Profitability Analysis of GSK PLC and Zero-Based Budgeting Report

This report provides a comprehensive financial analysis of GSK PLC and its competitor AstraZeneca, focusing on profitability using ratios like return on capital employed, operating profit margin, and earnings per share for 2016 and 2017. It further explores zero-based budgeting (ZBB), discussing its advantages and implementation scenarios. The report also examines the balanced scorecard approach, highlighting its components, strengths, and weaknesses. Finally, it considers critical financial issues in investment decision-making, ranking them by importance, and concludes with recommendations for ensuring business profitability. Desklib provides access to similar solved assignments and study resources for students.

Running head: FINANCIAL MANAGEMENT
Financial Management
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Table of Contents
Introduction:....................................................................................................................................3
Company overview of GSK Plc and its competitor, Astrazeneca Plc:............................................3
Part 1: Ratio Analysis......................................................................................................................5
Introduction:................................................................................................................................5
Return on capital employed:........................................................................................................5
Conclusion:................................................................................................................................10
Part 2: Zero-Based Budgeting.......................................................................................................10
Introduction................................................................................................................................10
Advantages of ZBB:..................................................................................................................11
Circumstances under which the Zero based budgeting can be implemented:...............................13
Conclusion.....................................................................................................................................14
Part 3: Balanced Scorecard............................................................................................................15
Introduction................................................................................................................................15
Four essential components of balanced scorecard.....................................................................15
Strength and weakness...............................................................................................................16
Design failure:...........................................................................................................................18
Process failure:...........................................................................................................................18
Conclusion.................................................................................................................................19

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Part 4: Consideration of Financial Issues for undertaking Investment Decision...........................20
Introduction:..............................................................................................................................20
Financial issues according to descending order of weight:.......................................................20
Conclusion:................................................................................................................................23
References:....................................................................................................................................24
Appendix:......................................................................................................................................28

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Introduction:
The first section of the assignment would focus on brief overview of the financial
condition of GSK Plc and its competitor, Astrazeneca Plc, which are two of the leading
healthcare service providers in UK for the periods 2016 and 2017. By evaluating the financial
position of these two organisations, it becomes possible for the different stakeholders in
identifying the strengths and loopholes inherent within the organisations. Secondly, the study
focuses on the “Zero Based Budgeting” system. In this method, the budget is made through
justifying all expenses for each new period. As the name suggests the method starts budgeting
from a “zero base” and each and every function of an organization is analysed based on its need
and cost. Thirdly, the balanced scorecard refers the company’s strategy to identifying the growth
of an outcome. This examines the results through comparing the outcomes. This enables the
management to makes a decision through evaluating the growth of a function. Finally, it would
be evaluated that there are a number of factors to be taken into account before any investment
decision is undertaken. In case of large organisations, the selection of projects is a serious
challenge. This is due to the number of viable alternatives, which might lead to rise in profit
level.
Company overview of GSK Plc and its competitor, Astrazeneca Plc:
GSK Plc is a British pharmaceutical organisation GSK Plc deals with creation, invention,
development, production and marketing of vaccines as well as health-related consumer products
in the international markets (Gsk.com 2019). The organisation has primary listing on the London
Stock Exchange and at present, it is a constituent of FTSE 100 index. At August 2016, GSK Plc
has market capitalisation of £81 million, which is the fourth largest in the London stock
exchange. The top selling products of the organisation in the global market include Advair,

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Flovent, Augmentin, Avodart, Lamcital and Lovaza. The goal of GSK Plc is to become the most
innovative, trusted healthcare and best performing global healthcare organisation. The main
values include focus on the patients, respect, transparency, integrity and others. On the other
hand, the expectations comprise of accountability, courage, teamwork and development. In 2010,
GSK Plc has acquired Laboratorios Pheonix, an Argentine pharmaceutical organisation for $253
million, and UK-based sports nutrition organisation for $256 million and currently it has staff
base of around 95,400.
Astrazeneca Plc is a British-Swedish multinational biopharmaceutical and pharmaceutical
organisation. In 2013, it has shifted its headquarters to Cambridge in UK and it concentrated on
three sites including Cambridge, Maryland and Gaithersburg. It is involved in developing,
discovering and commercialising prescription medicines in the areas of cardiovascular,
oncology, metabolism, autoimmunity and gastroenterology in the healthcare sector with an
employee base of around 64,400 (Astrazeneca.com 2019). In 2010, Astrazeneca Plc has acquired
Novexel Corporation, which has assisted in diversifying its asset base further in the global
market. The organisation has been focusing on science on significant therapy areas along with
accelerating its pipeline. In addition, it has placed additional efforts on transformation of
business through devices, specialty care and biologics. The targeted business development assists
in reinforcement of efforts. Furthermore, the organisation is evolving its culture along with
simplifying its business processes by drawing and retaining the best talent in the market. Hence,
Astrazeneca Plc has focused on these moves for maintaining competitive advantage in the global
market.

