Report on Financial Decision Making: Alpha Limited Performance

This report delves into the realm of financial decision-making, offering a comprehensive analysis of the concepts and applications within the context of Alpha Limited. The report begins with an introduction to financial decisions and the significance of accounting and finance. It then presents an overview of Alpha Limited, including its history and business operations. The core of the report focuses on the application of various financial accounting techniques, including management accounting, financial accounting, standard costing, budgetary control, and marginal costing, along with the role of accounting and finance within the selected company. The report further calculates and interprets key financial ratios, such as Return on Capital Employed, Net Profit Margin, Current Ratio, Debtor Collection Period, and Creditor Collection Period for Alpha Limited, comparing data from 2017 and 2018 to assess the company's financial performance. The analysis provides insights into the company's profitability, liquidity, and efficiency. The report concludes with a summary of findings and recommendations for improving financial performance. This report is a valuable resource for students studying finance, providing practical application of financial concepts and techniques.

Financial Decision Making

Contents
INTRODUCTION.......................................................................................................................................3
TASK 1.......................................................................................................................................................3
Overview of company.............................................................................................................................3
TASK 2.......................................................................................................................................................7
Calculation of the ratios to analyze company performance:....................................................................7
Interpretation and analysis of financial ratios:.........................................................................................7
CONCLUSION.........................................................................................................................................10
REFERENCES..........................................................................................................................................12

INTRODUCTION
Financial decision is the final decision that a reasonable individual takes in order to make
a sensible decision. The corporation's accountant files annual statements with the importance of
cost details. Each organization entity gathers account statements which are used to demonstrate
the economic position of the managing industries. This report's significant aim is to explain how
market issues invest in mutual funds as well as how to develop the company (Anderson, Baker
and Robinson, 2017). This report based on the Alpha limited company that is started back in
1954. The study would cover different subjects like the distinction among finance department
and accounts and the significance of accounting and financial feature. In addition, this study
addresses the accounting formula such as the return on capital employed, the current ratio,
ALPHA Limited's debtor collecting duration and lender accounts receivables used to make the
corporate accounting decision. It is using the most successful "Save Money, Live Better" slogan
that has impacted the individuals.
TASK 1
Overview of company
The business Selfridges is also recognized as Selfridges & Business. Harry Gordon
Selfridge formed this business in 1908, and is the second biggest division store in the UK. The
key items of the business concern fashion and cosmetics for men, women and children. Besides
that, they market some other items like costume jewelry, clocks and many others. It was founded
in 1908 by Harry Gordon Selfridge. The shopping center on London's Oxford Street is the 2nd
biggest supermarket in the UK (after Harrods) and launched on 15 March 1909.[4] Other
Selfridges shops operated in Manchester's Trafford Center (1998) and Market Place (2002), and
in Birmingham's Bullring (2003).
Different kinds of management accounting techniques
Management accounting: Management Accounting is the summary of accounting information
to determine the organization's objectives to be followed and to support these day-to-day

operations. In many other words, it helps participants performed all of their tasks including
planning, organizing, staffing, monitoring and controlling. It is the phrase used to refer the
financial instruments, structures and methodologies that strategy implementation in its
assignment of maximizing profit or increasing resistance to disease with particular understanding
and skills (Barrós-Loscertales, Espín and Perales, 2016).
Financial accounting: Financial accounting relates to accounting for money transfers by
categorizing, reviewing, assessing and reporting money transfers such as acquisitions, sales,
payable and receivable and eventually prepare financial reports including income statement ,
balance sheet and cash flow. Financial accounting's main objective is to showcase a honest and
realistic image of the firm's financial matters. First we should start with that double-entry system
and direct deposit & financial, and then progressively recognize paper and block chain, trial
balance, and four financial statements, to recognize its basic principles.
Standard costing: It is the cost which is identified as the corporate earnings prediction
and the operations which will happen in the following time. This value is measured on the basis
of the manufacture of the potential areas to the reasonable scale of production. These are the cost
accounting instruments which monitor the price at some manufacturing cost. It forecasts unit
operating costs at manufacturing level. The primary aim is to analyze the output, monitor the
variations, measure the value the inventory and determine the market price of the products
especially if allocation or measurement is finished.
Budgetary control: Through this organizational and financial method, the cost of
manufacturing expenses including such inventory, direct labor, and expenses at the specific level
of the produced item is measured or estimated. This also contrasts the regular costs with the
company's actual output at that production level. They are instruments that monitor or restrict
spending at the appropriate output level. This allows a favorable contrast between both the actual
and budgeted producer surplus function. Similarly, the company Selfridges use this approach to
figure out the approximate cost for the specific job and items (Liu, Jin, Xie and Skitmore, 2017).
Marginal costing: It is the value of the specific unit produced in the business segment
which is known as the price. It is measured as variations in the overall volume of manufacturing
when one additional product is produced at the factory. It is the cost that covers all operating

