Financial Performance Analysis Assignment

Financial Decision Making Assignment

Introduction - Financial Decision Making 

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The report is based on the analysis of the financial statement of ALPHA Limited located in the UK. The liability company has engaged in manufacturing. Here, the report evaluates the role and function of the accounting and finance of the company. It includes the different types of ratio analysis by using the financial statement of the company. There is the interpretation and the analysis of the various types of performance related to the ALPHA ltd. The key role of finance is to manage cash flow to the business. It will be crucial in the profit planning and the controlling cost of the business. The researcher may understand the performance of the company from the perspective of investors. The ratio analysis has included the calculation for two years such as Return on capital return, Net profit margin, current ratio, Debtors collection period, and creditors payment period.

Task 1

The role of accounting and finance within the organization

The role of accounting and finance plays a vital role in the process of achieving the goals of the business of the organization (Smallbusiness, 2019). These are the essential role of the management of the business to control the investments of the money in various sectors of the department. The context of the business plan at the stage of the financial debtors has been mainly responsible for the performance of the company (Pdr, 2019). It has obtaining the best process on the possibilities and the borrowing rates, controlling coast, and the reducing risk of the finance. The improvement of the debt collection and the betterment in the performance of the management may be able to evaluate the activities of the managers.

Obsession with different laws and taxation

The process of good account management in the organization may increase the practical at the very stages. These may help to keep compliance with the various types of practices. The different number of the law may violate the process such as not paying the amount of taxes (Smallbusiness, 2019). The sloppiness in the sector of poor or not developed companies may cause them to overlook the map of the details. The collection details at the time of carrying out the facilities. Nowadays the management of the taxation and their porting process may play a vital role in the sector of taking decisions that made the company deduction in the various sectors (Pdr, 2019). The improvement of the facilities and the various laws in the different sectors may comply with the safety of the law. A large number ofg multinational company in UK has value the global relationship with the government at the level of the tax manager. The taxdeduction may helpful to the company in the achievement of the work.

Determination of the Financial performance

It became hard for the company of ALPHA ltd. to improve the business to mean to understand of the past-occurred process (Smallbusiness, 2019). The review of financial record of the company by the process of controlling the business performance. The assessment of the value of the company may vary the various types of expenses to contribute to the overall operation of the business (Pdr, 2019). The regular accounting and finance process will help to improve the performance of the business. The financial report of the company may record the various types of expenses and assets to control the business and its financial statement. UK-based “Medium- to large-sized organizations” may involve an accounting system that helps to analyze the financial information that the organization needs (Smallbusiness, 2019). The systems accountants may be involved in the implementation of the changes in the process within the finance department to manage different types of financial system projects. This type of information may help to make the decision to downsize the operation to grow the business in the different sectors (Annualreports, 2018). This process will help the organization to identify the new areas of the little expenses but to the front that may become big dividends later.

The strategy of the business development

The most important goal of the company is to make a profit for the business to manage the organization as well as required. The company has used impressive years of progression that reflect the ALPHA’s successful growth strategy. The Group of revenue for the year of 2018 shows the increased net to £66.0 million respectively (Annualreports, 2018). The increment of the previous year at the accounting period ofg the management for the previous year has occurred 34.1% (Naim, 2022). The Alpha grew at the three core at the geographical region with the performance of the revenue The financial data of the company comprise the chief tools to understand the strategies used in the process of the management of the company (Naim, 2022). These will help to analyze the economic landscape of the market to operate the process of the individual process of the work. The director of finance is a member of the executive team and plays a vital role to provide a financial environment that supports the strategy of the business. The ALPHA Ltd. is a UK-based company therefore, the mixture of short-term and long-term finance and equity funds may be liable to meet the needed benefits (Pdr, 2019). According to the help of financial strategy may become the first and foremost to integrate with the techniques of 6he business plans.

The Business Development (BD) is the type of process that used by the ALPHA company to identify the various type of the risk. It helps to appoint new client in the compny to drive the opportunity in the development and growth of the profitability. It will help the business to drives the document to accomplish the various goal for the betterment of the business (Annualreports, 2018). This types of th be strategy in approve the different approach in the evaluation of financial data. 

Management Accounting

These processes are concerned with the analysis and control of the information of the finance may assist day by day. The analysis and the different types of the concerned will go up to the operation of ALPHA ltd (Smallbusiness, 2019). The UK-based large-sized or medium-sized company may manage the accountant responsible for the function of the report of the directors of finance. Management accounting will improve the process of accounting and finance in the organization (Annualreports, 2018). This will help to improve the overlap in the management reports. On the other hand, the various types of information derived from the financial accounting record may be helpful for forecasting the future business analysis of the company (Pdr, 2019). The purpose of the management accounting in the organisation may help in the purpose of the management to the support of the competitive decision-making. The evaluation of the business may include the process and the strategy of the making plans (Smallbusiness, 2019). The managerial account of the ALPHA ltd has included the support of the worker in the management of the wealth of the financial and stoical information. It helps in taking the decision of the business matters of the individual standard of the capital in the metrics of budget . The uses of the financial data that spend in the management of the business whether the cost of the project has based on the spending data (Pdr, 2019).

