Financial Analysis of Bestway Group and Alpha Limited - BM414

This report offers a comprehensive financial analysis, divided into two key tasks. The first task examines the functions of the accounting and finance departments of Bestway Group, evaluating their effectiveness in financial statement preparation, management accounting, tax functions, and auditing. The second task focuses on the financial ratios of Alpha Limited, assessing its financial position. The report explores the importance of financial analysis in evaluating business performance, with detailed discussions on financing, investment, dividend, and working capital functions. The analysis includes an overview of Bestway Group's operations and the implications of its financial strategies, including loan and equity management, investment appraisal methods, and dividend policies. The report concludes with an assessment of Alpha Limited's financial health and its ability to secure a loan from Camden Limited, based on the financial ratio analysis.

Financial Decision Making

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Executive summary
The main aim of this report is to understand the concept of financial analysis. The report is
classifies in two parts. In the first part, the functions of financial and accounting department
of Bestway Group has been discussed. It has been analysed that the function of financial and
accounting department is effective. In the second part, the discussion is made on the financial
ratio of Alpha Limited. As per the analysis, it is observed that Camden Limited cannot
provide the loan to the company as its financial position is not good.

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Contents
Task 1.........................................................................................................................................2
Overview of the organisation.................................................................................................2
Importance of Finance and Accounting department..............................................................2
Accounting department.......................................................................................................2
Finance department:............................................................................................................2
Task 2.........................................................................................................................................2
Financial ratios.......................................................................................................................3
Conclusion..................................................................................................................................3
References..................................................................................................................................4

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Introduction
Financial analysis is the process of evaluating the financial position of the organisation by
evaluating business, projects, and the other finance-related entities. In this report, the two
tasks have been done on the basis of financial analysis. In the first task, the discussion is
made on the functions of accounting and finance department of Bestway Group. In the
second task, financial ratio will be evaluated in order to analyse the financial position of
Alpha Limited.
Task 1
Overview of the organisation
Bestway Group is a British Multinational Conglomerate Company which is operated in
London, United Kingdom. It is also owned the UK second largest Wholesaler serving 125000
independent retailers and caterers from 64 warehouses nationwide (Bestway Group, 2018a).
It also runs the third largest pharmacy chain in UK which is based in Manchester. In the
country of Pakistan, it is the largest shareholder of United Bank while its subsidiary company
with name of Bestway Cement is the largest cement maker in Pakistan with a total capacity of
more than 8 million tons per annum. The company operated in three businesses such as
Pharmacy, Cement, and Banking (Bestway Group, 2018b).
Importance of Finance and Accounting department
Accounting department
Accounting department is the part of the company as it prepare the financial statements,
maintaining the general ledgers, paying bills, billing customers, financial analysis, and the
others.

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Financial accounting
Financial accounting is a process of recording, analysing and summarising the company
transactions to evaluate the financial position of the company. In this process, all the
transactions are summarised during the preparation of financial statements such as balance
sheet, income statement and cash flow statement. The financial statements are prepared by
implementing the accounting principles (PCG, 2018). It is observed that the organisation
requires preparing the financial statement to record the other business transactions. In the
case of Bestway Group, it is essential to maintain the financial statement as they operated in 3
fields in which they wants to achieve the success. It helps the company to manage the all
accounts of different business. The summarisation of all financial statements of the company
helps to reduce the chances of fraud and illegal work. The company also prepared the
financial statement every year at the end of the year. The income statement and balance sheet
of the company is given below as the evidence.
It is observed that Bestway Group prepared all financial statements due to which the chances
of fraud is reduces and the company also improve their performances as the financial position
is also evaluated while preparing financial statements. But the company has three businesses
due to which it has to maintain the individual financial statements. It consumes high cost to
maintain the financial statements as the company has to hire the Charter Accountant to
prepare the statements.
Income statement

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(Source: Bestway Group, 2018)
Management accounting
It is the process of analysing, interpreting, identifying and communicating information with
the managers in order to achieve the goals. Managers of the organisation adopt the provisions

