Financial Decision-Making: Skanska plc Analysis and Performance Review

This report provides a comprehensive financial analysis of Skanska plc, examining the roles of the accounting and finance departments within the company. It highlights the importance of financial decision-making for corporate success and evaluates Skanska plc's performance through the calculation and analysis of key financial ratios, including return on capital employed, net profit margin, current ratio, debtors collection period, and creditors payment period. The analysis compares the company's financial performance in 2018 and 2019, identifying trends and providing commentary on the factors influencing the observed changes. The report explores how Skanska plc can improve its financial management and achieve better outcomes by addressing the changes in financial ratios. The report aims to provide a clear understanding of the financial health and decision-making processes of Skanska plc, offering recommendations for improved financial performance.

FINANCIAL
DECISION MAKING

EXECUTIVE SUMMARY
The project report outlines the collective activities of all forms of corporate units in the
accounting and finance divisions. In addition to allowing best use of resources financial capital,
each division is critical. A corporation does not envision living for longer stretches in the lack of
both roles. Although the second section of the study summarizes that Skanska plc's fiscal
stability has been decreased in 2019 relative to 2018. That's because of poor control of the
financial capital and operations accessible.

Contents
EXECUTIVE SUMMARY.................................................................................................................................2
INTRODUCTION...........................................................................................................................................4
MAIN BODY.................................................................................................................................................4
Task 1......................................................................................................................................................4
Task 2......................................................................................................................................................7
CONCLUSION.............................................................................................................................................11
REFERENCES..............................................................................................................................................12

INTRODUCTION
Financial decision-making can be classified as a form of process or strategy wherein the
disposition of assets, debts, inventory and many others can be determined on the financial part of
the business (Gamble, Boyle and Bennett, 2015). This really is important for enterprises to make
correct financial choices so that they can support themselves in a global marketplace. The study
is based on a corporation called Skanska plc. This business is headquartered in the United
Kingdom and works in the form of building ventures. This corporation was launched in 1984 and
aims to improve its activities in the next ten years in many other European nations.
MAIN BODY
Task 1
Accounting and Finance Department: Both the accounting & financial departments are
connected to one another in every type of trade. This is how the accounting department is tied to
the compilation, review and documentation of financial statements in business books. This is one
of the key procedures that each corporate organization has to obey. In company resources, any
type of error will lead to a number of problems and uncertainty. Another main feature of the
finance department is the recognition of which kinds of company activities have to be reported
and what is not.
The Department of Finance can be interpreted as a type of organization connected to the
planning at the end of the fiscal years of different kinds of financial reports (Petersen, Kushwaha
and Kumar, 2015). During a given accounting cycle, this committee is known for learning about
the firm's earnings wellbeing. Via the previous paragraph accounting department, this
department maintains numerous forms of main financial data and this unit documents data in a
structured way and can be used to file financial reports.
Role of accounting and finance department for Skanska plc: The two divisions referred to it
above play a crucial role from the above market aspect. The accounting department is valuable
for tracking all monetary-related operations, such as land transactions, construction costs and

much more. Their manager prepares log reports and transactions that are used throughout the
year to review details about any single financial activity.
Likewise, the department finance often plays an important role in the above-mentioned sector.
This is how this group, at the end of the year, analyses and prepares financial reports (Bhayat,
Manuguerra and Baldock, 2015). These updated financial reports are appropriate for the purpose
of determining Skanska plc's financial condition. In addition, the owners are therefore able to
decide whether or not they can make an investment. They do so in keeping with the financial
report. In addition, another role of such a division is that the board and management of the
organization take important investment decisions in every long-term project.
Role of Accounts Department: In addition to the above-mentioned discussion, there is a central
function and relevance of the accounting department that is explained in this manner below:
Financial accounting- This accounting method can be characterized as a mode of accounting
concerned with the method of summarizing, reviewing and tracking a company's money transfers
over a given period of time. This work is carried out with the aid of a corporation's accounting
staff. That's so because, due to lack of knowledge, it is hard to accomplish the above tasks
without the assistance of such agency. Their finance department performs a vital role in the
performance of all aspects of financial reporting in the sense of Skanska plc. It is possible that
such a division includes a variety of financial details, such as the procurement of some property,
development, and also income from successful construction projects.
Management accounting-This can be interpreted as a type of accounting wherein inner reports
are created using both financial as well as non financial data (Duclos, 2015). Such inner reports
are used for a site management team in time to capture crucial decisions over an amount of time.
In this accounting, the finance department plays a significant role in supplying all types of
information that is used to generate internal records, such as financial as well as non elements.
Their accounting department helps tremendously, as in the example of Skanska plc by the above
assisting accounting professionals to write detailed reports.
Tax feature- Each form of company must pay tax on account of the essence of the company,
produced cash inflows and outflows, etc., to the state. This is important for enterprises to supply
the regulator or tax authorities with reliable statistics so that they can calculate the real amount of

