Financial Management Report: Morrison Supermarkets Analysis

This report provides a comprehensive analysis of financial management practices within Morrison Supermarkets. It begins by examining various decision-making approaches, techniques, and factors, including formal and informal approaches, cost-benefit analysis, and brainstorming. It then delves into stakeholder management, emphasizing the importance of balancing the needs of internal and external stakeholders. The report explores management accounting techniques for cost control, such as budgetary control and cost accounting, and discusses methods for fraud detection and prevention, including auditing and data mining. The second part of the report presents a financial ratio analysis of Morrison Supermarkets PLC for the years 2020, 2019, and 2018, evaluating liquidity and profitability ratios. It then assesses the usefulness of the financial data in decision-making, examines investment appraisal techniques to maximize ROI, and explores how financial decision-making supports long-term sustainability. The report concludes with recommendations based on the findings.

Financial Management

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
SCENARIO A..................................................................................................................................3
1. Evaluation of various approaches, techniques and factors of decision making.................3
2. Stakeholder management ...................................................................................................4
3. Management accounting techniques in cost control...........................................................5
4. Techniques of fraud detection and prevention...................................................................5
5. Reflection of learning.........................................................................................................6
Scenario B........................................................................................................................................6
Financial ratio's analysis of Morrison Supermarkets PLC for the year 2020, 2019 & 2018..6
Usefulness of data obtained in decision making..................................................................12
Evaluating the various investment appraisal techniques utilized to maximize ROI............13
Values of various techniques to inform financial decision making.....................................14
Ways in which financial decision making support long term sustainability........................15
Recommendation .................................................................................................................15
CONCLUSION .............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Financial management is referred to as the process through which the planning,
organizing, controlling and the directing of all the activities is undertaken in the management of
the financial activities (Chung and Chuang, 2016). The present report is based on Morrison
which is a company based in the retail sector. The present report will discuss about the various
techniques, factors and approaches of decision making used within the company. Also, it will
discuss about the stakeholder management along with the different management accounting
techniques used in cost control. Further the detection of fraud and the reflection of learning will
be provided. In the next part the ratio analysis of the company and the various techniques of
appraisal management will be applied. In the end it will be seen that how the financial decision
making supports the long term sustainability will be assessed.
SCENARIO A
1. Evaluation of various approaches, techniques and factors of decision making
For the business to be successful the most essential thing is the proper and effective
decision making. The decision making is a process through which a person chooses a single best
option from a variety of options.
Approaches of decision making Formal approach- this is a type of approach wherein the formal chain of command is
used in order to take the decision. This is essential because of the fact that if the company
will follow the formal chain of command for the decision making then proper and
accurate decision will be taken as only the top management will be included in the
decision making. Informal approach- this is another approach wherein the company does not follow the
formal chain and rather every person can share their views and suggestion relating to the
area of decision (Bapat, 2019). Thus, this is a better approach as here the company will
have better alternatives to select from as all employees participate within the whole
decision making process.
Techniques of decision making Cost benefit analysis- this is a technique in which the company analyses the benefit and
cost of every alternative and then in the option where there is maximum benefits and
lower cost that decision is being finalised (Herranz and et.al, 2017). This technique is

useful as this will assist the company in taking the most appropriate decision which will
be beneficial for the company. Brainstorming- this is another major important technique of taking the decision wherein
the whole management or the decision making committee sits together and the discuss
over the topic on which decision need to be taken. This is also a better technique as here
all the people discusses and then finally takes the decision.
Factors affecting the decision making process Mind- set of people- this is the major factor which affects the working and the decision
making process by a person. This is due to the reason that every person has their own
way of thinking and perception. Thus, when two or more people takes the decisions then
this factor affects to a great extent.
 Too many option- this is another major factor which affects the working to a great extent.
This is pertaining to the fact that when the decision taker has a lot many options then it
will be difficult for the company to decide which option to be selected.
2. Stakeholder management
The stakeholder management is a process or series of steps which are to be undertaken in
order to manage and monitor and organize for the requirements of the stakeholders of the
company. The stakeholder of the company is the one who are interested in the success of the
company as they have some personal interest within the company. There are different types of
stakeholder generally divided in two categories that is internal and external. This includes
stakeholders like management, employees, suppliers, owners, government, competitors and
many others. For getting success it is very essential for the company to keep all the stakeholder
happy and satisfied.
In contrast to this all the stakeholder have their own need and requirement which is
different from others (Yuniningsih, Pertiwi and Purwanto, 2019). This is pertaining to the fact
that interest and power of every stakeholder is different. For example, the government is a
stakeholder of the company who is interested in the profits of the company as the government
charges tax on the profit earned by the company. In contrast to this the management is interested
in cutting the cost of the company so that the profits of the company can be increased. On the flip
side the employees within the company expects that the company give them better salaries and
incentives (Choonara, Eyles and Morrison, 2020).

