BM414 Financial Decision Making Assignment Sample

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Introduction

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In this entire study, there will be some discussion on Panini Ltd, as well as there will be also some discussion on the accounting and finance departments and the roles and functions of that department in the organisation. This study also includes a ratio analysis which will show the performance of the company in the two years 2018 and 2019. There will be also mentioned sources of finance for small and medium-sized companies for expansion purposes.

Task 1

1.1 Accounting and Finance Departments

1.1.1 Accounting Department

In an organisation, there is a huge contribution of the accounting department as well as it “is one of the crucial parts of the organisation”. The accounting department of an organisation plays an important role and the accounting department also contributes a lot to the success of the organisation (Tistianingtyas, 2021). The accounting department has several functions and those functions are played by the different roles of the accounting. There are some functions and roles are given below:

A. Financial Accounting Department

Financial accounting is the major part of the accounting department of the organisation and it is also one of the major parts of the accounting department (Gao, 2022). In the case of the accounting department, it plays a major role in the organisation by analysing the financial data as well as it also stores the data and then recording those transactions of the organisation. It also summarises the data and then reports the financial transactions of the company. Though financial accounting is one of the major parts of the organisation and it also plays a crucial role.

B. Management Accounting Function

Management accounting is also one of the critical parts of the accounting department and it also contributes a lot to the success of the organisation. Management accounting is the major part of the organisation that deals with the performance analysis of the company as compared to the predicted performance (Hadid and Al-Sayed, 2021). The management accounting also analyses the financial statements of the company and that helps the decision-making process of the company. One of the major roles of the management accountants in the organisation is to prepare the financial report of the company and that also plays a crucial part in taking better decisions for the company. Management accounting is a major part of the organisation and it also “contributes a lot to the success of the company”.

C. Tax Accounting

Tax accounting is a critical part of the organisation and it also “contributes a lot to the success of the company” in the case of tax accounting it is one of the critical parts of accounting. In the accounting department tax accounting plays one of the major roles and that also contributes a lot to the taxation part of the organisation and that also helps the organisation to reach success (Shalaby, 2022). In terms of the roles of the tax accountant in the organisation, the tax accountants play a crucial role in the tax filings as well as also identifying tax benefits to the company. Tax accounting plays a crucial role in the organisation to identify the tax benefits as well as it also shows a better way to run the business operation in a legal way to avoid tax penalties. It also works as the tax advisory of the company and for that tax accounting plays a crucial role in the organisation. Though tax accounting is one of the major parts of tax accounting and it plays a critical role in the organisation.

D. Auditing Functions

The auditing function is also one of the critical parts of the organisation and it also provides a lot of support to the organisation audit accounting is one of the major parts of the organisation that also helps the organisation to reach success. It is one of the important parts of accounting and that helps the organisation as it helps to identify the quality of the risk management in the organisation as well as it also evaluates the compliance along with the rules and guidelines that have been established by the regulatory agencies (Al-Jaifi, Al-Rassas and Al-Qadasi, 2019). It also assesses the quality of the internal controls as well it also identifies the accuracy of the financial statements of the organisation and in that case, the auditing function plays a crucial role in the organisation.

1.1.2 Finance Department

The finance department is one of the important parts of the organisation and it also plays a crucial role in the organisation and that also helps the company to reach success. The “finance department” is one of the “major departments” in the organisation that takes care of the funds of the organisation (Liu and Yang, 2018). This department helps the organisation to manage the funds appropriately to achieve success frequently and it has also some parts and those parts play different roles in the organisation. The functions of the finance department are given below:

A. Financing Function

Financing is one of the important parts of the organisation and in that case, the finance department of the company plays a crucial role in the organisation. The financing includes several functions that help the organisation to reach success. Financing is one of the crucial parts of the organisation and in that case, the finance department helps to identify the resources of the organisation appropriately to allocate funds (Liu and Yang, 2018). Financing is one of the important parts of the organisation and it leads to allocating the funds for the several parts of the organisation as well as it plays a crucial role in the daily activities of the organisation and it plays the roles those related to the funds of the organisation.

B. Investment Function

The investment function is also one of the important and crucial parts of the organisation and it leads to improving the financial condition of the organisation. The investment function is related to the investment opportunities for the company and it helps to identify a better opportunity for the company to make the investment (Xie, Wang and Meng, 2019). The investment function is one of the major parts of the organisation and it also deals with the funds of the company and it creates the values of the funds of the company. The major role of the investment function is to create the value of the organisation through valuable investments, and it identifies the sources for the company in which the funds can be invested to gain some extra profits. So, this is one of the crucial parts and important parts of the organisation.

