Detailed Financial Analysis and Decision Making Report for SKANSKA PLC

This report provides a comprehensive analysis of financial decision-making within SKANSKA PLC. It begins with an introduction highlighting the importance of financial decisions and the competitive market landscape. The report then details the functions, roles, and duties of accounting and finance departments, emphasizing their significance in maintaining a company's competitive edge. The analysis extends to key financial ratios, including Return on Capital Employed (ROCE), Net Profit Margin, and the Current Ratio, providing calculations and interpretations for both 2018 and 2019. The report evaluates the company's performance based on these ratios, offering insights into its financial health and suggesting areas for improvement, particularly concerning the decline in the current ratio and net profit margin. The conclusion summarizes the key findings, reinforcing the critical role of financial management in SKANSKA PLC's success.

Financial decision
making

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Detailed identification and evaluation of the functions, roles, and duties that carriers a lot of
importance regarding accounting and financial part of the business...........................................1
TASK2.............................................................................................................................................3
Identification, analysis, and evaluations of the facts and figures of the company with its
interpretation................................................................................................................................3
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Financial decision making is a really significant as well as critical aspect because it is related
to the financial portion of the business, which is among the most important parts of a company
(Andarsari and Ningtyas, 2019). As a result, it is critical to analyse and assess all of the variables
that are related to it in a very reliable, specific, systematic, and consistent way so that it can
create value to the company’s long - term. Any business that operates in the current market
climate, which is both competitive and complex in nature, keeps a close eye on its finance
department so that it can assist in making appropriate and relevant decisions that will benefit the
company in the long run. The company studied in this study is SKANSKA PLC, which has been
operating in the United Kingdom for a long time and has thus accumulated a significant market
share. This report includes a thorough examination of all of the tasks, positions, and
responsibilities that an accountant and finance department employees perform for the company.
Apart from that, the study examines and calculates various types of ratios that are currently in
use and are relevant from a business standpoint, as well as providing an accurate and efficient
understanding of the same.
TASK 1
Detailed identification and evaluation of the functions, roles, and duties that carriers a lot of
importance regarding accounting and financial part of the business
There are a variety of activities that are carried out in a business firm that are very important
because they aid in the improvement of the organisation as a whole, allowing it to better sustain
and withstand the current market climate, which is highly competitive and complex in nature. It
also benefits the company because it allows it to stay ahead of all of its competitors in a similar
market by analysing and assessing all facets of the industry in a way that adds to the firm's long-
term value (Blue, O’Brien and Makar, 2018). Accounting and finance are two principles that are
very relevant for a business because one helps in managing and keeping records and the other
helps in making appropriate decisions that can help the company expand and succeed in the
market in which it operates. While the other makes decisions about the firm's financial status and
assists in the distribution of available capital, all within a short time period and with complete
consistency and effectiveness. As a result, both factors play a critical role in carrying out the

operations of the business, and their positions, functions, and responsibilities are discussed in
detail below with regard to the company SKANSKA PLC-
Accounting- It is one of the most important activities that a company must engage in in order
to remain competitive in the market for an extended period of time. It is primarily thought of as a
method of identifying, capturing, summarising, analysing, assessing, studying, and making
pertinent decisions in order to assist a company in increasing its profitability in the industry.
SKANSKA PLC has a team of professionals in this field who are sufficiently qualified to assist
in effectively and efficiently tracking the company's transactions so that it can contribute to the
organization's long-term success. Its positions, functions, and responsibilities are detailed below-
 Functions- An accountant's main job is to keep track of all of the events that take place
in a company in an accurate and precise manner so that it can expand and prosper in the
market. SKANSKA PLC has recruited highly skilled and intelligent workers in this
sector so that their knowledge and skills can be put to work in the company to help
achieve the desired goals and objectives (Cardoso, de Oliveira Leite and de Aquino,
2018).
 Duties- The primary responsibility of an accountant is to review the books of accounts
and cross-check and validate all sources in detail in order to reduce the risk of mistakes
and fraud, allowing for the most efficient use of funds. The accountant at SKANSKA
PLC also performs the aforementioned duties in a professional manner in order to
contribute to the company's long-term development.
 Roles- The primary role of an accountant is to make required and reasonable decisions
that will benefit the business, and the accountants at SKANSKA PLC perform all of these
functions efficiently.
Finance- It is a critical feature since it is linked to the organization's funds and thus must be
handled with the utmost efficacy and precision. SKANSKA PLC pays close attention to this
factor and hires talented employees to work in this field, and its positions, functions, and
responsibilities are detailed below-
 Functions- A finance manager's primary responsibility is to monitor and assess cash
inflows and outflows in order to minimise excessive waste. SKANSKA PLC has a team
of intellectuals working on this, ensuring that all of the company's resources are used to
their full potential (Cohen, 2016).

 Duties- A finance manager's primary responsibility is to develop and execute budgets
that are appropriate for the company's long-term viability in the face of fierce
competition. SKANSKA PLC's managers are also responsible for maintaining an
accurate balance sheet and income statement in order to provide a real and realistic image
of the business.
 Roles- The key role of a finance team manager is to ensure that the company's resources
are completely utilised and that there is no or minimal wastage in order to maximise
profitability, and SKANSKA PLC's managers do the same thing, which is one of the big
reasons for the company's enormous success (Eichelberger, Mattioli and Foxhoven,
2017).
TASK2
Identification, analysis, and evaluations of the facts and figures of the company with its
interpretation
Financial statements are one of the most important and crucial aspects for any business firm
functioning in the current market scenario, regardless of the industry it operates, since they assist
in making reasonable and relevant risk - based decisions, and that too in a suitable alternative, so
that it can meet the needs, requirements, and demands of the higher authorities of the firm
(Fijałkowska, Zyznarska-Dworczak and Garsztka, 2018). It also assists in analysing and
assessing the true financial state of the company so that a decision can be made and adopted that
will benefit the company in strengthening its market positioning and condition, as well as
helping it to stand out from all of its competitors in the same industry. Aside from that, financial
statements assist in evaluating the overall success of the organisation and the individuals who
work for it; so that performance can be judged on a variety of factors and the best one can be
recognised, motivating others to give their all for the company. SKANSKA PLC takes its
financial department very seriously and hires a team of specialists in that area so that their
expertise skills can be applied to the firm's long-term growth and development. Many businesses
calculate a variety of different ratios to analyse their financial condition, and since SKANSKA
PLC operates on a large scale, it is much more important to assess all of those ratios in a
comprehensive manner, so they are all measured and interpreted in detail below-

 Return on capital employed- It is one of the most significant ratios because it aids in
deciding the return that capital invested in the company generates over time. If it is
determined that the capital is not yielding the expected returns, adequate plans are placed
in place to ensure that the company's productivity is maximised in the long run. The most
desirable rate of return is about 15%, while anything below that is not considered very
good for the company and anything above 15% is considered extremely beneficial to the
company. The estimation of this ratio by the company SKANSKA PLC is shown below,
along with related explanation.
Particulars 2018 2019
EBIT 1125 1650
Capital employed 3825 5850
ROCE= EBIT/ Capital
employed*100 29.41176 28.20513
According to the above calculations, the business is doing extremely well in this regard, as its
rate of return on capital employed was about 29 percent in 2018, though it has since fallen to 28
percent, but it is still quite satisfactory, and the firm's capital is producing strong returns in the
industry. The key explanation for this is the company's intact capital rate, which has remained
consistent over time with little fluctuation, and is therefore the reason it is fetching a good price
in the market and with complete consistency. As a result, SKANSKA PLC is in a very good
position in terms of the return on capital it generates in the market (Krishnan, 2018).
 Net profit margin- It is a ratio that relates to the total sum left with the corporation
after paying all of the shareholders and deducting all of the expenses incurred when
conducting the day-to-day operations that the business firm provides in the sector.
It is a critical feature because it aids in identifying the income that the company
generates over time, allowing necessary steps and decisions to be made if the
company is falling behind in its results. This ratio's optimal profit margin rate is
15%, and anything above that is considered very positive for the business, while
anything below that is not as profitable. The above-mentioned firm's estimate, along
with its explanation, is detailed below-
Particulars 2018 2019
Net profit 600 675

Sales 4800 6000
Net profit margin= Net
profit/Sales*100
12.5 11.25
From the above calculations, it must be said that the company, SKANSKA PLC, is
performing poorly. It was not as bad in 2018, when the net profit margin was 12.5 percent, but in
2019, it fell below 12 percent and is now at 11.25 percent, which is not quite good by the
company's standards. The primary explanation for the decrease in net profit margin is that while
revenue grew, profit levels did not rise in lockstep, resulting in a decrease in the organization's
profit margin. It must address this issue as soon as possible so that it does not impede the
business firm's activities in the long run, and the company's management must make suitable
arrangements to address this issue effectively (Münscher, Vetter and Scheuerle, 2016).
 Current ratio- It is recognised as one of the most important ratios because it aids in
calculating a company's short-term paying ability by analysing and comparing current
assets and current liabilities. It is critical to strike a balance between the two factors in
order for the firm to be useful in the long run and to be able to withstand and endure the
market's fierce competition. The widely agreed ratio for this is 2:1, which ensures that a
company's current assets are twice as large as its current liabilities, and each and every
company should strive to maintain that ratio in order to help increase revenue and, as a
result, profitability in the long run. The above-mentioned company, SKANSKA PLC,
and its current ratio estimation, as well as related interpretation, are detailed and
sequentially explained below-
Particulars 2018 2019
Current assets 1515 2070
Current liabilities 645 2220
Current ratio= Current
assets/ Current liabilities
2.348837 0.932432
According to the above calculations, the firm SKANSKA PLC was in a rather good position
in the year 2018 because the ratio was above twice and now stands at 2.34:1, but the company's
results declined in the year 2019 because it slipped below once and now stands at 0.93:1. The
key explanation for the decline in the ratio is that the company's current liabilities grew at a rapid
pace while its current assets increased at a slower rate, resulting in a large difference between the

two, which hampered the company's overall success in the market in which it operates. Thus,
urgent steps must be taken in this regard so that the firm's current situation does not devalue
further in the current market and so that it can help it strengthen its current position by
introducing appropriate strategies that can cater to the firm's needs (Nusron, Wahidiyah and
Budiarto, 2018).
 Debtor’s collection period- It is amongst the most important ratios because it is
linked to the company's debtors, to whom the company must return the due sum
that was generated while providing sales, especially those of a credit nature. It is
critical that the company attempt to recover funds from debtors as quickly as
possible so that the funds are not hit in the market and can be used for the
enterprise's advantage and can add value to the firm in the long run. Other than
that, if an entity recovers the funds in a short period of time, the funds may be
reinvested in a different location where they can earn a higher rate of return than if
the funds are held in the sector for a longer period of time. The estimation of this
ratio by SKANSKA PLC is shown below, along with the relevant interpretation-
Particulars 2018 2019
Average debtors 900 1200
Credit sales 4800 6000
Debtor collection period=
Average debtors/ Credit
sales*365
68.4375 73
According to the above estimates, the firm is not performing up to its expectations in this
region, as the ratio was about 68 days in 2018 and rose to 73 days in 2019, indicating that the
company is unable to recover the dues within the specified time span. The main explanation for
this rise is that the company's revenues were mostly on credit, which increased the amount of
money owed to debtors, and debtors are also unable to pay over a short period of time, making it
worse for the company. As a result, it can be determined that urgent action is required to meet
the firm's long-term needs (Thuong, Zhang, Li and Hong, 2018).
 Creditor’s payment period- This is a ratio that measures and analyses the amount of
time that the company's creditors' money is held with the company, and it is
considered better for the company if this ratio is higher so the money can be

invested in the business and other reasons, allowing the company to expand and
succeed in today's market. The estimation of this ratio by SKANSKA PLC is shown
below, along with a systematic and sequential interpretation of the same (Vrbka and
Rowland, 2019).
Particulars 2018 2019
Average creditor 570 2100
Credit purchases 2700 4800
Creditor payment period=
Average creditor/ Credit
purchases*365
77.05556 159.6875
According to the above estimates, SKANSKA PLC is doing exceptionally well in this
regard, as the ratio was around 77 days in 2018 and has since risen to nearly double the previous
year's figure, and is currently around 160 days in 2019. The main explanation for the increase is
that the company's purchase was done on credit, which increased the amount of creditors. This is
also advantageous to the company because the money can be reinvested in a place that will
produce a higher return in the near future, making the business profitable in the market in which
it operates (White, 2017).
CONCLUSION
From the foregoing, it can be inferred that the two factors mentioned above are extremely
important and vital for each and every business firm operating in the market, and therefore must
be thoroughly examined and evaluated. Apart from that, it can be inferred that, despite its flaws,
SKANSKA PLC is performing admirably in the industry.

REFERENCES
Books and journals
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Journal of Accounting and Business Education, 4(1), pp.24-33.
Blue, L.E., O’Brien, M. and Makar, K., 2018. Exploring the classroom practices that may enable
a compassionate approach to financial literacy education. Mathematics Education
Research Journal, 30(2), pp.143-164.
Cardoso, R.L., de Oliveira Leite, R. and de Aquino, A.C.B., 2018. The effect of cognitive
reflection on the efficacy of impression management: An experimental analysis with
financial analysts. Accounting, Auditing & Accountability Journal.
Cohen, M.F., 2016. Impact of the HITECH financial incentives on EHR adoption in small,
physician-owned practices. International journal of medical informatics, 94, pp.143-
154.
Eichelberger, B., Mattioli, H. and Foxhoven, R., 2017. Uncovering barriers to financial
capability: Underrepresented students’ access to financial resources. Journal of Student
Financial Aid, 47(3), p.5.
Fijałkowska, J., Zyznarska-Dworczak, B. and Garsztka, P., 2018. Corporate social-
environmental performance versus financial performance of banks in Central and
Eastern European countries. Sustainability, 10(3), p.772.
Krishnan, P., 2018. A philosophical analysis of clinical decision making in nursing. Journal of
Nursing Education, 57(2), pp.73-78.
Münscher, R., Vetter, M. and Scheuerle, T., 2016. A review and taxonomy of choice architecture
techniques. Journal of Behavioral Decision Making, 29(5), pp.511-524.
Nusron, L.A., Wahidiyah, M. and Budiarto, D.S., 2018. Antecedent Factors of Financial
Management Behavior: An Empirical Research Based on Education. KnE Social
Sciences, pp.437-445.
Thuong, N.T.H., Zhang, R., Li, Z. and Hong, P.T.D., 2018. Multi-criteria evaluation of financial
statement quality based on hesitant fuzzy judgments with assessing attitude.
International Journal of Management Science and Engineering Management, 13(4),
pp.254-264.
Vrbka, J. and Rowland, Z., 2019. Assessing the financial health of companies engaged in mining
and extraction using methods of complex evaluation of enterprises. In Sustainable
Growth and Development of Economic Systems (pp. 321-333). Springer, Cham.
White, M.D., 2017. Nudging debt: On the ethics of behavioral paternalism in personal finance.
Journal of Financial Counseling and Planning, 28(2), pp.225-234.