Financial Decision Making Report: Analysis of SKANSA Plc Performance

This report delves into financial decision-making, focusing on the roles and duties of accounting and finance teams within SKANSA Plc. It outlines the importance of these departments and their functions, including financial planning, record-keeping, and control. The report then moves on to a practical analysis of SKANSA Plc's financial performance, calculating and interpreting key financial ratios such as Return on Capital Employed (ROCE), Net Profit Margin, Current Ratio, Debtor Collection Period, and Creditor Collection Period for the years 2018 and 2019. The analysis includes a comparison of the ratios and an interpretation of the trends. The report concludes by highlighting the implications of these financial metrics and suggesting areas for improvement in the company's financial strategies. This report provides a comprehensive understanding of the financial aspects of business operations and performance evaluation.

Financial Decision Making

Contents
INTRODUCTION.......................................................................................................................................3
TASK 1.......................................................................................................................................................3
Function/Role/Duties of accounting and finance team............................................................................3
TASK 2.......................................................................................................................................................6
Ratio Calculation.....................................................................................................................................6
Interpretation and analysis of ratio calculation........................................................................................7
CONCLUSION...........................................................................................................................................9

INTRODUCTION
Financial decision is important step taken by the finance manager concerning the
financing-mix of an enterprise is marketing move. It involves borrowing and allocating the funds
that are crucial for investment strategies. Financial selection process is one of the essential parts
of the job that allows management to evaluate current outcomes and then make effective
decisions. The fundamental aim is to provide creative or inventive ideas for achieving business
goals, dreams and expectations (Agarwal, Ben-David and Yao, 2017). It is crucial to create
sensible choices about it when, what and how an enterprise should obtain funds. To better
understand the concept of the report selected organisation SKANSA Plc. The company was
founded in 1984 and construction based organisation. The company has been operated their
activities across European countries in the next ten years. In this report consist of importance of
accounting and finance functions. Moreover, on the basis of financial statements calculate the
ratio of the company and analysis the performance of business.
TASK 1
Function/Role/Duties of accounting and finance team
Finance and accounting department of SKANSA Plc
Finance department: The finance branch is the division which handles corporate cash
and other related financial items. Generally, the obligations of a financial department involve
construct method, planning, supervision, accounting, and monitoring. The Federal Reserve
generally contains the financial information of the institution. The Finance Department is the
component of an institution that is indicative of increased financial resources, being able to
manage funds inside the institution, and coordinating commodity expenditure on different asset
classes.
Accounting Department: Facilitates the company to which it refers with economic and
operational aid services. All expenditures were recorded in this division relating to repay and
deferred revenue, inventory, employment, capital equipment, and monetary elements.
Accountants evaluate each agency's documents to evaluate the financial performance of the firm

and all of the necessary adjustments for the organization's business development. SKANSA Plc's
accounting division offers advisory services and controls a company's finances. Its duties include
financial recording, bill processing, consumer reporting and value and expenditure monitoring,
accounting, and essential tax record management (Bannier and Schwarz, 2018).
Importance of finance and accounting department
For SKANSA Plc, the Department of funding is essential, which allows them to
understand adequate resources for the relevant support they need from manufacturing and
thereby enables the organizations to make its responsibilities & goals. There are still some
important things that this finance department deals with cost control, successful financial
planning, achieving production levels etc. Several of the agency's major positions are to
comprehend suitable bank information until it is carried on to directors and decision-makers to
produce greater judgments. This can be done by continuing to spend behaviors to generate
financial reports and account information for the uses and tracking objectives of managers
(French and McKillop, 2016).
It is critical that SKANSA Plc's accounting department concentrated on management plan
of the organization. The accounting department is liable for collecting and analyzing a
corporation's cash-flow payments. This division has a range of main tasks and responsibilities
covering accounts receivables, accrued expenses, salaries, income reports and accounting
procedures. Users require information, records, reports, analyzes, reliable information on
resources, debt obligations, obligations, profit margins to operate a company; and it is why
bookkeeping is important to any business activity.
Role of finance department
Bigger businesses, with multiple levels of government, may have more specialist finance
departments. It may be the founder or a small staff in different firms that have wider positions
and leadership roles.
Record keeping and reports: It includes monitoring all money transfers and includes
finding and maintain proper documents are maintained. For a few decades, these documents are
available confidential to reflect the productivity of the business whether something makes a

