Financial Resource Management and Performance Analysis Report

This report provides a detailed analysis of financial resource management, covering key aspects such as the differences between financial and management accounting, the purpose of financial statements for both profit and non-profit organizations, and the identification of various stakeholder groups and their information needs. The report also includes a practical application of ratio analysis to assess the financial performance of Stratford Yachts Ltd, comparing its profitability and liquidity ratios with industry averages. The analysis provides insights into the company's financial health and performance, highlighting areas for improvement and strategic decision-making. The report is a comprehensive overview of financial management principles and their application in a real-world business context.

MANGING FINANCIAL
RESOURCES

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
a) Difference between financial accounts and management accounts........................................1
b) Purpose of various financial statements in profit and non profit organisation.......................3
c) Various groups of stakeholders and evaluate the different information needs.......................5
TASK 2............................................................................................................................................6
a) Ratio analysis..........................................................................................................................6
b) Detailed report subject to analysing performance of organisation.........................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Financial resources are most important part for business and organisations. It is important
for managers and accountant officers to manage the financial resources and tools in effective
way to attain desired results and outcomes (Ashwell, 2014). This report is prepared to explain
importance of financial accounts subject to analyse financial performance of organisation.
Purpose of financial statements for profit and non profit organisations also defined in this
context. Information and details which remain essential for stakeholders also defined. Financial
performance of Startford Yachts Ltd defined with the use of ratio analysis. A summery report is
provided to managers of organisation in terms of comparing profitability and liquidity with the
average of the sector over the period.
TASK 1
a) Difference between financial accounts and management accounts
Financial accounts
Financial accounts of an organisation indicates towards the financial performance and
growth of an organisation. Financial account helps to analyse information and details which
remain linked with financial transactions and events. Presenting financial information in numeric
form is one of the prime objective of financial accounts (Bridoux and Stoelhorst, 2014). In the
end of every year financial accounts are prepared and consolidated to evaluate the performance
of organisation.
Management accounts
Management accounting is a part of management decisions and helps to understand the
managerial decisions and effectiveness for better control and operation. Management accounts
holds the basic structure of management and function (Jackie, 2012). Managerial accounting
process which support management decisions and decision making process in order to make
better forecast and estimation. With the helps of management accounts managers and accounts
be able to sort out complex situations and managerial actions (Cascio, 2018).
Management accounts and financial accounts are two different aspects. Difference
between management accounts and financial accounts can be bifurcated as follows
Basis of
difference
Financial accounting Management accounts
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Objectives Recording financial transactions, events
and summarising information to determine
the financial performance of organisation is
one of the main objective of organisation.
Financial reports not only helps managers
to understand financial position but also
helps to stakeholders. These information
helps to take important decisions in respect
of analysing the performance of finance
function.
Supporting managerial actions and
decisions to attain desired
outcomes and results is one of the
main objective of this organisation.
There are some essential
information and summarised
reports remain essential for
decision making and assist
managers to make effective
business plans.
Purpose Financial accounts helps in both the
circumstances for both internal and external
purpose. With the helps of financial
accounts growth and development of
organisation is evaluate in statistical form.
Information which are produced under this
system remain essential for both inside and
out
Management accounting helps to
analyse the performance of overall
organisation. Information and
details are used for internal people
of organisation. It remain essential
for strategic planning and decision
making.
Frequency Basically financial accounts are prepared
on the basis of quarterly and half yearly
and annually basis. All the relevant
information and details are provided by
these statements in tabular and graphical
form.
There is no specific time duration
fixed for management accounts.
Information and reports are used
when managers needs to take
specific decisions. These are
usually prepared to prepare
business plans and strategies for
smooth functioning and operation
of organisation.
Compliance There are some finance rules and
legislation are made to retain financial
records and information. IFRS, ISA and
This is an internal part of an
organisation. It does not required
any kind of statuary compliance
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GAAP provides rules and standards subject
to preparing financial accounts. Statuary
compliance is mandatory for financial
accounts.
and legislations to prepare plans
and strategies. Management
decision and information remain
related to growth and development
of organisation.
Focus Financial accounts are made to summarise
financial information and data for better
implementation and utilisation of financial
resources. It provides a path to analyse
financial requirements and needs for for
performing financial actions and plans.
Management reports and
information are beneficial for better
forecasting and analysis of overall
business operations. With the help
of management accounts and
mangers become eligible to identify
required area of improvement for
better management and operation.
Skill sets It requires strong base and structure for
better presentation and formation of
financial records and information. All the
relevant rules and standards are used by
finance accountants. Rules and principles
provided by IFRS, GAAP and ISA are
basically used by organisation.
Various type of management
accounting systems and techniques
are used by organisation for
effective management and
operations such as cost accounting
system, preparation of management
reports and cost reports, inventory
and budget reports. These reports
make smooth the process of
decision making process.
Certified
courses
There are some certified courses made such
as charted accountants (CA), Association of
charted certified accountants (ACCA) and
certified public accountants (CPA), etc.
Charted institute of management
accountants (CIMA), cost
management and accountants
(CMA) are the courses which
certified management accountants
and managers.
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b) Purpose of various financial statements in profit and non profit organisation
Financial report provides the information regarding funds which are used within the
organisation. These reports are prepared by the organisation for shareholders and lenders to