income tax. In this case, the finance department plays a vital role in calculating the overall
amount of tax payable. It is because numerous records such as invoices, revenue budget, cost
sheets and much more will be reviewed by the accountant tax agency. As in the case of the
above-mentioned corporation, their accounting role is valuable in order to provide both the
business and the tax office with details on their taxable revenue.
Auditing Function-The term auditing may be described as a type of method in which external
directors examine and evaluate the annual financial performance. In order to assess the quality
and efficacy of financial reports, these records need to be reviewed by accountants (Seshan and
Yang, 2014). In addition to review a firm's earnings records, accountants require a variety of
documentation that can be used as proof by each item reported. Like if a company achieves an
annual purchase of 50000 pounds, the auditor may require a sleep or paper purchase and this is
issued by a corporation's auditor or finance departments. As with the above factor, Skanska plc
provides its accountancy firm all the appropriate documentation required by the accountants to
validate the authenticity of each item reported in the company's balance sheet.
Role of finance department- In contrast to this the corporate finance department also plays a vital
role in making it possible to perform and run all activities efficiently. Any Finance Department
responsibilities are described below, which are as follows:
Investment function-The word investing can be regarded as a means of operation linked to
making investments in a specific project with a potentially higher return goal. Each investing
choice needs to be made effectively and any failure will relate to varying sorts of business
problems (Robinson, Bond and Roiser, 2015). There are a number of strategies to make the
correct financial decision, and each strategy is based in the financial department. This is so that
the accounting department produces income reports such as the account of benefit and loss, cash
flows, and much more. Skanska plc's investors are taking critical decisions on the best
investments by testing their operating revenue, amount of expenditures and much more. Thus the
financial manager is helpful in correctly executing the investing feature.
Finance Function-The financing pattern is defined to be one of the key functions of an
enterprise's financial planning. Essentially, this is due to the method of raising funds from

multiple forms of outlets. Company must keep their accounting statements up-to-date and
provide real reports so that investors can review their fiscal stability and make choices on
making loans. In the background of Skanska plc above, their fiscal officers, by reporting the real
value of the company accounts, obtain financial support from multiple forms of sources. This
position of the finance office is therefore too critical for any form of organization to develop and
prosper.
Dividend function-The word dividend can be interpreted as a means of assigning or transferring
a business earnings to various groups of consumers (Hoffmann and Post, 2014). It is essential for
organization management to understand about the real sum of gross revenue and profits in order
to do just that. Executives depend on the accounting department for the element, as that division
contains reports on the total sum of net sales, investments and much more. As in the example of
Skanska plc before, their financial department is very important in supplying positive place on
the level of income profits gained and on top of those managers; they make sound decisions to
pay dividends to all categories of stakeholders involved.
Role of working capital- Over a span of time, working capital may be recognized as a differential
between revenues and expenses (Lux, Adam and Pfeiffer, 2015). Working capital has been used
with the aid of existing assets to cover everyday expenditures. It may make it impossible for
businesses to survive on a regular basis for a significant period of time in the lack of suitable
capital expenditures. For day-to-day operations, it is important for businesses to make a careful
evaluation of the requisite working capital. As with Skanska plc, their management decides the
need for additional capital expenditures and this is achieved by analyzing balance sheet details.
Data on existing assets ratio is contained in the income statement and is compiled by the
financial department.
Task 2
Calculation of ratios:
Ratio Formula 2018 2019
Return on capital
employed
Operating profit/Total
assets-current*100
750/3825*100=
19.60%
975/5850*100=
16.67%