financial decision and to maintain track of transactions owed to creditors and other clients.
Documents from a SKANSA Plc are used to prepare and estimate the outcome, and are reviewed
by lenders, tax authorities, and independent audit to ensure that it works out.
Accounts payable and receivable: Accounts payable (AP) is the division of a finance
team necessary for creating transactions for services and products to other parties. Accounts
receivable (AR) monitors cash from customers/visitors coming into a SKANSA Plc for items
and/or services. It'll even send notes, reward or late fees. In general, receipts and payments are
monitored that used a software program and checked at the end of a cycle (for example, at the
end of next month, portion or year). This guarantees that if all the extra cash that moves to and
from the company is responsible, and all loans and debit card transactions are agreed (Gerrans
and Hershey, 2017).
Financial controller: A financial controller plays a key role on a finance department, and
by applying these security processes, ensures that all financial procedures meet legal standards in
comply with fraud and corruption. They supervise all financial operations to ensure we all align
and therefore all payments are added up. Economic managers are now liaising with outside
accountants. Financial controls are the organizational processes, regulations, and implies.
Regulate and track the course, distribution, and use of its financial capital. Accounting records
are at the very heart of each and every organization's operations of capital and operating
performance.
Role of accounting department
Every market requires at its center an accounting management team, or at but at one
consultant who recognizes the ground and the particular expectations of the organization
correctly. There is a lot going into a standard accounting SKANSA Plc’s job, and although their
key responsibilities may vary slightly, the much more essential job conditions are generally all
there with all instances (Hayat and Anwar, 2016).
Budgeting: In such an accounting department of SKANSA Plc the much more apparent
usage is to manage the institution's expenditure and its various agencies. It is always hard to
schedule the desires of several divisions at once, particularly as they begin to deviate with their

own plans developed and it is nice to have a unified entity that handles care of the issues in an
arbitrary way with the benefit of the corporation in view.
Investments: Depending on the line of business, outer investment funds can be a huge
part of business. Nonetheless, SKANSA Plc would like them to be managed by someone else
who genuinely knows how to manage the success of the corporation and its creditors, rather than
just automatically agreeing on any offer that arrives in any form. There are several complicated
specifics to build long - term relationships with shareholders, and a minor error will also cost as
much as necessary to achieve that they defend themselves against such errors.
High level planning: Accounting will clearly play a significant role in either high-level
corporate and management decisions made during the duration of managing the place. There are
several methods in which the accounting scenario will have an influence on the choices being
taken at this stage, and they'll want to understand that they often operate with both the complete
facts and that there is also no lack of good chances to score things additional resource for
company. Good preparation of business expansion can only occur with proper information on the
financial situation (Leaver and Reader, 2016).
Functions of accounting and finance department
Tax Function: For economy and organization, this is an essential feature in which
businesses pay a fixed amount of investment income. This sum is being used to develop schools,
education reform, hospitals, roads as well as other items by delivering support that improve the
organization expand. SKANSA Plc's leader expects to pay excise tax which helps to enhance
corporation kindness and customer satisfaction. Government collects tax amounts and they are
used for nation development.
Auditing Function: Every control of manufacturing an inspection of the organization of
the company which helps preserve business performance. Each year, the organization conducts
internally and externally audits to will the risk and demonstrate financial stability. It is critical
also because product threat and productivity condition can be evaluated by audit process
administrators and accountants. SKANSA Plc Company is a retailer that performs internally and
externally monitoring in order to determine the financial risk and start preparing financial