 Task 2

A. Ratio analysis

For the year ended 31 Dec. 2017 (£000)	For the year ended 31 Dec. 2018 (£ 000)
XYD Ltd
Profitability Ratios
1. Gross Margin Ratio
Formula	(Gross Profit/Sales)*100
Gross Profit	675	750
Sales	2,400.00	3,000.00
Gross Margin Ratio	28.13%	25.00%
2. Net Profit Margin Ratio
Formula	(Pre Tax Profit/Sales)*100
Pre Tax Profit	300	262.5
Sales	2,400.00	3,000.00
Net Profit Margin Ratio	12.50%	8.75%
3. Return on Equity
Formula	(Profit after tax/ Equity)*100
Profit after tax	300	262.5
Equity	450.00	450.00
Return on Equity	66.67%	58.33%
4. Return on Capital Employed (ROCE)
Formula	(Profit after tax+interest/(Non Current Liabilities+Equity)*100
Profit after tax	300	262.5
Interest	0	0
Non Current Liabilities	0	0
Equity	450.00	450.00
Return on Capital Employed	66.67%	58.33%
Liquidity Ratio
1. Current Ratio
Formula	(Current assets/Current liabilities)
Current Asset	2,235.00	4,035.00
Current Liabilities	2,235.00	4,035.00
Ratio	1	1
2. Acid Ratio
Formula	(Current assets-inventory/Current liabilities)
Current Asset	2,235.00	4,035.00
Inventories	225	375
Current Liabilities	2,235.00	4,035.00
Ratio	0.899328859	0.907063197
Efficiency Ratio
1. Average Inventory Turnover Days
Formula	Inventory/Cost of sales*365
Inventory	225	375
Cost of sales	1,725.00	2,250.00
Ratio	47.60869565	60.83333333
2. Average Receivable Turnover Days
Formula	Receivable/Sales*365
Receivable	450.00	600.00
Sales	2,400.00	3,000.00
Ratio	68.4375	73
3. Average Creditors Turnover Days
Formula	Payable/ Cost of Sales*365
Payable	285.00	1,050.00
Cost of Sales	1,725.00	2,250.00
Ratio	60.30434783	170.3333333
Investment Ratio
1. Earning Per Share in Pence (EPS)
Formula	Earning available to shareholders / no. of shares available in issue
Earning of shareholders	556.5	825
Share issued	450	450
Earning per share	1.236666667	1.833333333
For the year ended 31 Dec. 2017 (£000)
XYD Ltd
Profitability Ratios
0
1. Gross Margin Ratio
Formula	(Gross Profit/Sales)*100
Gross Profit	675
Sales	2,400.00
Gross Margin Ratio	28.13%
0
2. Net Profit Margin Ratio
Formula	(Pre Tax Profit/Sales)*100

Table 1: Ratio Analysis

(Source: self-created)

(i) Return on capital employed

A good ROCE has been occurring between the organization and sectors that have used to change over time. The average long-term in the sector of different types of wider market is around 10%. The formula used for the calculation is “by dividing net operating profit, or earnings before interest and taxes (EBIT), by capital employed” that is / capital employed) (Plesca, 2018). The ROCE of the ALPHA Ltd has become 66.67% and 58.33% for the year ended 2017 and 2018 respectively. 

(ii) Net profit margin

The income statement of the company may “by subtracting the cost of goods sold (COGS), operating expenses, other expenses, interest (on debt), and taxes payable Divide the result by revenue” (Nariswari and Nugraha, 2020). Then 100 divide converting result. The net profit margin of the company based on pre-tax profit divided by sales has become 12.50% and 8.75% for both the year respectively.

(iii) Current ratio

The current ratio of the company may be based on the liquidity ratio that measures in liability. (Current Ratio formula Assets / Current Liabilities) (Husna, A. and Satria, I., 2019). The company’s current ratio has occurred 1 in both of the years. The potential current ratio become between 1.2 to 2, which shows that the business has two times better liabilities to cover the debts. This shows that the company is not in a good position.

(iv) Average Receivable days/ Debtors collection period

The calculation has been measured “by dividing the various amounts owed by trade debtors by the annual sales on credit and multiplying by 365” (Munene and Tibbs, 2018). Here, the company’s 68.4375 and 73 for the year ended 2017 and 2018 respectively. 

(v) Average Payable days/ Creditors payment period

The Average Payable days/Creditors' payment period of the company has been calculated based on the company ratio that has been calculated on the basis of the payable cost of the company. As per the opinion of Johan et al. (2021), the creditor's payment period is the term that indicated based on the time where the current liabilities are outstanding in the company. The company's Average Payable days/ Creditors payment period is where the receivable is 450 and 600 respectively. During that time, the sales of the company were 2400 and 3000. The ratio has considered at the rate of 68 and 73 respectively.