costs such as fix and adjustable for the reason of counting to report the costing payments within
the company. Fixed costs are set at the same manufacturing cost, while variable expenses can
change rapidly as a result of changes in productivity improvement. Selfridges business uses this
method when it comes to determining production costs. This helps in checking the overall cost at
a specific stage of the produced.
Cash flow statement: It is the accounting statement which reflects the profitable growth
from the company's activity. These should include the various organizational, economical, and
acquisition process. It influences the money and its activity over even a length of time by
explaining the adjustments in the revenue sheet and balance sheet. Selfridges corporation makes
this declaration periodically in order to identify the cash transaction in the sector (Miller,
Whitlatch and Lyons, 2016).
Role of accounting and finance in selected company: Finance and accounting are
crucial for businesses as they successfully address corporate banking transactions. Accounting
information is very essential in the accounting industry, because it is connected by monetary and
non - monetary findings to the production of new kinds of sustainability report. And even this
accounting contributes to successful decision-making and the planning of plans. The function of
corporate finance is listed below which is as continues to follow:
Financial planning: Efficient strategy for better utilization of budget is essential for
enterprises. Such research is carried out with the support of alternative methods of managerial
accounting. And also the lack of adequate liquidity, it can be challenging for companies to
market the financial resources. They stand to gain from management accounting techniques in
creating good financial resource management, just like in the element of the Selfridgs
Corporation above.
Helps in effective forecasting and budget making: A further benefit of money
management is that it allows businesses to forecast revenue and expenditures that contribute to
the formation of budgets. This is so because businesses can predict possible economic plans and
make projections on the grounds of that with the aid of planned income statement. As in the
dimension of the business selected above, Selfridgs, their administrator, with the aid of predicted

revenues and expenses, prepares budget. All of this becomes feasible mostly because of the
financial reports review (Krupp and et.al, 2018).
Allocate money in the line with mission and objectives of companies: Additionally,
finance and accounting are important for efficiently allocating funds according to business
targets and objectives. With the assistance of accounting, it will become feasible due to various
formulated expenditures (Lee, and Kim, 2018). In broad sense, organizations will know how
often fund is required independently in each operation then on the grounds of that, appropriate
financial distribution of wealth by helping schedules. As in the dimension of the Selfridgs
business mentioned above, their wealth institutions categorize the funds available into various
categories of responsibilities and processes.
Brings efficiencies into business operations and activities: To take the decisions and
actions in productive and successful manner, and also finance and economics are essential for
organizations. Via efficient planning of financial capital in operations it will become necessary.
They profit from financial information and strategies in enhancing organizational activities and
processes, as in the instance from the above Selfridgs business. Additionally, various types of
financial reporting make correct decisions that will help keep the operations effective (Resta,
2016).
Helps in measurement of performance: This is important for businesses to assess the
actual results so that they can take potential proactive steps. Using structured income reports, this
can be accomplished easily as they can equate real quarterly earnings with expected results. They
are taking potential steps on the background of this so that efficiency can be enhanced. Here, the
feature of Selfridgs business mentioned above, they use different kinds of financial statements
such as income statement, cash flows and capital structure to determine their specific levels of
productivity. Furthermore, it is necessary for them to determine the actual revenue and
expenditure so they can start planning appropriately. Although they won't ever be able to learn
about which behaviors result in higher costs as well as which others are helpful, in the absence of
it (Chang and Tsai, 2016).