3. Management accounting techniques in cost control
The cost control is very essential within the success of the company as if the cost will be
low then the profits of the company will be high. Thus, this will assist the company in increasing
the profit and the working capacity of the company. There are various management accounting
techniques which will assist the company in controlling the cost and these are discussed below- Budgetary control- this is a technique which assist the company in estimating the income
and expenses and then direct the whole study towards the completion of that only. This is
of value to the stakeholders as they will know how much they have to spend and how
much they can expect the income form the operations of the company.
 Cost accounting- this is another technique of the management accounting which assist
the company in controlling the cost. Under this technique the company allocates the cost
to the activities of the business. This assist the business in calculating the total cost of the
company and assess the fact that where the company is present.
4. Techniques of fraud detection and prevention
There are many different techniques of detecting the fraud within the company and
detection of fraud is very essential for the company. This is particularly because of the reason
that that the fraud reduces the working efficiency of the company. Thus, it is essential for the
company to identify and detect the fraud so that it can be removed and performance can be
managed. The various ways of detecting fraud and preventing them are as follows- Audit- this is the method in which an auditor is appointed and they check that whether all
the principles of ethical working are followed by the company or not. If not, then the
auditor provides some solution to the company for the improvement of the business.
 Data mining- this is another important technique under which the company records all
the data on some common basis (EKIMOVA and et.al, 2017). This will assist the
company in managing and checking the data from time to time so that there is no problem
within the business and its information and accounts.
The major way of preventing the fraud is providing training to the employees so that they
record all the transaction on the basis of the principles and guidance provided only. This is
pertaining to the fact that when the employees know how they have to record the data then there
will not be any problem at time of managing the accounts and other information (Larson and
et.al, 2016).

5. Reflection of learning
From the above whole discussion, it is clear that the management accounting practices
are very essential to be used by the business. this is particularly because of the reason that when
the company will make use of these management accounting principles the company will be able
to improve its business. With the above study it is clear that decision making must be good and
effective for the company as this will help the company decide for better options for the growth
and development of the company. Also, I learnt that the use of different types of approaches and
techniques of the decision making assist the company in taking effective decision and this
increases the working efficiency of the company. This is majorly because of the reason that id
the company will not be able to take the decision in proper manner then they will not be able to
work in effective manner.
Also, with this study I learnt that the management of the need and interest of the
stakeholder is very essential. This is due to the fact that stakeholders are important as these are
the people who work for the company but the objective of each of the stakeholder is different
from one another. Also, from the report I learnt that the use of management accounting
techniques can be used in order to manage the cost of the company. In addition to this I learnt
that the fraud can hamper the working and growth of the company and for this the detection of
the fraud is very essential. This can be done with help of auditing of books of accounts and other
information to check that whether it is correct or not.
Scenario B
Financial ratio's analysis of Morrison Supermarkets PLC for the year 2020, 2019 & 2018
Morrison's
2020 2019 2018
Liquidity ratio
Current assets 1322 1379 1279
Current liability 3396 3349 3080
Inventory 660 713 686
Quick Assets 662 666 593
Current ratio
Current assets / current
liabilities 0.39 0.41 0.42
Quick Ratio
(Current Assets -
Inventory) / Current
Liabilities 0.19 0.2 0.19