liabilities
Net profit margin Net profit/sales*100 600/4800*100= 12.5% 675/6000*100=
11.25%
Current ratio Current assets/current
liabilities
1515/645= 2.35 times 2070/2220= 0.93 times
Debtors collection
period
Receivables/sales*365 900/4800*365= 68
days
1200/6000*365= 73
days
Creditors payment
period
Payables/
purchase*365
570/2700*365= 77.05
times
2100/4800*365= 159
days
Comment on performance:
Return on capital employed: - It can be interpreted as a type of ratio that is used in businesses to
measure a company's efficacy in order to produce a return on its resources. Different forms of
corporate organizations adapt this ratio according to their needs (Musa, Musová and Debnárová,
2015).
This ratio shows the manner wherein the money of the business is handled and the sum produced
at the end of each year. If a corporation earns a higher return than it means that it is able to
handle its resources efficiently.
In relation to the aforementioned business, it can be estimated that in 2018, the return on capital
employed ratio was 19.60 percent, which fell and in 2019 became 16.67 percent. This shift in
amount suggests that in 2019 the company struggled to manage its capital, which leads to a low
amount of return. The explanation why this ratio decreased in 2019 opposed to 2018 is that since
their existing liabilities grew dramatically in 2019 as in 2018, current liabilities rose by 645,
which improved and were 2220 for 2019. The reason why this ration fell in 2019 as compared to
2018. As a consequence, the value of invested capital impacted the business and the yield on
invested capital was smaller.

In this case, the above business can be recommended to concentrate on achieving higher net
profit such that excess amount of current liabilities could be compensated and higher rate of
return price can be generated on the resources employed.
Net profit margin- It can be described as a condition of ratio that is used to calculate an employee
success by deducting all sorts of expenditures to produce net profit. This ratio is important for
businesses to calculate because it represents a company's total status and dividend payout choices
are often taken on this basis (Hershey, Austin and Gutierrez, 2015). In the sense of Skanska plc
above, it can be calculated which their net income margin decreased by 12.5 percent in 2018 and
decreased by 11.25 percent in 2019. This difference in the statistic indicates that during 2019,
they struggled to control their total costs, resulting in a smaller profitability ratio.
The reason for this reduced success in 2019 is that the profitability of the company rose at a
smaller amount relative to spending. In 2018, like the sales price of the company, it was 3450,
which rose and became 4350 for 2019. It illustrates that their costs have risen at an efficient
level, while net profit has risen at a moderate speed.
This can be proposed to the aforementioned organization in such a situation that they ought to
reflect on the forms wherein their income profits can rise and costs can be minimized. However,
their net profit is rising, but as a relation of expenditures such as revenue prices and operational
expenses, that's not so effective.
Current ratio-It can be recognized as a process of ratio that represents the relationship between
accumulated total assets. This ratio indicates an operating cash flow status over a given time
frame (WEBSTER, 2014). The optimal model of this ratio is 2:1 that also implies that an
enterprise must have 2 asset periods to pay 1 current obligation times. Basically, this ratio shows
the liquidity status of a firm or analyses a company's productivity in terms of cash that use to
cover different brief expenditures.
In contrast, this can be evaluated from the above tables that the current ratio of the business was
2.35 times that fell and become 0.93 times in 2018. Below, we could see that the firm's earnings

