Financial Decision Making: Skanska Plc - Accounting and Finance Report

This report provides a comprehensive analysis of financial decision-making at Skanska Plc, a UK-based construction company. It begins with an executive summary and an introduction to financial decision-making. The report then critically evaluates the importance of accounting and finance functi...Read More

FINANCIAL DECISION MAKING

Executive summary
It will oversee the development of the firm's extremely promising future strategy. It is also
critical that businesses ensure this mechanism is continuously applied in order to meet long-term
competitive goals, such as higher profits. The focus of this article is on the analysis by Skanska
Plc, a building company based mainly in the UK

Contents
Executive summary.........................................................................................................................2
INTRODUCTION...........................................................................................................................4
TASK 1............................................................................................................................................4
Critical Evaluation of the importance of accounting and finance functions, duties and roles
within the entity...........................................................................................................................4
TASK 2............................................................................................................................................7
Calculation of different ratios of Skanska Plc.............................................................................7
Comment on the results of a business with a shareholder of 1 million.......................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
Financial decision-making can indeed be defined as a mechanism that formulates different
potential judgments and makes it very important for all individual investors to make suitable
chooses (Gamble, Yu, and Bennett, 2015). When planning to increase their performance, it is
very important to ensure that businesses review every aspect of their financial activities. The
business was founded in 1984 and has since been running continuously. This position covers
many business-based topics. The company's responsibility, obligations and functions are
significant. In addition, the ratios are assessed in order to calculate the profit of the company, and
this report also discusses outcomes for investor advice.
TASK 1
Critical Evaluation of the importance of accounting and finance functions, duties and roles
within the entity
The management of a company plays a major role, helping you to track profit and loss, ensure
enforcement of legislation and providing consumers with quantitative financing reports,
management and strategy that could be used in crucial business choices. Accountancy plays a
key role in the success of every business. Companies are operating on revenue, and if they do not
manage it they are not controlling the market. It regulates cash flow and thus directs the direction
of an organisation by proper business sales and expenses preparation (Petersen, Kushwaha and
Kumar, 2015). The belief that accounting and finance are similar is a popular meaningless term.
Yet accounting and finance are essentially two different business processes. There are two
distinct industry elements that implementation of integrated to keep the enterprise running. In
symbiotic partnership, they are indeed related, if not the same. Accounting is a way of
documenting, categorising and summing up significantly and as regards money, payments and
incidents at least partly monetary in nature and of reporting the data thereof as described by the
American Institute of Certified Public Accounting (AICPA). The fundamental principle of
accounting is that it is capital that reflects on the state of the corporation in the financial term.
The accounting process starts to classify the activities and expenditures that impact the financial
status of the enterprise.

An organisation usually undergoes several activities and incidents every day, but not all such
events are deemed to be a reporting case. It tracks and contains only financial accounts in the
financial accounting. The Financial Statements relate to this critical compilation of accounting
facts. The financial reports reflect the financial position of the company. It explains what the
corporation did to make use of the capital and the remainder of all its history and the financial
position of the corporation was effective.
Skanska Plc is a UK-based construction company. It was founded in 1984 and all the operations
were carried out accordingly. It is crucial that all organisations like Skanska are all aware of the
choice process. A report on the company, which represents the evaluation of managerial,
financial, and accountabilities, as well as role within the organisation, is expected of all
executive employees. The foregoing was explained in depth in the system of the company:
Accounting and financial roles: these are the main elements of corporate finance that the whole
organisation can perform to accomplish future goals successfully. The functions of the finance
department are cantered in Skanska Plc below:
Final cycle of accounts: one of the most significant distribution and purchase roles. If the steps
taken in previous years are effective or unfavourable, it is very hard to observe, since it is
impossible to disclose sales (Tang, Valacich and Sweeney, 2014). Three key forms of final
accounts occur in this feature. Both of them are benefit and loss declarations, capital
management and cash balance. Anything helps to analyse if the organisation can meet its
financial goals or not. It can measure liquidity, actual position etc by allowing people to make
successful use of future decisions and satisfaction from difficult work viability. It is very
necessary; hence it helps the organisation to provide clear reports of all events.
Market Growth Plan- Many organisations have the objective of producing a bunch, so that they
have to build a path. Financial information from within the company's own market is one of the
main strategies for assessing the economic landscape of the market. By buying more devices and
making less effort, customers would tell the company that all is recorded. And if the
organization's paperwork alerts us that an overseas advertising company does not earn
satisfactory returns, it will plan to put advertising home, hire a new company and alter the
business dramatically.
Performance evaluation: The performance evaluation is one of the main finance and management
elements. This assesses the benefits or weaknesses of the prior proposals, which makes them