Profitability ratio
Employed Capital 7524 7317 7382
Net operating profit 521 394 458
Return on capital
employed
Net operating
profit/Employed Capital 6.92% 5.38% 6.20%
Net Income 348 244 311
Shareholder's Equity 4541 4325 4250
Return on Equity
Net Income / Shareholder's
Equity 8.00% 5.64% 7.32%
Cost of Sales 16907 17128 16629
Sales 17536 17735 17262
Gross Margin
Total Sales — COGS/Total
Sales 3.59% 3.42% 3.67%
Operating profit 521 394 458
Sales 17536 17735 17262
Net profit ratio
Operating Income/ Net
Sales 3.00% 2.22% 2.65%
Efficiency Ratios
Inventory 660 713 686
Trade Receivables 353 347 250
Net Assets 4541 4325 4250
Cost of Sales 16907 17128 16629
Sales 17536 17735 17262
Asset turnover ratio Sales / Net assets 3.86 4.1 4.06
Inventory turnover ratio Sales / Inventory 26.57 24.02 24.24
Account receivable
turnover ratio
Sales / Accounts
Receivable 49.68 51.11 69.05
Debt
Debt 6379 5285 5122
Equity 4541 4325 4250

Debt equity ratio Debt/ Equity 1.4 1.22 1.21
Analysis and interpretation:
Liquidity ratio
The presented charts below depicts the current ratio and quick ratio of the Morrison's.
The both the ratio of the company is very low which indicates the serious issue for managing the
short term liabilities of the business (Sedláček, 2016). Thus, the company should work on either
increasing its current assets or reducing its short term liabilities.
2018 2019 2020
0.375
0.38
0.385
0.39
0.395
0.4
0.405
0.41
0.415
0.42
0.425
current ratio
Profitability ratio
The graph given below shows the increase in trend of both return oncapital employed and
return on equity. Thsi indicates that the company is effectively utilizing its capital employed and
shareholders funds in earning higher income. This means Morriosn's is going towards growth.

2018 2019 2020
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
Return on capital employed
2018 2019 2020
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
Return on Equity
As depicted by the below graph, the gross profit margin of the company is declining
which shows increase in the cost of goods sold or reduction in the revenue of the organization. It
ahs reduced from 3.67% to 3.59% in 2020.

2018 2019 2020
3.25%
3.30%
3.35%
3.40%
3.45%
3.50%
3.55%
3.60%
3.65%
3.70%
Gross margin
The net profit margin of the Morrison's has increased to 3% in the year 2020 and has also
shown that the profits have been steady (May, 2017). Therefore, the comapny needs to work on
increasing its profits.
2018 2019 2020
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
Net profit ratio
Efficiency ratio
The asset turnover ratio of the company is fluctuating with minor variation which means
that the company is handling it assets in a consistent manner. The company should make an
effort to increase it further whcih will help in getting better results.

2018 2019 2020
3.7
3.75
3.8
3.85
3.9
3.95
4
4.05
4.1
4.15
Asset turnover ratio
The below stated graph represents inventory turnover ratio of the organization. In case of
Morrison's , there is a increase from 24.24 times to 26.57 times in 2020. This is teh good sign
that company is able to sell out its inventory as quickly as possible.
2018 2019 2020
22.5
23
23.5
24
24.5
25
25.5
26
26.5
27
Inventory turnover ratio
The chart presented below states that the accounts receivable turnover ratio of Morrison's
has declined which means that the company is not able to recover the due money from its
customers to whome goods sold on credit. Morrison's needs to make chnages in its credit policy
and introduced effective collection team.

2018 2019 2020
0
10
20
30
40
50
60
70
80
Account receivable turnover
ratio
Solvency ratio
2018 2019 2020
1.1
1.15
1.2
1.25
1.3
1.35
1.4
1.45
Debt equity ratio
The graphical representation above shows that there is an increase in the financial
leverage in the capiatl structure of the organziation at slow rate. Thus, company needs to ensure
that it pays off its debt quickly to avoid risk.
Usefulness of data obtained in decision making
The data obtained using the fianncial statement of the organization helps in taking
effective business decisions. The information gathered through ratio analysis provides support to
the business organization in effectively evaluating the business organization (Škretović and et.al,