SKANSKA PLC: Financial Decision Making & Accounting Functions (BM414)

This report provides an overview of financial decision-making within SKANSKA PLC, a civil building company. It emphasizes the importance of accounting and finance functions, duties, and roles within the organization. The report differentiates between accounting and finance, highlighting their respective responsibilities, and analyzes SKANSKA PLC's financial performance using accounting ratios calculated from the company's income reports for 2018 and 2019. Key aspects covered include asset management, monetary activities, vendor and client relations, revenue and debt management, cost control, fraud prevention, expenditure patterns, capital protection, and asset evaluation. The report assesses the Return on Capital Employed (ROCE) and Net Profit Margin (NPM) to evaluate the company's investment productivity, competitiveness, and profitability.

Financial decision
making

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
Task 1...........................................................................................................................................1
Task 2...........................................................................................................................................5
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Flexibility has considered an important factor in determining an organization's success
(Ahmed, Manwani and Ahmed, 2018). The business's visionary and managers are entrusted with
generating choices which ensure the organization's effectiveness, including economic actions
that impact shareholders' valuations, obligations, and the issue of shares inside the business.
Firms create decisions to determine the best way to spend their investments in order to
accomplish long-term goals and advantages. Profitability selection, financing decisions, current
assets, and equity layout are among the fiscal possibilities. Leadership and investors must take
several choices on a regular basis, particularly investment choices, in order to run a successful
organisation. Economic information include those made in regards to a statement of monetary
position, obligations, and the issuing of securities. The ability to make economic choices for the
company is critical to the company's future. Accountancy and finances play a critical role in the
administration and functioning of any company. Any company investor's primary goal is to
produce financial profitability. The accountancy and financial division is critical to achieving the
profit-making goal. Working capital may be managed and analyzed, driving commercial
activities, via effective implementation of firm resources and accounting. The research examines
fiscal decision-making in the setting of SKANSKA PLC, a civil building company situated in
Hertfordshire, United Kingdom. SKANSKA PLC was founded in 1984 and seeks to grow its
operations in additional EU nations over the following ten years. As a member of the
organization's accountancy and revenue department, I've received charged with providing
information for leadership on the corporation's economic decision-making procedure. The study
would then undertake a thorough assessment of the significance of funding and ethical features,
responsibilities, and responsibilities within SKANSKA PLC; and use the company's income
reports for the years ended 2018 and 2019 to calculating proportions and remark on the
company's present condition depending on the proportions computed.
MAIN BODY
Task 1
Accountancy is a method of capturing, evaluating, synthesizing, and presenting monetary
statements in a much more physical medium of expression. Accountancy, as per the European
Financial reporting Society, is "the method of recognizing, estimating, and disseminating fiscal

records; it helps buyers to create knowledgeable selections about the data." Accountancy is
critical to an organization's ability to operate because it offers critical information to managers
and supervisors, who use the information to generate knowledgeable strategic choices (Aina,
2017). Accountancy performs a crucial function in assuring that a company runs smoothly and
economically. While budgeting is among the most major elements of any firm, and it is critical to
perform forecasting correctly because the company's survival is wholly reliant on how well it is
formed. Because the accountant has access to the entire collection of data in the company,
planning is a critical job. Quantitative statements from the accountancy and fiscal departments
are required for the establishment of fiscal management. It is vital for a company, irrespective of
location; SKANSKA PLC is a huge organization which needs a massive expenditure to handle
the present economic atmosphere's competitiveness problems. SKANSKA PLC should
determine which objectives should indeed be established depending on the latest corporate
environment and its competitors. It plays a vital role in supplying fiscal details because
expenditures are formed depending on statistics given by accountancy. Keeping the law in
order since policies differ from one nation to the next, businesses are expected to agree to the
legislation and requirements of the countries in which it function. It would be only able to trace
the mentioned standards and policies in a viable manner using genuine accounts. SKANSKA
PLC has avoided disputing judgment calls, including being punished for bending the law and
norms, thanks to its financial capability and excellent accounting. Creating a corporate plan as
profitability is among the most important goals which a company hopes to achieve. The road to
gaining success is fraught with stumbling blocks, and businesses should devise viable economic
methods to help them get there. Furthermore, the existence of the accountancy and treasury
departments would make this more likely. The accountancy and financial division at SKANSKA
PLC enables the company to develop or recommend effective commercial concept that has
helped the company operate well throughout time. The accountancy and financial division
provides valuable information that the company may use to better understand the economic
climate and develop viable strategy (Blue, 2017).
Financial and Accounts Division Functions-
 Asset Management is the process of planning for the future. The job entails selecting
from a variety of construction implementation practises. Before choosing the ideal
initiative for funding, the division evaluates a range of work. The Payback Time,

