Financial Decision Making Report: SKANSA PLC Financial Analysis

This report provides a comprehensive analysis of financial decision-making within SKANSA PLC. It begins with an introduction to financial decision-making and its importance for effective business investment. The report then explores the critical roles and functions of accounting and finance within the company, including financial planning, managerial accounting, financial accounting, and revenue management. A significant portion of the report is dedicated to the calculation and interpretation of key financial ratios, such as Return on Capital Employed (ROCE), to assess SKANSA PLC's financial performance. The report examines the company's performance in 2018 and 2019, offering insights into its profitability and efficiency. The report also covers aspects like investment valuation, budgeting, and fraud prevention, highlighting their significance in sound financial management. The conclusion summarizes the key findings and reinforces the importance of effective financial decision-making for the success of SKANSA PLC.

Financial Decision Making

Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Importance of Accounting and Finance functions, duties and roles in SKANSA PLC:.............3
TASK 2............................................................................................................................................7
Calculation of ratios for the company and comment on performance of company.....................7
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Financial decision-making refers to a collection of actions or a process for determining the
benefits and disadvantages of actions in relation to the use of resources. The main purpose of this
latest study is to illustrate all the important factors that need to be taken into account by all
companies in an effort to make effective business investment decisions (Agarwal and Mazumder,
2013). Business decision provides help to maximise the financial capital needed to meet the
company's priorities before a sufficient level of corporate financial success is reached. It provides
both a practical and philosophical framework for the financial judgement phase. Advertising,
acquisitions, distributions and control of net-working capital are the core facets of all business
decision. The current thesis is focused primarily on SKANSA PLC, who was founded in 1984 as
a UK-based building company. The research report covers a detailed assessment of the financial
plan of the company using accounting ratios.
TASK 1
Importance of Accounting and Finance functions, duties and roles in SKANSA PLC:
In order to accomplish organisational purposes, accounting and funding all these principles play
an overall primary function for the organisation that is used to operate in a way. The manner in
which a company's financial results are recognised, acquired, classified and published is known
to be finance that is necessary for making the required strategic decisions (Lusardi, 2012). The
financial activities and the details that provide the necessary details and to monitor the activities
must be analysed by every company. In the case of SKANSKA PLC, the main roles of both
corporate finance are being used by the management to track their business by measuring both
company-relevant revenues and expenditures to increase performance.
Financial planning: This is defined as the main business feature for the financial management
and preparing of the company and also creating expenditures with the aid of this. In the
SKANSKA business, managers are responsible for executing the financial management system
by understanding both business and audit activities.
Managerial Accounting: Which is the method of audit formulation, accounting and financial
process control and company reports collection. These tasks are carried out by the SKANSKA
government to help effective management decisions through the collection of monetary and
essential documents.

Financial accounting: it involves the keeping of accounting documents on all payments, use of
the dual accounting information system and the preparing of final reports which are necessary for
regulatory reporting, brokerage firm and regulatory agencies to meet the different governmental
requirements.
Supporting corporate policy and developing financial policies: The financial manager is
responsible for managing a financial climate that promotes financial and business planning (Nga,
and Yien, 2013). In order to accomplish the mission of the company to have the organization
performance needed to seize the opportunities, the best mix of shortened and lengthier financing
and capital tools should be made available. Both management have the primary role of producing
value, and the financial police's key points are to help them to do this.
Earnings and expense monitoring: accounting finance is a crucial feature of the organization that
wants it to track the income and losses incurred or currently generated in the company.
Classification of expenses and control of the purpose is essential for the agency. Administration
hires accounting & financial systems in the SKANSKA Organization to track profits and also
costs that lead to improving competitiveness.
Sound and productive business planning: in the organisation, finances and accounting procedures
are needed as they help to create effective strategies and techniques that can enhance the
operation of the competitive environment and meet the goals. In SKANSKA PLC, there is a
substantial need for the multiple administrative functions to be successfully executed.
Administration focuses mainly on fund management, sales, market growth, the establishment of
planned performance and stock level calculation in this sense, which helps to assess the
inventory levels.
Business utilization of resources: multiple tasks are carried out in the organisation, so
management need to employ accountant elements that help them to handle corporate assets and
assign resources to these various actions in order to accomplish the business goal. SKANSKA
PLC management use accounting & financial data to identify and distribute all available business
tools to maximise productivity with optimum resource utilization (Brahmana, Hooy and Ahmad,
2012).
Long-term priorities action plan: the organisation aims to develop and develop its activities to a
wide extent as well as to fulfil a vision. Managers are expected to formulate long-term plans in

