Financial Decision Making: SKANSA PLC Report Analysis, BM414

This report delves into the financial decision-making processes of SKANSA PLC, evaluating the importance of accounting and finance functions within the organization. It examines the roles and duties of financial managers, emphasizing the use of management accounting techniques, budgeting, and financial statement preparation. The report analyzes SKANSA PLC's financial performance through ratio calculations, including return on capital employed and net profit margin, to assess the company's profitability and efficiency over two years. It highlights the significance of financial planning, investment decisions, and accurate financial reporting for stakeholders. The report also explores the duties of the finance and accounting department, such as tax adjustments, staff training, and the creation of key performance indicator reports. Overall, the report provides a comprehensive overview of financial management principles and their application in a real-world business context.

FINANCIAL DECISION
MAKING

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Management of SKANSA PLC, by evaluating the importance of Accounting and Finance
functions, duties and roles within the organization.....................................................................1
TASK 2............................................................................................................................................6
Calculation of ratios.....................................................................................................................6
Analysis financial performance of SKANSA PLC.....................................................................7
CONCLUSION................................................................................................................................9
REFRENCES...............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Finance is the blood of business organisation. It is really essential to take effective decision
which is directly influenced by financial resources of Business Corporation. To understand the
concept of financial decision making SKANSA PLC has been taken. This report briefly describe
role responsibility and importance of financial as well as account It define in a systematic
manner role of financial manager and tools the used to recognise business performance and
importance of these financial management policy . This also include use of ratios to understand
the difference between arises 2 years off scanner PLC this report has been define analysis of
financial performance on the basis of result arises after calculating ratios
TASK 1
Management of SKANSA PLC, by evaluating the importance of Accounting and Finance
functions, duties and roles within the organization.
Financial management help in all the essential business financial resource through which
organization is able to control and manage effective business activities. For this purpose they use
management accounting techniques. Follow ng are the functions of accounting
Functions of accounting
 Creation of budget: For take effective business decision managers need to prepare
budget, it is statement which define expected value of future business profit and
expenses. In management department of SKANSA PLC it is major function of finance
department to use management accounting technique through which they formulate
budget (Johnston, Kassenboehmer, and Shields, 2016).
 Measurement of financial performance: Success of an entity depend on performance of
financial resources. For analysing performance of SKANSA PLC they use effective tools
of managerial as well as financial accounting, by using key performance indicator,
benchmarking, calculation of ratio, measurement of income statement, manager evaluate
performance.
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 Develop business strategy: It is function of management department of SKANSA PLC
by using accounting and financial reports they formulate business policies and strategies
which proved direction to workforce to work according business policies. These
strategies are made by understanding effect of each accounting activity as well as
recognize effect of finance business policies. These are consider as strategies for running
business activities in effective manner.
 Allocate business funds: Optimum utilization of business resource are very essential,
without that SKANSA PLC not able to properly use their available financial funds.
Management department thus allocate business resource according to financial activities
and resource allocate in departments.
 Controlling business activities: It is necessary business function of management
departments that they need to formulate effect competitive business strategies through
which they can analysis which business activity may become the reason of increasing
cash outflow, they on the basis of that formulate business strategies for controlling
wastage of cash outflow (Zaleskiewicz, and Traczyk, 2020).
Duties of finance and accounting department
 Preparation of financial statement: It is prior duty of manager of finance that on the basis
of collecting accounting information through formulating accounting and finance report,
financial statement has been prepared. To consider balance sheet, income and trading
statement, which prescribe the overall bureau or information of expenses incurred in
various business activities for converting raw material into finished good and distributing
them, as well as adjustment related to transfer of share, value of creditors and calculation
of profit value.
 Tax adjustment: finance manager formulate financial statement for recognize liability
related to tax then need to pay for particular financial year. it is essential duty of them to
pay tax liability. on the basis of calculating each business adjustment they recognize
value of deferred, income tax and then formulate policies and adjust through which they
can able to a apply for subsidiaries.
