Financial Decision Making: Accounting and Ratio Analysis Report

This report provides a detailed analysis of financial decision-making within Skanska Plc, a UK-based construction firm. It begins with a critical evaluation of the importance of accounting and finance functions, duties, and roles within the entity, highlighting their significance in monitoring profits, ensuring regulatory compliance, and informing business decisions. The report then delves into a ratio analysis of Skanska Plc, calculating key financial ratios such as return on capital employed, net profit margin, current ratio, and days of receipt/creditor period. The results are used to assess the company's financial performance and provide insights for shareholder guidance. The analysis covers the years 2018 and 2019, allowing for a comparative assessment of the company's financial health and operational efficiency. The report concludes with a summary of the findings and their implications for financial decision-making within the company.

FINANCIAL DECISION MAKING

Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Critical Evaluation of the importance of accounting and finance functions, duties and roles
within the entity...........................................................................................................................3
TASK 2............................................................................................................................................6
Calculation of different ratios of Skanska Plc.............................................................................6
Comment on the results of a business with a shareholder of 1 million.......................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
Financial decision-making can be described as a process based on formulating various future
decisions and ensuring that all investment analysts are capable of making appropriate choices is
quite critical. It is highly necessary to ensure that the companies evaluate any component of
financial operations when preparing to enhance their efficiency. It will direct the production of
highly successful future plan of the organization (Agarwal and Mazumder, 2013). It is really
important for corporations to make sure that this process is consistently carried out to reach long-
term strategic targets such as higher earnings. This analysis is focused on the study of Skanska
Plc which is a primarily UK-based construction firm. The company was founded in 1984 and has
been working systematically since then. This role covers multiple subjects based on the business.
The accounting tasks, responsibilities and roles of the company are of significance. In addition,
various ratios are measured to measure the firm's results, and this article also covers results
assessment in order for shareholder guidance to be offered to investment.
TASK 1
Critical Evaluation of the importance of accounting and finance functions, duties and roles
within the entity
Accounting plays an important part in managing a restaurant, as it lets you monitor the profits
and losses, guarantees regulatory enforcement, and provides quantitative financial reports to
customers, leadership and policy that can be used to make critical business decisions. In
managing any company, accounting and finance play an important role. Companies run on
money and it doesn’t manage the industry if they don't control it. It will control money flow and
thus steer the direction of an enterprise by correctly planning for the business earnings and
expenditures.
Skanska Plc is one of the United Kingdom-based building firms. It was formed in 1984 and done
accordingly all the activities. It is really important to ensure that all companies such as Skanska
that they are all likely to draw attention to the decision making process. Each of the executive
employees of the corporation is required to create a report mostly on organization that reflects on
the measurement of operational and finance operations, responsibilities and positions within the
enterprise. In the sense of the organisation, the following are all explained in detail:

Accounting and finance roles: They are the essential parts of corporate finance which are
expected to be fulfilled by all the company so that potential objectives will be achieved
effectively. In Skanska Plc below roles are based by the accounting department:
Final accounts generation: one of the most important sales and purchasing features. It is very
difficult to observe if the actions made in prior years have ended good or detrimental because the
company cannot produce income reports (Lusardi, 2012). In this feature, there are three major
types of final accounts. These are all the declaration on profit and loss, capital structure and cash
flow. All will help analyse whether or not the company can accomplish its financial targets. With
the assistance of them that may be used effectively for potential decision-making and satisfaction
of challenging job viability, liquidity, real role etc can be calculated. It is really important, so it
allows the company to have accurate records about all operations.
Developing Business Strategy- Many businesses' aim is to make a buck, so they need to create
the way to get there. One of the key methods for analysing the economic landscape of the sector
in which company work is financial data from inside own business. When buyers buy more
gadgets and fewer efforts, it will inform the organisation that everything is registered. And if the
documents of an organisation warn us that it does not get adequate returns from an external
advertising agency, they may decide to bring advertising home, to recruit a new department and
to radically change their industry.
Performance assessment: Performance assessment is among the core accounting and financial
features. That will evaluate the advantages or disadvantages of the previously developed plans,
making it very relevant for the company. If the organisation cannot review the present results, it
can be very hard to determine whether or not potential targets are reached. The appraisal of the
current role will also lead to detecting the beneficial or detrimental impact of any attempts taken
to gain potential benefits. If Skanska Plc's management cannot achieve that the demands of
customers, lenders, etc will prove difficult to satisfy.
Implementing all legislation: it is very essential for the finance department to ensure conformity
with all legislation while implementing accounting reports, as this will help avoid regulatory
interventions (Nga and Yien, 2013). It is also very hard to prepare financial reports are free of
partiality since members of staff in Skanska are unable to execute this work in a systemic
manner. Unless the rules are followed, accountability and consistency of the financial reports

