Financial Reporting and Analysis: MFR Report for Stratford Yachts Ltd

This report provides a comprehensive analysis of financial and management accounting principles, focusing on the case of Stratford Yachts Ltd. It begins with a comparison of financial and management accounting, outlining their definitions, motives, regulatory requirements, governing principles, time horizons, reporting parties, and outputs. The report then identifies and analyzes the vital objectives of using financial statements in both profit and non-profit organizations, highlighting their similarities and differences. Furthermore, the report evaluates various groups of stakeholders, categorizing them into primary and secondary stakeholders and assessing their significance in the decision-making process. Finally, the report includes the calculation of various financial ratios to assess the overall performance and present position of Stratford Yachts Ltd.

MFR

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1.1: Comparison among financial and management account .....................................................3
1.2: Identify and make analyse of vital objectives of using financial statements.......................5
1.3: Various group of stakeholders and evaluating their vital data.............................................6
TASK 2............................................................................................................................................8
a): Calculation of various ratios..................................................................................................8
b): Compare the overall performance and present position .......................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Nowadays, it has been seen that finance is an essential aspect that is associated with
learning of every capital investments. It deals with dynamics of assets and debts over the time
under the given situations of various stages of uncertainty present in any decision-making. It has
been found that without having proper availability of funds, a business cannot survive for longer
period of time. This project report provides crucial information about financial and management
accounts. Moreover, the purpose of using financial statements in both profit and non-profit
organisations has been described in the assignment. Evaluation of different group of stakeholders
and make analysis of required data. The overall data of “Stratford Yachts Ltd” will be analysed
by using various types of ratios (Allen, 2012).
TASK 1
1.1: Comparison among financial and management account
Illustration 1: Comparison of financial and management account
(Source: Jackie, 2012)
It has been seen that every business organisation needs to make use of accounting
information in order to have proper evaluation of current year performance of the company. As
per the mentioned case study of “Stratford Yachts Ltd”, they are not able be introduce new
product lines. Traditional products are the major aspects of this company but in recent time, they
have generated maximum turnover to maintain their overall performances. After making proper
overview regarding various departments and other essential things, they have decided to appoint
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a new management consultant who can assist the company to increase its growth and overall
performances (Cascio, 2018).
It is necessary for Stratford Yachts Ltd to manage their financial statements in more
effective ways so that chances of getting maximum benefits can be enhanced. In accordance to
evaluate performance of an organisation, it is necessary to make use of both financial as well as
management details at the same time. They are happens to be more vital part of any business
enterprise. By they do have certain similarities which will be explain underneath:
Basic Financial accounts Management accounts
Definition The financial statements are a
crucial aspects of every business
concern that provide overall
performance of the company.
Whereas management may use the
financial statements for the future
decision-making or analysing the overall
profit and losses they are incurred during
and accounting duration.
Motive The primary objective is to deliver
data to external parties. It totally
focuses at assisting stakeholders in
order to make effective decision.
The vital aims varies as per the situation
of companies financial statements. This
information is necessary for evaluating
business decision for future.
Regulatory
requirements
It is mandatory need for every
public sector organisation. It is
followed by using accounting
standards and laws.
They do not have to follow any kind of
set format because rule are being already
prepared by the company itself.
Governing
principles
These are formulated on the basis
of Accepted accounting principles.
There is no any set standard format for
preparing management accounting
statements.
Time Horizon It has been seen that time horizon
for financial accounting is based on
past mainly for one financial year.
It does not have particular time horizon
but the primary focus is on future
estimation.
Reporting
parties
This type of financial data is being
prepared by outside and external
Reports are formulated under internal
management guidance which is helpful
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parties. For example, shareholder,
suppliers, customers, banks etc.
for CEO, director and other promoter
those are crucial part of an organisation.
Output It consists of profit and loss
statement, cash flow and balance
sheet.
They use to make report on monthly,
weekly or yearly basis.
1.2: Identify and make analyse of vital objectives of using financial statements
In accordance to make evaluation of financial statements, it is necessary to have proper
record of information. It has been observed that one of the major myth associated with non-profit
organisation is that most individual trust as real that does not operate for the motive of earning
profits from their overall business operations. Apart from this, profit organisation is working
with the motive of increasing maximum profit by utilisation of resources in more effective
manner. The only aspects which would make them differentiate are the ways they operating their
business functions. It has been observed that not only organisations running for the purpose of
increase their earning while some other entities work for the goal to serve communities and
society as first priority (Cotton, 2013).