statements. Through auditing a business entity cannot test the risks ahead and cannot preparing
financial statements.
Investment function: For business organizations, customers, creditors and other users
that enable sound investment decisions, it's most essential. It is strategically based that helps
managers invest in the company after analyzing the requirements and benefits. SKANSA Plc's
supervisor analyzes the market for institutional investors at various locations that deliver superior
profit and reduced probability. The finance department spends capital in this business on
different projects that are more valuable to the organization. In addition, getting marginal
performance via capital expenditure is essential (Lee, and Lee, 2015).
Dividend function: Dividend is the percentage being used by company’s management to
allocate between stockholders. This component is helpful because it makes owners and analysts
to start making even more financial decisions which will help grow the market. Including sharing
the profits to shareholders through SKANSA Plc, which raises demand from further expenditure
to get greater yields. In addition, it is essential to measure the importance of industry sectors.
TASK 2
Ratio Calculation
Ratio Formula 2018 (£’000) 2019 (£’000)
Return On Capital
Employed (ROCE)
= (Operating Profit
/Capital Employed)
*100
= 750 / 3825 *100
= 19.61 %
= 975 / 5850 * 100
= 16.67 %
Net Profit Margin = Net Profit / Revenue
* 100
= 600/ 4800 * 100
= 12.5 %
= 675 / 6000 * 100
= 11.25 %
Current Ratio = Current Assets /
Current Liability
= 1515 / 645
= 2.35 Times
= 2070 / 2220
= 0.93 Times
Debtor Collection
Period
= Receivable / Sales
*365
= 900 / 4800 * 365
= 68.44
= 1200 /6000 * 365
= 73 Days

= 68 Days
Creditor Collection
Period
= Payable / Purchase
* 365
= 570 / 2700 * 365
= 77.06
= 77 Days
= 2100 / 4800 * 365
= 159.68
= 160 Days
Interpretation and analysis of ratio calculation
Return on capital employed: This is an accounting ratio used only to analyze the
financial services, market value, and financial reporting requirements. It allows companies
quantify the yields or selling price when capital is being used. In addition, it's used to know the
operational productivity to build the business (Montford and Goldsmith, 2016). SKANSA Plc's
company takes the returns and compares them with prior information that would help to that is
income. It shows the ability of the organization to receive returns until current liabilities are
subtracted from total assets. It also suggests the growth of the business, which demonstrates how
efficiently companies use their funds to significantly boost the profitability. SKANSA Plc's
ROCE was 19.61 percent in 2018 and 16.67 percent in 2019 was down about 5 percent from last
year. As higher ROCE yields higher efficiency which was shown in 2018. ALPHA Ltd did not
adequately use wealth in 2019 which tried to give fewer profit compared with 2018.
The key factor for less ROCE in 2019 is a decrease in operating income and an rise in
capital employed. Staff employees and current liabilities both surpass 2018 yet operating income
will not surpass 2019. For this reason SKANSA Plc's ROCE is less than 2019. In order to
improve the ROCE Corporation it is vital to decrease the costs which will lead to boost the
operating income. In addition, by trying to sell an elevated range of products and services, it
wanted to expand the net income. SKANSA Plc's can enhance ROCE after using it, and can
improve revenue
Net profit margin: It is the amounts of remaining profits that are measured after all
operating expenditures are deducted. It is used to quantify the revenue by decreasing the mean
sales expenditures. Each year, including such SKANSA Plc calculates net profit which helps to
start a restaurant more and therefore make financial decisions. It demonstrates how often revenue
industry receives after lowering the amount of taxes and interest (Mouna and Jarboui, 2015).
N.P. implies the success of the organization so that it helps to understand how this market will