output varies significantly in terms of volatility. This illustrates that the organization is unable to
adequately control its costs as well as its current assets.
The reason for such low results relative to existing assets is due to increased valuation of current
liabilities. However the existing shares of the business are also strengthened, but not in the
manner in which their cash flows can be managed.
In this case, the above-mentioned business would concentrate on certain operations that
contribute to a rise in current liabilities. Those activities that are carried out on a credit basis
must also be excluded since such credit roles contribute to an increased amount of current
liabilities.
Debtor’s collection period- This is referred to as a type of ratio that is used to determine the
success of a business in raising debt from borrowers (Wagland and Taylor, 2015). If in much less
period a corporation is able to repay its debts than it really is too advantageous for them. The
success of this ratio relies on the performance of the debtors and workers in recovering the debts.
With respect to Skanska plc, it can be calculated that the collection time of their debtors for 2018
was 68 days, which rose before becoming 73 days. These estimates indicate that the productivity
of the company was decreased in order to recover debt from debtors for the year 2019.
As opposed to 2018, the reason for such success is attributed to higher loan purchases in 2019.
The other explanation for this may be the capacity of debt collectors to recover debt sums in a
given period of time.
It can be advised to the business in line with the apparent reasons that they can concentrate on
decreasing trade credit so lower credit sales raise the pressure on them. Besides this sector, credit
transactions can only be available to those consumers who are willing to pay within a specified
time period. Another key advice is that only old clients who are successful in servicing debt on
time can be granted credit sales facilities by the firm.
Creditor’s payment period- This can be characterized as a form of ratio that is used to measure
the efficacy of a corporation in paying its debt on time (Shouzhen and Su, 2015). If a business
takes so long time to repay its loans, it may have a detrimental effect on its credibility, and
vendors may avoid credit transactions with them.

In the case of Skanska plc above, it can be calculated that their liabilities were paid in 77 days in
2018, although they were paid in 159 days in 2019. It implies that the firm has struggled to make
payments on schedule to its lenders, and this can impact their business goodwill. The reason for
such low results is solely due to higher debit transaction rates in 2019 relative to 2018. In 2018,
they made debit transactions of 2700 pounds, whereas they made 4800 pounds in 2018. This is
also the primary reason that bad production has contributed to the settlement of debts on
schedule. This can be proposed to the company in the form of the aforementioned review, that
they can rely on trading with cash instead of debt. This is because higher loan account volumes
result in a strain on the firm's earnings wellbeing.
CONCLUSION
It can be inferred, on the grounds of the entire above project, that each corporate organization
needs to consider the value from both the accounting & financial divisions. This is because all
divisions are the foundation of the management of the firm and each one of them leads to the
utilization of limited financial capital in a successful manner. In addition, it is possible to express
from the second section of the project study that the operating results of Skanska plc is low in
2019 relative to 2018. It is because each calculated ratio indicates that the efficiency of the
organization falls in 2019 at a large margin. Therefore since their output is not so good for
development, Skanska plc must look for the perfect time to make a spending decision in
European countries.

REFERENCES
Gamble, K.J., Boyle, P.A., Yu, L. and Bennett, D.A., 2015. Aging and financial decision
making. Management Science, 61(11), pp.2603-2610.
Petersen, J.A., Kushwaha, T. and Kumar, V., 2015. Marketing communication strategies and
consumer financial decision making: The role of national culture. Journal of
Marketing, 79(1), pp.44-63.
Duclos, R., 2015. The psychology of investment behavior:(De) biasing financial decision-
making one graph at a time. Journal of Consumer psychology, 25(2), pp.317-325.
Seshan, G. and Yang, D., 2014. Motivating migrants: A field experiment on financial decision-
making in transnational households. Journal of Development Economics, 108, pp.119-
127.
Robinson, O.J., Bond, R.L. and Roiser, J.P., 2015. The impact of stress on financial decision-
making varies as a function of depression and anxiety symptoms. PeerJ, 3, p.e770.
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,
pp.1023-1029.
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.
WEBSTER, A., 2014. Financial decision making under uncertainty. Academic Press.
Wagland, S. and Taylor, S.M., 2015. The conflict between financial decision making and
indigenous Australian culture. Financial Planning Research Journal, pp.33-54.
Shouzhen, Z. and Su, C., 2015. Extended VIKOR method based on induced aggregation
operators for intuitionistic fuzzy financial decision making. Economic Computation &
Economic Cybernetics Studies & Research, 49(4), pp.183-191.
Lux, E., Hawlitschek, F., Adam, M.T. and Pfeiffer, J., 2015. Using live biofeedback for decision
support: Investigating influences of emotion regulation in financial decision making.
Bhayat, I., Manuguerra, M. and Baldock, C., 2015. A decision support model and tool to assist
financial decision-making in universities. Journal of Higher Education Policy and
Management, 37(1), pp.69-82.