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Part 1: Ratio Analysis
Introduction:
The current part would provide a brief overview of the financial condition of GSK Plc
and its competitor, Astrazeneca Plc, which are two of the leading healthcare service providers in
UK for the periods 2016 and 2017. For performing the profitability analysis of the two
companies, three important ratios have been considered that include operating profit margin,
return on capital employed and earnings per share. These ratios would aid in gaining an overview
of the two selected firms in 2016 and 2017.
Return on capital employed:
As indicated by Loughran and McDonald (2016), return on capital employed denotes the
efficacy of a firm to use its capital for generation of profit. Specifically, this ratio assists in
measuring returns accomplished by a firm from capital employed denoted in percent form. The
investors mainly utilise this ratio so that they could ascertain the feasibility of investment within
the concerned firm (Gippel, Smith and Zhu 2015). The ratio for the two organisations is
computed briefly as follows:
Return on Capital Employed = Operating Profit/ (Total Assets – Current Liabilities)
Table 1: Return on capital employed of GSK Plc and Astrazeneca Plc for 2016 and 2017
(Source: Gsk.com 2019: Astrazeneca.com 2019)

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2016 2017 2016 2017
GSK Plc Astrazeneca Plc
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
6.48%
13.71%
10.37%
7.83%
Return on capital employed
Figure 1: Return on capital employed of GSK Plc and Astrazeneca Plc for 2016 and 2017
(Source: Gsk.com 2019: Astrazeneca.com 2019)
The above figure makes it evident that GSK Plc has experienced an increase in return on
capital employed to 13.71% in 2017 from 6.48% in 2016. On the other hand, the trend is
observed to be declining from 10.37% in 2016 to 7.83% in 2017 for Astrazeneca Plc. The
primary reason that the ratio is found to increase for GSK Plc is due to the significant increase in
operating profit with fall in capital employed in 2017. For Astrazeneca Plc, the reason that this
ratio has declined is the generation of lower operating income along with the acquisitions of
Pearl Therapeutics for $569 million and 100% shares of Omthera Pharmaceuticals for $323
million. In addition, there has been acquisition of Almirall Sofotec for $878 million
(Astrazeneca.com 2019). In this context, McLaney and Atrill (2014) remarked that high
investments generate lower return on capital compared to the current business. Therefore, in
terms of return on capital employed, GSK Plc is observed to be in a better position than
Astrazeneca Plc in the UK market.

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Operating profit margin:
In the words of Hoyle, Schaefer and Doupnik (2015), operating profit margin signifies
the proportion of profit made by an organisation after incurring variable costs of production such
as wages and raw materials. Along with this, it denotes the return obtained from standard
operations and it does not consider unique or one-time transactions. The detailed breakdown of
this ratio for the two selected companies is provided as follows:
Operating profit margin = Operating Profit/ Sales Revenue
Table 2: Operating profit margin of GSK Plc and Astrazeneca Plc for 2016 and 2017
(Source: Gsk.com 2019: Astrazeneca.com 2019)
2016 2017 2016 2017
GSK Plc Astrazeneca Plc
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
9.32%
13.54%
21.31%
16.37%
Operating profit margin
Figure 2: Operating profit margin of GSK Plc and Astrazeneca Plc for 2016 and 2017