will also be impaired. This is a very critical feature for the corporation to avoid every legitimate
involvement in company and other activities.
Formulating future decision-making based on current situation: Such reporting and funding
feature notes that the formulation of judgments based on current business status is very relevant
for all companies like Skanska. It will help boost efficiency and meet future targets. In preparing
to grow the company, the managers or executives will pay special attention to this mission, as it
will lead them in achieving their lengthy objectives.
Accounting and finance responsibilities: Separate reporting and finance departmental duties
apply. Skanska would concentrate on both of them and it will help accomplish all possible goals:
Estimating future expenses and revenues: This is one of the principal finance and management
activities that Skanska's accounting professionals can work on, as it will help them evaluate all
potential costs (MacLean and Ziemba, 2013). It would allow them to be able to negotiate with it
all and to manage their finances independently so that they can meet properly. Besides this,
proceeds from reporting and funding that will help formulate future budgets may also be
calculated.
Systematic conduct of all operations: Due to this responsibility, the organisations' finance and
accounts department is capable of reliably carrying out all operating activities. Both the teams
that are responsible for the completion of the job should be allotted appropriate funds. Skanska
Plc will help ensure it is able to reach all its potential targets, such as higher earnings, higher
sales, consumers with high loyalty etc.
Comply with the operational specifications: it is very necessary that all organisations follow all
the criteria and carry out all the activities accordingly. One is accounting, that is an oversight and
financing responsibility. It will help to accomplish all lengthy targets if well executed. This is
one of the key tasks because if not concentrated, the success and accomplishment of potential
expectations and goals would be very challenging. It is necessary for management teams to take
care of this challenge in order to refute the risk of potential losses.
Accounting and finance: it is also very essential in any organization, so that administrative
operations can be conducted in a coordinated fashion, to be attentive to accounting

responsibilities and funding roles (Hsu and Willis, 2013). Some of the major finance and
management functions are discussed as follows:
Keeping note on all incomes and expenditures: the collection of reports on sales and expenses
that took place throughout the year is one of the key functions of accounting. This can help to
examine that the company, like Skanska Plc, can compensate for all its costs with the help of
annual sales. It is very hard to complete future values and aims if the data is not gathered
regularly.
Handling cash flow: finance and funding have the function of controlling cash flow to assess true
cash flow and capital outflow during the accounting cycle. It is hard to ensure that future
expectations can be effectively reached if management in Skanska plc cannot handle the flow of
capital. It is one of the key functions in coordinating all of the entity's operations to accomplish
all long-term targets.
Accounts maintenance: this finance and accounting position shows that a firm must produce all
reports of revenue and expenditures as they can help accomplish future targets (McLaughlin and
Somerville, 2013). Different stakeholders will allow them to consider the current state of their
company and decide about the future. This task is very critical for the accounting department in
Skanska because it will assist in the growth of Skanska's potential sector.
Analyzes of various categories of duties, activities and accounts and financing positions in
Skanska Plc are the subject of this discussion. They all play a vital role for the company and they
will help accomplish all potential targets, such as managed activities, the cash situation, greater
sales and wages. It would be incredibly important for the organization to relate to and expand the
company if they cannot pay attention to each other. In Skanska, the top management reports on
the tasks, obligations and duties of corporate finance, as they focus on the organization's
development and growth.
TASK 2
Calculation of different ratios of Skanska Plc
Ratio methodology can be viewed as a mechanism by which the company's current
financial status can be measured to assess its actual results. It would be very tough for businesses
to make strategic decisions if they cannot evaluate the present situation. The managements in

