Financial Decision Making: Ratio Analysis and Insights for Panini Ltd

This case study provides a detailed financial analysis of Panini Ltd, focusing on the roles and responsibilities of its accounting and finance departments. It begins by outlining the core functions of these departments, including financial accounting, management accounting, tax functions, auditing, investment, financing, dividend, and working capital management. The study also explores various internal and external sources of finance available to the company. A significant portion of the analysis involves calculating and interpreting financial ratios, such as gross profit margin, operating profit margin, and ROCE, to assess the company's financial health and performance. The analysis includes a comparison of financial data from 2018 and 2019, providing insights into the trends and potential areas for improvement. This assignment, contributed by a student and available on Desklib, offers a comprehensive overview of financial decision-making principles applied to a real-world case.

Financial Decision
Making

Table of Contents
Contents
INTRODUCTION...............................................................................................................3
TASK..................................................................................................................................3
Identify the functions related to finance and accounting departments......................3
PART B..............................................................................................................................6
Calculate the ratios....................................................................................................6
CONCLUSION.................................................................................................................11
REFERENCES................................................................................................................12
1

INTRODUCTION
The case study of Panini Ltd describes the duties and responsibility of accounting
and finance function with in the enterprise. It also explains the basic concept of
accounting and finance function of panini Ltd. Before discussing the duties and
responsibility it’s important to understand the main purpose of accounting and finance
function, it is the centre part of every company which are answerable for ensuring the
effective or productive financial management and control to support the all company
tasks. Afterwards it shows the duties and main responsibilities of accounting function is
Bills payable, receivables and report financial related activities apart from this the roles
and responsibilities of finance function is, to prepare financial strategy, to keep the
books of accounts and analysing the funds which are raised by the business. In other
instance it discusses some basic finance sources which includes internal and external
sources. Also. In other task it analyses some various kinds of financial ratios which
indicates the financial situation of the entity. In other part it provides some reason, show
the performance and give suggestion on the basis of the above calculated ratios.
MAIN BODY
TASK 1
Part a: Accounting and Finance functions
 Accounting Function: The Accounting function of panini Ltd plays a very
important role in the financial management of the company. Basically, it
maintains the documents of the organization it mainly pays off by the firm and
check the overall expenditure of the company is paid or not in a particular period
of time (Ahmed, 2019). It includes some kind of accounting functions along with
its duties and responsibility of these functions within the organization that are
given below:
 Financial accounting: The financial accounting of the company is very crucial to
keep the details of historic transactions of the entity along with this it also provide
an assistance to the auditor of analysing the documents of the enterprise. Apart
from all this it manages the reports of the company and record the daily tasks
and accounting transactions of the firm.
 Management accounting: The management accounting of Panini Ltd assists
the managers to create its self-owned decisions into the company. Generally, it
assists the entity for analysing, describing, identifying and conveying the full data
leader. It mainly assists for accomplishing the goals and objectives of the
company. Along with this it usually provides an assistance to create and
forecasting the plan to implement in the projected task of the company (Amaning
and et.al., 2021).
 Tax function: The tax accounting function is mainly useful to handle the tax
which involved risk but for some other reasons it involves strategies work,
forecast the problem and give data about the plan to the staff members of the
company. Also, it suggests about the financial transaction of the organization.
They required to show higher concentration on their limits of transactions, for
paying less taxes.
 Auditing function: The auditing function of accounting department is usually
helps to identify the time duration, nature and the growth of audit process. In this
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scenario, it required to measure the accounting of the organization and examine
the proper structure of accounting, the auditor of the company required to ensure
the assets within the company. Apart from all this it determines the assets worth
and ensure the assets availability (Brockman and et.al., 2019).
 Finance function: The finance function of panini Ltd create strategy to manage
the funds of the company and check that the organization can generate funds
through many ways. It also answerable for making the issues and it is usually
based upon the financial reports of the organization. It involves some various
kinds of finance function along with its duties and responsibility of these functions
within the entity that are given below:
 Investment function: The main purpose of investment function is to indicate the
comparison between the worth of interest and the firm’s investment. They usually
invest its money in those technology who are newly introduced in the market and
useful for the society as well. This type of investment accomplishing success in
future for making high profit.
 Financing function: This is one of the most important function of finance in which
it assists in sustaining and utilizing of financial funds for the impressive growth
and expansion of company’s activity. It also controls the strategy of financial
resources (Chen, Zhang and Nie, 2020).