Financial reports are based on annual statements which are compiled through accounting
department to share financial outcomes and overall worth for “Stratford Yachts Ltd”. Every
organisation use to maintain an effective accounting to record and summarise financial data for
wide variety of objectives which consists of financial and strategic planning, cash flow
management. Non-profit organisation, however they have included plenty of responsibility for
tracking various sources of funds (Epstein, Buhovac and Yuthas, 2015). With respect to this,
certain types of organisations are working in their respective segment. Both of them are having
certain kind of similarities, but they differ in its respective areas. Some of them were discussed
underneath:
Basis Profit organisation Non-profit organisation
Meaning They are said to be those
organisations whose primary motive
is to earn maximum profit from their
available resources.
Whereas, these are those organisations
which are working for the motive of
serving various communities and
societies.
Form of It provides crucial information for Such types of organisations are working
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organisation sole traders, partnership and other
business organisation.
in Club , charitable trust and public
hospitals.
Sources of
income
Their major sources of earnings are
collected from selling commodity
and services to respective customers.
In this types of organisation, they use to
gather funds from subscriptions,
donations and some other fees.
Money earned
over and above
Whatever profit incur during the
time is being posted into capital
reserve account for future planning.
Such kind of organisation, profits
generated as surplus will be transfer to
capital gains.
For example, in case comparing the major financial statements of a profit to non-profit
organisation. It has been noticed that even though both reports helps in creating financial value to
the company (Culp, 2011).
For- profit Non-profit
Some of the crucial financial reports those are
being prepared by such kind of organisations
are:
 Balance sheet
 Profit and loss statements
 Cash flow statements
There are certain effective reports which will
be followed under these types of organisation
are:
 Statement of financial position
 Activity detail summary
 Cash flow report
1.3: Various group of stakeholders and evaluating their vital data
It has been seen that “Stratford Yachts Ltd” needs to make use of their financial
informations in order to determine current position of the company. It is necessary for them to
provide proper value and interest to their external and internal parties those are continuously
working with the motive to make maximum profit in an accounting duration. It has been closely
looked that stakeholders are directly or indirectly related with company's future decision-making
process. They require to be more powerful and valuable persons in taking crucial business
operation in near future. The change agent or business managers are responsible for influencing
various key stakeholders and develop full support for the project (Baker, Singleton and Veit,
2011).
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Through this approach that would assist manager to assess total support to most effective
manner. All stakeholders have required to determine more significance to the business when
making new effective plans. This will deliver proper involvement in forming of project and
effective implementation of latest plans and policies those are helpful in betterment of an
organisation. This will increase their feeling regarding likelihood of being getting successful and
their appropriate skills to perform their task in effective manner. There are certain advantages to
“Stratford Yachts Ltd” which are higher because early involvement of different types of
stakeholders will allows to make projects reflect and maintain proper balance in their respective
field. It guide to control and make sure that can not create any conflicts during the formulation
regarding final decision of increase profitability of the company (McElroy and Van Engelen,
2012).
Stakeholders: It is said to be important person which is responsible for increase goodwill
of the company by taking crucial steps. They are directly participate into business decision-
making process to analyse their effective view points. It is increasingly helpful for national and
international stages to manage and operate their overall business growth and performances. The
initial aspects of stakeholders will be related with an organisation to make mapping of overall
performance of the department. It used to determine overall targets and pull together to reach at
their set destination in more quick time. These are associated with those parties which is related
either with internal or external level of the department. Some crucial members those are being
present in decision making activities are explain underneath:
Primary stakeholders: These are said to be an effective individual or entities that are
responsible for generating more benefits from the given activities in an organisation. They are
the one which is having direct stake in the operations decision-making for increasing maximum
profitability for “Stratford Yachts Ltd”. A stakeholders is vital person or entity that is having
valuable role in success of a business. It is an individual or business concern that is used to bears
overall risks present with the performance of any entity. The below mention are some common
types of primary stakeholders:
 Partners: They are the one which is directly related with business operation and share
profit out of total net earnings. The mostly depend on making strategies initiatives in their
overall research to increase better image in coming times (Swee-Hock, 2011).
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 Employees: There is certain important financial risks associated to their employees that
are working in an organisation for increase maximum earnings. The major objectives of
them is to removing obligations those are affecting the performance of an organisation.
 Customers: They bear financial and operational risk involve in formulation of firms
overall performances. They are responsible for forming infrastructure, services or any
other products those are being manufacture by the company.
