Financial Decision Making and Ratio Analysis: A Report on Panini Ltd

This report provides a detailed financial analysis of Panini Ltd, focusing on financial decision-making processes and key accounting functions. It highlights the importance of finance and accounting roles within the organization, including duties related to bookkeeping, management accounting, tax functions, and auditing. Various sources of finance available to small and medium-sized companies for expansion are discussed, such as equity, retained earnings, and debts. The report includes a computation of leading financial ratios for 2018 and 2019, including gross profit margin, operating profit margin, return on capital employed, current ratio, quick ratio, and inventory turnover days, providing an assessment of the company's profitability, liquidity, and efficiency. The analysis indicates areas where Panini Ltd has improved, such as its current ratio, and areas needing attention, such as declining profit margins and returns on capital employed.

Financial Decision
Making

EXECUTIVE SUMMARY
The following report states that the functioning and working of Panini. Ltd. Works in
competitive environment. It further calculates the ratios such as inventory turnover ratio, Debtors
collection period and Creditors collection period. Further recommendation is given on the basis
of the working of the organisation in the business environment. Further calculations are
performed to know the performance of the company.

INTRODUCTION
The main element for any business is making financial decision regarding the business. It
includes making choices between debt and equity for continuing the business operations.
Decision related with investment such as purchasing of assets. Making decision regarding the
profits and revenues earned by the business has to reinvest the amount earned by the business
and distribute the profits. Panini Ltd deals in bread and various grocery activities.(Luukkanen
and Uusitalo, 2019). In the following it explain about the Importance of finance and accounting
functions, roles and duties of the organisation. It further discusses the sources of finance
available to small and medium company for the purpose of expansion. Ratios of the company are
calculated to determine the functioning of the company. Further analysis is done to know the
financial position of the firm.
TASK
1.1 Explain the importance of finance and accounting functions, duties and roles of an
organisation.
Accounting: It can be stated as compiling, sorting and collection of information at one
place and recording all the monetary transactions. Development of reports, records and
statements. It is often thought of as a way to keep a legal record book and make use of relevant
regional information. The primary job of bookkeeping is also to analyse the performance of the
employees the business serves in the relevant environment. Therefore, it is also valuable for
assessing the state and productivity of businesses and economies. It evaluates the interpretation
of cash inflows and outflows that occur in a particular organization. Likewise, it is seen as a tool
for individuals who have ties to the company or wish to be involved in businesses operating in
harsh environments.
Functions of Bookkeeping: There are a variety of abilities that can help Panini Limited. organize.
Some expressions are as follows:
 Evaluate Valuable transactions: Panini Ltd is obliged to document relevant
communications which, after considering the work of climate-related businesses,
document a clear and clear outcome of such a lengthy process.
 Examine the performance served: Bookkeeping is valuable for legal investigations of
Panini ltd organisations, which will help businesses to monitor the relevant life cycles

within a specific time frame, which will also be useful in the fight against severe climate
in the near future.
Management Accounting: It helps to understand the role a company serves in carrying out
related activities in a timely, efficient and effective manner. Some are expressed as follows:
 Keep a history of related expenditures and payments: It records the organization's
contributions and purchases. It will help Panini understand what drives revenue
generation and payment related capabilities, and what activities should be controlled,
which will help further develop expenses incurred during business operations and
operations. (Gaitonde, Malik and Zimmern, 2019)
 Work towards a better direction: Accounting is useful in skilled and engaging navigation
by choosing the most ideal elective option anyone would expect to find through Panini
Ltd. Also, it can be valuable when choosing the part that best fits the requirements and
necessities of connecting the company. Undefined timeframes and which systems will
help limit expenses and improve yields within a certain range.
Duties of Accounting:
 Financials: It helps to find out what assets might be investing resources into related
business activities, and how the organization should monitor the inflows and surges of
funds over time.
 Forecasting Finance-Related Activities and Predicting Hazards: The obligation of
bookkeeping-related variables is to predict opportunities and hazards that may harm an
organization's development in the near future.(Surbakti and et.al., 2019)
 Observe and control prepared spending plans: Accounting as a supporting process for
planning and arranging financial plans. It also helps find areas to contribute cash and
splurge without proper help.
Tax Function - Taxation is the responsibility of all organisations controlled by the Treasury
Department. It focuses on building a good relationship with the government by remitting
PAYE to the appropriate authorities, and works to ensure that tax payment should be done
within system policy (Tucker and Jones, 2019)
Audit function - The corporate finance department focuses on current assets. The company's
working capital needs to be effectively controlled in order to make more profits, and it is
more of a blame for the company's liquidity than the amount of funds being taken up.