Skanska Plc measure various kinds of ratios that managers are using to assess the real situation
of the organisation. The equations including the ratio definition are as follows:
Return on capital employed: used primarily for the purposes of profit calculation and the
organization's capital performance. It will confuse managers to forecast potential roles for
companies if this is not adequately measured. For Skanska Plc, the equations are the following:
Formula: Net profit / capital employed * 100
Particulars 2018 2019
Net profit 600 675
Capital employed 3825 5850
Results 15.69 11.54
Net profit margin: it is primarily based on evaluating business financial results by
defining the relationship among revenues or expenses as well as net profit produced throughout
the year (Lichtenberg, Ficker and Rahman-Filipiak, 2016). For Skanska Plc, the formula is
defined:
Formula: Net profit / sales * 100
Particulars 2018 2019
Net profit 600 675
Net sales 4800 6000
Results 12.50 11.25
Current ratio: It is based primarily on corporate current assets. It can be inferred that
perhaps the organization can repay all short-term obligations with both the assistance of different
resources in one year again (Loerwald and Stemmann, 2016). For Skanska it is measured
accordingly:
Formula: current assets / current liabilities
Particulars 2018 2019
Current assets 1515 2070
Current liabilities 645 2220
Results 2.35 0.93
Total days of receipt/period for receiving the debtor: This profile is found principally to
assess the days when reimbursement by debtors would be obtained in order to provide funds for
future operations. It will have a negative effect on firm decision-making unless the organization
cannot analyse this. The thorough overview of shorter repayment days is just as follows Skanska
Plc:
Formula: Accounts receivable / sales * days in the year

Particulars 2018 2019
Accounts receivables 900 1200
Sales 4800 6000
Results 68.44 73.00
Average collection time for due days/creditors: the length of payments to investors shall be
referred to as a borrower collecting period. The companies have a great agreement with them
because they can withdraw money over a lengthy amount of time (Lu, Won and Cheng, 2016).
The following is the measurement for Skanska:
Formula: accounts payable / cost of goods sold * days in year
Particulars 2018 2019
Accounts payable 570 2100
COGS 3450 4350
Results 60.30 176.21
Comment on the results of a business with a shareholder of 1 million.
The ratio review indicates a downturn in the business's output in 2019, as net sales, return
on equity as well as the liquidity amount from the year were smaller than in the preceding year.
For management it is very necessary to take successful future actions in order to boost company
efficiency. In addition, debtor recovery time is extended in 2019 as well, indicating that Skanska
Plc's success in 2019 is slow in contrast with 2018. The collection period for creditors represents
a rise in the amount of days when companies paying creditors in 2019 too (Rai and Lin, 2019). It
indicates that due to low results, the organisation is not able to spend the money on schedule. It
would be very necessary, or probable, for the company to consolidate its place in terms of
maintaining it on the marketplace by constructing successful futures choices. With the aid of the
subsequent comments the causes, implications and explanations for adjustments in the business
ratios can be evaluated:
• Increased revenue is among the key reasons for improvements in the corporation's
proportions. In 2018, revenue amounted to 4800, rising to 6000 in 2019. Because
of this benefit, sales expenses etc the aspects of the balance sheet were affected
and the financial statements were adjusted.
• Major increases in existing liabilities may be another explanation for changes in
company ratios. In 2018, these amounted to 645 and in 2019 to 2220. This was the
key explanation for the drop in the existing ratio, with current assets in 2070 in