order to achieve the same. But in industry, a lengthy plan may be executed by an efficient action
plan that incorporates finance and business procedures and gathers information for this purpose.
Supervisors use financial data in SKANSKA to help their task plan to meet longer-term targets.
Managing and raising finances: funds are necessary for beginning and continuing to run an
operation, so corporate administrators have to assess the adequacy of company funds to
efficiently operate business processes. In this situation, financial management are essential for
them to identify the precise need of funds, monitor the distribution of funds inside the
organisation and identify the successful sources of funds. SKANSKA's management uses
financial and accounting systems to efficiently track finances, preserve the corporation's
appropriate liquidity status, and determine the best way to collect funds when possible.
Revenue Management: This technique is a key programme for those related to money or
marketable securities implemented by the accounting department. The sales management
technique requires the amount of obligation that can be undertaken at any given time period or
length by the company (MacLean and Ziemba, 2013). In general revenue activities and
management are handled by Assistant Finance Manager or Junior Accountant, while any aspect
of FA is managed by Chief Financial Officer. As a building company to ensure that any
infrastructure project has the expected revenue volume, SKANSKA PLC must have sufficient
sales power. SKANSKA PLC will also need appropriate protocols of revenue forecasting to be
accurate and less reliant on expectations.
Method of investment valuation: this is a methodology developed by the finance and accounting
section, a very valuable marketing process. As it helps the shareholder to decide the results of the
portfolio, the investor may use the investment valuation approach to recognise the right choice
between choices. SKANSKA PLC is a very well building company that retains a significant
investment portfolio. In order to retain large shareholders and recruit new shareholders,
SKANSKA's finance and business divisions must build effective financial analysis advertising to
engage existing investment institutions and investment advisors to the sector.
Establishing Accounting Policies and Procedures Manual: the establishment of inventory
valuation that regulates all accounting and financial activities is the main duties of the finance
and business section. These measures would verify that all transactions are carried through
externally and internally through the industry. Since such strategies tend to be approved by
senior management, they are initially established by the division of accounting and finance.

Financial reporting political choices are guidelines established by the division of corporate
finance. For SKANSKA, accounting standards are very important, as they would help the
organisation to keep track on its revenue. The most important things to note to manage include
tracking transfers, because losing track of such a single transaction would mess with the
corporation's whole financial sector.
Budgeting: This is one of the key pillars of every enterprise. This needs to be done successfully,
and the brand growth ultimately depends on how expenditures are generated efficiently. As it
keeps a comprehensive list of estimates within the business, financial planning is a key function
of the accounting & financial division (Kramer and Weber, 2012). The Financial Department
was able to review the numbers and analyse the actual condition of the business. Budgets help
clients to foresee a potential vision in such a manner that the organisation needs to be efficient
enough to work properly. For all smaller or larger businesses, finance is essential, so SKANSKA
PLC, as the well big company, needs much more financial planning to meet the demands of
market competition. SKANSKA PLC. The goals to be set, together with the rival's position, must
be calculated in compliance with current industry evaluations. Accurate forecasting is not
possible without appropriate budgeting strategies.
Eradicating fraud: Avoiding fraud and stressing transparency in all dealings is one of the main
duties of auditors within a business. For top management, it is difficult to stop fraud under their
own. For the prevention of theft, upper management depends heavily on finance and business
departments. As the finance department manages inflows and outflows, the department should be
solely responsible as higher oversight brings significant obligations. The bigger the company's
size, the higher the employees and the greater the corporation's risk of corruption. SKANSKA
PLC is an immense business, and it is much tougher for a major corporation to deal with fraud.
To help SKANSKA PLC to eliminate bribery as a whole, control and tax departments must hold
a close eye on transparency.
In order to stay an efficient business unit, the accounting & finance department of SKANSKA
PLC should accept the duties and responsibilities listed. For the development of business, the
Finance Department has a strong degree of importance. It's why it has a greater responsibility to
develop the best tactics and approaches to ensure that the aim of the business is accomplished as
necessary. SKANSKA is more capable of retaining its position or raising it to a whole new level

