Financial Resource Management Report: Stortford Yachts Analysis

This report delves into financial resource management, contrasting financial and management accounting to provide a comprehensive understanding of their roles. It examines the purpose of financial statements in both profit and non-profit organizations, highlighting the distinctions in their preparation and objectives. The report evaluates various stakeholders, such as governmental authorities, directors, shareholders, banking agencies, and creditors, and their respective information needs. Furthermore, it analyzes the financial performance of Stortford Yachts Ltd. over two years, calculating key ratios like net profit ratio, return on capital employed, asset turnover, and liquidity ratios to assess profitability and liquidity. The analysis includes a detailed report analyzing the company's financial position, offering suggestions for improvement and strategic changes to enhance operational performance. The report concludes with a summary of findings and recommendations for the director of Stortford Yachts Ltd.

MANAGING FINANCIAL
RESOURCES

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
a) Difference between financial accounts and management accounts...................................1
b) The purpose of financial statements in a profit and non- profit organizations.................2
c) Evaluation of stake holders and their different information needs. ..................................4
TASK 2............................................................................................................................................5
a). Stortford Yachts Ltd financial performance for two years................................................5
b) Preparation of report analyzing profitability and liquidity................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
To identify the requirements of the firm the role of a financial analyst in determining the
current state of the business which is needed to be improved and managed by strategic changes
in the operations. The report incorporates information of Stortford Yachts Ltd. last two year
profits and balance sheet details. Paul Marriot director of company needs to evaluate the past
performance of the company so as to determine the downturn by introducing tighter management
control and in-depth checking of standards. Moreover, the report will be useful in presenting the
appropriate suggestion to have the increment in the operational performance of entity.
TASK 1
a) Difference between financial accounts and management accounts.
Accounting is a process of maintaining records and classifying them in money terms so
as interpret the position of the organization (Bryce and Herrington, 2017).. The two type of
accounting mainly financial and management accounts play a crucial role in determining the
value of business.
Financial Accounts:
These are the accounts which were made for external users such as investors,
governmental bodies, suppliers, banks and employees in organization (Bryce and Herrington,
2017).. It is helpful process which aids in decision making as well as interpreting profitability
and liquidity of the organization (Omeje, 2017).
It incorporates various statements such as income statement, determining cash flow and
balance sheet prepared at the end of the year.
Management Accounts:
Another accounting statement is known as management accounting which involves
identifying and recording of daily activities of the organization. This technique helps is making
organizational decisions which affect daily working of business units.
It helps in managing the funds for the operations in better cost control that will make
effective execution over work and workforce. It includes preparation of budget statement which
will help in taking cost related decisions for the organization.
Financial and Management Accounting
Basis Management Financial
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Scope It incorporates both financial
and non-financial information
of Stortford Yachts Ltd.
It records only the financial
aspect of the company and
interprets it to get the end
result .
Users Only internal members of the
company are the users of
management accounts (Bryce
and Herrington2017).
All stakeholders are termed as
users of financial accounting
as it helps them to evaluate the
organizations value and status
(Grabher, Gernot, and Jonas,
2017).
Public display Since only internal users can
evaluate these accounts it need
not be displayed for public
view.
These accounts need to be
displayed publicly as
shareholders, investors and
others need to view the current
status of the company.
Standards There is no such requirement
of any standards as it is only
considered by the internal
members for gaining the
appropriate information
There will be influence of
IFRS, GAAP, FRS and various
standards that will be
necessary for accurate
reporting and proper use of
techniques to present the
reports.
As financial accounting is helpful in the proper record keeping of numerous transactions and
comparison of the performance of two periods of an entity or between the two entities, while the
management accounting is helpful in analysing the performance, making a strategy, taking an
effective judgment and preparation of policies for the future (Grabher, Gernot, and Jonas, 2017).
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b) The purpose of financial statements in a profit and non- profit organizations.
The prime motive of financial statements is to render specific information and relevant
details which is needed to be reviewed by investors, shareholders, creditors and other
stakeholders. It is majorly used to determine decision making as well as for analyzing the
profitability of business. As per the guidelines provided by IFRS, all organizations engaged in
trade practices must disclose its final accounts for reviewing by various persons and government
(Grabher, Gernot, and Jonas, 2017). Therefore, these accounts are to be prepared on the basis of
international standards which make informative disclosures to all the users. The preparation of
financial accounts is typically different for profit generating organizations and non-profit
business units.
(Source: Reporting and Operations, 2008)
Financial statements of Profit making organizations:
Financial statement is a formal way of recording the financial transactions of the
business. The statements designed in profit making organizations is publicly displayed for the
purpose of interpretation by investors, shareholders, creditors etc (Grabher, Gernot, and Jonas,
2017). The motive behind preparation of financial statements is to identify profitability of
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Illustration 1: Financial Statement

businesses and amount of capital invested as well as liquidity of the organization. Therefore, they
focus mainly over improving the turnover as well as balancing the assets of the firm which will
be attractive to the investors and they feel secure in investment terms. The financial statements
include (Omeje, 2017)
 Balance sheet
 Income statement
 Cash Flow statement and Change in Equity statement
Financial statements of Non-Profit organizations:
The financial statements for non profit organization refers to maintaining records of
company's assets and liabilities so as to determine its financial condition. Unlike profit
organization, these firms do not identify overall profitability for stakeholders rather determine
financial status of the firm so as to expand its business for charity purpose or fulfilling some
social motive (Omeje, 2017).
These organizations obtain funds from government, through sponsorship, donations form
large business firms, society and community for which it works etc. They prepare the financial
statement for ascertaining the actual requirement of costs for the operations. The financial
statements of non-profit organizations include:
 Cash Flow Statement
 Changes in Total Assets
 Statement of Activities
 Balance Sheet
c) Evaluation of stake holders and their different information needs.
The purpose of evaluation of various stakeholders and their need for information
regarding Stratford is vital as they are the sources of funds required by company at any time as
well as they are suppliers of specific materials needed for production purposes (Barr and
Margaret, 2018).
Governmental authority: The use of financial statements for the government is to
ascertain the financial position of the business as well as the payment of corporatisation taxes by
them.
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Director and managers: The use of financial statement for the directors and managers in
and entity which were tends to make the adequate analysis over the growth and profitability of
entity. Moreover, with the help of such analyse to determine the necessary changes to be made in
the operations as well as plan e for the costs for each activities.
Shareholders: These are the individuals which look for the profitability and the annual
turnover retained by the business as to make profitable gains. They analyse the growth of
business over the period and then make their estimation for the future development of the
business. They seek for the profitable dividend to be payable over their invested money.
Banking agency: These are the authorities which looks for the loan repayment made by
the firm over their landed funds. Moreover, they analyse the efficiency of the firm in making the
payments to their loans. It brings them the adequate knowledge relevant with efficiency and
ability of the firm in making the payments of their loans.
Creditors: These are the suppliers and relevant people who grant money to the firm. The
main requirement for financial statements for these people in making the adequate analysis over
the ability of firm in making the short terms payments of the loans.
TASK 2
a). Stortford Yachts Ltd financial performance for two years.
Particulars Formula 2015 Ratio 2016 Ratio
Industry
Average
Net Profit Ratio NP *100 0.57 16.40% 0.51 11.80% 14.50%
Sales 5.3 6.6
Return on capital
employed
net operating
profit 0.87 27.90% 0.78 22.50% 26.00%
capital
employed 0.91 1.26
Asset turnover ratio Sales revenue 5.3 1.7 6.6 1.9 1.79 times
Net assets 4.68 5.37
Debtors collection
period
accounts
receivables *365 1.32 91 1.84 102 183 days
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Sales revenue 5.3 6.6
Current ratio CA 1.91 1.22:1 2.49 1.3:1 1.87962
CL 1.56 1.9
Quick ratio CA- inventories 1.79 0.87:1 2.34 0.99:1 1.76323
CL 1.56 1.9
Gearing ratio Net liabilities 1.56 70.80% 1.9 63.70% 32.00%
total
stakeholder's
liabilities 0.91 1.26
Distribution costs as
% of sales
Distribution
costs *100 0.49 9.24% 0.61 9.24% 9.50%
Sales revenue 5.3 6.6
Administrative costs
as % of sales
administrative
costs *100 0.22 4.15% 0.27 4.09% 4.50%
Sales revenue 5.3 6.6
Labor cost as % of
sales direct labour *100 0.98 18.50% 1.25 18.90% 18.10%
Sales revenue 5.3 6.6
Operating costs as %
of sales operating cost *100 4.43 83.60% 5.82 88.20% 85.00%
Sales revenue 5.3 6.6
b) Preparation of report analyzing profitability and liquidity.
To: Director,
Paul Marriot Stratford Yachts Ltd.
From: Business Planning Assistant
Subject: Presenting financial accounts report of Stratford Yachts Ltd. for year 2015-2016
Sir,
As per the analysis I have made over the financial position of Stratford Yachts Ltd, it
can be said that the firm will have appropriate gains by proper working of employees and strict
control over operations by management (Omeje, 2017). Analyzing organizations financial
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position for two consecutive years represent following information. To analyse the profitability,
efficiency and liquidity of the firm, there is a need to make investigation over the several ratios
such as:
Return on capital employed:
The return on capital employed in the year 2015 was 27.90% as compared to the
year 2016 in which it was reduced to 22.50%. Thus, it has been concluded that the firm has
reduction in the operational performance as compared with the last year. There has been
reduction in the operating income in 2016.
Asset Turnover ratio:
The asset turnover ratio depicts 1.7 times in 2015 in contrast to 2016 it was 1.9
times showing an increase implies the companies assets have increased (Williams, 2014). Thus,
it concludes that the year 2016 has seen larger proportion of sales which lead to better asset
turnover ratio.
Net profit ratio:
This ratio will be helpful to the firm in determining the probability which
ascertains that they are bale in making the returns to their equity holders. Therefore, in 2015, it
was 16.40% which drastically changed in 2016 as 11.80%. Thus, in respective period, firm has
poor management of work and increasing operational costs in business activities.
Current ratio:
The current ratio of the company holds 1.2:1 in 2015 which raised to a point
difference in 2016 as 1.3:1 which implies that the firm gains the ability to make short term
payments as liquidity holds good.
Quick Ratio:
The quick ratio of Stratford Yachts Ltd. in year 2015 was 0.87:1 and in 2016 it
was 0.99:1 with a minor difference which implies inventories and prepaid expenses rose during
consecutive years (Barr and Margaret, 2018).
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CONCLUSION
The above report concludes how Stratford financial position has changed during two
consecutive years and how it has affected overall company's value and share prices. It depicts
various ratio analysis for two years that is (Bryce and Herrington, 2017).2015 and 2016 and an
analysis of industry average in which Stratford performs its operations. Thus, as per the financial
analysis of Stratford Yachts Ltd., it can be said that there is need to have control over operating
expenses which are influencing the annual turnover of the firm. Moreover, the use of such
statements will be fruitful in managing the business operations as well as in attracting large
number of stakeholders to the firm.
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