Financial Management Report: Analyzing Mazars' Financial Performance

This report provides a comprehensive analysis of financial management principles and their application within the context of Mazars, an international firm specializing in audit, advisory, legal, and tax services. The report begins by exploring key financial theories, including Modern Portfolio Theory, Efficient Market Hypothesis, Arbitrage Pricing Theory, and the Fifty Percent Principle, and discusses their relevance to Mazars' operations. It then delves into strategic implementation techniques, such as the Balanced Scorecard, and various portfolio management tools like fundamental and technical analysis, and the use of Personal Capital. The report also examines the nature, elements, and importance of working capital, assessing Mazars' working capital needs and strategies. It covers elements like current assets, current liabilities, and working capital management, and highlights the importance of effective debt management and efficient financing decisions. The report concludes by analyzing the benefits of effective working capital management, including improved liquidity, enhanced reputation, and the ability to handle business crises. This report is available on Desklib, a platform providing AI-based study tools for students.

Financial Management

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
LO1..................................................................................................................................................3
1.1 Key Financial Theories:-.......................................................................................................3
1.2 Strategic implementation techniques:-...................................................................................4
LO2..................................................................................................................................................6
2.1 Nature, elements and importance of Working Capital...........................................................6
2.2 Working capital needs and strategies of Mazars:-.................................................................7
2.3 Analysing manner business organisation manage the needs of working capital...................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Financial Management is the implementation of basic principles and theories of
management to the financial possessions of an organisation. In other words, Financial
management means organising, planning, controlling and directing the financial operations such
as utilization and procurement of funds of the organisation. This study is based on Mazars which
is an independent, international and integrated firm that is specialised in audit, advisory, legal
and tax services. This report includes major financial theories that can be used by Mazars. It
evaluates strategic implementation techniques using various portfolio management tools and
balanced scorecard. This study also explains the needs, elements and importance of working
capital in Mazars. This report evaluates how Mazars assesses and manages their working capital
requirements for running its operations effectively. Apart from that it determines the analysis or
evaluation of financial risks. This study also includes various mitigation techniques that can be
adopted by Mazars.. This report ascertains the suitability of techniques applied by Mazars to
organise its global risks.
MAIN BODY
LO1
1.1 Key Financial Theories:-
The finance theories play an important role in Mazars accounting firm. The finance
theories refers to the concept of evaluating the various ways through individuals and businesses
raise money, and how this money is apportioned to the project while evaluating the risk factors
related with them. There are various key finance theories that offers different approaches to
Mazars which are explained below:-
 Modern Portfolio Theory (MPT):-MPT refers to a theory which evaluates the ways
through which the risk-averse investors can prepare the portfolios to maximise or
optimize estimated return on the basis of predicted level of market risk, highlighting the
risk is a fundamental part of higher return or reward. As per this theory, it is possible to
prepare an efficient frontier of excellent portfolios providing the maximum estimated
return for an expected level of risk(Kim and Zhang., 2016). It is a extension and
formalization of diversification in investing, the approach that occupying the various