 Provides training for staff: Financial manager on the basis of analysis performance of
workforce, organize training program, for their motivation and for influence employee,
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providing learning for them to increase their skills regarding how to use accounting
software and record business transactions. This help in enhancing capabilities in staff.
 Creation of key performance indicator report: main duty of management department is to
create report regarding with measurement of performance of employees. Manager set
target and on the basis of that they analysis [performance of each business department.
Key performance measurement is tool of managerial accounting. By the use of this tool
managers able to understand causes of reduction of performance of workforce and on the
basis of that they set target which is essential for department to fulfil as on ha basis of
that they get incentive, which useful for career worth of employees. Management
department of SKANSA Plc need to use this technique for understanding capability of
their various working department (Al Balushi, Locke, S. and Boulanouar, 2018).

Role of accounting & financial department
 Management accounting: accounting manager force on using and applying management
accounting techniques. They use cost management system, inventory management
system and techniques of profit volume ratio, marginal costing tools, standard variance,
all these useful in recording transaction and effectively optimize inventory management.
Management accounting useful in decision making and properly use resource of business
organization. Key performance indicator, benchmarking and financial governance all
these are essential policies through which they can run business in ethical manner.
SKANSA PLC apply techniques and tools of managerial accounting for their business
policies.
 Financial accounting: Just like management accounting, department of management
apply tools of financial management or accounting, for taking review regarding
collection of financial transactions
 Use of system of finance: Their main function is to use all the financial system in
effective way, there will be various kinds of system used by managers which useful in
archiving business target. By using theses system, it is it’s formulate policies and analysis
performance of business organization. Manager on the basis of formulating business
polices understand position of business
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 Financial planning: Manager of SKANSA PLC prepare plan for making effective
financial strategies by using tools of accounting as well as financial system. They used to
understand each and every situation and on the basis of that plan for formulating effective
business polices which help in providing path and guideline for work in effective manner.
This planning help in recognizing all the essential activities
Importance of financial management
 Identification of needs of finance functions: Financial management help in analysis main
reason of using financial system and tools for business organization. Manager need to
decide which accounting tool they need to use for identify cost as well as method apply
for preparing financial statement. On the basis of that manager of SKANSA PLC
formulate their strategies which useful in getting best financial result.
 Recognize source of finance: financial management tool & technique use in finding out
best survey they can able to take, as it is rely hard to decide which portfolio investment is
useful in providing benefit for organization. And successfully deal with each
department‘s financial needs (Strough, Wilson, and de Bruin, 2020).
 Use for performance measurement: Financial management is effective technique through
which manager can able to understand performance of every department which include
Sales Production as well as Human Resource Department the use of Management
Accounting when and financial accounting tools through which they can able to
recognise performance of their departments probability manager SKANSA PLC use key
performance indicator as well as benchmarking to recognise performance of their
workforce on the basis of performance measurement the formulated strategies related
with providing incentive rewards bonus performers recognition all this useful in influence
interest of workforce towards business organisation
 Investment decision: The most essential path of financial management is that by using its
various techniques when is able to take decision by using profit volume ratio standard
costing and financial statements ratio analysis use of various capital budgeting technique
when is understand which investment is beneficial for them unable to generate more
profit success of organisation totally depend on how effectively investment decision
organisation take for achieving their long term goals
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 Accurate result: The best benefit of using financial management as well as accounting for
business organisation is that these are help in recording accurate business decisions as
well as presenting them in effective manner managerial accounting is help in properly
record analyse and interpret date accounting information in effective manner on the other
side by using financial statements an adjustment various type of adjustment has been
made on the basis of following accounting or International Financial standards by using
these guideline of these manager of SKANSA PLC able to provide reliable and accurate
business decision and information which is beneficial for internal as well as external
stakeholders
 Effective presentation: Major benefit of applying financial as well as accounting
management techniques is that organisation able to present the year information related to
each business transaction in effective manner in front of their major shareholders media
public owners directors equity as well as professor holder Ola related with an attached
with financial performance of organisation does it is really essential for making effective
presentation through which organisation able to present these information manager of
SKANSA PLC properly formulate financial statements and cash flow fund flow
statements an adjustment of all the relevant transaction they made balance sheet in
effective manner which is easy for or their stakeholders to understand financial position
of the company (Park and Cho, 2019).
