Strategic Financial Management: Stakeholder & Financial Analysis

This report provides an analysis of strategic financial management, focusing on Tesco plc and Benedict Corporation. Task 1 involves a stakeholder analysis of Tesco, identifying key stakeholders like customers, government, and employees, and analyzing the role of environmental and social reviews i...Read More

Strategic Financial Management

Contents
INTRODUCTION.....................................................................................................................................3
MAIN BODY.............................................................................................................................................3
Task 1......................................................................................................................................................3
Task 2......................................................................................................................................................6
CONCLUSION........................................................................................................................................12
REFRENCES...........................................................................................................................................13

INTRODUCTION
The term strategic financial management can be understood as a form of study which involves
not only controlling the value of a firm, but also managing them with the aim of meeting the
aims and objectives of the organizations and price stabilization value over time (Delkhosh and
Mousavi, 2016). This is about producing market profit and achieving an adequate return on
investment (ROI). Financial control is characterized by company financial strategies, the
development of accounting policies and the making of financial decisions. The report is based on
two companies named Tesco plc and Benedict Corporation. Under the report stakeholder
analysis of Tesco plc has been done while in second part of report financial performance of
Benedict Corporation is done by help of various kinds of ratios.
MAIN BODY
Task 1
a) Explains the term ‘stakeholder’ and identifies three types of stakeholder of Tesco
Stakeholder: A stakeholder is an entity who has a stake in a corporation and may either control
the company or be influenced by it (Kumar, 2017). Its owners, personnel, clients, and vendors
are the key stakeholders of a particular company. However, the term has been expanded to cover
societies, states, and labor associations, with growing commitment to corporate social
responsibility.
Stakeholders may be intrinsic to an entity or extrinsic to it. Individuals whose participation in a
business comes from a direct interaction, such as work, ownership, or expenditure, are internal
stakeholders. External partners are people that do not deal for a firm directly but somehow are
influenced by the company's actions and performance. All external parties are known to be
vendors, creditors, and civic groups.
In accordance of annual report of Tesco plc, this can be inferred that there is both types of
stakeholders including internal and external. Tesco's key stakeholders are consumers, vendors,
creditors, opponents, parties, local governments, and the government. Tesco works with
hundreds of manufacturers and producers in order to serve consumers with high quality,

nutritious and organic goods. These producers and distributors not only provide Tesco with the
quality goods needed, but they also help the business minimize food waste. Below some key
stakeholders are explained which are as follows:
Customers: These are the main stakeholders of a company as they have an ability to affect their
performance. Customers are considered as external stakeholders because they do not have their
own interest in company’s policies and plans (Trinh and Thao, 2017). Though, customers can be
affected due to change in company’s strategies and plans. This is so because if a company makes
change in their prices than customers can be affected can change their purchasing habits. In the
context of Tesco company, this can be inferred that their sales in year 2016 has been dropped by
few volumes which indicates that customers might shifted their interest towards other company.
As well as Tesco might have changed their policies and plans which may lead to lower sales and
customer diversion.
Government: The government is also a main stakeholder as they can affect to company’s
performance by changing own policies and plans. It is essential for companies to follow
regulations and guidelines of government. In addition to this government collects tax from the
companies on a regular basis. The government of United Kingdom is a key stakeholder of Tesco
plc. This is so because they have ability to impact financial performance of such company. The
effect of government can be measured by help of amount of tax paid during an accounting
period. From annual report this can be stated that they have paid tax on profit after tax but in year
2016 they paid less amount of tax due to lack of income in such year.
Employee- Workers are important internal stakeholders. Employees have substantial financial
and time commitments in the company and play a specific role in the organization's policy,
tactics, and activities. These stakeholders are key person of many firms, also recognized as
lenders, and have a monetary stake in a business's performance. They offer the business
resources and the capacity to perform and even expand by their stake in the company. So, the
stake of a shareholder in a corporation is financial, but not all investors are involved. In the
context of above Tesco plc this can be inferred that there are a range of employees in their
operations and activities which play a significant role.