Functions of finance:
 Arrange support in a specific way: It means that assets that are scarce in nature should be
arranged to meet needs and goals in the right way. (Hemrajani and Sharma., 2018)
 Asset Raising: It centres on areas that help generate money and revenue that can also be
used for other tasks of the organization.
Types of Finance
 Investment function - Investment is used to obtain benefits or premiums within a given
time frame. This is the inverse link between revenue velocity and speculation.
Entrepreneurial jobs increase compensation levels and creativity by facilitating the
assembly and acquisition of capital goods.
 Financing Function – This capability is used to handle the organization's funding and to
accommodate sailing. It demonstrates the acquisition and use of explicit assets for
production tasks. Finance is a major part of running any association and it provides cash.
 Dividend Functions – is to promote the diversification of the interests of important
investors. Profitability refers to the instalments the ranking holder organization makes to
pay financial backers to put cash into their efforts.(Li and et.al., 2022)
 Working Capital Functions – Working capital is determined by deducting continuing
resources to current liabilities. It is cash valuable to the organization's day-to-day costs
and expects to pay the organization's short time frame expenses that need to be paid at
the end of the currency year.
1.2 Explain various sources of finance and how it helps in the growth of a company.
There are a number of approaches that ultimately become useful in the context of producing
associations of assets to expand and develop business-related competencies and exercises. The
only motive behind the organization of Panini ltd is to develop its function and expand its scope
globally. It will also help to develop and conduct business in some undefined time frame. Some
of the tools that can be used as revenue devices are represented as follows:
 Equity: It is security which offers ownership to the holder of the security. Individuals
who need to be owners of the organization and practice the privileges granted to them at
the time. It helps companies create reserves that can be used in relevant regions that
require businesses to work and work better.

 Retained Earnings: Another better option, can be ruled out in the case of passing on
financial related capabilities, procurement can be used when development and expansion
are required. It is also considered the most efficient way to create valuable open doors, as
it does not include obligations or borrowings of due care. (Zander and et.al., 2019)
 Debts: Considered a technique that helps categorize assets used for speculation, such as
bonds, bank borrowings and money funds. Cash also receives income and should also be
paid in a clear manner. It can also be considered a source of money.
TASK 2
Computation of the leading ratios for the financial year 2018 and 2019.
 Gross profit margin: Gross profit/ Net sales * 100
Year 2018
3500/ 10000 * 100 = 35%
Year 2019
3265/ 11500 * 100 = 28.39%
Gross profit margin: It a type of profitability ratio that help a firm to measure ideal
returns which will received on its capital. It express in terms of percentage of gross profit over
sales of an enterprise. It also provides idea of how much amount of sale used to meet operating
expenses.((Dobson-Lohman., 2020)
Analysis of above calculation: As per above computation it state that cost of sales of
Panini ltd is increased in 2019, resulting gross profit margin fall down by £235. Gross profit ratio
is fall down as compare to the year 2018. another reason of decrease in gross profit margin is
lower selling prices of products and also major changes in the product mix where all product has
different price and margin.
 Operating profit margin: Operating profit/ Net sales * 100
Year 2018
2765/ 10000* 100 = 27.65%
Year 2019
2305/ 11500* 100 = 20.04%