 Dividend function: The dividend function is usually assists to provide the profits in
a divided form to its company shareholders. In any year if organization generate
profit then firm distribute profit to its board members and partners of the
organization then it distributes in a form of dividend to its equity and preference
shareholders of the company.
 Working capital function: The function of working capital helps to recover the
company short -term expenditures which are particularly due within a year. They
use cheaper source of finance for the expansion and development of the
organization. Every firm generates high profit in the organization so, they work
very efficiently and necessary to concentrate more in their operational activities
and reduce the expenses as well.
Part B: Sources of finance
Before starting any projected task, firm required to create funds for their daily
operational activities. They necessary to complete various types of expenditures it
involves bills payable, inventory and tools. In simple words it is the process in which
company creates resources for their business tasks (Chowdhury, Rahman and
Sankaran, 2021). Company can generate financing through internal and external path:
 Internal finance source: The funds which generates from within the organization.
It involves some kinds of internal techniques which are given below:
 personal savings: This type of savings helps the owners of the company to invest
the money in their business it creates funds for the company through the
personal savings of the entrepreneur. It mainly performs to fulfil the basic future
requirement of the company. If company perform the task of the organization and
due to the shortage of funds they face difficulty, then company owner can use
such type of savings to execute the task in the company.
 Retained earnings: If company makes profit in their firm then it uses few or
completed funds in the organization and again invest to grow its money. This
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source of finance does not involve interest charges or needed the dividend
payment. Which can make it a useful source of finance (Endrawes and et.al.,
2020).
 Selling off assets: It involves selling of goods and services which are owned by
the firm. It mainly useful for the firm when it’s not highly utilize the products or it
needed to create funds speedily. Assets of the firm which can be sold like, tools,
inventories and machinery.
 External finance source: It involves those funds which generate from outside the
business. There are some external techniques which are given below:
 loan from commercial bank: If company wants to generate funds in their business
then they can apply for the loan in commercial bank to perform the operational
activity of the company. But the banks provide the loan against some property or
assets of the firm which are required to be considered as a same value of loan
amount. If company fail to pay its loan, then it recovers through the assets of the
firm.
 Relatives and friends: It is an another source of finance which create funds in the
company through borrow money to friends and family members for the
investment reason in the organization. This borrowed money not required to be
repaid or paid with low or no charge of interest (Endrawes and et.al., 2020).
 By issuing equity shares: If company wants to generate funds in the organization
then they have some source of finance to create funds in their business by
issuing equity shares in the public. If the company is reputed and earn profit in
last few years then more individual show their interest in the shares of the
company and buy the shares of the organization and it will automatically
maximise the funds of the entity and assists the organization to achieve their
targets and objectives.
TASK 2
Part a: Calculation of the 8 ratios below using the correct formulas
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Part b: Individual analysis of each ratio based on the numerical results from part
a
For this part, you should provide the below points for each of the 8 above ratios. Each
ratio analysis should be presented in a single paragraph (total: 8 paragraphs)
(i) Gross profit margin
a. This is the income determined after deducting the association's labor and
sales and assembly costs of the product.
b. b. The scale tells how well the organization exhibits: The scale accounts
for the productivity of the organization, which is determined after deducting
costs incurred in functional exercises. This ratio is determined by
separating net earnings from the business' transactions.
c. C. Contrast the 2018 data with the data determined in 2019: the
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interpretation of the 2019 scale adjustment is the result of the institutional
exhibition adjustment. The organization's net benefit decreased by more
than 6% in one year due to the expansion of costs due to administration,
while the proportion of transactions expanded relatively less, and the
resulting expansion of expenses.
d. d. How Proportional Value works from now on: Organizations need to cut
expenses that result in costs and organizational costs. The walkthrough
must be confirmed by the association in order to get to know the real
exhibition of the organization. Associations need to use more liquid assets
and reduce waste from time spent assembling merchandise (Endrawes
and et.al., 2020).
(ii) Operating profit margin
a. This income ratio reflects the associations brought about by the work
activities of the enterprise.
b. b. What the ratio says about the organization's presentation: This ratio
helps determine the organization's exhibition: This ratio helps to decide
based on the execution of the business and the overall progress of the
business.
c. C. Reason for the change in the proportion from 2018 to 2019: The reason
for the adjustment in 2019 is that the proficiency brought by the
organization in the work is not high, and it can continue to develop further
in 2018.
d. d. The Work Scale Approach From Now: In 2019, businesses need to
reduce the cost of work to build the benefits of the organization. It
facilitates the legitimate use of an organization's accessible resources by
saving additional costs incurred during the assembly process (Khoruzhy
and et.al., 2021).