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(Source: Gsk.com 2019: Astrazeneca.com 2019)
The above figure clearly identifies the rise in operating margin of GSK Plc to 13.54% in
2017 from 9.32% in 2016. On the other hand, the ratio has fallen from 21.31% in 2016 to
16.37% in 2017 for Astrazeneca Plc. The ratio for GSK Plc has increased owing to the change in
management strategy resulting in fall in overall operating expenses over the year. On the other
hand, the reason behind the declining trend for Astrazenca Plc is due to the expenditure related to
growth platforms like research and development expenses. The rise in selling, distribution and
administrative expenses have resulted in downfall of the net operating margin. One such reason
is the denominations in currencies, since cash is converted and held in US dollars (Hillier et al.
2014). Hence, operating income could be affected in US dollars by the exchange rate
movements. However, despite such downfall, the ratio is still found to be higher for Astrazeneca
Plc compared to GSK Plc. Hence, in terms of operating profit ratio, the position of Astrazeneca
Plc is found to be better than GSK Plc in the UK market.
Earnings per share:
Earnings per share, termed as net income per share, are a market prospect or profitability
ratio measuring the amount of profit earned per share of outstanding stock (Cleverley and
Cleverley 2017). Precisely, such earnings could be explained as the amount to be earned by each
share of stock; in case, the total profit is divided into outstanding shares at the end of the year.
Moreover, by calculating earnings per share, the profitability of a firm could be understood
effectively on shareholder basis. Thus, a bigger firm needs to distribute its earnings among
increased shares of stock than a smaller firm. The detailed computation of the ratio for the two
firms is represented in the form of a table and a figure as follows:

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Earnings per share = Net Income/ Number of Outstanding Shares
Table 3: Earnings per share of GSK Plc and Astrazeneca Plc for 2016 and 2017
(Source: Gsk.com 2019: Astrazeneca.com 2019)
2016 2017 2016 2017
GSK Plc Astrazeneca Plc
£-
£0.500
£1.000
£1.500
£2.000
£2.500
£0.314 £0.188
£2.241
£1.749
Earnings per share
Figure 3: Earnings per share of GSK Plc and Astrazeneca Plc for 2016 and 2017
(Source: Gsk.com 2019: Astrazeneca.com 2019)
From the above figure, it is clearly visible that the earnings per share of GSK Plc have
declined to £0.188 in 2017 from £0.314 in 2016 and the trend is similar for Astrazeneca Plc as
well from £2.24 in 2016 to £1.75 in 2017. A higher ratio is found to be suitable in contrast to a
lower ratio, as it signifies more profit level of the company and it has the capability of adding
more profits to the shareholders. In case of both GSK Plc and Astrazeneca Plc, the ratio has

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declined from 2016 to 2017; however, the position is still found to be better for Astrazeneca Plc
in the UK market.
Conclusion:
The above discussion clearly makes it evident that for carrying out the profitability
evaluation of GSK Plc and Astrazeneca Plc, operating profit ratio, earnings per share and return
on capital employed are taken into account. The performance of Astrazeneca Plc is found to be
better than GSK Plc in terms of earnings per share and operating profit ratio, while GSK Plc is
enjoying competitive edge over Astrazeneca Plc in terms of return on capital employed.
However, the trend is declining for Astrazeneca Plc, which makes it necessary for the
management of the organisation to undertake necessary steps for ensuring business profitability
in future.
Part 2: Zero-Based Budgeting
Introduction
This segment of the study focuses on the “Zero Based Budgeting” system. In this method
the budget is done through justifying all expenses for each new period. As the name suggests the
method starts budgeting from a “zero base” and each and every function of an organization is
analysed based on its need and cost. Then the budgets are being built based on what is needed for
the upcoming period regardless the fact that expects the budget can either be higher or lower than
of previous period. Further, the segment compares the benefits and drawbacks of the ZBB
system and lastly understanding the importance of this budgeting system the circumstances at
which the ZBB system can be implemented has been explained below.

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Advantages of ZBB:
The benefit of using that method into the accounting system has been explained below:
Accuracy:
This method of budgeting system provides accuracy in identifying the future budget, as
the ZBB makes a detailed overview on the each sector of the cash flow and calculates the
operational expenses of each sector (Brusca et al., 2016). This helps in reducing cost and brings
cost efficiency into the business operation, as this gives a clear overview of expenses that are not
assumed rather practically evaluated.
Efficiency:
The budgeting system achieves efficiency through identifying the exact fund resource
and each operational expense has been identified based on the real figure rather than focusing on
the assumptions (Langfield-Smith et al. 2017).
Justification of operating expenses:
This process forces managers to justify all operating expenses and identifies the area of
revenue that the company is generating (Becker, Jagalla and Skærbæk 2014).
Reducing the unnecessary activities:
With the help of this measure, it is possible to eliminate the unnecessary activities from
the budgeting system. This method helps to identify the opportunities and more cost effective
way of achieving things through removing all unproductive activities and unnecessary functions
into the business.