Discounted Cash Flow, and Return on Capital are among the approaches used by the
departments. It emphasises that an effective and useful corporate finance mechanism not
only anticipates but also measures the value of a situation through time.
 Monetary Activities are processed as it is among the most important jobs and obligations
of an organization's financial and accountancy division. As financial transactions occur,
the division registers these in the appropriate cash receipts journal. Events are directly
moved to the proper accounting records by journalising them. As a result, it's critical to
keep track of activities in the appropriate database (Ghesquiere, McAfee and Burnett,
2019).
 The financial and accountancy division is responsible for maintaining a positive working
connection with both vendors and clients. This is accomplished by making sure that
vendors are compensated and that consumers pay their bills on schedule. It is the agency's
obligation to keep an eye on and take advantage of any possibility that would save
revenue for the organisation. The group, for instance, is involved in finding promotional
offers or rewards which might be utilised to persuade borrowers to pay their bills
relatively quickly. In particular, the administration would verify that the suppliers do not
incur any late fees.
 The Managing of Revenue and Debt as it refers to the coordination of identical and
accessible currencies. SKANSKA PLC's financial and accountancy division is in charge
of ensuring coordination between accessible funds, currency, and working with
operational assets.
 Controlling costs and expenses as it is among the accountancy and financial district's key
tasks. When estimating fixed expenses, the division normally closely resembles a fixed
budget, which is then carried out using financial statements. Following the estimation, the
division measures the average expenses to the benchmark expenses to measure the
operational productivity. As a result, SKANSKA PLC would be enabled to effectively
manage its expenses. Information from business statements is used by the administration
to calculate and evaluate benchmark expenditures and contrast them to costs incurred.
Minimizing or eradicating deception is one of the responsibilities and roles of the
financial and accountancy division- Among the most important roles of accounting in a
company is to eliminate or reduce deception and to emphasize openness in all monetary

operations (Kautsar and Asandimitra, 2019). It is difficult for an organization to combat
deception sans involving the division because it is responsible for all income and expenses and
therefore must be held to a good standard of accountability because enormous duty goes with
enormous liabilities. The larger the organisation, the more employees it has, and the more
probable it is to be a victim of deception. SKANSKA PLC is a large corporation with a high
probability of deception. As a result, the division must keep a tight eye on openness in order to
help the company combat deception.
 Developing and Maintaining Expenditure Patterns as SKANSKA PLC's financing
and accountancy division examines investment arrangements and recommendations
to leadership on a specific basis. The division creates and controls the corporation's
expenditure strategies in order to enable the business to carry out its activities
effectively and sans substantial obstacles.
 Institutional Management for Capital Protection as the division's purpose is to support
the company in properly securing its resources. The section of SKANSKA PLC
safeguards the corporate resources by establishing and implementing practical
organizational and constructive and cooperative systems (Khemakhem and
Boujelbene, 2018).
 Evaluation of an Asset as the accounts and financial divisions construct the asset
evaluation process because they have the necessary information and abilities, and it is
an essential instrument for every firm. The investing evaluation method, which allows
an owner to choose the optimal possibilities amongst possible choices, aids owners in
assessing the result of their venture. As a constructions firm, SKANSKA PLC has a
sizable investment pool. To entice prospective users and keep institutional
shareholders, the accountancy and financial division must develop efficient capital
evaluation tools.
To develop an efficient and profitable division inside the company, the division must implement
the stated responsibilities. The division plays a critical role in guaranteeing the performance of
SKANSKA PLC because it is responsible for developing acceptable systems and processes. The
division's effectiveness would give several impact to the companies, including increased market
sentiment because the unit could maintain a proper equilibrium among profitability and growth
and volatility. Money planning establishes a corporate decision-making procedure that is both

ordered and methodical. As a result, SKANSKA PLC has a strategic edge over its competitors
because it can react immediately to any financial concerns.
Task 2
The 5 competitive percentages would be calculated using SKANSKA PLC accounting
transactions for 2018 and 2019. Evaluating different elements in an accounting records is
referred to as accounting ratios. Businesses utilize a convenience sampling to gain a thorough
grasp of their company's solvency, productivity, and competitiveness. Profitability ratios
evaluation is critical because it serves as a platform for basic stock assessment. Fundamental
accounting is important because it allows users and researchers to assess an organization's fiscal
viability prior taking any choices (Koto and Pulungan, 2017).
Return on Capital Employed (ROCE)
ROCE= EBIT/CE
EBIT= earnings before interest and tax CE= capital employed
CE= Total Assets – Current Liabilities
Year 2018
CE= 4,470 – 645= 3,825
ROCE= (600/3,825) *100= 15.69%
Year 2019
CE= 8,070 – 2,220= 5,850
ROCE= (675/5,850) *100= 11.54%
Interpretation- The return on capital employed is a performance measure used to assess
a company's investment productivity and competitiveness. The proportion must be calculated
because it allows relevant stakeholders to see how an institution generates money from its
investment. The findings of the above estimate of SKANSKA PLC's ROCE for 2018 and 2019
show a downward trend from 15.69 percent to 11.54 percent. The poor attainment of excess
money is likely to be the cause of the reduction in ROCE (Nurcholisah, 2016). It should be
noticed that SKANSKA PLC was much more successful in obtaining money from its investment
in 2018 than it was in 2019. The steady decline in ROCE may be detrimental to SKANSKA PLC
because it decreases the amount of shareholders engaged in making investments by creating a
poor perception about resource use. The lack of shareholders could be due to a reduction in
funding resources, preventing corporate investment.

