Financial Decision Making: Performance Analysis of SKANSKA PLC

This report provides a detailed analysis of Skanska PLC's financial decision-making processes, focusing on the role of management accounting techniques in planning, control, and decision-making. It evaluates the effectiveness of these techniques and their impact on the company's financial stability a...Read More

FINANCIAL DECISION
MAKING

Table of Contents
TASK-1............................................................................................................................................3
INTRODUCTION...........................................................................................................................3
Role of management accounting techniques in planning, control and decision making process3
Evaluation:...................................................................................................................................5
CONCLUSION................................................................................................................................6
TASK-2............................................................................................................................................7
Ratio analysis...............................................................................................................................7
Performance of SKANSKA PLC................................................................................................8
CONCLUSION..............................................................................................................................12
REFERENCES................................................................................................................................1

TASK-1
INTRODUCTION
Financial decision making can be understood as one of the most specific aspect, widely
crucial for further enhancing competitive business positioning within industry dynamically. The
role of financial decision making can be understood to be widely crucial, for further attaining
new business optimum pace for delivering new strengthened vision. Key accounting and finance
functions for company are to keep check on working scenarios related with capital inputs and
outputs attained, where finance structure can be further optimized. Importance of finance
functions and accounting can be also further worked on, by strengthening focus toward bringing
profitability attained within longer run. Skanska PLC is multinational construction and
development company based in Sweden which is the fifth largest construction company in world.
The brand has been taking up new strategies, for building strong financial worth where
accounting and finance functions plays crucial role. Cpital budgeting, inventory valuation and
product costing are some of the significant functions of accounting and finance where Skanska
PLC has adopted significant strategies diversely (Lind and et.al, 2020).
The financial decision making has been significantly adopted by company, for yielding
on towards untapped new business goals rapidly and generating wider scale performance growth
diversely. Company has been significantly taking up new advanced scale strategies for further
enhancing functional working reach within financial stability parameters, and to expand key
strengthened new determinants. The report will explain importance of accounting and finance
functions, analysing roles and specific duties for creating functional growth variedly into system
diversely. Furthermore, research will analyse focus on towards integrating new advanced
financial strategies based on results of statements. Study will also further integrate structure of
best aspects, by studying financial statements of company, and to yield on specific focus on
strengthened vision diversely. Research will further expand analysis on company performance
from investors perspective, and strengthened vision for dynamic competitive growth.
Role of management accounting techniques in planning, control and decision making process
The managerial accounting techniques provides informative information needed to fuel
up effective decision making procedures, which can be further correlated to planning, directing
and controlling of business decisions. Skanska PLC, has been implementing effective
management accounting techniques for further advancing among corporate expertise targets,

which enhances further scope for strengthened vision dynamically. Some of the most essential
management accounting techniques can be analysed as follows:
 Financial planning- One of the most significant management technique of management
accounting is financial planning which significantly addresses focuses on achieving
primary objectives within business parameters (Gardi, 2021). It also further significantly
includes long term and short term financial working objectives competently in enterprise,
formulating financial policies. It may relate to determination of amount of significant
capital required for further excelling stronger determination of income within business
grounds. The role of financial planning as management accounting technique, can be
understood vitally for strengthened business efficacy dynamically and also to attain
significant growth.
 Analysis of financial statements: Significance and meaning of financial statement data
can be understood with cash funds flow statements and ratio analysis which results in
operative business executives and investors. The usage of financial statements, also
enables usage of best management accounting techniques to further enhance working
expertise dynamically on varied grounds for strengthened working vision. This analysis
results in presentation of information which help business executives, investors and
creditors for further gaining stronger competitive positioning. It enables company to
predict future earnings and ability to pay interest and debt maturities, with profitability
and sound dividend policy aspects dynamically (van der We, 2020).
 Budgetary control: The management accountant uses tool for budgetary control for
effective planning and control of various activities in business, which further directs
business operations in achieving satisfactory competitive investment diversely. It can be
also analysed that budgetary control technique further also enhances management
accounting techniques, to further enhance budget formation to be done effectively. The
role of budgetary control is also correlated to further leverage functional rise diversely,
which further brings on wider scale competent efficacy. Cash flow and budgetary control
are significantly worked on, by enhancing functional working rise diversely and also to
leverage new paradigms dynamically on wider grounds.
Funds flow: The management accounting also significantly addresses focus towards practical
effective funds flow, which further strengthens working engagement diversely toward effective