contrast with liabilities being very low for 2019. As a result, the average figure for
2019 was down from last year. In order to boost the efficiency of the company, it
is also very essential for the top management to ensure that they have resources to
satisfy short-term commitments.
• The shift in partnerships is attributed, in contrast with revenue, to relatively little
increase in earnings. The 2018 revenue amounted to 4800, growing to 6000, but
throughout 2019 the income rose by 75. This lead to an effect on the organization's
performance, which was smaller than last year.
• Adjustments in profitability metrics have a significant impact on the corporation's
poor financial standing. Since the organization's success in 2019 is not good
relative to 2018, it is also very hard to secure that on the market. As a
consequence, show that trade' confidence could decrease. In addition, the gradual
decline in financial results has negative implications for revenue, income and
profit margins. It is highly necessary for Skanska Plc, in order to sustain both of
them just to make successful future actions so that its financial situation is
strengthened.
Examination of the proportions of Skanska Plc analyses that the future investor who is
likely to spend 1 million pounds in Skanska Plc must not invest capital in the enterprise
this year. Skanska Plc's suggestion: The investor can prepare for a period of two or three
years for participate in and evaluate development in Skanska (Serrano-Silva, Villuendas-
Rey and Yáñez-Márquez, 2018). If it is successful, it will benefit in the potential to gain
larger returns. This is also observed that increased the chance of poor returns for the
investments made when making investments in the present year.
CONCLUSION
Abovementioned project study has found that this method of financial decision-making is
really the development of appropriate policy choices to meet relevant financial targets and goals
effectively. If administrators are unable to make strategic decisions during the next decade,
future stated goals would be very hard to complete. There are different accountability and
finance tasks, responsibilities and duties which all companies need to concentrate on. Almost all
of them seem to be final reports, performance reviews, compliance with all legislation, future
decisions based on the present situation. Apart from all these things, it is also the tasks and

functions of reporting and funding to predict possible expenditures and profits systematically
carry out all activities, satisfy operational criteria, control fund flow, hold accounts and so forth.
Different forms of ratios can be determined in order to assess the financial feasibility of an
entity. Most are income return, percentage with net benefit, liquidity ratios, total due and owing
days. It would be very crucial for employees to evaluate by measuring all of them the company
has or does not have growth. Shareholders may also use the metrics to decide whether or not they
should make a suitable investment in the company.

REFERENCES
Books and Journals
Agarwal, S. and Mazumder, B., 2013. Cognitive abilities and household financial decision
making. American Economic Journal: Applied Economics, 5(1), pp.193-207.
Hsu, J.W. and Willis, R., 2013. Dementia risk and financial decision making by older
households: The impact of information. Journal of Human Capital, 7(4), pp.340-377.
Lichtenberg, P. A., Ficker, L. J. and Rahman-Filipiak, A., 2016. Financial decision-making
abilities and financial exploitation in older African Americans: Preliminary validity
evidence for the Lichtenberg Financial Decision Rating Scale (LFDRS). Journal of Elder
Abuse & Neglect. 28(1). pp.14-33.
Loerwald, D. and Stemmann, A., 2016. Behavioral finance and financial literacy: Educational
implications of biases in financial decision making. In International handbook of
financial literacy (pp. 25-38). Springer, Singapore.
Lu, Q., Won, J. and Cheng, J. C., 2016. A financial decision making framework for construction
projects based on 5D Building Information Modeling (BIM). International Journal of
Project Management. 34(1). pp.3-21.
Lusardi, A., 2012. Numeracy, financial literacy, and financial decision-making (No. w17821).
National Bureau of Economic Research.
MacLean, L.C. and Ziemba, W.T., 2013. Handbook of the fundamentals of financial decision
making (Vol. 4). World Scientific.
McLaughlin, O. and Somerville, J., 2013. Choice blindness in financial decision
making. Judgment and Decision Making, 8(5), p.577.
Nga, J.K. and Yien, L.K., 2013. The influence of personality trait and demographics on financial
decision making among Generation Y. Young Consumers.
Rai, D. and Lin, C. W. W., 2019. The influence of implicit self-theories on consumer financial
decision making. Journal of Business Research. 95. pp.316-325.
Serrano-Silva, Y. O., Villuendas-Rey, Y. and Yáñez-Márquez, C., 2018. Automatic feature
weighting for improving financial Decision Support Systems. Decision Support Systems.
107. pp.78-87.