very valuable to the organisation. When the company cannot analyse the actual outcomes, it will
be very difficult to assess whether future goals are fulfilled or not (Forbes, Skerratt and Soufian,
2015). The evaluation of the current position would also cause the favourable or negative
impacts of measures to obtain future benefits to be identified. When the management of Skanska
Plc is unable to meet the conditions of its clients, lenders, etc.
Implementation of all regulations: ensure consistency with all regulations in the course of
accounting reporting is very relevant for the financial department and this tends to deter higher
volumes. Financial analyses are often very difficult to plan, since workers in Skanska cannot
conduct these activities in a systematic way. Without consideration for the rules, accounting
reporting will therefore be less accountable and reliable. This is a very significant aspect in
avoiding any legal engagement in businesses and other operations for the company.
Formulating investment decision on the basis of current circumstances: Such reporting and
financing note that decisions made on current market circumstances are particularly important
for all businesses such as Skanska. It will add to productivity and accomplish future goals. The
managers and executives are especially concerned with this role when planning to expand the
business (Shouzhen and Su, 2015).
Accounting and financial responsibility: Departmental accountability and finance are different.
Skanska will focus upon both and help to fulfil all feasible objectives:
Predicting investments and incomes in long term: this is one of Skanska's key management and
financial tasks to help them assess the financial risks. It will allow them to deal about everything
and to handle individually their funds so how they can meet appropriately. Furthermore, reports
and funding revenues can be determined which help to devise future budgets.
Systematic efficiency of all operations as a result, the department of financial management will
efficiently practise all operational activities. Sufficient funds should be distributed to each
development team for finishing the job (Seshan and Yang, 2014). Skanska Plc allows you to
accomplish all your future goals.
Comply with organisational requirements: all companies shall meet all standards and conduct all
actions accordingly. One of them is accounting, which is management and finance. If well
implemented, it would help to achieve all long goals. This is one of the main challenges, since
the fulfilment of future goals and targets can be very difficult if they are not focused. This
problem has to be discussed by top management to counter the possible failure risk.

Financial and accounting: it is also very critical for any company to be mindful of accounting
obligations and financing rolls so that operational activities can be carried on an organised basis.
The following was addressed in each of the key funding and role has evolved:
Keeping records of all receipts and expenses: one of the main financial information is gathering
reports on income and purchases which occur during the year. The findings will help to decide
that the firm, such as Skanska Plc, with total profits should pay for all its expenses. If the
information is not obtained periodically, it is very difficult to meet future principles and goals.
Cash Flow Management: Funding and financing was structured to monitor cash flow throughout
the accounting round and determine real working capital and asset account (Robinson, Bond and
Roiser, 2015). It is impossible to meet future goals if leadership in Skanska plc cannot
accommodate capital flows. It is one of the main tasks for managing all the activities of the entity
in order to meet all lengthy goals.
Refurbishment of accounts: this role on financing and reporting demonstrates that a company
must obtain both income and expense records to meet future goals. Various stakeholders would
encourage them to evaluate their company’s current situation and decide for themselves on the
potential. For the finance department in Skanska, this role is very important as it will allow the
future sector of Skanska to expand.
This review would concentrate on the study of different areas of tasks, operations and funds, as
well as the funding roles in Skanska Plc. They both play a crucial role that can contribute to the
achievement of all future goals, including management, cash conditions and better revenue and
salaries. If the organisation cannot pay close attention to one another, it would be extremely
necessary to contribute to and grow the business. In Skanska, the board reports on corporate
financial activities, obligations and responsibilities, concentrating on the company.
TASK 2
Calculation of different ratios of Skanska Plc
The ratio approach can be considered as an instrument in which the overall financial condition of
the organisation can be calculated in order to determine its real performance. If organisations
can't determine the actual situation, it will be very difficult for them to take strategic decision.
The Skanska Plc management calculate a variety of ratios that managers use to determine the
true condition of the business. The risk appraisal is a comprehensive means of getting a deeper