benchmarks. Funds flow determines strengthened working vision proactively for company to
establish new financial business positioning parameters significantly, and for further excelling
toward stringent innovation. Management has strong funds flow when following stronger
management accounting principles and further enhancing business reach diversely, where funds
are managed effectively. There is also specific rise further pertained on achieving cash flow
targets dynamically, and harness parameters connectively for attaining optimum growth. The
funds flow also enhances stronger vision on capital as Skanska PLC, aims to further evolve on
optimum criteria significantly for further attending new business criteria dynamically for
strengthened competitive accountability (Abdulshakour, 2020).
From the above analysed aspects, it has been concluded that Skanska PLC aims to further
harness functional working engagement diversely, and for technical innovation among criteria
for untapped vision in management accounting criteria.
Evaluation:
The role of management accounting techniques can be evaluated in role of extended
usage of planning, controlling and decision making, for further integrating working engagement
in aspects correlated towards financial management. Skanska PLC, aims to significantly enhance
role of management accounting techniques rapidly, for using planning, control and decision
making working aspects dynamically which enhances stronger goodwill positioning. Critical
evaluation, will enable further analysis done on role of management accounting techniques and
control, decision making factors for strengthening vision oriented company practices.
As per the views of AFFANDI and et.al, (2020), role of management accounting
techniques can be understood with detailed analysis on role of planning, controlling and decision
making which further enhances stronger accountability. Integration of management accounting
techniques such as capital budgeting, trend analysis and forecasting strengthen up business
functioning variedly on long term business levels for strengthening wider goals. Research also
brings on focus towards role of management accounting paradigms, which rapidly diversifies
business paradigms dynamically on strengthened specifics. However, with changing business
demands and integration of new capital investments management accounting further determines
functional new vision which enhances pace for wider scale management accounting. The role of
management accounting implements significant implementation of new standards, wider
productive working targets where long term decisions need to be implemented.

As noted by the views of Schubert and Boenigk, (2021), various other techniques of
management accounting such as inventory valuation and working aspects diversely further
determines wider scale aspects for untapped new vision competitive abilities. The techniques of
management accounting, further determines focus on aspects where application enhances
business positioning criteria to leverage stringent growth paradigms innovatively. However,
some of the techniques of management accounting are time taken and uncertain, which further
lowers functional innovation aspects variedly into system. Also implementation has uncertain
pace, which further lowers business pace of companies and demand new practice working goals
within longer run. Role of management accounting further also lowers competitive business
placement, which leverages factors such as where company has to enhance practically new
parameters dynamically.
These can be applied in effectively new corporate business practices among Skanska
PLC, where practical competitive vision oriented implementation and stringent functional
growth further opens up scope for company to further enhance business reach diversely. Also
usage of best divergence in management accounting techniques, further opens up new platforms
for building strong pathways and leverages engagement towards untapped corporate standards.
Skanska PLC also practically builds up new management accounting techniques to strengthen up
wider quest growth, which further determines wider vision on competent pathways effectively
within company working parameters. Evaluation has collaborated significant functional
competencies engagement to enhance business accountability, where Skanska PLC management
accounting standards are also practically strengthened. This further also determines new keen
paradigms to further collaborate business avenues for strengthened new parameters diversely,
and also functionally pathways stringent goals (Sedliačiková, Aláč and Moresová, 2020).
CONCLUSION
From the above analysis, it has been concluded that Skanska PLC as one of the rising
company within competitive business industry aims to functionally implement financial planning
and management accounting diversely for higher profits. The above research has also
summarized new vision and practical targets working for attaining higher financial optimum
standards, where financial planning tools such as analysis of financial statements and budgetary
control are some of the most critical. Research further also concluded productive focus on new

management accounting techniques such as budgetary control, where decision making process
further strengthens vision for extended business goals into practical criteria. The study also
further concluded implementation of management accounting, correlated to financial
management decisions importance strengthened implementation diversely (Jayasundara, 2021).
Financial decision making has been concluded to bring on new practical working surge,
for harnessing significant functional reach diversely as within research. Research also concluded
practical implementation of management accounting at company Skanska PLC, for pertaining
towards finance decisions criteria and leverage working productive criteria diversely on wider
domains for strong business accountability goals. Also, further management accounting also
enhances competitive business capital formation and also to primitively advance up strengthened
goals rapidly into financial system paradigms. Study has also summarized Skanska PLC
financial decision making efficacy to be rapidly evolved among new grounds and working
criteria dynamically.
TASK-2
Ratio analysis
RATIOS FORMULA 31/12/18 31/12/19
ROCE Operating profit/
Capital employed*100
750/3825 *100
19.60%
975/5850*100
16.66%
NP margin Net profit/ sales
revenue *100
600/4800*100
12.5%
675/6000*100
11.25%
Current ratio
(Liquidity ratio)
Current assets/current
liabilities
1515/645
2.34
2070/2220
0.93
Average receivable
days
Trade receivables/
credit sales*365
900/4800*365
68
1200/6000*365
73
Average payable days Trade payables/credit
purchase*365
570/2700*365
77
2100/4800*365
159
Notes:

Operating profit= Gross profit- Operating expenses
For 31-Dec 2018
Operating profit= 1350-600=750
For 31-Dec 2019
Operating profit= 1650-675=975
Capital employed= Total assets- CL (current liability)
For 31-Dec 2018
Capital employed= 4470-645=3825
For 31-Dec 2019
Capital employed= 8070-2220=5850
Performance of SKANSKA PLC
Accounting ratio and its importance
Accounting ratios are the comparison of financial data of two or more than two years of
the company so that the performance of the company would be analysed (Subburaj, 2019). It can
be right to state that it is a mode by which the financial statement of the company would be
analysed.
Importance:
With the help of accounting ratio various aspect in association with company including
profitability, liquidity, solvency and various aspects are determined. Likewise, with the help of
ratio analysis the financial performance with regard to company would also be analysed. In the
same way investors through the concept of ratio analysis would determine the financial position
and performance of the company and on that basis they can make their decision. This means
ratio analysis also assists in decision making process.
Return on capital employed:
ROCE is one of the important ratio that measures the return that is grabbed by company
on employing its capital (Gilchrist, 2018). As this is the ratio of operating profit to capital
employed so it measures the return in terms of profit that is being earned by capital employment.
Importance:

It is one of the important ratio because it enables the company to determine its efficiency
in terms of profitability along with a consideration of all the capital that is being employed in
such profitability generation. With this ratio company can determine that how to raise the return
with the efficient utilization of its assets in the best and possible manner.
From the above analysis of ROCE of SKANSKA PLC it can be determine that the ROCE
in 2018 was 19.60% while in 2019 it become 16.66%. This means that there is a downfall with
regard to this ratio which also implied that company is not generating adequate return from its
assets. It can be cause because of the non-efficient utilization of assets, over estimation of
depreciation or overvaluation of assets. This would also reduce if the assets that are being used is
of low efficiency. Thus, in order to improve the ROCE ratio, SKANSKA PLC make efficient
utilization of assets. It can also ensure that the assets will be best deployed and need to be
updated so that efficient production will take place that will ultimately raise the proportion of
returns.
Net profit ratio:
It is the ratio that shows the net profit that is being earned by the company after the
deduction and adjustment of all the expenses and cost (Madushanka and Jathurika, 2018). As it is
the ratio of net profit to sales so with the help of this ratio profit can be measured in comparison
with sales of the company.
Importance:
With the analysis of this ratio, company would determine its efficiency in regard to
working capital and operation. With this ratio investor as well as shareholders of the company
would determine that whether the company is generating adequate profit or not. Also a cost
determination in terms of operation cost is also analysed by the shareholder that whether the cost
is maintained or not in regard to the profit generation.
With the calculation of NP ratio of SKANSKA PLC, it can be analysed that the ratio is
declining because in 2018 it was 12.5% which decline in 2019 and stuck to 11.25% in 2020. This
means that the profitability of the SKANSKA PLC is declining. Its cause may include raising in
the cost of operation or the reduction of sales proportions. Likewise, it may also decline because
of poor pricing strategies or inefficient management. In order to make it improve SKANSKA
PLC need to be cautious regarding the pricing strategies or the maximisation of its sales. Along

with pricing strategies it also need to focus towards the aspect of reduction of its operation cost
so that the profit will be maximised.
Current ratio:
It is also called liquidity ratio. As per this ratio the efficiency of the company in terms of
making payment to short term obligation are determined (Coulon, 2020). Current ratio measures
the availability of cash or liquidity so that it can make repayment of its short term liability.
Importance:
This ratio shows the efficiency of the company with regard to making repayment of its
short term obligation and liability. It also shows the ability of the firm with respect to make
payment of its current liability from its current assets. Through current ratio investor enable to
know that whether the firm is having capacity with respect to make payment of its short term
debts or not.
As per the analysis of the above table it can be understood that the current ratio of the
SKANSKA PLC was declining i.e. it was 2.34 in 2018 while in 2019 it become 0.93. This shows
that the current ratio with regard to the SKANSKA Plc is declining which depict the capacity of
the company for making payment of its short term debts is declining. The declining ratio is
caused with the because of the non-availability of sufficient cash and funds in order to make
payment of its current liability. It is also related with the low capacity of the company in regard
to its operation. Likewise, improper utilization of resources is also a major cause that lead to
decline the ratio. It can be improved by making timely payment of its liability so that it will not
be over burden. In order to make improvement in the current ratio SKNSKA PLC need to focus
over delaying purchase of capital that would include a high cash requirement. Selling of
unproductive assets, faster conversion cycle would also assist in raising the liquidity ratio.
Average receivable days:
This ratio measures the number of days that is required by company in order to recover
money that is due to its debtors (Ilter, 2019). As every company make credit sales of its product
so this ratio measures the efficiency of the company with regard to recovering debts that is due to
the company.
Importance:

This is an important ratio because with the help of this ratio company would determine its
dues that is associated with its debtors. This will enable to company to make recovery of its debts
that would lead to raise its funds.
As per the analysis of the SKNSKA PLC’s debtor collection period is raising i.e. from 68
to 73 days from 2018 to 2019. This shows that the company is not able to make recovery of its
debts from the debtors. This has made a major impact over the company in terms of non-
availability of sufficient funds that make further affected their business operation. The major
reason that has raised the debtor collection period includes the poor management of the
company. Likewise, poor credit policy, reduced efforts for collection. In order to make it
improve SKANSKA Plc need to inculcate good credit cycle, avail discounting policy, timely
collection of debts and various other practices so that it can make timely recovery and reduce the
period.
Average payable days:
As per this ratio, determination of credit period with regard to the company would be
analysed (Sadi’ah, 2018). As no company would able to perform its function without the aspect
of credit so average payable period enables the company to determine the average days the
company have with respect to making repayment of its debts and dues.
Importance:
It is an important ratio because it shows the company’s efficiency with regard to
repayment. Likewise, this ratio enables the company to take decision regarding investment in the
best alternative so that maximum return would be grabbed.
In case of SKANSKA Plc the Average payable days are raising i.e. in 2018 it was 77 days
which raised to 159 days in 2019. This means that the company’s payment period is raring which
signifies a good ratio because it will enable the company to avail efficient investment of the
funds and raise its returns. This raised days also assist the company in raising return. However,
in order to make it further it further improve, it need to be lower down so that company’s image
in the market would also be maintained and raised.

CONCLUSION
From the above analysis it would be concluded that the financial performance of the
SKANSKA Plc is not good. This is because majority of its financial ratio are showing an adverse
result that clearly shows that the company is not performing well in regard to financial
performance.
On this basis it would be recommended that the investor need not to make investment in the
company because the profitability, liquidity and various other aspects are depicting adverse
results which shows that making an investment in the company is of no worth and it must be
avoided.

REFERENCES
Books and journals
Abdulshakour, S., 2020. Impact of financial statements for financial decision-making. Open
Science Journal, 5(2).
AFFANDI, M. A.,and et.al, 2020. Role of ABAS and Bureaucratic Reformation in Improving
Governmental Financial Performance Through Financial Decision Making. The
Journal of Asian Finance, Economics, and Business, 7(11), pp.1069-1075.
Coulon, Y., 2020. Efficiency Ratios. In Rational Investing with Ratios (pp. 31-45). Palgrave
Pivot, Cham.
Gardi, B., 2021. Investigating the effects of Financial Accounting Reports on Managerial
Decision Making in Small and Medium-sized Enterprises. Available at SSRN
3838226.
Gilchrist, R.R., 2018. Managing for profit: The added value concept. Routledge.
Ilter, C., 2019. A Discussion Paper on Accounts Payable Ratio. Acta Oeconomica
Pragensia. 2019(3-4). pp.85-94.
Jayasundara, B. M. W. U .C.B., 2021. Essays on financial decision making (Doctoral
dissertation, Queensland University of Technology).
Lind, M., and et.al, 2020. Support for Financial Decision-Making. Maritime Informatics, pp.255-
273.
Madushanka, K.H.I. and Jathurika, M., 2018. The impact of liquidity ratios on
profitability. International Research Journal of Advanced Engineering and
Science. 3(4). pp.157-161.
Sadi’ah, K., 2018. The Effect of Corporate Financial Ratio upon the Company Value. The
Accounting Journal of Binaniaga. 3(02). pp.75-88.
Schubert, P. and Boenigk, S., 2021. Pressure, Cost Accounting, and Resource Allocations:
Experimental Evidence on Nonprofit Financial Decision-Making. Nonprofit and
Voluntary Sector Quarterly, p.08997640211003218
Sedliačiková, M., Aláč, P. and Moresová, M., 2020. How Behavioral Aspects Influence the
Sustainable Financial Decisions of Shareholders: An Empirical Study and
Proposal for a Relevant Decision-Making Concept. Sustainability, 12(12), p.4813.
Subburaj, L., 2019. IMPACT OF ACCOUNTING RATIO ANALYSIS IN MAKING OF
MEANINGFUL BUSINESS DECISIONS. INNOVATIONS IN BUSINESS AND
MANAGEMENT, p.193.
van der Werf, M.M.B., 2020. Improving sound financial decision-making: Four experimental
field studies on financial behaviour (Doctoral dissertation, Leiden University).
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