016
£’000
2015
£’000
Change
%
Turnover(continuingoperations) 189,711 179,587 +5.6%
Profitfor the financial year 43,057 18,987 + 127%
%Shareholder’sequity 83,815 63,057 +32.9%
Currentassetsas%ofcurrentliabilities 222% 304% -82%
Customersatisfaction 4.5 4.1 +10%
Averagenumberofemployees 649 618 +5%
Turnoverfromcontinuingoperationsincreasedby5.6%duringtheyear,primarilyduetotheacquisitionoftheE
xtinguishersbusinesson1May2015,whichmadeafullyearscontributionin 2016.
2016
Gross Profit = £81,125
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Net Profit = £43,057
Net Profit increased in 2016by 127%duringtheyear.
Shareholders’equityincreasedby32.9%by £20758.
Thecompany’s“quickratio”(CurrentAssets(excluding stock) divided byCurrentLiabilities)is 1.47
Thecompany’s“current ratio”(Current Assets divided by Current Liabilities. )is 2.22
PLEASE SHOW YOUR WORKING OUT OF EACH OF THESE
CALCULATIONS
Quick ratio =
¿ Current assets−stocks
Current liabilities
= 84,349−28,571
37,928 = 1.47
Current ratio = Current assets
Current laibilities
= 84,349
37,928 = 2.22
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