view of the reliability, firm value, and viability of company through the review of financial
statements, particularly financial reporting. Profitability ratios are the cornerstone of a
comprehensive equity appraisal (Hoffmann and Post, 2014). Ratios are benchmarks for firms.
They calculate inventories within a market. They likewise test a business against today's
historical events. In most cases, it is often important to know the leading ratios of variables as
management has latitude to change its strategy to make its assets and market partnerships more
desirable. Moreover in accordance with other quantities, percentages are commonly not used in
isolation. A fantastic strategy of the percentages will give you a comprehensive view of the
market from various angles and allow you to identify potential ratios in one of the four
commonly specific criteria. Analysts and investors use ratio analysis to determine the financial
results of companies by reviewing past and existing financial data. Comparing data will illustrate
how a business performs over time, so that potential future outcomes can be expected. In
addition, the financial position of an entity can be associated with industry dynamics as it
assesses how a corporation meets businesses in the same field. This is the following ratio
analysis of SKANSKA plc:
The ratio description equations include: Equations are:
Return on Capital employed: used mainly to measure the benefit and efficiency of the company.
If this is not properly assessed, administrators are confused in predicting future positions for
businesses (Musa, Musová and Debnárová, 2015). The formulas for Skanska Plc are as follows:
Formula: EBIT / Capital employed * 100
Particulars 2018 2019
EBIT 750 975
Capital employed 3825 5850
Results 0.19 0.16
Net profit margin: mainly focused on the measurement of financial success in the sector, the
correlation between sales or expenditures and net profit earned over the year is established. The
method is described for Skanska Plc:
Net profit / sales * 100
Particulars 2018 2019
Net profit 600 675

Net sales 4800 6000
Results 12.50 11.25
Current ratio: It is largely focused on current assets of companies. It can be assumed that the
company will maybe settle all short-term liabilities within one year with the aid of various
capitals (Hershey, Austin and Gutierrez, 2015). The calculation is appropriately for Skanska:
Current assets / Current liabilities
Particulars 2018 2019
Current assets 1515 2070
Current liabilities 645 2220
Results 2.35 0.93
Complete days of loan receipt/period: This model is primarily used for calculating the days of
borrower repayment to supply funds for potential operations. If the company cannot understand
this, it would have a significant impact on team making decisions. Skanska Plc provides a
comprehensive description of short payback days:
Formula: Accounts receivable / sales * days in the year
Particulars 2018 2019
Accounts receivables 900 1200
Sales 4800 6000
Results 68.44 73.00
Average settlement time for due dates/creditors: the span of the investment instalments is alluded
to as the time agreed for the creditor (WEBSTER, 2014). The businesses cooperate with them
strongly so they will withhold capital for a long time. The steps for Skanska are as follows:
Formula: accounts payable / cost of goods sold * days in year
Particulars 2018 2019
Accounts payable 570 2100
COGS 3450 4350
Results 60.30 176.21