Operating profit margin: It is an another type of profitability ratio that measure the share
of firm's operations or activities towards its profitability. It express in terms or percentage of
operating profits over net sales of the company (Butterbaugh, Ross and Campbell., 2020)
Analysis of above calculation: As per above computation it states that company is not
able to generate favourable profits as compare to year 2018, it decreased by £460. this also states
that company is not able to manage its cost of overheads or expenses, due to increase in
manufacturing expenses it suffers from profit erosion.
 Return on capital employed: Earnings before interest and tax/ Share equity +
Long term liabilities * 100
Year 2018
2765/ 8755= 31.58%
Year 2019
2305/ 10211* 100 = 22.57%
Return on Capital employed: It refers to the computation of the returns that is realised by
the company on its capital employed or capital assets. It works as indicator for the company
which indicate the efficiency and profitability to generate returns from its capital investments.
Analysis of above calculation: As per above computation it states that Panini limited is
not able to generate efficient profits from its capital investment that decreases by £460. company
also using more debts to meet their routine operations which is not good for the company. There
is a decline of almost 9% in the capital returns, due to increase in the long term debts.(Lo and
Liao., 2021)
 Current Ratio: Current assets/ Current liabilities
Year 2018
1175/ 970 = 1.21: 1
Year 2019
2110/ 512 = 4.12: 1
Current Ratio: It is a type of liquidity ratio that help in measuring short term position of
the company. It is also helpful to take corrective measure to improve short term health of the
company and its ideal ratio is 1:1. It determine how much current assets are needed to meet
current debts of the company over a period of time.

Analysis of above calculation: As per above computation it states that short term health
of the company is improving continuously with a grate percentage. Company efficiently working
in order to increase in current assets and decrease in current liabilities. (Drugău-Constantin,
2018)
 Quick Ratio: Current assets – Inventory / Current liabilities
Year 2018
1175 – 350/ 970 = 0.85: 1
Year 2019
2110 – 675/ 512 = 2.80: 1
Quick Ratio: It indicate the short term solvency of a company. It is said to be an updated
and more accurate formula of current ratio. This ratio is also called as acid test ratio.
Analysis of above calculation: As per above computation it states that Company improve
its sort term solvency position to cover its short term debts after realisation of current assets.
Company decrease its current liabilities and it’s also suggested that they have to keep eyes on the
current liabilities.
 Inventory turnover days: Cost of goods sold / average inventory
Year 2018
6500 / 350 = 13.57 times
Year 2019
8235 / 512 = 16.08 times
Inventory turnover days: This ratio help to measure the time duration taken by the
inventory to convert into the sales in a particular period of time. It estate the relation between the
average inventory and cost of goods sold (COGS).
Analysis of above calculation: As per above computation it states that Company working
more efficiently and effectively convert its stock in to sales within shorter time period as
compared to year 2018.
 Receivable collection period: 365 / sales on credit / accounts receivable
Year 2018
365 / 10000 / 760 = 27.74 days

Year 2019
365 / 11500 / 1340 = 42.54 days
Receivable collection period: This ratio indicates the time taken by a firm to convert its
credit sales into cash. In other words, it represents the time taken by a firm to write-off its
debtors by collecting their payment. (Weber, 2018)
Analysis of above calculation: As per above computation it states that Panini ltd take
lesser time to convert its credit sales into cash. It also indicates that company's offers discounts in
order to take payments early.
 Payable payment period: 365/ cost of sales / trade payable
Year 2018
365 / 6500 / 920 = 51.6 days
Year 2019
365 / 8235 / 707.5 = 31.36 days
Payable payment period: It refers to the time period taken by a firm to make payments to
its creditors. In other word it shows the time taken by the organization to convert its credit
purchases by cash or cash equivalents.
Analysis of above calculation: As per above computation it states that Company
efficiently meet their creditors payment on time as compare to year 2018. This will increase the
brand value and also increase the reputation of company in front of investors and creditors.(Carr
and Rosato., 2019)
Recommendations on the basis of above computation:
According to above computation of ratios it is concluded that short term solvency position of the
company Panini ltd is quite good. Quick as well as current ratio of the company tells that
company can easily meet their short term obligation by their current assets. Company performing
well in year 2019 as compared to year 2018. Company manage their stocks in efficient manner.
Company collect its payments earlier and pay-off its creditor’s timely (Yeates and et.al., 2022)
CONCLUSION
From the above report, it can be concluded that what types of steps are important for the
company Panini Limited to improve the business position and decision making. Due to these two

departments are briefly discussed along with their functions. The first department is accounting
department which include financial accounting function, management accounting function, tax
function and auditing function. It also describes the sources of finance used by the company. The
second department is finance that consist investment, financing, dividend and working capital
function. To analyse and compare the two-year financial position of the company, the ratios are
also derived, explain and recommended that resulted the company position is dealing in the year
2019.