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Budget inflation:
ZBB overcomes the weakness of the incremental budget in the budget inflation as this
asks for justification of each line item (Réka, Ştefan and Daniel 2014).
Coordination and communication:
This process helps in generating a great coordination among the various function of the
organization as this analyses each function that are being includes into the budget. Alongside,
this also generates a good communication system among the employees of the various sectors of
the company as this allows the employees to take part into the decision making process.
Implementation of the strategic goal: The ZBB system helps in implementing top level
strategic goal by tying them into the specific functional area of the organization, where costs
have been grouped first and then measured against the past result and the current expectations.
Disadvantages
The drawbacks have been identified below:
Time consuming: The process of Zero Based Budgeting system is lengthy and time consuming
as this examines each element of the organizational operation so that the operating expenses of
each sector can be identified. Compared to the incremental budgeting this method has been
identified, as toughest and lengthier method.
High and knowledgeable man power needed: Under this method, the budgeting has been done
from the scratch. Therefore, this involves the requirement of large number of employees. As the
method is done through identifying each operating cost hence the process requires those
employees who are highly skilled and knowledgeable.

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Lack of expertise: As the process requires high level of financial management knowledge, this
process requires those employees who are highly skilled and knowledgeable. As each and every
company does not have an expert line of employees hence the training of the mangers are
required and this involves an additional cost for the company (Sandalgaard and Nikolaj Bukh
2014).
Manipulation by savvy managers: The budgeting process can be gamed by the savvy mangers
of the company as they eye on getting resources into their department. This leads to the cultural
change into the organization where there is a decreased spirit of cooperation in the organizations,
as workers or employees feel discouraged and demotivated.
Circumstances under which the Zero based budgeting can be implemented:
Implementing zero-based budgeting has been discussed below:
 The zero based budgeting has been considered as the core process of forming planning
and current budgeting cycles. This cannot be identified as the alternative way of
budgeting in the organization. Identifying this as an ancillary method of budgeting this is
to be continued after an interval of two to three years in order to pay attention to
expenditures on strategically crucially functionalities and actions (Mauro, Cinquini and
Grossi 2017).
 Being a scientific method of identifying operating cost, the method has been used in
identifying the functions of the organizations that are generating profit. This helps in
maximizing profit for the organization through identifying the cost effectiveness into the
organizational function.

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 There are some organizations that use this ZBB into their newly formed business
activities to limit the request of extra funding while using other process of budgeting for
current functionalities.
 The ZBB allows manager to allocate the available resources while by controlling and
mentoring the organizational activities. Since the process requires the organizational
operation and financial information altogether hence while implementing a successful
ZBB system the mangers need to have proper knowledge over the drivers of the various
expenses (Klychova, Faskhutdinova and Sadrieva 2014).
 With the change in production process the decision making process lies on the revenue
resources and the production requirement. This refers in forming budgeting from the
scratch, where the ZBB has been done based on the previous experience.
Conclusion
The Zero based budgeting has been done through keeping the base as zero. Which means
this omits the possibility of getting influenced from any business activities while establishing a
budget for a company. On the other hand the budgeting system includes the knowledge of
operational information and financial information. This involves the managerial responsibility of
identifying the relationship among them. This helps in achieving cost efficiency. Hence, the
report has provided an idea over the benefit of utilizing this method and also provided idea on
recognizing the draw backs for utilizing this method. The importance has been identified through
identifying the circumstances at which the process is implemented. Therefore, identifying the
area for utilization of this process this helps in concluding the fact that ZBB has been most
scientific process of planning budget as this takes practical information, which are productive in
nature.

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Part 3: Balanced Scorecard
Introduction
This segment of the study focuses on identifying the balance score card system and the
strength and weakness of the balance scorecard. The balanced scorecard refers the company’s
strategy to identifying the growth of an outcome. This examines the results through comparing
the outcomes. This enables the management to makes a decision through evaluating the growth
of a function. This has been identified as the performance metric where the cost efficiency has
been achieved through the performance evaluation. The balance score card includes the four legs
which are identified as the four aspects of the business. These are learning and growth, Business
process, Customer prospective and financial data. This segment of the report identifies the
strength and weakness of the balanced scorecard system where the drawbacks and the
importance of using balance score card has been identified.
Four essential components of balanced scorecard
Balanced scorecard is deemed to possess four essential components, which are discussed
as follows:
 Customer perspective oversees the organisational performance from the perspective of
the customers or the other major stakeholders associated with the organisation.
 Financial perspective is involved in reviewing the organisational performance along with
the usage of financial resources.
 Internal process perspective reviews organisational performance from the perspective of
efficiency and quality associated with the products and services.