by accurately applying the techniques and procedures recommended by the accounting &
financial department. Accounting-and-finance activities are important for the analysis,
maintenance and control of all business-related financial processes and for the efficiency of all
operations (McLaughlin and Somerville, 2013). In order to create and run a business, it is
necessary to have a good understanding of facets of financial management that take place when
operating within the company, so that they can be properly handled.
TASK 2
Calculation of ratios for the company and comment on performance of company
Ratio analysis: - Through analysing the financial statements including the financial statements,
risk assessment is a systematic way of obtaining insight into to the stability, operating
performance, and profitability of the business (Samanez-Larkin, 2013). A foundation of
quantitative equity valuation is profitability ratios. Ratios are points of reference between
businesses. Inside a market, they measure stocks. Similarly, they measure a corporation against
the historic events today. In most situations, knowing the guiding ratios of factors is also
essential, as administration has the versatility to adjust its approach at times to make the portfolio
and business ratios more appealing. In addition, ratios are not usually used in isolation, or in
conjunction with other proportions. In any of the four generally listed categories, getting a clear
idea of the ratios would give you a detailed view of the business from multiple angles and help
you spot possible red flags. Through scrutinising previous and present financial accounts,
investors and analysts use ratio research to assess the financial performance of businesses.
Comparison statistics can indicate how a corporation operates over time which can be used to
predict possible future results. This information will also correlate the fiscal status of an
organisation with market trends when assessing how a company matches up against firms in the
same sector. Below ratio analysis of SKANSKA plc is done below in such manner:
Return on capital employed:
Particulars/Details Year 2018 Year 2019
Net profits 600 675
Capital employed 3825 5850

ROCE: Net profit /
Capital Employed *
100
600 / 3825
* 100 =
15.69
675 / 5850
*100 =
11.54
Working notes:
Calculation of capital employed
Particulars/Details Year 2018 Year 2019
Total assets 4470 8070
Less: Current liabilities 645 2220
Capital employed =
Total Assets less total
current liabilities 3825 5850
ROCE advises executives on how best an organisation manages its money. ROCE should be
used as a basic study for management to assess whether or not firms use their resources well or
not. Returns on investment money, or ROCE, are a lengthy profitability ratio that measures how
easily an organisation uses its capital funds. The data depicts the production generated by a
pound employ. This was measured by analysing the different ratios of the SKANSA PLC group
that the efficiency of the company was very high in 2018 relative to 2019. The results of the
aforementioned ratios suggest that the return on equity spent in 2018 was about 15.69 and
declined to 11.54 in the subsequent year. This suggests that the firm is losing the competitive
advantage as this reduction in ROCE reveals that the productivity of the company in producing
returns/yield has decreased over the time.
Net profit margin:
Particulars/Details Year 2018 Year 2019
Net profit 600 675
Sales 4800 6000

Net profit Margin = Net
profit / Total
sales/revenue * 100
= 600 /
4800 *100
= 12.5 %
= 675 /
6000 =
11.25 %
The margin of the NP implies the margin remaining to owners, i.e. investors. It measures the
overall productivity of the organisation, except gross profit, which estimates the company's
operating output. Reasonable net profit margins can only be created if the bulk of activities are
successfully carried out (Carlin, Gervais and Manso, 2013). This provides a partnership between
net earned profit and net profits. The profitability factor, which is measured as a variable and
thus multiplies the outcome by 100, is the net gain ratio. The net profit ratio of the Company in
2018 was 12.5, which declined to 11.25 in 2019, reflecting a decreasing trend in the degree of
profitability. This means that the company's capacity to obtain net profits from the operations of
the business has been diminished. This declining trend in profitability suggests that the
productivity of the company in achieving net income has been decreased.
Current ratio:
Particulars/Details Year 2018 Year 2019
Current assets 1515 2070
Current liabilities 645 2220
Current Ratio =
Current Assets /
Current Liabilities
= 1515 /
645 = 2.35
= 2020 /
2220 = 0.93
The current ratio is the calculation that determines an enterprise's ability to meet its current
liabilities with revenue collected from its current assets. These are calculated by splitting the
total assets according to the current liabilities of the company. The current ratio compares current
assets with current business liabilities and tells us that the amount of current assets is sufficient to
meet existing business obligations. There is actually no particular effective current ratio, because
when measured in the perspective of the company's competition and its competitors, ratios are
more relevant. There is a substantial reduction in the current business ratio of 2.35 in 2018,