C. Working Capital Function

The working capital is one of the major parts of the organisation and for that only the organisation can run the daily operations. The working capital function plays a crucial role in managing the “funds for the day-to-day operations” of the organisation and it deals with the daily operations of the organisation (Ahkam and Alom, 2019). It also takes care of the liquidity of the organisation to meet the daily operation smoothly. The working capital function needs to be played properly otherwise it can bring several losses to the organisation and it may reduce the production of the organisation.

D. Dividend Function

The dividend function is one of the crucial parts of the finance department and it leads to making the investors satisfied. The dividend function takes care of the disbursement of the dividend to the investors of the company. Distribution of the dividend is one of the crucial parts of the organisation and the dividend function helps to identify the yield on which the company will distribute the extra amount of profit to the investors (Triani and Tarmidi, 2019). So that is one of the crucial parts and that is also played by the finance department of the company.

1.2 Sources of Finance for Expansion Purpose

In the case of the source of finance for the expansion of the small and medium-sized companies, there are some sources for finance. One of the better sources of finance is personal capital and which doesn’t cut the ownership as well as doesn’t create debt to the company (Akbulaev, Aliyev and Ahmadov, 2019). In another case, there are some major sources there to the company such as debt, equity and mixed. These are the major sources that have been followed by several organisations. In the case of debt, the company can take debts from the banks as well as from other financial institutions this will charge interest on the principal.

In the case of equity, the company can use this way to finance and it will help the company to do its operation and there will not be problems related to the funds. Equity will take a portion of the business and the investor will have ownership of the company at a proportion. That is also one of the better options for the company.

In the mixed strategy, the company can use both debt and equity as the source of finance and that will help the company to generate funds (Akbulaev, Aliyev and Ahmadov, 2019). That can be done as the company can borrow some amount of funds by debt as well as for the rest amount the company can issue equity shares to fulfil the need the finance.

These are the major ways for finance to the company and by using these the company can finance its operation and which will help the company to expand the business. So, these are the major sources available to the company for expansion purposes.

TASK 2

A. Calculation of The Ratios for Each of The Two Years

B. The performance of Panini Ltd as per the Ratio Analysis

The ratio analysis is one of the important metrics to analyse the performance of a company, it also shows the growth and decline in the performance of the company. The ratio analysis shows all aspects of the organisation and explores different areas of the company (Dance and Imade, 2019). Panini Ltd is one of the medium-sized company and for that company, the gross profit margin was 3% in the year 2018 and after that year the value becomes 28% in the year 2019. As well for the operating profit margin, the value of that ratio was 28% in the year 2018 and in the next year, the value of the operating profit margin becomes 20%. In terms of the return on capital employed, the value of this ratio was 32% in the year 2018 and in the next year, the value declined to 23%. So as per the profitability of the company, the values decline and that is one of the negative aspects as per the ratio analysis. The value of the profitability ratios needs to be improved and for that, the company needs to take care of the expenses as well as needs to give focus on the revenue of the company.

By seeing the values of the liquidity ratios such as current ratio and quick ratio, in terms of the current ratio, the value was 1.21 in the year 2018 Panini Ltd and in the next year, the value becomes 4.12 (Dance and Imade, 2019). Simultaneously the value of the quick ratio of the “panini ltd in the year 2018 was 0.85” and in the next year, “the value of this ratio becomes 2.80”. As per the values of the liquidity ratios, it states that the liquid condition of the company was better in the year 2018 and in the year 2019 the values are not well and that indicates that the company has not utilised its assets properly in the year 2019. The company needs to utilise its assets in order to earn a better profit.

The efficiency ratios are those types of ratios that show the level of efficiency of the company in terms of different aspects (Islami and Rio, 2019). The panini ltd has an inventory turnover ratio of about 19.65 in the year 2018 and in the year 2019, the value of the inventory turnover ratio becomes 29.87. In the case of the debtor’s collection period, it was 27.74 in the year 2018 and in the year 2019 the value was 42.53 and as per the last creditor’s collection period of the panini ltd, the value was 51.66 in the year 2018 and in the year 2019 the value was 21.94. In terms of the efficiency ratio, the company needs to improve the value of the declining value in the year 2019 so the company needs to focus on inventory turnover, debtor’s collection and creditors collection.

As per the ratio analysis, it shows that the company has performed well in the year 2018 and in the year 2019 the values of the ratios decline so there is a negative performance of the company (Islami and Rio, 2019). Panini Ltd needs to improve its performance in relation to liquidity, profitability and efficiency of the company so that the values of the company will be also improved.

Conclusion

Throughout this study, there are several discussions on Panini Ltd, as well as a brief discussion on the performance of the company as per the values of the ratio analysis. There was also a discussion on the accounting and finance department as well as the functions and roles of the parts of the accounting and finance department. There was also some information related to the source of finance for the small and medium-sized companies in order for business expansion.