Net Profit Margin
Net Profit Margin= (Net Income/ Sales) *100% Where; Net Income (NI)= R- COGS- E- I-T R=
Revenue
E= operating expenses
I= interest T= taxes Year 2018
NPM= (600/4,800) *100= 12.5%
Year 2019
NPM= (675/6,000) *100= 11.25%
Interpretation- The Net Profit Margins is a percentage-based statistic which compares a
company's operating income to its earnings. The ability to calculate Profitability Ratio is critical
for a company because it allows investors to see how every pound collected converts to earnings.
The NPM proportion is a key indication of a company's fiscal performance. This even aids in
analysing if operational costs have indeed been reduced or controlled in the firm. The NPM for
2018 and 2019 was 12.5 percent and 11.25 percent, correspondingly, depending on the above-
analyzed data. It has dropped by 1.25 percent, that's not good for SKANSKA PLC. A loss of
accountability over corporate operational costs might be the root of the problem. The firm's
shareholder value goal is hampered by the diminishing profitability ratio, which is a danger to
SKANSKA PLC stock (Paluri and Mehra, 2016).
Current Ratio- It assesses a company's capacity to pay off its debts inside a year. It's a
financial measure that determines a company's present resources to its present obligations. It is a
measure of a firm's ability to discharge short-term obligations by maximising available facilities
while preserving efficiency. It is critical because it allows a company as well as other clients to
improve their capability to resolve short-term obligations. The metrics enlighten investors and an
expert on how well the business can optimize its present resources to satisfy short-term
obligations on the firm’s balance sheet shows the fiscal status (Roychowdhury, Shroff and Verdi,
2019).
Calculation
Current Ratio= Current Assets/ Current Liabilities
Year 2018
Current Ratio= 1,515/ 645= 2.35
Year 2019

Current Ratio= 2,070/ 2,220= 0.93
Interpretation- A good current proportion is somewhere between 1.2 and 2. A company
with a current ratio of two has twice as many existing resources as it does present obligations.
The current ratios for 2018 and 2019 were calculated and the findings were 2.35:1 and 0.932:1,
correspondingly. It has decreased from the preceding year that has an influence on the
profitability status of the organisation. SKANSKA PLC used to have a good ratio in 2018,
suggesting that this may be able to meet its current commitments in the near future. Furthermore,
the company's current ratio was low in 2019, implying that the company's capacity to meet its
current obligations with current assets is insufficient. The substantial amount of current
obligations reported in 2019 is associated with the decrease in CR. Despite the fact that current
assets are expanding at a rapid pace, the rate during which obligations are rising is reason for
worry. As a result, it has a detrimental impact on SKANSKA PLC's actual quality. If the
company wants to sell its current assets, the proceeds would not be enough to cover the
obligations (Ul-Hameed, Mohammad and Shahar, 2018).
Average Receivables Days/Debtors Collection Period Calculation
Average Receivable Days (ARD) = (Trade Receivables/ Credit Sales) *365 days
Year 2018
ARD= (900/4,800) *365days= 68days Year 2019
ARD= (1200/6,000) *365days= 73days
Interpretation- It is also referred as average receivables days, is a proportion that is
intended to calculate how long it takes a company to recover outstanding debts by its accounts
receivable. Furthermore, the proportion represents a company's ability to satisfy debt
responsibilities by increasing current assets and preserving production. The major goal of
calculating average receivable days is to ensure whether a company has enough cash to run its
day-to-day activities. In the case of SKANSKA PLC, the proportion is critical because the
company typically depends on borrowing. The metrics for 2018 and 2019 are 63 and 73 days,
correspondingly, based on the preceding figures. The ten-day rise in the quantity of periods is
unfavourable to SKANSKA PLC because it implies that the sum which must be acquired from
accounts receivable would take longer. The rise in days could be due to borrowers' inability to
pay their obligations, which could be due to insolvency or going down of operation. As a result,
it may have a detrimental impact on SKANSKA PLC's economic cash flow account, as the