TASK 2
Calculation of the ratios to analyze company performance:
Ratios 2018 2017
ROCE or Return On Capital
Employed :
= (Operating Profit /Capital
Employed) *100
here, Capital Employed = Total
Assets – External liabilities.
= 412 / 2925 * 100
= 14.10%
= 375 / 1912.50 *100
= 19.60%
Net Profit Margin:
= Net Profit / Sale * 100
= 262.50 / 3000 * 100
= 8.75 %
= 300/ 2400 * 100
= 12.5 %
Current Ratio:
= Current Assets / Current
Liability
= 1035 / 1110
= 0.93
= 757.50 / 322.50
= 2.34
Debtor Collection Period:
= Receivable / Sales *365
= 600 / 3000 * 365
= 73 Days
= 450 / 2400 * 365
= 68.43
= 68 Days
Creditor Collection Period:
= Payable / Purchase * 365
= 1050 / 2400 * 365
= 159.68
= 160 Days
= 285 / 1350 * 365
= 77.05
= 77 Days
Interpretation and analysis of financial ratios:
A financial ratio or accounting ratio is a principle components of two chosen data
variables extracted from the entity's financial statements. There are several standard ratios that
have been used in financial reporting to attempt to measure the economic financial situation of a
corporate entity and other institution (Bonsall IV, Leone and Rennekamp, 2017). Supervisors
within a company, existing and future investors (shareholders) of a company and investors of a
company can use profitability statements. Business material to the financial statements statistics
to evaluate advantages and disadvantages across different businesses. If a remaining profits are

decided to trade in an economic market, the market price of the shareholdings is used in some
financial ratio.
Return on capital employed: This is a type of ratio that businesses are measuring to
quantify the number of returns on the investments made. This factor is useful for calculating
company cost savings in order to receive return. Large companies should concentrate on certain
operations by measuring this proportion in which the anticipated return is greater. Furthermore,
this is also useful for different kinds of environmental shareholders since they can allow their
resources invest in the operational activities of organizations dependent on it. Thus, the ratio of
return on capital employed is 19 in the sense from the above Alpha limited business in 2017, 60
per cent. In 2018, this will be reduced by 28.16 percent and 14.08%. And it can be seen that in
2018 the capacity of the business to receive gain was reduced as opposed to 2017. The best
reason for this change may be the need for operational costs in 2018 as in 2017 these
expenditures amounted to £300 and rose to £337.50. This increase in spending changed the
global return in 2018 immediately. In this regard, it is important for management beyond Alpha
Limited to concentrate on reducing overall operating costs for years to come. Through doing so,
their yield on the money they hire will growing in generations to follow.
Net profit margin: The net profit margin describes the relationship among net revenue
and taxable income. All development, funding, etc. investment is removed in this income. That
calculation is important for businesses to determine, so that at the end of the fiscal year they can
measure earned net profit. Such ratios are evaluated by utilizing net profit formula / net sales *
100. Like the above-mentioned ratio, it is beneficial for multiple outside parties
like shareholders, distributors, etc. as they make decisions on spending money in business
projects on the basis of it. It is because when the net profit ratio of corporations is greater then it
implies that the overall return level is increasing. Its net profit margin in the above-mentioned
Alpha limited company was 12. 05 per cent declined by 29 in 2017. This was 41 per cent and 8.
75%. 75%. This difference in the above operating profit ratio determines that there will be more
losses in 2018 compared to 2017. A further reason for the disparity in net profit margin in 2018
is the increasing direct and indirect costs in the manufacturing cycle and also increased operating
costs. For the above-mentioned business, it is important to emphasize the generation of