REFERENCES
Books and Journals
Bordeianu, G.D. and Radu, F., 2020. Basic Types of Financial Ratios Used to Measure a
Company's Performance. Economy Transdisciplinarity Cognition. 23(2).
Butterbaugh, S.M., Ross, D.B. and Campbell, A., 2020. My money and me: Attaining financial
independence in emerging adulthood through a conceptual model of identity capital
theory. Contemporary Family Therapy. 42(1), pp.33-45.
Carr, E. and Rosato, E.M., 2019. Making the Case: Clinical assessment of financial
toxicity. Clinical Journal of Oncology Nursing, 23.
Dobson-Lohman, E., 2020. Artificial Intelligence-based Decision-Making Algorithms, Internet
of Things Smart Devices, and Real-Time Process Monitoring in Sustainable Industry
4.0. Economics, Management, and Financial Markets. 15(2), pp.30-36.
Drugău-Constantin, A.L., 2018. Emotional and cognitive reactions to marketing stimuli:
Mechanisms underlying judgments and decision making in behavioral and consumer
neuroscience. Economics, Management, and Financial Markets. 13(4), pp.46-52.
Gaitonde, S., Malik, R.D. and Zimmern, P.E., 2019. Financial burden of recurrent urinary tract
infections in women: a time-driven activity-based cost analysis. Urology. 128, pp.47-54.
Hemrajani, P. and Sharma, S.K., 2018. Influence of urgency on financial risk-taking behavior of
individual investors: The role of financial risk tolerance as a mediating factor. IUP
Journal of Applied Finance. 24(1), pp.30-43.
Li, Y. and et.al., 2022. Consensus reaching process in large-scale group decision making based
on bounded confidence and social network. European Journal of Operational Research.
Lo, F.Y. and Liao, P.C., 2021. Rethinking financial performance and corporate sustainability:
Perspectives on resources and strategies. Technological Forecasting and Social
Change. 162, p.120346.
Luukkanen, L. and Uusitalo, O., 2019. Toward financial capability—empowering the
young. Journal of Consumer Affairs. 53(2), pp.263-295.
Surbakti, E.E. and et.al., 2019, September. Analysis of software development method selection: a
case of a private financial institution. In Proceedings of the 3rd International Conference
on Business and Information Management (pp. 168-173).
Tucker III, J.J. and Jones, S., 2019. Diversity Continues to Challenge the Financial Services
Industry: Benefits, Financial Performance, Demographics, Impediments to Progress,
and Best Practices. Journal of Financial Service Professionals. 73(1).
Verhallen, P.F., 2021. No, they didn't? Oh, they did!: Advancing insights on social norm
interventions in consumer financial decision-making.
Weber, O., 2018. Financial sector sustainability regulations and voluntary codes of conduct: do
they help to create a more sustainable financial system?. In Designing a Sustainable
Financial System (pp. 383-404). Palgrave Macmillan, Cham.
Yeates, L. and et.al., 2022. Decision-making and experiences of preimplantation genetic
diagnosis in inherited heart diseases: a qualitative study. European Journal of Human
Genetics. 30(2), pp.187-193.
Zander, K.K. and et.al., 2019. Preferences for and potential impacts of financial incentives to
install residential rooftop solar photovoltaic systems in Australia. Journal of Cleaner
Production. 230, pp.328-338.

(Luukkanen and Uusitalo, 2019) (Gaitonde, Malik and Zimmern, 2019) (Tucker and Jones,
2019)(Li and et.al., 2022) (Zander and et.al., 2019) (Butterbaugh, Ross and Campbell.,
2020) (Drugău-Constantin, 2018) (Weber, 2018) (Carr and Rosato., 2019) (Lo and
Liao., 2021) (Bordeianu and Radu., 2020) (Verhallen., 2021) (Hemrajani and Sharma.,
2018) (Surbakti and et.al., 2019) (Dobson-Lohman., 2020) (Yeates and et.al., 2022)