Secondary stakeholders: It refers to the outside stakeholders which know that company
recognises that they have certain stake in them and take care out of them. They used to
accumulate more positive reputation and cooperation for increasing and other necessary
activities which are organise from business side. There are some effective parties those are being
associated with secondary stakeholders. Some of them are discuss underneath:
 Competitors: They are the one who are responsible to make huge impacts on the
operation of any business. Other than performing primary role they are said to be main
part of secondary stakeholders (Clayton, 2014).
 Government: In order to make crucial rule and regulation every business concern have
to take prior permission from local authorities. Then after they can operate their daily
operations in more effective manner.
 Media: It refers as crucial members of company for making promotion of their products
and services in various parts of the nation. They are presented from beginning of any new
venture.
 Banks: As a secondary stakeholders, there primary role is provide valuable amount
finance to manage and coordinate their everyday business transactions in more
accurately.
TASK 2
a): Calculation of various ratios
In order to reach at certain solution, it is crucial to calculate certain ratios that can assists
in evaluating specific outcomes in order to make comparison to Industry average (Kane, 2011).
There are various ratios that are related with increasing profitability of the company in more
quick time. Some of them are discuss underneath:
Ratio Formula 2015 2016
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ROCE
Operating profit / capital employed
*100
27.88461538
46
22.4783861
671
Capital employed Total assets – current debts 3.12 3.47
Assets turnover ratio Sales / Net assets
1.698717948
7
1.90201729
11
Net profit margin Profit after tax / Net sales *100
16.41509433
96
11.8181818
182
Current ratio Current assets / current liabilities
1.224358974
4
1.31052631
58
Acid test ratio
Current assets-(Stock + prepaid
exp.) / current liabilities
0.871794871
8
0.99473684
21
Debtors collection period Trade creditor / sales *365
90.90566037
74
101.757575
7576
Gearing ratio
Long term liabilities/ Capital
employed *100
70.83333333
33
63.6887608
069
Labour cost as % of sales Total labour/ sales*100
18.49056603
77
18.9393939
394
Operating costs as % of sales Operating cost/ total sales*100
83.58490566
04
88.1818181
818
Distribution costs as % of sales Distribution cost/ Total sales*100
9.245283018
9
9.09090909
09
Administrative costs as % of
sales
Administrative cost / Total
sales*100
4.150943396
2
4.09090909
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b): Compare the overall performance and present position
This report is prepare in order to examine financial position of the company. During the
phase of evaluating financial condition it is vital to make use of appropriate formula that can
assists in better understanding of positive results. After making proper evaluation of various
ratios, it has been seen that performance of “Stratford Yachts Ltd” is much more positive in 2016
as compare to 2015. there are certain fluctuation which is being seen in overall calculation of
certain ratios. If owners can overlooked to net profit margin they can realise that total gain which
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is more in last year with 16% has come down to 11%. this can directly make impacts on growth
as well as reputation of “Stratford Yachts Ltd”. Debtor collection period fix from industry point
of time is taking maximum time to recover their total amounts. However, liquidity position of the
company is providing specific information about total assets because they are getting 1.22 and
1.31 in respective time frame. Liquid ratio is close to their ideal ratio which is 1: 1.
Henceforth, total labour cost would be 18% in both year. Whereas, operating costs for the
company out of total sales is increase from last year as 88%. Distribution and selling costs are
common it means they are investment similar amount on these expenditures. Likewise,
administration costs are also more similar with 4% out of total sales during those two years. The
overall performance of an organisation is having more effective outcomes in order to increase
maximum profitability in near future. The total interest amount evaluated from profit and loss
statements because of which gearing ratios is lower from last year performances. The overall
comparison taken from total industry average is not taken as much effective. They are below the
asking standards that are being set by taking overall average of the company.
CONCLUSION
From the above project report, it has been concluded that managing finance is quite tough
task for every business. The outcomes collected out of overall performance of the mentioned
company is being evaluated in more effective manner. For this purpose, they a well effective
comparison is done in between finance and management accounts so that actual difference can
be determine in more easily. Further, analysis is generate valuable results from examine profit
and non-profit organisation financial statements. The overall study assists in calculating specific
ratios those are being helpful in making comparison among set industry targets. At the end, use
of data in order to better understanding of financial techniques in respect to increase better
growth and performance in coming future time.
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REFERENCES
Books and Journals:
Online
Jackie, 2012. [Online]. Available through: <http://hoileongchan.blogspot.in/2012/09/the-
differences-between-financial.html>.
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