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of accounting information in order to better inform themselves before they decide matters
within the organisation. In the other words, it can be said that it is the provision of financial
and non-financial decision information to managers (Mowen, Hansen, and. Heitger, 2016). In
the case of Bestway Group, management accounting is a profession that involves in
management decision making, division planning and control to assist the management in
formulation and implementation of an organisation strategy. The company develop the plan
to expand the business at the international level due to which it develops the plan to expand
the business in diversify areas.
There are two approaches of management accounting such as traditional and advance. In
traditional approach, the evaluation is not appropriate due to which it is difficult to examine
the exact financial position of the company. But with the help of advance approach, the
organization can easily evaluate the financial position as its updated with the new techniques
and formulas.
Tax Function
Tax function refers the social responsibility in terms of distribution and redistribution of
incomes towards the society. Providing the amount of tax helps to build the social image in
the market. The tax amount is necessary for those companies who are eligible as per the
income tax act. In the case of Bestway Group, the company earns the high amount as income
in the three businesses that is why; it is necessary for it to pay the tax amount. As the
company not have high brand image in the market due to which paying the tax amount is
beneficial because it build the high brand image.

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(Source: Bestway Group, 2018)
It has been seen that the evaluation of tax is beneficial for the company. The tax a charge of
the company is increasing due to which the profit amount is reduces as it has to pay the huge
amount of tax such as 185297. But the reason of increasing the tax is that the company net
profit is also increasing that is a positive factor for the organization such as 365807 in the
year 2018 as the main motive of the company is to earn the high profit will achieved.
Auditing function
Auditing function is the process of alteration of the financial books in which it maintain all
records and summarising the data. It is required to evaluate the operational procedure, risk
management, control function and the process of governance. Auditing is the process of
alteration of books of accounts (Trotman, and Carson, 2018). The audit department of the
company alter the books and accounts of financial statement of the organisation. As per the
audited financial statements, 2018 is considered as the challenging year for the company due
to poor business condition in both the market such as UK and Pakistan.
Bestway Group audits the financial statements that help to enhance the credibility and
reliability of the figures. It helps the organization while it sells the machines or the other
fixed asset. It has been seen that the auditors of the company apply the sample techniques to
audit the financial statement due to which the risk of inappropriate result is high or the
chances of fraud is also high. The audit is beneficial for the company but it is also limited at
certain point.

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Finance department:
Finance department of the company manages the money. The function of finance
departments includes auditing, organizing, planning, accounting and controlling the company
finances.
Financing function
Financial function is the part of financial management. It is the activity which involves the
acquiring and utilisation of funds necessary for efficient operation. It is the source to run the
business in the different areas by maintaining the financial accounts. It is essential for the
company to records all transaction related to gaining and investing the income. It is
considered as the source to record the whole information of business as evidence and
operated smoothly in the market (Hall, 2015). The transaction of loan and equity is
mentioned especially as they are transaction from which the funds are arises in the company.
The Bestway Group Company has the loan and equity which is describe with the given
evidence.
Loan
(Source: Bestway Group, 2018)
Equity

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(Source: Bestway Group, 2018)
It has been seen that the company issues all shares to raising the funds to invest to grow in the
market. Financing function is beneficial for the company as it helps to raise the funds with
the appropriate amount as per the limited amount of loan. It helps the organization to protect
variable interest rates or economic charges. Issuing the share is beneficial for the company as
the large amount is collected as capital that can invest by the company to grow. But the
company has to pay the interest or dividend on these shares in every month that affects their
profit.
Investment function
The investment function is the summary of all variable which affects the all accounts of
financial performance. The investment is required for the company in order to expand the
business as well as earning the income (Sedláček, 2016). The main function of the company
is to utilise the funds in a proper manner. The main purpose of the investment function of the
company is to evaluate the right place of investment or buying the instruments. The
investment decision is taken by the company by containing the functions of Investment
appraisal, NPV, ARR, IRR and Payback method (Das, 2019).

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Investment appraisal
Investment appraisal is a group of techniques which is used to evaluate the attractiveness of
an investor towards the investment.
NPV
NPV stands for net present value of the company. NPV is the difference between present
value of cash outflow and inflow at a particular period.
ARR
Accounting Rate of Return is also the capital budgeting method that helps to evaluate the
percentage of rate of return which is expected on an investment or asset as compared to the
initial investment.
IRR
It is a metric which is also the part of investment function that helps to estimate the
profitability of potential investments.
Payback method
This method helps to determine the period in which the company can recoup the funds
expended in an investment or to reach the break-even point.