(b) Analyses how the Environmental and Social Review help to demonstrate performance.
The environmental and social review plays a key role in order to evaluate performance of a
company during a particular time period. Basically, it defines different kinds of tasks and
activities to achieve compliance with implementation of proper policies and regulations
(Mitchell, 2017). In the absence of proper planning of rules and regulations of environmental
review this might become difficult for companies to stay in competition. In the context of Tesco
plc, this is essential for them to review environmental and social aspect so that they can meet
their objectives.
There are likely to be disputes and conflicts of interest if a group of individuals come together
just to work on anything. Due to potential conflicts between stakeholders of companies, the idea
of corporate governance becomes essential. There are mostly disputes between upper manager
and investors, but they may occur between several parties and citizens. Corporate governance
reports include mechanisms to ensure that businesses are dedicated to corporate governance
practices and compliance with all relevant laws and regulations for shareholders. Corporate
governance is basically a set of procedures, practices, systems and associations that are enforced
and kept to account for the purpose of managing and directing organizations. Corporate
governance requires the policies and practices that companies rely on to make good decisions in
company governance. It is a dynamic term in which the frameworks and values define the rights
and duties of the many different persons inherently involved in companies, including, though not
limited to, the roles and obligations. Procedures of governance involve processes that lead board
members to set targets and how they approach goal-setting in the light of social, legislative and
business problems and circumstances. Corporate governance reports illustrate how businesses
track the company's activities, strategies, procedures and actions, and also the effects on their
agents and decision makers of their behavior.
CSR towards customers: The definition of corporate social responsibility or CSR is composed of
three main parts which serve as its four principles (Lasserre, 2017). These are the financial,
social, and environmental obligation. For a corporation to successfully fulfill its obligations.
Social responsibility is the most recent component of CSR in which companies take an active
role in social concerns and community relations. The purpose of transparency would be to
include consumers or the purchasing public as stakeholders. The idea of providing consumers

with respect and fulfillment is nothing new to companies, but being accountable to customers has
an effect on profitability. Customer satisfaction, simply put, is how the consumers are
appropriately handled if, for example, they have grievances and inquiries. Companies are
obligated to give such problems prompt and courteous consideration. They must uphold fair
standards of advertising and trading and not deceive customers into anything that is not true.
Companies are also responsible for supplying both current and prospective consumers with full
product, service, and business details to the purchasing public.
CSR towards employees- The firms are treated an investment by a corporation. In particular, if
we speak about skilled labor, manpower resources are not so easy to acquire (RA, 2017).
Working people often enjoy a company that is not only prosperous but also puts emphasis on its
workers. Because of the increasing liberalization and high in the world market, many businesses
work hard to improve efficiency, simplify operations, or deliver improved investor benefit. For a
company to accomplish all this, they should have skilled and competent individuals and maintain
the best workers in the sector. Companies that have practiced corporate responsibility have found
that CSR operations have been successful in rising the retention of employees. This is not only
true for working professionals, but also for workers. For most organizations, employee
engagement has become increasingly common in order to boost the end result by making people
who work socially conscious. Many effective companies owe much of their prosperity to the
creation and implementation of volunteer employee initiatives that are now used to track and
measure their effect on society.
Task 2
a) Explain the purpose and relevance of the chosen ratios.
Current Ratio:
Current ratio is a liquidity ratio that measure whether a company has ability to meet its short
term requirement. It is calculated by dividing current assets with current liability (Malyshenko,
2016). The reason to choose current ratio is that it assesses a company's short term financial

position. High current ratio indicate stability within company and less current ratio shows risk of
liquidity within company.
Quick Ratio:
Quick ratio is a type of liquidity ratio which is also called Acid- Test ratio. This ratio measures a
company's ability to use cash or quick assets to retire its current liability. It is calculated by
dividing quick assets with current liability. Reason to choose quick ration is that it measures
more accurately how current assets pay off current liability and it only include liquid assets
which convert in cash or is cash ready.
Receivable turnover ratio:
Receivable turnover ratio is also called debtor's turnover ratio. It measures a company's ability to
extend credit or in collecting its receivable. It measures how many time a customer pays dues in
a year. High receivable turnover indicate the efficiency of company to bring back business
owned money.
Trade payable ratio:
Trade payable ratio measure how many times a company pays off its supplier and creditor during
a period of time (Morden, 2016). Higher trade payable turnover ratio shows that company is
paying off its supplier in a timely manner. It also shows that the company has adequate cash to
meet short term debt.
Inventory Turnover Ratio:
Days of inventory is a financial ratio that measure the average time in a day a company take to
convert its inventory in to cash. It is calculated by dividing average inventory with cost of goods
sold and multiply by 365 days. It is the best ratio to measure company's efficiency to convent
inventory into sales.
b) Include the results for each chosen ratio and reasons for the movement between the two years.
Current ratio
Current assets/current liabilities