B. Comment on the company’s performance

The financial activity helps the organization to manage the ability of its monetary resources and funds. The money of the firm is applicable to attend to the procurement of the resources and the assets of the company. Furthermore, the essential and the management of the organization at the estimation of the future aspects and the investment at the various sects will be able to conclude (Annualreports, 2018). The above table will help to analyze the past performance of the company. The financial manager will get the solution of the future by getting the help of the previous financial statement of the company. The analysis of the ratio and the liquidity of the ALPHA Company, it is required of the managers of the company to take various vital measures in the different sectors.

 The primary responsibility of the company is to evaluate or provide the financial environment to support the business strategies that the company uses. The trade and receivables recognized that the organization has initially to the state of the invoice value. The average receivable turnover of the company has occurred at 68.4375 and 73 for the year ended 2017 and 2018 respectively (Annualreports, 2018). It shows that the company has a staff of the growth performance. The company has tried to improve my method of analysis of the financial statement. The manager of the company will not be able to collect the amount due to the original term of the trade receivables.

The amount of the cash and cash equivalent of the company has been compare to the cash balance of the company at the deposit of the management. The gross margin ratio of the ALPHA ltd. has occurred 28.13% and 25.00% for both the year. It shows that the financial performance of the company has not been good. The sale of the company has been increase but the gross profit has not increased as to the demand for the product in the market. The level of the performance has been take as the part of the management to improve the valuation of the finance. The net profit margin ratio has decreased, as the sale value has not increased well. Therefore, it is required for the company to choose a better calculation method. The return on equity has become 66.67% to 58.33% at the performance of the company. This shows that the investment of the company has not been well developed in the different sectors of the organization. The liquidity ratio of the company has remained the same.

The efficiency ratio of ALPHA ltd has been based on the Average receivable and turnover days, average inventory turnover days, and average credit turnover days that show the number of the changes in the method. These calculations have been taken as the part of sales and the difference investment by the investors. These all are based on the analysis of the ratio.

the financial position of according to the analysis of the ratio it has been shown that the company has faced profit or loss both in the different sectors of the analysis of the performance. The boards of the director of ALPHA ltd. companies use the level of the capital at the long term of the debt of the commodities. The debt ratio of the analysis has determined the new issues of the shares at the different sectors of the business performance of the company.

Conclusion

This report has been prepared based on the financial analysis of ALPHA ltd., which operates its business in the UK market. This report has developed the condition of the business based on the development that is derived from the basic structure of the business. The company has developed the concept where the company has developed its organizational structure that is required for the development of the company. The company has developed the key role required for the development process of the organization that can make for the development and for the changes in the organization. The company had derived the structure on the basis of its financial structure that is considered for the development and for the consideration of the business. The new ideas and the development strategies are required to develop the condition of the company on the basis of financial role.

References

Annualreports, 2018, the power of our people, 2018, Available at: https://www.annualreports.com/HostedData/AnnualReportArchive/a/LSE_AFM_2018.pdf [Assessed on: 26.05.2022]

Bebbington, J. and Unerman, J., 2018. Achieving the United Nations Sustainable Development Goals: an enabling role for accounting research. Accounting, Auditing & Accountability Journal.

Husna, A. and Satria, I., 2019. Effects of return on asset, debt to asset ratio, current ratio, firm size, and dividend payout ratio on firm value. International Journal of Economics and Financial Issues, 9(5), p.50.

Johan, S., 2021. Separatist Creditors Problems on Postponement of Debt Payment Obligations Based on the Supreme Court’s Decree Number 30/KMA/SK/I/2020. Fiat Justisia: Jurnal Ilmu Hukum, 15(3), pp.207-220

Munene, F. and Tibbs, C.Y., 2018. Accounts receivable management and financial performance of Embu Water and Sanitation Company Limited, Embu County, Kenya. ACCOUNTS RECEIVABLE MANAGEMENT AND FINANCIAL PERFORMANCE OF EMBU WATER AND SANITATION COMPANY LIMITED, EMBU COUNTY, KENYA. Kenya: International Academic Journal of Economics and Finance.

Naim, A., 2022. ROLE OF ACCOUNTING AND FINANCE IN PERFORMANCE APPRAISAL. American Journal of Sociology, Economics and Tourism, 1, pp.1-17.

Nariswari, T.N. and Nugraha, N.M., 2020. Profit growth: impact of net profit margin, gross profit margin and total assests turnover. International Journal of Finance & Banking Studies (2147-4486), 9(4), pp.87-96.

Pdr, 2019, The Role of Accounting in Business and Why It’s Important, 2019, Available at: [Assessed on: 26.05.2022]

Plesca, A., 2018. Temperature distribution of HBC fuses with asymmetric electric current ratios through fuselinks. Energies, 11(8), p.1990.

Smallbusiness, 2019, The Role of Accounting & Finance in Business Management, 2019, Available at: https://smallbusiness.chron.com/role-accounting-finance-business-management-65620.html [Assessed on: 26.05.2022]