which decreased dramatically to 0.93, suggesting a diminishing trend in the ratio that measures a
company liquidity situation. In 2019, this unidirectional pattern in the current ratio under 2
indicates that the brief liquidity status of the group is not strong. This reduction is attributed to a
higher rise in current liabilities relative to variation in current liabilities.
Average Receivable days/ Debtors collection period:
Particulars/Details Year 2018 Year 2019
Account receivables 900 1200
Annual total sale 4800 6000
Average Receivable
days = Accounts
Receivables / Total
credit sales * 365 days
900 / 4800
* 365 =
68.44 or 68
days
1200 / 6000
* 365 days
= 73 days
Accounts receivable cycles, also alluded to as deferred tax days, are basically the days during
which customers earn credit income (Wood, Downer, Lees and Toberman, 2012). For
management to assess both collection quality and cash receipts assessment, this ratio is very
important. The receivable period of the account measures the average amount of days usually
charged to the firm by credit customers. The lesser amount of days expressed the good
compilation of credit check performance, and the lengthy duration of times was a prolonged
length of time. The account receivable time for the company was 68.44 days, which was lifted to
73 days that is not a good indication for the business. This upward pattern in the ratio of the
efficacy of the business in recovering its receivable duties form account has been reduced.
Average Payable days/ Creditors collection period:
Particulars/Details Year 2018 Year 2019
Account payables 570 2100
Cost of goods sales 3900 5250
Average Payable days = = 570 / = 2100 /

Accounts Payables /
Cost of goods sold * 365
3900 * 365
= 53.35
5250 * 365
= 146
Accounts payable days are liquidity metric in finance that tests how quickly a firm pays off
lenders (suppliers). The estimated period of settlement indicates the average amount of time the
corporation needs to make loans to creditors (Zaleskiewicz, Gasiorowska and Kesebir, 2013).
This is calculated by estimating the number of elderly days per year depending on the creditors'
turnover margin. Services In 2018, due business days were 53.35 days, hitting 146 days with a
wide difference. This big rise in payable days in liabilities shows that the shorter-term financial
performance of the business is not good as the firm makes transactions to its vendors.
A cumulative review of all the ratios indicates that the efficiency of the business in 2019 has
decreased relative to 2018. The productivity position of the organization has decreased over the
time as well as also there is a reduction in ROCE, pointing out the decrease in the capital
structure.
CONCLUSION
From the aforementioned project report, it was concluded that the financial judgement method is
a critical aspect that must be considered by all firms as it facilitates the successful achievement
of both lengthy and shorter-term objectives. For both businesses, all accounting and financial
functions, duties and standards are very important, since they can contribute to the efficient
execution of corporate and operational operations. It is very helpful for companies to focus the
assessment of the financial ratios when seeking to determine the financial condition of the
company. The ROCE, the NP margin, the present ratio, the deferred revenue recovery period as
well as the repayment term are the different metrics that can be used to determine the company's
financial position.

REFERENCES
Agarwal, S. and Mazumder, B., 2013. Cognitive abilities and household financial decision
making. American Economic Journal: Applied Economics, 5(1), pp.193-207.
Lusardi, A., 2012. Numeracy, financial literacy, and financial decision-making (No. w17821).
National Bureau of Economic Research.
Nga, J.K. and Yien, L.K., 2013. The influence of personality trait and demographics on financial
decision making among Generation Y. Young Consumers.
Brahmana, R.K., Hooy, C.W. and Ahmad, Z., 2012. Psychological factors on irrational financial
decision making. Humanomics.
MacLean, L.C. and Ziemba, W.T., 2013. Handbook of the fundamentals of financial decision
making (Vol. 4). World Scientific.
Kramer, L.A. and Weber, J.M., 2012. This is your portfolio on winter: Seasonal affective
disorder and risk aversion in financial decision making. Social Psychological and
Personality Science, 3(2), pp.193-199.
McLaughlin, O. and Somerville, J., 2013. Choice blindness in financial decision
making. Judgment and Decision Making, 8(5), p.577.
Samanez-Larkin, G.R., 2013. Financial decision making and the aging brain. APS
observer, 26(5), p.30.
Carlin, B.I., Gervais, S. and Manso, G., 2013. Libertarian paternalism, information production,
and financial decision making. The Review of Financial Studies, 26(9), pp.2204-2228.
Wood, A., Downer, K., Lees, B. and Toberman, A., 2012. Household financial decision making:
Qualitative research with couples. Department for Work and Pensions Research
Report, 805.
Zaleskiewicz, T., Gasiorowska, A. and Kesebir, P., 2013. Saving can save from death anxiety:
Mortality salience and financial decision-making. PloS one, 8(11), p.e79407.