Comment on the results of a business with a shareholder of 1 million.
The study reveals a decrease in the performance of the group in 2019 since net profits; equity
income and liquidity in the year were lower than last year. To maximise market productivity, it is
very critical for manager to identify successful steps in the future. Moreover, the repayment
period for debtors is also extended in 2019, suggesting that the performance of Skanska Plc in
2019 was sluggish relative to 2018. In 2019, as businesses paying creditors, the collection period
reflects a boost in the number of days. It reveals that the company cannot invest the money on
time due to poor performance. In order to stay on the market by making a good potential
decision, it will be very important or possible for the firm to strengthen its position. The reasons,
results and interpretations of improvements in the market ratios could be analysed with the
assistance of the following comments:
• Sales improved are one of the main factors for improving the share of the company. In 2018,
sales were 4800, and in 2019, sales were up to 6000. As a result, distribution prices etc.
influenced elements of the budget and changed the income reports.
• Another reason for shifts in business ratios might be substantial rises in current liabilities. This
was 645 in 2018 and 2220 in 2019. This would be the biggest reason for the reduction in the
current ratio as the total assets for 2070 were very low compared with 2019 debts. As a
consequence, the 2019 mean was below last year. It is also important for management to insure
that they will have the money to fulfil the short-term obligations in order to maximise the
productivity of the business.
• In comparison to sales, the change in relationships is due to a comparatively modest rise in
profits. Revenues in 2018 totalled 4800, hitting 6000, but revenues grew by 75 in 2019. This has
had an influence on the productivity of the company, which was less than this year.
• Profitability changes have a huge effect on the weak financial condition of the organisation.
Since the performance of the company in 2019 isn't good in comparison with 2018, this on the
marketplace is therefore difficult to ensure. As a result, the trust in trade could decline. Moreover
the progressive downturn in financial performance has adverse effects on income, revenue and
profit margins. Skanska Plc is incredibly important in order to support them both so that they can
take good steps in the potential to order to improve their financial position.
An analysis of the percentage of Skanska Plc analyses the probability of potential owners
spending 1 million pounds in Skanska Plc not investing money this year in the firm. Suggestion

of Skanska Plc: The shareholder can plan to participate in the production of Skanska for duration
of three years. It would benefit from the opportunity for greater yields if it is efficient. It is also
noted that the probability of low rates of return start of a new year has risen.
CONCLUSION
This form of business decision is in practise, the creation of suitable policy choices to efficiently
accomplish the related financial targets, the above described project analysis revealed. If
management can't make realistic choices for the next decade, it will be very difficult to meet
future specified targets. All businesses tend to focus on various obligations and funding
activities, duties and responsibilities. Nearly all tend to be final statements, evaluations of the
results, enforcement with all regulations and recommendations based on the current situation.
Besides all this the monitoring and financing roles and functions are also to routinely forecast
future costs and income, meet operating conditions, monitor the distribution of money, hold
records, etc. In order to measure a company's financial viability, various ratios should be
calculated. Some of them are profits, net profit percentage, liquidity rates, gross due and due
times. By weighing them all the organisation has or doesn't expand, workers will be very
important. Stockholders may also make the necessary contributions in the business by using the
calculations.

REFERENCES
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making in transnational households. Journal of Development Economics, 108, pp.119-
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Robinson, O.J., Bond, R.L. and Roiser, J.P., 2015. The impact of stress on financial decision-
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Hoffmann, A.O. and Post, T., 2014. Self-attribution bias in consumer financial decision-making:
How investment returns affect individuals’ belief in skill. Journal of Behavioral and
Experimental Economics, 52, pp.23-28.
Musa, H., Musová, Z. and Debnárová, L., 2015. Responsibility in the corporate governance
framework and financial decision making process. Procedia economics and finance, 23,
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Hershey, D.A., Austin, J.T. and Gutierrez, H.C., 2015. Financial decision making across the
adult life span: Dynamic cognitive capacities and real-world competence. In Aging and
decision making (pp. 329-349). Academic Press.
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