greater earnings from capital invested and to also remember to maintain all expenditures below
the planned goal.
Current ratio: It is a form of ratio which corporations calculate to determine the
condition of flexibility. This is determined by the current assets / current liabilities ratio.
Furthermore, it is necessary for organizations to sustain this ratio in the ideal form of 2:1 periods.
Unless the current ratio of businesses is according to the ideal ratio so servicing short-term debts
would be simple for them. As well as increasing this ratio businesses focus on minimizing
current liabilities and attempting to increase current assets. Its current ratio in the above-
mentioned Alpha limited partnership was 2.34:1 time in 2017 declining in 2018 and 0.93:1 time
in 2017. This two-year leverage situation determines that the financial state of companies during
the period is stronger in 2017 as they have sufficient capital assets to make quick-term debt
payments. There, in 2018 the source of this smaller current ratio is raised for this year's
obligations number. Furthermore, over the period from 2017 to 2018, total current assets are
drastically reduced. In this case, it is necessary for the above-mentioned business to concentrate
on the current assets, because then their ratio will reach the ideal ratio requirements. It can also
support to improve the performance of corporations to produce quick-term debt payments.
Debtor’s collection period: It can be described as something of a proportion that is
connected to calculating the number of weeks that businesses implement in order to get side
funds from different debtors. The percentages of repayment periods for debtors are quantified in
units of hours. Including this ratio when it stays smaller, it is deemed higher. With for this
formula, companies will determine certain debtors who've been responsible for reimbursement
and are willing to build a positive partnership. Furthermore, it is measured using equation of
average receivables / net sales * 365 days. In Alpha limited company below, this ratio is 68 days
in 2017, which improved in 2018 and reached 73 days in 2018. This means that the productivity
of the enterprise to receive debtor-owned credit is rising. Since of the different frequency of this
ratio, the company seems unable to determine which debtors will in fact be unplayable. The
Alpha limited company must be able in this respect to concentrate on those debt holders who
make delay in interest payments and let’s not give loans in the subsequent date. Furthermore,
company should concentrate on creating money transfers so that the amount of indebted

borrowers can be reduced. However, if this ratio increases year on year and, it will lead to
shortage of funds or a deficit for the above-mentioned business.
Creditor’s payment period: The same with the ratio before, it is calculated in terms of
times as well. This can be described as something of a ratio that corporations are calculating to
assess the timeframe that is expected to take in the act of manufacturing bondholders payments.
Basically, investors exist for companies as they make credit transactions with everyone.
Organizations need to remain the ratio as simple as possible in this dimension. That's so but if it
is smaller than the productivity of the organization to make transaction is stronger calculated. As
regards the above-mentioned Alpha limited business, this ratio is 77 days in 2017, which
improved by 52 per cent in the following year and becoming 160 days. This could be seen as a
major disadvantage of businesses' image when it comes to making payments to their lenders.
Thus, it is appropriate to attempt to make a payment in money well above business. Along with
if they are doing an international economic, the emphasis should be on paying compensation in
fewer periods. However, if this ratio increases anymore, above that the business can face
problems.
Thus, based on the data findings of the business efficiency of Alpha Limited Company in
2017 to 2018, it can be mentioned that the management of the business is better in 2017
compared to 2018. This is so as their all fifth ratios indicate positive results in 2017 although the
outcome is weaker in 2018. Additionally, their spending is also rising in 2018, which in 2018 has
become a major lack of efficient financial efficiency.
CONCLUSION
Based on the earlier in this thread-mentioned project report, it was concluded that
financial decision-making would be too necessary for organizations because this is essential in a
smarter manner for business banking. Different forms of accounting methods, including such
cost accounting, regular costing, etc., are stated underneath the project study, and their value.
Aside from this, financial ratios are determined for Alpha limited companies and their analysis
has been completed with the intention of making informed business decisions. The ratios of the
company shows actual financial performance accordingly all the investors are taking right
decision in regard of the investments in particular project.