provide information regarding their current financial position. It includes the three different types
of basic reports like balance sheet which provides the information about the assets and liabilities
and net worth. Another report is income statement which helps to understand about the profit and
loss incurred by organisation during one financial period (Marshall and et. al., 2011). Last one is
cash flow statement, which shows inflow and outflow of cash which is incurred by organisation
through their business activities during given period of time.
It is the responsibility upon the accounting officer of Stratford Yachts Ltd. Is to prepare
their financial reports on the basis of their annual statements. It is the duty of every organisation
is to keep the proper records of their accounts which helps in collection of important information
and results to accomplish their objectives through preparation of strategies and policies (Smith,
2014). Non profit organisation has large number of responsibility is to keep proper record of the
different sources from where they raise their funds to bring transparency in their operations.
There is huge difference among the objectives of both non profit and profit organisation.
NPO's are working to provide large number of benefits to individuals of society. They are not
working to earn profits but on other hand, Profit organisation works to earn large number of
profits (Purce, 2014). After having differences in objectives of both organisations there are many
similarities are identified in their operations and respective areas which are mentioned below:
Basis Profit organisation Non-profit organisation
Meaning It refers to such organisations
which provides their functions
regarding for the purpose of
earning large number of profits
It seems to be such companies
whose motive is to provide
maximum benefits to society
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Form of organisation The different types of
organisation which are
included in this are
partnership, sole traders and
other organisation.
It includes Club, charitable
trust and public hospitals. Such
organisations works with the
support of government.
Sources of income Such organisations earn their
profits from the selling of their
different products and services
to end customers
Such types of organisations
attains their funds from
donations, subscriptions,
government funds etc.
Money earned over and above The amount of profit which
earned above the limits is
transfers to the capital reserve
accounts to plan about their
future activities
The surplus which is earned by
organisation is ascertained as
capital gains.
For ex., comparison of the financial statements of the profit and non profit organisation
helps in determination of their financial strengths and helps in creation of more value to attain
their objectives within stipulated period of time.
For-Profit Non-Profit
The financial reports which are prepared by
accounting officer of such organisation are
mentioned below:
 Balance sheet
 Profit and loss account
 cash flow statements
The major reports which are prepared by the
accounting officers of such organisation are
mentioned below:
 Statement of financial position
 Activity detail summary
 Cash flow report
c) Various groups of stakeholders and evaluate the different information needs
Stake holders: these are the parties, person and people who contains some interest in
growth and development of organisation. They are the person who remain responsible for
sustainable success of organisation (Massingham, 2014). Stake holders plays vital role in respect
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of enhancing the performance of organisation subject to assist the organisational structure in
right direction. There are two type of stake holders are found in organisational context:
Primary stakeholders: these are also considered as internal person and members of
organisation. Managers, directors, CEO, senior level management and authorities, business
partners, customers are considered as primary stakeholders of organisation (Robb and
Woodyard, 2011). Primary stake holders of “Stratford Yachts Ltd” contains significant interest in
growth and success of an organisation.
Secondary stakeholders: these are also called as external members and part of
organisation. Government, competitors and government, media, financial institutions, banks and
business analyst are the considered as secondary stakeholders of organisation. Financial
information and details remain essential for external stake holders (Pearlson, Saunders and
Galletta, 2016). Goodwill and reputation of organisation depends upon the fair and clear
overview of external stakeholders of organisation.
TASK 2
a) Ratio analysis
Ratio Formula 2015 2016
ROCE
Operating profit / capital employed
*100 27.88% 22.48%
Capital employed Total assets – current debts 3.12 3.47
Assets turnover ratio Sales / Net assets 1.70 1.90
Net profit margin Profit after tax / Net sales *100 16.42% 11.82%
Current ratio Current assets / current liabilities 1.22 1.31
Acid test ratio
Current assets-(Stock + prepaid exp.) /
current liabilities 0.87 0.99
Debtors collection period Trade creditor / sales *365 90.91 101.76
Gearing ratio
Long term liabilities/ Capital
employed *100 70.83% 63.69%
Labour cost as % of sales Total labour/ sales*100 18.49% 18.94%
Operating costs as % of sales Operating cost/ total sales*100 83.58% 88.18%
Distribution costs as % of sales Distribution cost/ Total sales*100 9.25% 9.09%
Administrative costs as % of Administrative cost / Total sales*100 4.15% 4.09%
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sales
b) Detailed report subject to analysing performance of organisation
As analysis of financial information of organisation following information can be
produced in report as follows:
Report
To: Business Planning Assistant
Date: 21st May 2017
From: Finance manager
Subject: Stortford Yachts Ltd. - Financial information
Liquidity: to analyse liquidity of organisation current ratio and acid test ratio is calculated such
as 1.22 for 2015 and 1.31 for 2016. as per the analysis report liquidity get increased for the year
2016.
Solvency: this ratio indicates towards the capacity of repayment of debts of organisation by
cash flows. This is one of the key matrix which shows the capacity of organisation to meet
debts whether short term and long-term with other obligation. Assets turn over ratio of company
shows the balance the ratio 3.12 for the year 2015 and 3.47 for the year 2016. as per above
results it is seen that the solvency position get strong for the year 2016.
Profitability: as per net profit margin ratio following results come across such as 16.42% for
the year 2015 and 11.81% for the year 2016. this indicates that the organisation has less
profitability for the year 2016.
Conclusion: overall the financial performance is very well and in organised manner. Company
need to control operating expenses to enhance net profitability. There are favourable results
found in respect of profitability and solvency of Stortford Yachts Ltd.
CONCLUSION
This report is prepared to analyse the aspect of financial accounting subject to managing
financial resources of an organisation. Difference between management accounts and financial
accounts also defined in this report. The role of financial statements for profit and non profit
organisations also defined in this context. Important of financial information for various group of
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stakeholders also elaborated in this report. Financial performance of Stratford Yachts Ltd
presented by ratio analysis and a financial report is prepared for enhancing financial performance
of organisation.
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