types of financial assets is less unsafe or as compared to occupying only one type. Its key
concept is that an asset's return and risk should not be estimated by itself but by the ways
through which it contributes to overall return and risk of a portfolio.
 Efficient Market Hypothesis (EMH):-EMH is a financial theory where share prices
indicate all information and constant alpha generation is not possible. Hypothetically,
neither fundamental nor technical analysis can adjust excess returns and risks constantly
and therefore only internal information can result in external risk adjusted
returns(Mathuva., 2015). As per this theory, stocks or shares always trade at fair value on
the stock exchanges which makes impossible for the investors of Mazars to either sell
shares for inflated price or purchase undervalued shares.
 Arbitrage Pricing Theory (APT):-APT includes numerous factors of asset pricing
models on the basis of the concept that the returns of an asset can be estimated by
applying the linear relationship between various macroeconomic variables and the asset's
estimated returns that takes systematic risks(Holm., 2018). It is an essential tool for
evaluating portfolios from a value investing approach in relation to determine the
securities that may be mispriced temporarily. So APT evaluates markets and sometimes
misprice securities before the securities shift back to their fair value and the market
eventually get correct.
 Fifty Percent Principle:-This theory is a technical improvement that provides 50 to 67
% of the most current stock price returns before the price starts advancing again. If a
share currently gain 30% return this principle assumes that it will provide minimum half
of the return or gain before analysing new highs. Generally this theory is implemented to
the short term trends that traders and technical analyst may sell or buy on.
1.2 Strategic implementation techniques:-
Every organisation makes various strategies for financing its activities and operation that
are to be implemented in such enterprise on the basis of which all the operations are performed
efficiently(Khan and Jain., 2018). Even Mazars also also follows various strategic techniques
which are described as below:-
Balanced Scorecard (BSC):-BSC is an strategic technique executed to convert the overall
business strategy and mission statement of Mazars into quantifiable, significant goals and to
control the performance of Mazars in relation to accomplishing these goals. In other words the

Balance Scorecard is a comprehensive tool that evaluates the performance of firm in four areas
which include:-
Financial analysis:-It is considered as the traditional performance indicator that helps managers
to access shareholder value and financial success.
Customer analysis:-It looks at customer retention and evaluation.
Internal analysis:-It concentrates on innovation and production.
Learning and growth analysis:-This analysis ensures the effectiveness and efficiency of
management in relation to employee retention and satisfaction(Masri and Abdulla., 2018).
So the BSC concentrates on strategic agenda of Mazars which is related with the choice
of few data items to control a mix of non financial and financial data items.
The strategic techniques may be implemented while using various portfolio management
tools which are explained below:-
 Tools of Fundamental analysis:-These tools refers to financial statements such as
income statement, balance sheet, cash flow statement, ratio analysis help the organisation
to make important strategies(Tahir and et.al., 2016). The data from the financial
statements can be used to compare the present data with past data an on the basis of such
comparison the management can take important decisions which will ultimately result in
accomplishing objectives of Mazars. So by evaluating data, Mazars may reach at a
reasonable valuation of the stock of particular company and ascertain whether the stock is
a good buying or not.
 Tools of Technical Analysis:-Mazars may choose various tools of technical analysis as
strategic implementation techniques. It can use charts to identify current price patterns
and market trends for predicting or estimating future trends and patterns on the basis of
which the operations of Mazars will be performed(Wasiuzzaman., 2015). This is
considered as one of the important analysis which is often used by investors. In this
analysis there are various cues or signals also known as indicators that helps in predicting
the future market movements. So these tools help the organisation in making various
strategies.
 Personal Capital:-Personal capital can also be the perfect portfolio management tool.
The personal capital finance incorporates all credit card, bank and investment accounts
and provides a 360 degree view of how the investments are performing along with

various relevant money information(Currie and Seddon., 2017). This tools will help
Mazars to evaluate its cash flow and calculate its net worth and analyse its accounts fees.
This tool helps in selecting the portfolio with maximum returns by comparing the current
asset allocation to selected target or recommended improvements.
LO2
2.1 Nature, elements and importance of Working Capital
Nature of Working Capital:-The nature of working capital is related with the issues that arise
in attempt to organise the current assets, current liabilities(Abor., 2017)(. The various matters
which describe the nature of working capitals:-
 The working capital is being used in acquiring current assets that will be transformed into
cash for a short term of period only.
 It causes the elements of costs which includes materials, expenses and wages.
 It changes continuously to maintain the wheels of business moving.
 It is very liquid so it can be converted into cash easily without losing anything.
 Working capital is less risky as investment in current assets is just for short term.
 There is circular movement of working capital as it is constantly converted into cash.
Elements of Working Capital:-There are major two elements of working capital that includes
current assets and current liabilities which are evaluated below:-
 Current Assets:-Current assets are those assets which in the general course of business
will be or can be transformed into cash within a year without bearing a decile in value
and without interrupting the activities or operation of Mazars(Wei., 2016). The examples
of current assets include account receivables, inventory, marketable securities and cash.
 Current Liabilities:-Current liabilities refers to those liabilities which are intended to be
paid in the general course of business within one year out of the earnings or current assets
of Mazars such as bills payable, outstanding expenses, account payables and bank
overdraft.
Importance of Working Capital:-The proper management of working capital is essential for
the effective operations of Mazars because of the following points:-
 Smooth Flow of Operations:-To obtain a smooth flow of operations it is essential that
sufficient working capital is available in Mazars For paying labour, trade suppliers and
for incurring various operating expenses.

