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Financial Management & control
Finance & Accounting
Pages 11 (2761 words)
Financial Management & control Contents Part A: Solvent PLC 3 Part B: Mega PLC 6 Question1 6 Question2 8 Question 3 9 Question 4 9 Part C: Brothers Ltd. 10 Question1 10 a) Payback Period 10 b) Accounting Rate of Return 10 c) Net Present Value 11 d) Internal rate of Return 11 Question 2 11 Part D 12 References 15 Part A: Solvent PLC As per the financial ratios of the company, it is observed that the company’s turnover has increased by 5% from 2010 to 2011, but it has not resulted in increase in the profitability.
The company has not been able to earn more from the money of its shareholders. In 2011, it has earned approximately 30% lesser than 2010 from the money invested by its shareholders which resulted in a decline in return on equity. The debtors’ collection rose by 47 days over the previous year which means that in 2011, the company now required 130 days to get the money from its debtors which it did in 83 days in 2010. This not only blocks the money for the company but also makes the company lose on the interest of the money blocked with the debtors. The chance of the debtors going bad also increases if the payment cycle expands which has been proved by bad debts going up by more than 200%. The operating profit of the company has halved from 17% in 2010 to 8.5% in 2011, which implies that even when the company has sold more than the previous year, it has not been able to make profits out of the sales. This can be due to many reasons. The company might have sold at lesser price or the company might have incurred greater selling expenses. ...
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