continue or otherwise. If industry receives net loss then corporation insolvency determination is
taken by management teams. In addition, higher earnings exhibit massive operational
efficiencies which boost more earnings. Such as SKANSA Plc's net profit proportion in 2018
was 12.50 percent, which decreased in 2019 and remained 11.25 percent, which means
organization's low capacity and lower effectiveness. The net profit ratio ought to be large to
consider giving company organization positive experience.
The possible explanation here seems to be that 2019 net profit is smaller than 2018. As in
2018, net profit amounted to £ 600, while in 2019 it amounted to £675, which is less than the
previous year. Its primary reason is to boost its financial cost in order to lose the corporation.
Current ratio: It is also known as financial ratios which demonstrate the operating cash
flow position. It can be used for organizational measures that have sufficient funds to satisfy
quick-term or lengthy-term goals. It also contrasts liquidity ratios with those of a corporation.
The ideal current ratio is 2:1 which is best for enterprise and demonstrates the company's main
liquid assets. Current ratio shows the money supply of industry which helps to make financial
decisions. It also shows how corporate organizations meet short-term responsibility. If current
liabilities are high over total assets, this implies that businesses can experience problems and
risks to remain solvent (Mubashir and Bin Tariq, 2017).
SKANSA Plc's current ratio was 2.35 and will be .93 in 2018, which is the lowest in
previous years. This indicates that businesses have elevated total liabilities as compared to
current assets. Extremely skilled of operating a company or expanding its business in 2018
according to top measurement. From the other hand, its ratio decreased in 2019, and capacity
decreased as well, which may be due to decreased profit margins. SKANSA Plc has increasing
its current liabilities in 2019 due to the low current ratio in 2019 compared to 2018, which is a
explanation for the low current ratio. If the company's business obligations are increased, this
implies that perhaps the interest cost too much.
In order to boost this ratio, SKANSA Plc must increase current assets by selling number of
goods and by payment to lenders must decrease current liabilities. A management team should
look at the company's financial condition that helps to boost the industry.

Average receivable days/Debtors collection period: In how long a business owner can
receive the cash that is given, that means. That is used in small, medium and large businesses to
indicate the situation of compilation which helps further to broaden business operations. The
collection period for debtors compares the maximum amount of time it takes to retrieve debt.
Moreover, fewer periods imply high performance in raising funds. SKANSA Plc does have a
debtor collection period of 68 days in 2018, and 73 days in 2019. It demonstrates the firm's
capacity-gathering capital. Because of SKANSA Plc will accumulate indebted in 68 days, where
everything collects debts in 73 days, which is 5 days lower than 2019, as in 2019.
Its primary reason underneath expanding the debtor receivable period is the policy and
the fluctuation of the specification which increases the amount of liabilities. It ought to be fewer
to have the advantages, because there will be less debtors payment time frame then organization
will have more time to pay the obligations. It can enhance the customer base or earnings, which
will significantly reduce the period of debtor collection. Additionally, the management team
must decrease the quantity of the deferred revenue to reduce the computation duration (Rubin
and Patel, 2017).
Average payable days/Creditors collection period: This is an accounting ratio used to
understand the duration wherein company obligations are to be paid out. For each and every
business executive, it is essential to have the relevant data about how long they have to pay off
the debts. It implies the success of the organisation that is premised on the operating cycle of
creditors because if the accounts receivable of creditors is less then the company wants to expand
industry. It can enhance this by decreasing the buying decision of loans as its buying of loans
raises the repayment schedule computed in table. So the corporation wants to lower the buying of
credit and enhance the payables (Wald and Franco, 2016).
SKANSA Plc seems to have a collection period of 77 days in 2018 and there are 160
days in 2019 which would be great since it has opportunities to improve the company. The
primary cause is, it’s buying of loans and accounts payable in 2019 is higher than in 2018. In
2018, the payables were £570 and that was less than that of 2019 so because payments are
£2100.

CONCLUSION
As per the above report it has been concluded that financial statement is valuable for
understanding the strategic performance. Financial statement serves to create financial decisions
by making specific statements. In addition, along with financial information, it helps preserve
liquidity inside the institution. This section discusses profitability ratio such as the current ratio,
capital employed, debtor collection and the period of collection of creditors that assist to obtain
come back by making an investment the sum. In addition, the report will show management
accounting methods that help create various types of budgets and achieve revenue and expense
figures.