StudentShare solutions
Triangle menu

Financial Management & control - Essay Example

Nobody downloaded yet

Extract of sample
Financial Management & control

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. ...
The current ratio of the company increased from 1.5 in 2010 to 1.8 in 2011. The increase in the current ratio is a result of the increase in current assets which includes an increase in the debtors’ collection period due to which the debtors are rising, an overdraft bank balance and more than doubling of bad debts inflating the current ratio. The acid test ratio increased from 1.2 in 2010 to 1.5 in 2011. This indicates that the company now has lesser short-term assets to sell in order to cover up its immediate liabilities without selling off its inventories. The company’s ability to pay off its interest expenses has also declined and it is indicated by the fall in the interest cover ratio from 9.6 times in 2010 to 4.34 times in 2011. This is due to the shortage of funds which has been blocked by the debtors, increasing bad debts, bank overdraft balance etc. The gearing ratio describes the level of the company’s capital being funded by the owners’ money versus the money of creditors. Here, it has declined by 3% as the creditors collection period has also slightly decreased. This means that the company is paying off its creditors earlier than it used to do in the previous year. This results in lesser availability to creditors’ funds and more reliability of the business on the owners’ equity. The earnings per share of the company declined from 0.63 in 2010 to 0.29 in 2011. A decline in EPS is the result of a decline in the profitability of the company. EPS measures the allocation of company’s profit to each of its outstanding shares. Since profit has declined, the allocation to each share also declined and hence the EPS. The operating cash flow per share of the company increased from 1.2 in 2010 to 1.5 in 2011 ...Show more

Summary

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…
Author : leanne86
Financial Management & control essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"Financial Management & control"
with a personal 20% discount.
Grab the best paper

Check these samples - they also fit your topic

Financial Deregulation and Capital Control
The first section of the paper will address the role of financial deregulation and capital control in international diversification. The next section will offer a discussion the two major drivers of financial i.e. technology and innovation in global financial market and it will be followed by a description and mechanism of carry trade strategy.
13 pages (3250 words) Essay
Financial Analysis and Control Systems
59). Efficient working capital management is essential in the sense that cases of bankruptcy can be avoided because the business is able to balance needs and obligations. Therefore in understanding the significance of working capital management, focus is shifted towards its importance in budgeting and investment appraisal.
3 pages (750 words) Essay
Management Control Systems
Effective management is the key to improved organizational productivity and performance. Companies use management control systems to support organizational objectives, control activities, and drive organizational performance.
8 pages (2000 words) Essay
Course financial planning and control
The company falls in Financial, Investment and other diversified group in global perspective. Locally it belongs to General Financial sector. The Finance industry in UK itself is organizing in a formidable industry despite a difficult trading environment.
19 pages (4750 words) Essay
Financial control
Standards set are based on the first four months performances. Accordingly those shall be treated as short term standards for a year or so far beneficial. It is
4 pages (1000 words) Essay
Financial Planning and Control
This paper analyses the different aspects associated with an engineering business model placing emphasis in financial models. The major topics covered in the
4 pages (1000 words) Essay
Critically evaluate the use BUDGETS in management control systems ( Module: Financial Control in Management Control Systems )
Based on these arguments, this paper would the go on to ascertain the subsequent effects of budgeting on management control systems and what advantages and disadvantages they bring to the organization which has implemented this
6 pages (1500 words) Essay
Internal Control Over Financial Reporting
The price of the company’s stock should be affected by its quality of internal control system. A company associated with a poor internal control system poses a risk to the investor due to the unreliability of information. Such a risk would require a considerable return on investment, which imposes low prices of the stock.
5 pages (1250 words) Essay
Financial Analysis and Control Systems
Therefore in understanding the significance of working capital management, focus is shifted towards its importance in budgeting and
3 pages (750 words) Essay
Financial Management
nonprofit organizations and subsequently offers a comparison and distinction between the application of financial management techniques in nonprofit and for-profit organizations. In achieving this, this paper focuses on the sources of funds, use of debt, performance evaluation,
7 pages (1750 words) Essay
Hire a pro to write
a paper under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
YOUR PRIZE:
Apply my DISCOUNT
Comments (0)
Click to create a comment