20X0 20X1
Current assets 6400 12800
Current liabilities 5100 10800
Current ratio 1.25 1.19
Quick ratio
Quick assets/current liabilities
20X0 20X1
Quick assets 3800 7600
Current liabilities 5100 10800
Quick ratio 0.75 0.70
Trade receivable days
365 days’/Accounts receivable turnover ratio
20X0 20X1
Sales 24900 30800
Accounts receivables 3800 7600
Accounts receivables
turnover ratio 6.55 4.05
Trade receivable days 55.70 90.06
Inventory days
365 days’/Stock turnover ratio
20X0 20X1
Cost of goods sold 14500 16000
Stock 2600 5200
Stock turnover ratio 5.58 3.08
Inventory days 65.45 118.63
Trade payable days
365 days’/accounts payable turnover ratio

20X0 20X1
Purchase 24900 30800
Accounts payable 4300 6800
Payable turnover ratio 5.79 4.53
Trade payable days 63.03 80.58
Current ratio: In terms of such ratio this can be inferred that in year 2010, this was of 1.25 which
reduced and became of 1.19 times. While ideal current ratio is of 2:1 times that means above
company failed to manage an adequate balance between current assets and current liabilities.
From the above table this can be inferred that company’s performance dropped in year 2011
compared to past year. This is so because of more number of current liabilities compared to
current assets. In this aspect, above company need to focus on minimizing their short term
expenses as much as possible.
Quick ratio: This ratio is also same as the above ratio as it is used to assess a company’s
efficiency in terms of converting their current assets into cash in less amount of time period. The
ideal form of quick ratio is of 1.5:1 times and above company is not able to meet this aspect
(Farhatali, 2017). In the context of above company this can be inferred that their ratio has been
dropped in year 2011 compared to year 2010. This is so because of higher number of current
liabilities in current year.
Trade receivables days- With rationale to this ratio, this can be find out that they are taking more
number of days in collecting debts from the debtors in year 2011 compared to tear 2010. As in
year 2010 they have taken time of 56 days which increased and became of 90 days. This is so
because of more number of credit sales to the customers. In this aspect they need to minimize
their credit sales and try to make more effective policies to recover the debts.

Inventory days- In terms of this, above company is taking too much amount of time in
converting goods into finished products in year 2011 compared to year 2010. This is so because
of more number of stock and higher amount of cost of goods sold in year 2011. Hence above
company needs to minimize their cost of goods sold lower as much as possible. If they will do so
than this will be easier for them to meet the need and demand of customers in an effective
manner.
Trade payable days- With rationale to this ratio, this can be find out that they are taking more
number of days in paying debts to the creditors in year 2011 compared to tear 2010. As in year
2010 they have taken time of 63 days which increased and became of 80 days. This is so because
of more number of credit purchase from suppliers. In this aspect they need to minimize their
credit purchase and try to make more effective policies to pay the debts.
c) Highlight any aspects of the performance of Benedict Co. which would give cause for
concern.
From the above analysis of ratio, it can be find out that the performance of company in all ratio is
dropping in current year compared to past year. As well as they are not able to meet ideal form of
ratio under each aspect. Below detailed analysis has been done:
 Current Ratio: The ideal form of current ratio is 2:1 and the company is not able to meet
that ratio. Ratio is also decreasing in current year in compare to previous year ratio and it
shows company's poor liquidity. Company should maintain adequate liquidity level to
fulfil day to day requirement. Poor liquidity shows risk of liquidity for stakeholders of the
company.
 Quick Ratio: Ideal quick ratio of a firm is 1:1 and the company is fail to meet that
proportion. The decreasing ratio of above company shows that they are not capable to
pay off the current liability. This may become concern in future to make payment of short
term debts.