 Increase in Solvency and Liquidity Position:-The adequate working capital helps in
enhancing solvency and liquidity position of Mazars.
 Enhancing Reputation:-If Mazars would have sound working capital position, it will be
able to make timely payment of suppliers and their outstanding bills which will
ultimately help in improving its image and reputation(Barr and McClellan., 2018).
 Benefits of Cash Discounts:-The working capital also enables Mazars to avail itself of
benefits like by making timely payments it can avail cash discounts.
 Easy Loan:-The adequate working capital leads to sound credit worthiness of Mazars
because of which it becomes easy for Mazars to access additional loans in favourable
conditions and terms in relation to meet seasonal rise in demand.
 Effective use of Fixed Assets:-The appropriate amount of working capital also help
Mazars to use it fixed assets extensively and efficiently (Mueller, Stathopoulos and
Vedolin., 2017). If the fixed assets remain unproductive due to inadequate working
capital, interest on borrowed capital and depreciation on fixed assets will have to bear or
incur unnecessarily.
 Ability to face business crisis:-The adequate working capital also helps the organisation
to face business crisis in uncertainties or emergencies like at the time of depression
period.
2.2 Working capital needs and strategies of Mazars:-
Working capital management is one of the most typical financial concepts for the
business owners. In fact the term indicates the various things to various people. In general words
working capital is the difference between current assets and current liabilities(Karadag., 2015).
However, if the management simply conduct this computation each period to try to evaluate or
analyse working capital it would still become difficult to determine the working capital needs
and the criteria to meet these requirements(Wali and Nisar., 2017). A more essential tool for
ascertaining the working capital requirements is the operating cycle, This operating cycle helps
in analysing the inventory, accounts payable and receivable cycle in terms of days
However, there are various strategies that Mazars can adopt for organising its working
capital efficiently which are described as below:-
 Effective Management of Debtors:-This is one of the best strategy for managing the
working capital effectively as it is important to ensure that money is coming in on proper

time. Reassessing credit terms and contracts with debtors is essential to ensure that
Mazars is not giving too much time to debtors to pay for goods and services because it
may negatively impact the cash flow of Mazars. So the CFOs of Mazars should offer
appropriate credit terms to debtors and to reduce bad debts they should make sure that
efficient credit control procedures are using to examine late-paying
customers(McKinney., 2015). So they should execute more rigorous credit checks so that
the management can finance their other operations.
 Make Efficient Financing Decisions:-The adequate working capital lead to strategic
financing decisions which directs the operational efficiencies and performance.
Conversely, not having sufficient operating liquidity as assets are tied up in unpaid
invoices or inventory can greatly affect the cash flow. Mazars may use key performance
indicators to ensure that the working capital is properly organized as constant controlling
of metrics is relevant for maintaining adequate working capital and effective funding
operations.
 Pay Vendors on time:-The organisations that pay on time build better relationships with
their creditors and suppliers and are in sound position to bargain better deals, discounts
and payment terms(Ogiela., 2015). So if Mazars will also pay on time and will keep its
suppliers happy it could save the money in long term when it comes to receiving better
discounts for bulk buying, recurring orders and increasing the credit period. And if the
money would be saved it will lead to proper funding of Mazars.
 Refinancing Risk:-This is one of the important funding strategies of working capital
management as to match life expectancy of assets with the maturity of liabilities is
essential. This lead to self liquidating liabilities (Wali and Nisar., 2017). If the life
expectancy of assets is shorter than the maturity of liabilities then there should be
adequate working capital to finance the various operations and to pay off the debts. So
that if the long term financing is not possible the management of Mazars can use working
capital to finance its operations.
2.3 Analysing manner business organisation manage the needs of working capital.
Working capital is considered as one of the most important aspect for every business
organisation as it helps in determining the ability of the company in making payment of all the
dues. By determining the working capital ratio, it helps in assessing financial position of the