sector would experience a rise in outstanding loans. As a result, the corporation must adopt a
much more proactive strategy to reduce average receivable days.
Average Payable Days/ Creditors Collection Period- It's a measure of viability that has
been utilized to figure out how long it requires a company to repay its obligations with its
vendors. The value is commonly computed monthly or annually, and it shows how successfully a
company's working capital is handled. An average payable day is a measure of a firm's ability to
discharge debt responsibilities while maximising current assets and remaining engaged. The
contemporary percentage, also known as the organized financial ratio, is calculated by
combining existing assets and capabilities with existing obligations (Valizadeh Larijani and
Behbahaninia, 2019).
Calculations
Average Payable Days (APD)= (Total Payables/ Total Purchase) *365days
Year 2018
APD= (570/2,700) *365days= 77days Year 2019
APD= (2,100/4,800) *365days= 160days
Interpretation- According to the findings of the aforementioned computation, the year
2018 had 77 days, whereas the year 2019 had 160 days. The firm's higher credit buy in 2019
opposed to 2018 resulted in a significant disparity of 83 days. A significant APD was reported by
SKANSKA PLC that is a warning sign. The greater the repayment time, the bigger the dangers
SKANSKA PLC is liable to undergo, according to the calculations. SKANSKA PLC's inability
to pay its lenders has resulted in a rise in the quantity of due days. Furthermore, a longer average
payback period may have a detrimental effect on provider reputation. As a result, SKANSKA
PLC's confidence with its providers may be harmed, and the collaboration may be terminated.
CONCLUSION
Monetary static enables firms to recognise and decipher account records, as well as to create
capacities and confidence in order to make better judgments. The study provides a thorough
examination of the accountancy and financial division's roles and obligations, as well as its
significance inside the SKANSKA PLC. According on the findings of the paper, it is reasonable
to assume that the accountancy and financial division of every company or organization plays a
critical job in assuring the team's growth and continuation. The division is responsible for a
variety of functions and obligations which are critical for every company, including SKANSKA

PLC. Furthermore, it is reasonable to assume that fiscal statement evaluation is critical for a
deeper comprehension of SKANSKA PLC's operations. The study provided administration,
investors, and analysts with important knowledge to identify opportunities for improvement. As
a result, businesses should maintain accurate fiscal data in order to undertake improved
effectiveness assessment.

REFERENCES
Books and journals
Ahmed, F., Manwani, A. and Ahmed, S., 2018. Merger & acquisition strategy for growth,
improved performance and survival in the financial sector. Jurnal Perspektif
Pembiayaan Dan Pembangunan Daerah, 5(4), pp.196-214.
Aina, A. Y., 2017. Financial management decision-making processes in public primary schools
(Doctoral dissertation, University of Pretoria).
Blue, L., 2017. There are serious problems with the concept of ‘financial literacy’. The
Conversation. pp.1-3.
Ghesquiere, A.R., McAfee, C. and Burnett, J., 2019. Measures of financial capacity: A review.
The Gerontologist, 59(2), pp.e109-e129.
Kautsar, A. and Asandimitra, N., 2019. Financial Knowledge as Youth Preneur Success Factor.
Journal of Social and Development Sciences. 10(2 (S)). pp.26-32.
Khemakhem, S. and Boujelbene, Y., 2018. Predicting credit risk on the basis of financial and
non-financial variables and data mining. Review of Accounting and Finance.
Koto, M. and Pulungan, D. R., 2017. The financial literacy of students and investment decisions
in the Indonesia stock exchange. Proceedings of AICS-Social Sciences. 7. pp.305-311.
Nurcholisah, K., 2016. The effects of financial reporting quality on information asymmetry and
its impacts on investment efficiency.
Paluri, R.A. and Mehra, S., 2016. Financial attitude based segmentation of women in India: an
exploratory study. International Journal of Bank Marketing.
Roychowdhury, S., Shroff, N. and Verdi, R. S., 2019. The effects of financial reporting and
disclosure on corporate investment: A review. Journal of Accounting and Economics.
68(2-3). p.101246.
Ul-Hameed, W., Mohammad, H. and Shahar, H., 2018. Retracted: Microfinance institute’s non-
financial services and women-empowerment: The role of vulnerability. Management
Science Letters, 8(10), pp.1103-1116.
Valizadeh Larijani, A. and Behbahaninia, P.S., 2019. Investigation of Effective Items on Stock
Return: Different Aspects effecting on Decision Making. Journal of Financial
Accounting Knowledge. 5(4). pp.69-102.