 Trade receivables days- Company is taking too much time in order to recover their debts
from debtors and this is an issue because they need to aware about their recovering
amount. The concern may become of lack of cash availability for operating different
kinds of operations and activities for upcoming time period.
 Inventory days- In the context of such ratio, company’s performance is poor in both year
and this is an issue for them. It is so because they are taking too much time to convert
goods into prepared products. In future time period this may lead to higher cost as well as
competitors may beat them if they will not deliver products on time.
 Trade payable days- In terms of such ratio, this can be stated that it is a reason of concern
for above company. This is so because they are taking more number of days to make
payment to their creditors. This may lead to a core risk in future time period for above
company. This is so because if they will not make payment to their creditors on time than
there may be risk of decrease in goodwill.
d) Critically evaluate the application of financial ratios in interpreting and measuring the
performance of a company.
 Standardized method of comparison: Financial ratio provide a standard of comparing
company and industry (Oladeji, Oyewo and Akinjare, 2016). These methods put all the
company on same path and judge them on their performance instead of their size, sales
volume and market share. Ratio provide information related to capability of company in
profitability, financing the business and other factors.
 Industry analysis and benchmark: Performance of a company can be measured by ratio as
it discloses the trends of specific industry. To make strategy for organization of small
business, industry benchmark is used and it measure their performance against that
industry.
 Stock valuation for strength and weakness: By understanding the ratio analyst can
identify strength and weakness of a particular company or industry. To identify the
strength of the company, fundamental analysis is used with the intention of investigation.
It helps to identify company’s fundamental strength by analysis of firm's ratio to increase
value of their stock and profit opportunity. It also indicates weaker market players of the
industry.

 Planning and performance: It help the entrepreneur in preparing business presentation
and business plan for the investor and lender (Nestor, 2016). It uses industry trends as
base for small business owner to set performance goals in term of particular ratio to give
investor a particular view in the company.
 Assess the liquidity of the firm: Ratio helps in assessing the capability of firm to meet its
short term obligation. Short term obligation includes short term debts which can be paid
within the period of less than 12 months. Short term debt include salary, wages, payment
of supplier.
 Analysis of financial statement: Financial statement provide essential data to
shareholders. Ratio analysis helps to interpret data from balance sheet and income
statements (Patel, 2016). Different investor has different interest in the result of financial
interest as shareholders want growth in dividend payment while creditors want repayment
of their dues on timely basis.
CONCLUSION
On the basis of above report this can be concluded that management of funds and other aspects is
too crucial for companies to sustain in competitive environment. From first part of report this can
be concluded that companies need to consider the importance to their stakeholders and try to
fulfill their needs. Tesco Plc has both kinds of stakeholders including internal and external. In
addition to this, from second part of report this can be concluded that Benedict company's
performance is poor under each aspect which need to improve as soon as possible.

REFRENCES
Delkhosh, M. and Mousavi, H., 2016. Strategic financial management review on the financial
success of an organization. Mediterranean Journal of Social Sciences, 7(2 S2), p.30.
Kumar, R., 2017. Strategic financial management casebook. Academic Press.
Trinh, T.H. and Thao, L.T.N., 2017. Corporate valuation modeling for strategic financial
decisions. Asian Economic and Financial Review, 7(12), p.1153.
Mitchell, G.E., 2017. Fiscal leanness and fiscal responsiveness: Exploring the normative limits
of strategic nonprofit financial management. Administration & Society, 49(9), pp.1272-
1296.
Lasserre, P., 2017. Global strategic management. Macmillan International Higher Education.
RA, H., 2017. Strategic Financial Management.
Malyshenko, V., 2016. A model of system and strategic financial analysis of the Crimean health
resorts. Economy of region, 1(2), pp.510-525.
Morden, T., 2016. Principles of strategic management. Routledge.
Farhatali, S.S., 2017. Influence of Strategic Financial Management on Small and Medium
Enterprises’ Performance in Nairobi Central District (Doctoral dissertation, United
States International University-Africa).
Oladeji, T., Oyewo, B. and Akinjare, V.A., 2016. Comparative Analyses of Strategic Financial
Management Practices In Faith-Based and Community-Interest Organisations. Journal of
Financial Studies & Research, 2016(2016), pp.1-14.
Nestor, O., 2016. A historical retrospective and the essence of strategic financial
planning. Ekonomia Międzynarodowa, (13), pp.71-78.
Patel, H.R., 2016. An Evaluation of How Strategic Financial Management Enhances
Performances of Small & Medium Enterprises in the Nairobi County (Doctoral
dissertation, United States International University-Africa).