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 Learning and growth perspective is involved in reviewing the organisational performance
from the perspective of infrastructure, culture, human capital, technology and other
abilities/
Strength and weakness
The strengths and weakness of using this method has been identified below
Strengths:
1. Performance measurement: That provides an idea on the performance growth or decline.
This evaluates the result of the outcome through which the performance of each sector of
the organization has been measured (Shafiee, Lotfi and Saleh 2014).
2. Scientific method: This is a scientific method of evaluating performance as it tracks the
performance at each and every point.
3. Better strategic plan: As the process tracks the performance at each point this gives the
management an opportunity to make strategic plan according to the requirement. This
enables an opportunity of achieving a better performance through forming a better
strategic plan for future (Valmohammadi and Ahmadi 2015).
4. Decision making: This gives a better evaluation of the performance which helps in
making proper decision.
5. Organizational process alignment: The balance score card implementation helps in
aligning the business process such as risk management, budgeting and analytics with the
strategic priorities. Bringing the alignment under the business process helps in forming an
effectively strategy focused- organization.

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6. Better alignment of initiatives and projects: this enables the organization to evaluate their
initiative towards organizational goal by based on the outcome that the management has
at the end of a specified period. Based on which the project has been undertaken (Niven
2014).
7. Better management information: Influenced from the views of Mehralianet al. (2017), the
primary process of making decision requires the source of information. Based on which
the management undertakes certain decisions. Since understanding this fact the balance
scorecard provides information from all aspects to the management which helps in
achieving cost efficiency within the work flow.
While on the one hand, using the balance score card system helps in measuring the
performance, on the other hand the method has some draw backs which generates obstruction on
adoption of this process for every organization. However, the drawbacks are being identified
below:
Cost and time involvement:
The process requires extensive knowledge of performance evaluation along with that a
proper knowledge of understating this process is required. Which is little tough for an origination
to employees such internal expertise who can successfully use this method. Hence this enables
the organization to depend on the external consultant to obtain assistance with the process. This
involves an extra cost for the company. Hence the process becomes a costlier process for the
company. Along with that the process is a time consuming processes as the process requires time
understand and evaluate the performance of a function or activity. Therefore, this becomes a
lengthy process as well (Martello, Watson and Fischer 2016).

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Incomplete information: The balance scorecard system is effective only if the current element is
chosen. Hence the usefulness of the balance scorecard relies on the value of the information as
the information needs to present relevance with the function.
Staff resistance:
Although the process is received huge support from the various organization but there are
some resistances have been recognized from the staffs’ side. This has been recognized that as
this process required proper knowledge over this method, staffs requires training and times
investment for learning the balance scorecard and its usage. Hence, this has been seen
managements are not willing to adopt this method into their work process (Hoque 2014).
Design failure:
A poor design of the balance scorecard results in failure of the organization and also
results in poor decision making. This type of design failure is stated below:
1. A very few measures in all prospective results in failure to strike balance among financial
and non-financial indicator.
2. Without screening the information that are used as the performance indicator may result
in a futile effort of identifying the growth. This implies that the organizational strategies
are not converted into action, which creates obstacles from enjoying the benefit of using
the balance score cards system (Perkins, Grey and Remmers 2014).
Process failure:
The process failure for the balance score card has been mentioned below:
 Very few individual involvement

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 Lack of interest by senior management
 Ensuring the score card at the top
 Lengthy process of development
 Treatment of balanced scorecard in the form of a system project
 Hiring an inexperienced consultant
 Introducing the balanced scorecard only for achieving compensation
The primary reason of getting failure into this process is the ineffective communication
among the management and departments. This has been identified as the lengthy process as this
is not a single time project instead this is continuous process of identifying the performance. All
of such elements that are used within the process as information that are needed to have a
physical evidence otherwise the system losses it’s value of representing current growth
opportunity (Zizlavsky 2014).
Conclusion
The balanced scorecard system allows the management to identify their organizational
objective through understanding the performance at each level. This enables the organization to
make strategy according the performance evaluation. This has been recognized that the process is
important towards making decision while by underrating the requirement of making change into
the strategy. Since understanding the importance of this model, the project has shown the
strength of this method. However, the drawbacks are also being identified through understanding
the possibility of process failure, design failure into this model. Further, the drawback has also
included the factors like cost involvement and time consumption while implementing the process
into the practical business environment. Hence, through evaluating the factors of the balance