business firm related to payment off short term debts. The need of working capital requirements
of many business companies varies from the type of business there are engaged or dealing in
with. The needs of working capital of business is required to be managed in effective and
efficient manner so that business operations doesn't get affected. Following are the aspects which
results in managing of working capital needs of the business:
 Nature of Company – As per the nature of enterprise, needs of working capital can be
identified. In case of public firm for instance has its main focus on employment of fixed
assets in respect of business operations whereas department having its business
operations of merchandise nature usually have its core focus on inventory as well as
receivable level (Aktas, Croci and Petmezas, 2015).
 Creditors Demand – The interest of creditors are in the security of loan amount as
emphasis is made on fulfilment of their amount which has been provided to the company
in form of loan. They required their dues and obligations to be covered fully with security
such as assets.
 Requirement in terms of Cash and money – Every business organisation is having cash
as one of its important current asset as it is having characteristics of highly liquid as well
as accepted on the universal level. It is very much essential to hold minimum cash level
with the company for conducting of smooth and proper business operations. By having
adequate cash balance, it helps the company in maintaining good credit relationship with
its clients.
 Nature as well as size of business – The need of working capital of business also
depends upon the size as well as nature of business it is engaged in with. The size of
business firm can be related and measured in the context of scale of operation it is
engaged in with.
 Time – It is one of the most important factor which helps company in determining the
working capital level of the business (Pais and Gama, 2015). Time includes period which
has been taken by company in the goods manufacturing process. Also, the inventory
turnover as well as unit cost of goods at which they are sold place crucial role in the
context of working capital requirements.

CONCLUSION
From the above report it can be concluded that by having proper and effective business
plans, it assists company in gaining competitive advantages from the market place. With the help
of working capital management, Mazars has been able to ensure the needs of business timely.
Before engaging into any international business operations, it is very much important to first
assess all the risk factors associated with it so that profitability as well as productivity level of
the company can not get affected. By making use of proper risk management techniques, Mazars
has been able to identify all the factors which are associated with the future business events
resulting into the vulnerability and risk of value. Furthermore, for minimizing negative impact of
risk factors on the assets value of the company implementation of risk management process will
be helpful.

REFERENCES
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Evidence from firm performance and investments. Journal of Corporate Finance. 30.
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Multinational Operations. John Wiley & Sons.
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Emerging Financial Markets: The Case of Algorithmic and High Frequency Trading.
Holm, L., 2018. Cost Accounting and Financial Management for Construction Project
Managers. Routledge.
Karadag, H., 2015. Financial management challenges in small and medium-sized enterprises: A
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Khan, M. Y. and Jain, P. K., 2018. Financial Management: Text, Problems and Cases, 8e.
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evidence. Contemporary Accounting Research. 33(1). pp.412-441.
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profitability.
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Online
Working capital management. 2019. [Online]. Available through:
<https://shodhganga.inflibnet.ac.in/bitstream/10603/70588/9/09_chapter%201.pdf>.
Financial Risk Associated With International Business. 2019.Online Available through:
<https://smallbusiness.chron.com/financial-risk-associated-international-business-
76951.html>.