Financial management and control
TABLE OF CONTENT
1. Part A: Solvent Plc
Table 1: Summary of Differences in two years of Financial Ratios 2
Calculation of Working Capital Cycle (days) 2
Performance Analysis 3-4
2. Part B: Mega Plc
Question 1 5
Question 2 6
Question 3 7
Question 4 7
3. Part C: Brothers Ltd
Question 1
a) Payback Period Calculations 8
b) Accounting Rate of Return (ARR) 8
c) The Net present Value 8
d) The Internal Rate of Return (IRR) 9
Question 2 9
4. Part D
Question A 10 – 11
Question B 11 – 12
5. Reference 13
PART A: Solvent Plc
*Stock Turnover in Days
2011
365/20.6 = 18 days
2010
365/19.37 = 19 days
Working Capital Cycle (days)
2010 Working Capital Cycle
= 18 days + 83 days – 142 days
= -41 days
2011 Working Capital Cycle
= 19 days + 130 days – 129 days
= 20 days
Performance Analysis
There are 5 key performance analyses that could evaluate the performance of Solvent Plc, which include ‘Profitability Ratio’, ‘Efficiency Ratio’, ‘Liquidity Ratio’, ‘Gearing Ratio’, and ‘Investor Ratios’.
Profitability Ratio
Lubica Lesakova (2007) has mention that Profitability ratios disclose the company’s ability to return a profit to the investment and how effective is the company in managing their wealth. It appears that the evaluation of the profitability performances is a guideline for all the managers of any company.
The Return on capital employed (ROCE) had a decrease of 20% changes from 45% to 25% from 2010 to 2011, In this case, we would say Solvent Plc is performing poorly In terms of how efficient the company has utilize their resources, a 20% decrease between years is a huge
1. Part A: Solvent Plc
Table 1: Summary of Differences in two years of Financial Ratios 2
Calculation of Working Capital Cycle (days) 2
Performance Analysis 3-4
2. Part B: Mega Plc
Question 1 5
Question 2 6
Question 3 7
Question 4 7
3. Part C: Brothers Ltd
Question 1
a) Payback Period Calculations 8
b) Accounting Rate of Return (ARR) 8
c) The Net present Value 8
d) The Internal Rate of Return (IRR) 9
Question 2 9
4. Part D
Question A 10 – 11
Question B 11 – 12
5. Reference 13
PART A: Solvent Plc
*Stock Turnover in Days
2011
365/20.6 = 18 days
2010
365/19.37 = 19 days
Working Capital Cycle (days)
2010 Working Capital Cycle
= 18 days + 83 days – 142 days
= -41 days
2011 Working Capital Cycle
= 19 days + 130 days – 129 days
= 20 days
Performance Analysis
There are 5 key performance analyses that could evaluate the performance of Solvent Plc, which include ‘Profitability Ratio’, ‘Efficiency Ratio’, ‘Liquidity Ratio’, ‘Gearing Ratio’, and ‘Investor Ratios’.
Profitability Ratio
Lubica Lesakova (2007) has mention that Profitability ratios disclose the company’s ability to return a profit to the investment and how effective is the company in managing their wealth. It appears that the evaluation of the profitability performances is a guideline for all the managers of any company.
The Return on capital employed (ROCE) had a decrease of 20% changes from 45% to 25% from 2010 to 2011, In this case, we would say Solvent Plc is performing poorly In terms of how efficient the company has utilize their resources, a 20% decrease between years is a huge
References: 2. Peter Atrill and Eddie McLaney (2011): Accounting and Finance for Non-Specialists, 7th edition, Financial Times/ Prentice Hall. Journal Articles; 3. Friedrich A.Lutz (1945): Corporate Cash Balances, 1914-43: Manufacturing and Trade. Liquidity Ratios and Cash Balances.[Online] ISBN: 0-870-14136-8. Available from http://www.nber.org/chapters/c4822.pdf [Access: 12 December 2013] 4 5. Rich Brott (2007): The Financial Benefits of budgeting. [Online] Available from http://www.richbrott.com/wp-content/uploads/2007/02/the-financial-benefits-of-budgeting.pdf [Access: 13 December 2013] 6 7. Tamoor Tariq (2013): Start-Up Financing. PP.2-8 Websites;