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scorecard this can be concluded that the process is effective only, if the information provided
into the process is effective and relevant towards the decision making.
Part 4: Consideration of Financial Issues for undertaking Investment Decision
Introduction:
There are a number of factors to be taken into account before any investment decision is
undertaken. In case of large organisations, the selection of projects is a serious challenge. This is
due to the number of viable alternatives, which might lead to rise in profit level. However, the
unavailability of sources of finance restricts in doing the same. In addition, there persist different
financial issues related to project selection. These issues are deemed to be vital, since project
success or failure is reliant on them (Batra and Verma 2017).
Financial issues according to descending order of weight:
The managers often take into consideration discounting and non-discounting cash flows
and certain other aspects at the time of making any acquisitions or modifications of non-current
assets with the intent of enhancing the economies of scale and ensuring sustainable growth
strategies. However, consideration is made that any high value proposal need to be investigated
thoroughly for its estimated earnings to generate return on investment, availability of funds and
growth in market share when analysing pertinent risks and rewards confronting the issues on
strategic long-term decision-making and inherent challenges.
Net present value (NPV):
NPV indicates the expected value to be generated from any particular project or
investment. If the NPV of the particular investment is found to be positive, it would result in net
profit for the organisation and in case of the opposite situation, there would be net loss.

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Internal rate of return (IRR):
IRR is used for analysing the feasibility of an investment or project. In case; the IRR of a
new project is more than the required rate of return of the organisation, the project is desirable
for the manager. On the other hand, if IRR is below the required rate of return, the manager
needs to reject that particular project (Salikin, Ab Wahab and Muhammad 2014).
Accounting rate of return (ARR):
ARR signifies the measurement of expected profitability from any specific capital
investment. This denotes the profitability from investments by using easy estimates that assists in
analysing capital projects. By using this technique, the manager could analyse the risk associated
with investment along with inferring if the investment would generate adequate earnings for
covering the level of risk.
Payback period (PBP):
Payback period assists in ascertaining the amount of time needed for recovering the
initial investment made in a project. If the period is lower than the economic life of the project,
the manager could accept the project and vice-versa.
Expected project return:
The manager needs to question the amounts presented by the team in the form of return
percent and the individual has to ask about the way of finding the amounts and the anticipated
accuracy of the same like payback period and net present value (Ardalan 2016). The cardinal
figure to any project investment is the NPV estimate, which is the project profitability along with
the rate at which there would be recovery of initial investment for the ascertainment of viability.

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Sources of finance:
The manager has to find out the way of the team proposal for assuring funding like
equity, loans and debt for the project and the reasons behind which the choice has been made.
Moreover, it is necessary to identify whether the choice represent the actual financial situation of
the firm like financial leverage and the risks related to sources of finance. This is vital, since it
focuses on the business exposure of tolerance towards the creditors (Rossi 2014).
Contingencies:
These would aid in ascertaining the types of headwinds estimated with a significant
financial commitment. The team needs to have a thorough insight of the market situations and it
has to formulate plan for the likely systematic risks and contingencies (Salikin, Ab Wahab and
Muhammad 2014).
Involvement of outside parties:
In case, there is involvement of outside parties, the manager has to understand the type of
exposure that the parties are willing to accept compared to return estimates. The manager needs
to assure effective sanctioning of risk-return for the organisation in such instance (Park and Jang
2014).
Hedge options:
Since the project is associated with investment, there are chances of hedge bets for
minimising the overall risk. Therefore, the manager has to question the team regarding the
exploration of hedging opportunities and the techniques of risk mitigation (Clancy and Collins
2014).

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Cost consideration:
All costs of investment have to be allocated efficiently for maximising return. This is
because if any investment has weighty short-term effect on profit, the firm might be deviated
from its set targets and the minimised profit might pose concern for the shareholders. Therefore,
this situation needs to be managed properly for avoidance of panic (Mauboussin and Callahan
2014).
Conclusion:
The above discussion clearly makes it evident that a manager needs to consider a number
of financial issues for ensuring project success. This is because if they are not addressed
effectively, it might result in profit minimisation or serious losses for the concerned organisation.

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Appendix:
Exchange rate table: