Comprehensive Financial Analysis Report: Vivo Energy Mauritius Limited

This report presents a comprehensive financial analysis of Vivo Energy Mauritius Limited (VEML). It begins with an introduction to the company, its functional areas, and strategic integration. The core of the report involves a detailed examination of VEML's financial statements for 2018-2019, including a thorough analysis of the profit and loss statement, balance sheet, and key financial ratios such as current ratio, quick ratio, gearing ratio, return on capital employed, interest cover ratio, and net profit margin ratio. The report further delves into the budgeting process, evaluating various budgeting methods and the impact of technology. Additionally, the report explores organizational performance management, discussing performance measurement tools. Finally, it addresses capital budgeting decisions, evaluating sources of finance and investment appraisal techniques, including both discounted and non-discounted methods. The report concludes with a comprehensive reference section.

Anwar RADIM
Anwar RADIM

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Faculty Name Mr. Shahid Wani
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Email ID [e-mail]
TO BE FILLED BY THE SUTDENT
Student Name Anwar RADIM
Student ID ONL2101012A01
Email ID [e-mail]
Turinitin Class ID 19578115
Turnitin Enrollment key CIQGM700
Course Master in Business Administration
Date Submitted 09/01/2021
ASSIGNMENT INFORMATION
Full/ Part Assignment Full
Date Assignment Issued 13/12/2020
Date Assignment Due 12/1/2021
Assignment IV by Dr. Vivek Mohan
TO BE FILLED BY THE ASSESSOR
Assessment types Marks Marks
Awarded
Understanding the concepts of financial analysis,
interpretation, and tools of financial decision making
40
Understanding Budgeting process and evaluating
organisational performance and tools
30
Understanding and evaluating the procurement and
utilization of funds
30
Overall Marks 100
Overall Grade

Faculty Name
Summative Feedback by Faculty for further improvement
Assessment Brief/Task
The detailed requirements for this task are as follows:
Scenario:
You are to select a PLC that has a listing on any recognized stock exchange of your choice and agree
this with the module tutor. Once this is done, you are required to answer the following questions:
Assignment Task 1 (40 Marks):
1. Provide a brief introduction of your chosen organisation. 5 Marks
2. Critically examine the importance of various functional areas within organisations, emphasizing

the significance of Finance as a critical functional area within your chosen organisation and
how a strategic integration can be achieved? 10 Marks
3. You are required to look into the financial statements of your chosen organisation for the year
2018-19 and explain the following: 25 Marks
a. Analyze and interpret the profit and loss statement, identify the major expenses &
incomes, compare with previous year, & recommend actions for the upcoming year.
You are also required to compare and interpret the P&L statement in the light of cash
flow statement.
b. Analyze the Balance sheet and critically discuss the financial position of your chosen
organisation and recommend future actions.
c. Explain, Calculate and interpret the following ratios for your chosen organisation for the
years 2018 and 2019:
 Current ratio
 Quick ratio
 Gearing ratio
 Return on capital employed
 Interest cover ratio
 Net profit margin ratio.
Assignment Task 2 (30 marks):
1. Explain the process and significance of budgeting process. Critically evaluate various methods
of budgeting and how they differ from each other? As a Finance Manager, which budgeting
approach would you employ and why? You are also required to examine the impact of
technology on the budgeting process and see how technology can be best used in the process to
enhance and speed up the budgeting process? 15 Marks
2. Explain why it is important for organisations to measure their performance. Discuss the
different types of performance management tools and techniques which can be deployed in

large global companies for evaluating its suitability across a range of business and economic
environments. 15 Marks
Assignment Task 3 (30 marks):
1. Acquisition and utilization of funds are two of the major decisions taken by an organisation
which requires careful analysis. You are required to explain and evaluate various sources of
finance available to a business. Once this is done, you must examine and justify 15% Net Asset
Investment decision taken by your chosen organisation in order to upgrade the technology.
Which sources of finance do you believe would be appropriate for your chosen organisation
and why? 15 marks
2. Considering your organisation’s plans of making capital investments which is the need of the
hour as the organisation is facing a tough competition, the board of directors have approached
you for your expertise in regards to making a capital decision. You must critically evaluate the
investment appraisal techniques you would employ to help your organisation to reach a
decision. You are also required to explain the time value of money and hence compare and
contrast the discounted and non-discounted capital budgeting techniques. 15 Marks
Word count: Approx. 5500 words
Contents
1 TASK 1: Vivo Energy Mauritius Limited Financial Analysis...........................................9
1.1 Introduction.................................................................................................................9
1.2 Functional Areas........................................................................................................10
1.3 Financial Statement Analysis....................................................................................11
1.3.1 Profit and Loss Statement Analysis...................................................................11
1.3.2 Balance Sheet Statement Analysis.....................................................................13
1.3.3 Ratio Analysis....................................................................................................15
2 TASK 2: Budgeting and Organisational Performance Management...............................17

2.1 Budgeting..................................................................................................................17
2.1.1 Budgeting Process..............................................................................................17
2.1.2 Significance of Budgeting..................................................................................18
2.1.3 Methods of Budgeting........................................................................................19
2.1.4 Impact of Technology on Budgeting..................................................................20
2.2 Performance Management.........................................................................................21
3 TASK 3: Capital Budgeting.............................................................................................24
3.1 Question 1: Source of finance...................................................................................24
3.1.1 Equity finance....................................................................................................24
3.1.2 Debt Finance......................................................................................................25
3.1.3 VEML Investment..............................................................................................26
3.2 Question 2: Investment Appraisal Techniques..........................................................26
3.2.1 Non-Discounted Techniques..............................................................................27
3.2.2 Discounted Techniques......................................................................................28
4 References........................................................................................................................30
5 Appendix..........................................................................................................................32

1 TASK 1: Vivo Energy Mauritius Limited Financial Analysis
1.1 Introduction
Vivo Energy Mauritius Limited (VEML) is a public limited company established in 2011.
The company acquired all shell’s operations within the country and is currently responsible
for the distribution and marketing of shell-related products to commercial customers and
retailers within Mauritius (Vivo Energy Mauritius n.d). VEML is part of the Vivo energy
group which is distributed and markets shell-related products across the African continent.
The company’s products are classified into two major category namely retail and
commercial offers. Retail products include shell fuels, lubricants, LPG, and card services.
Under the shell fuel category, the company supplies Shell fuel save diesel and unleaded fuel.
The lubricants supplied by VEML include Shell Helix, Shell Advance, and Shell Rimula. The
third product supplied by the company is liquified petroleum gas (LPG) under the brand
name shell gas. Last but not least, the company provides its customers with various card
services (Vivo Energy Mauritius n.d). The card services option offered by VEML includes
visa card, fleetman card, and Shell card.
Also, the company offers various commercial products. Products supplied to
commercial customers include Shell diesel, Shell oil, shell Rimula, Shell Gadus, Shell Tellus,
and Shell gas. Vivo Energy Mauritius Limited has only been in operation for 8 years and as
of 31st December 2019, the company had 119 employees. The total number of service stations
within the country amounted to 49 in 2019. The company had 49,923 metric tonnes of fuel
and 4,175 metric tonnes of LPG storage (Vivo Energy Mauritius Limited 2020).

1.2 Functional Areas
There are various functional areas within any organisation. The number and size of these
areas vary across organisations with the most common functional areas being Finance,
operations, marketing, and human resource. Each of these areas is important to the successful
running of a company. The operations function ensures that the inputs are translated into
goods and services that are of quality and meet the demand in the market. The marketing
function is another critical function because it ensures that customers are made aware of an
organisation’s products. Also, marketing helps in identifying different customers’ needs
thereby enabling a company to supply products that satisfy customers. The human resource
function is significant to an organisation because it ensures the right talent are hired and
retained. Employees play a major role in the success of a company and hence the importance
of this functional area.
Another critical functional area in an organisation is finance. This area is significant
to an organisation because it manages all the finances of an organisation. The finance
function carries out the planning and budgeting process ensuring the achievement of strategic
goals. The area also a source for finances needed for expansion and day-to-day running of an
organisation. And last but not least, finance provides useful information used by management
in the decision-making process. Therefore, finance is a key functional area within an
organisation.
Strategic integration can be achieved at VEML by integrated the different functional
areas. The company buys, stores, markets and distribute petroleum product. Therefore, by
establishing an integrated model, controls can improve, and efficiency increased thereby
improving its performance. Integrating the operation, marketing, and financing functions will
ensure smooth flow of processes thereby increasing efficiency.

1.3 Financial Statement Analysis
Financial statement analysis looks into the company’s performance through its profit
and loss statement, balance sheet statement, and ratio analysis.
1.3.1 Profit and Loss Statement Analysis
The company profit and loss statement show the company’s profitability during a
period. This statement summarises the company’s incomes and expenses during the financial
year. Table 1 below shows VEML's main expenses and incomes for the fiscal year 2019 and
2018.
Table 1:Major Income and Expenses Analysis
FY2019
% of
sales FY2018
% of
sales
Rs 000
Difference
%
Diff.
Revenue from customers
contract 11,825,133 12,849,184 - 1,024,051 -8%
Cost of sales 10,834,726 91.62% 11,943,911 92.95% - 1,109,185 -9%
Gross profit 990,405 8.38% 905,273 7.05% 85,132 9%
Administration expenses 571,259 4.83% 541,944 4.22% 29,315 5%
Operating profits 444,678 3.76% 397,844 3.10% 46,834 12%
(Source: Vivo Energy Mauritius Annual Reports 2019)
It is evident from Table 1 above that the company’s operating profits increased in
2019 despite a decrease in its revenue in the same year. The company’s revenue decreased by

8% in 2019 compared to the previous. Similarly, the cost of sales decreased to Rs.
10,834,726,000 in 2019 from Rs. 11,943,911,000 (Vivo Energy Mauritius Limited 2020).
The gross profit increased by 9% in 2019 from 2018. The increase in gross profit despite the
increase in revenue is due to a high rate of decrease in the cost of sales. The company’s cost
of sales accounted for 92.95% of sales in 2018 and 91.62% in 2019.
In addition to analysing the profits of the company, the cash flow generated can also
be evaluated. The difference between the P&L profits and the cash flow statement figures is
shown in Figure 1 below. The figure shows an extract of VEML’s cash flow statement.
Figure 1:Statement of cash flows
It is evident from the figure above that the cash generated before changes in working
capital is more than the organisation’s profits before tax because of the several adjustments.
These adjustments include all the non-cash items included in the determination of the
company’s profit. While the P&L statement incorporates non-cash items such as depreciation
in the determination of profits, the cash flow statement excludes such items in the calculation
of cash generated by the company.