Financial manager is essential human resource of business organisation as the
make strategies and policy control all over the financial resources of this organisation.
The need to take decision regarding with the use of ratio with helping taken financial,
budgeting investments on the basis of that the able to generate defective profit. It is also a
tent competition advantage when the use in i say resources in effective menopause is the
need to apply managerial accounting policies in affecting manners using these words is
helping managers able to understand each and every busy scenarios as well as this is
organisations able to generate there's avenue inspector manatee understand causes of
production of performance as well as 4 minute effective policies with a waiting business
games economic profit bike making financially capable strong of the business
organisation managers cup plc use all these mechanism for learning they business
organisation in effective with help in understanding is in every busy signal as well as
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maintenance composition within given listen environment present time it is really special
for them to use all the resources in wicked to in applying enough activities for money
policies of financial management should be able to understand all the reason of
decrement of performance (Eroğlu, 2020).
TASK 2
Calculation of ratios
Return on capital employed
Particular 2018 2019
Operating profit 4,800 6,000
Capital employed = Total
assets - Current liabilities
2310 3780
ROCE % Operating profit \
Capital employed
2.07 1.58
Interpretation: Capital employed this ratio has been used to analyse ability of
organisation to generate profit. By using total assets or capital employed the term capital
employed is consist of differences between total Assets and current liabilities. It is really
essential for organisation to use this ratio for analysing their financial performance by calculating
this ratio management department able to understand effect of capital employed on operating
profit. SKANSA PLC use this ratio to determine their date of generating profit by using assets
from the analysis for calculation of ratio of 2018 and 2019 it has been analysed that in 2018
organisation is able to generate 2.07 ratio and as compared to 2018 the rate of return on capital
employed has been decline the only able to generate 1.58 ratio.
Net profit margin
Particular 2018 2019
Net profit 600 675
Net sales 4,800 6,000
Net profit ratio = Net profit \
Net sales *100
12.5 11.25
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Interpretation: profit margin this ratio is used to analyse ability of organisation to
generate profit over sales this show that organisation have capacity to save their product and
services for making for generate business revenue (Wald, and Franco, 2016).
Average Receivable days
Particular 2018 2019
Net credit sales 4,800 6,000
Average accounting
receivables
900 1200
Average receivable days =Net
credit sales \ Average account
receivables * 365
68.35 73
Interpretation: Average receivable days this ratio is calculated by using average
receivable turnover ratio by multiplying it number of days a particular period of time by using
this ratio organisation is able to understand time required for collection of debt funds.
Average Payable days
Particular 2018 2019
Net credit purchase 4,800 6,000
Average payable days 570 2,100
Net credit purchase\ Average
credit payable days * 365
42.97 128
Interpretation: Just like every receivable day’s organisation calculate average payable days
through which they analyse or understand ability of organisation to pay their credit liabilities
within a particular period of time.
Analysis financial performance of SKANSA PLC
Business Corporation use ratio analysis through which able to analyse financial
performance of particular time period. This also used for comparison after calculating all the
essential ratios which included efficiency and profitability ratio. It has been recognised that
performance of PLC in 2018 was much better than as compared 2019 capital employed ratio
value is 2.70 and in 2019 it was calculated at 1.58 which means that organisation is able generate
more profit by using their assets in effective manner value of net profit in 2018 was calculated at
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12.5 and in 2019. It was 11.25 which means that organisation ability to generate or use net sales
for making sales revenue is higher than as compared to 2019 ability of collection from debtors of
SKANSA PLC is better than 2019 as it justice 68 days for collecting or receiving money from
the editors on the other side they need to take 73 days in 2019 for collecting payment or deploy
ability from their potential debtors ability of pain that in 2018 was much better than as compared
to 2019 as it is take 43 days for to payable their credit liabilities and they need to take 128 days
which is double or triple 2018.