(iii) ROCE
a. This ratio helps in deciding to purchase from the funds that the business
uses in its business mission. It helps to create the interests of the
organization and break down the areas where the interests are identified.
b. b. What is the proportion of the organization's exhibitions: As can be seen
from the above definition, the organization is reaping key benefits from its
mission and generating enough revenue to understand the productivity of
the association.
c. C. Reason for the change somewhere in the 2018 and 2019 ranges: In
this process, the time of year a business earns depends on the rate of
return on capital used. How much income is generated by the capital
employed by the business. Businesses made gains in 2018 and almost
none in 2019, reducing overall business productivity.
d. d. The way to increase the proportional value from now on: it further
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expands the benefits and reduces the cost of doing business that helps
increase the company's productivity. This equation takes advantage of
interest and assesses prior interest.
(iv) Current ratio
a. This ratio helps determine the liquidity of the business. This proportion
mainly includes the continuing resources and current liabilities of the
enterprise and the temporary liabilities of the enterprise. This ratio reflects
the relationship between ongoing liabilities and current resources.
b. b. What the scale shows for the organization's exhibition: This scale
estimates the organization's momentary presentation, which contains
fleeting responsibilities and fleeting resources. This ratio shows the
connection between an organization's ongoing resources and current
commitments.
c. C. Reasons for the change in the proportions in 2018-2019: Explanation of
the continuous proportion adjustment, worrying that the responsibility will
expand with the expansion of continuous resources and current liabilities.
d. d. Approach to dealing with proportional value from now on: This ratio
helps the association determine the firm's tentative commitment and
current resources. These exercises also include those of the current
proportions that are required to further develop the ongoing liquidity
situation of the business (Lu and et.al., 2022).
(v) Quick ratio
a. One. This ratio helps determine the true liquidity of the business, which is
determined by deducting the organization's inventory and prepayments.
b. b. How does the ratio affect the organization's exhibitions: This ratio helps
determine the execution of the business by separating ongoing resources
and current liabilities.
c. C. Reasons for the change in the proportion of a certain place from 2018
to 2019: Due to the high organizational obligations, the purpose of
adjusting the proportion quickly.
(vi) Inventory turnover days
a. One. This ratio determines the amount of time the stock is replaced over
the entire time frame.
b. b. What does scale do to an organization's presentation: It helps
determine an organization's presentation by knowing the amount of time
an organization can turn around inventory.
c. C. Reason for the change in the proportion of a certain place from 2018 to
2019: The bylaw adjusted the proportion due to the expansion of the
agency's cost of selling goods.
d. d. How Proportional Values Work from Now: Associations may additionally
reduce typical stocks to amplify the revolution in stock turnover.
(vii) Debtor’s collection period
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a. The time span to determine the time span to understand the borrower's
expected time span for the classification.
b. b. Explanation of the proportion of institutions participating in the
exhibition: The trading volume of the association has expanded, and the
number of days for institutions to collect payments has also increased.
c. C. Reasons for the change in the proportion from 2018 to 2019: With the
increase of institutional accounts receivable, institutional accounts
receivable decreased.
d. d. How the value of the ratio works from now on: The ratio changes
because the result of the adjustment expands the number of days in which
the executive is advised to recover the amount due to an increase in
borrowers.
(viii) Creditor’s collection period
a. The time span over which management decides the amount determines
the time span over which the organization makes payments to account
holders.
b. b. The ratio indicates how well the organization is exhibiting: The ratio
indicates that the organization will receive a bit longer than last year from
account holders.
c. C. Reasons for the change in the ratio from 2018 to 2019: the decrease in
foreign exchange payable and the increase in organizational transaction
costs.
d. d. How to calculate proportional value from now on: This ratio helps
determine the productivity of a job. The classification of proficiency and
low level shows the effectiveness of the business.
CONCLUSION
From the above report it can be inferred that Panini Ltd and different business
capabilities and execution have collapsed. In the long run, these capabilities contribute
to the future productivity of businesses and businesses. It also helps to suggest areas
where the government can use its resources and assets to make more purchases. A
further different ratio was determined to determine the presentation of the organization
as soon as possible rather than late, in addition to the engaging view of the business.
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