From all the calculation financial performance of SKANSA PLC is much better in 2018
as compared to 2019 the use the main reason of getting better performance in 2018 is that the use
effective in ancient management policies as well as they have the ability to manage their cash
flow statement in effective manner. On the other side due to lack of managerial skills or effect of
economic crisis it is really hard for organisation to maintainability of generate revenue as well as
within given time period manager of SKANSA PLC need to use marginal or manage
management or financial accounting tools.
Manager need to use analyse those activities which become the reason of reduction of
profit stability ratio as well as efficiency ratio of organisation for this purpose the need to use
effective tool of financial management prepare budget reports as well as use managerial
accounting tools by using these tools to recognise main reason behind decrement in financial
performance of SKANSA PLC.
Business organisation use effective tool of financial is through which they can able to
made effective business strategies for this purpose the use financial as well as managerial
accounting and make effective business policies they work according to budget policies and
motivate employees to work in effective manner which will help in reducing wastage all this
activities useful in managing financial performance of scan SKANSA PLC (Hernes, and
Sobieska-Karpińska, 2016).
Financial performance use in measuring monitor performance in effective manner for this
purpose need to use business strategies the using all the recommended financial policies manager
able to understand reason behind there reduction in financial performance the use key
performance indicator and benchmarking technique which help in motivating financial
performance office organisation these tools useful in making business Strategies for analysing
financial performance the use business organisation through which on the discovery command it
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business goals benchmarking useful in making. These tools help in setting desirable goal every
employee need to fulfil their target within a given time period and on the basis of achieving their
time get financial manager recognise or analyse differences between budgeted as well as
accurate actual target workforce able to achieve with the given time period this will help in
analysing causes of differences by using effective tools of Management organisation able to
reduce differences between these items manager of business organisation use financial
accounting tools for which the table to understand each and every detail business organisation
there will be many reasons of reduction in financial performance business organisation tools of
energy performance which help in recovering performance of Organisation in effective manner it
is the duty of manager to use every tool in effective manner as well as record and National
Information according to ethical laws and norms they used to control insider trading and
cybercrime by using effective organisational structure table to divide what is your roles and
responsibilities in effective manner strong financial performance is the their needs (Balushi,
Locke. and Boulanouar, 2018).
CONCLUSION
From the above analysis it has been concluded that financial decision making is
an essential part of every business organisation. Without taking decisions related with investment
financial as well as operating business corporation not able to deal with every situation of the
face during running business activities. Manager needs to use effective tools of financial as well
as marginal for managing accounting it is the responsibility of manager to formulate budget take
decision use making effective business strategies and properly use each and every tool or which
help in taking decisions affecting business organisation use ratio for identifying financial
performance and compare it with previous year. On the basis of that they recognise reason
behind decrement in performance. The formulate policies through which they can cover up all
the difference arising due to issues of business organisation.
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REFRENCES
From books and journal
Johnston, D.W., Kassenboehmer, S.C. and Shields, M.A., 2016. Financial decision-making in the
household: Exploring the importance of survey respondent, health, cognitive ability and
personality. Journal of Economic Behavior & Organization, 132, pp.42-61.
Zaleskiewicz, T. and Traczyk, J., 2020. Emotions and financial decision making.
In Psychological perspectives on financial decision making (pp. 107-133). Springer,
Cham.
Al Balushi, Y., Locke, S. and Boulanouar, Z., 2018. Islamic financial decision-making among
SMEs in the Sultanate of Oman: An adaption of the theory of planned behaviour. Journal
of Behavioral and Experimental Finance, 20, pp.30-38.
Strough, J., Wilson, J. and de Bruin, W.B., 2020. Aging and financial decision making.
In Psychological Perspectives on Financial Decision Making (pp. 167-186). Springer,
Cham.
Park, I. and Cho, S., 2019. The influence of number line estimation precision and numeracy on
risky financial decision making. International Journal of Psychology, 54(4), pp.530-538.
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