Financial management - Essay Example

Shareholders are interested to know if the risk they took in investing in the company provided returns that increase the wealth not only of the company but also of the shareholders as well. II. Critical evaluation of corporate governance of a selected company  The company that is the subject for evaluation of governance in this paper is Leeds PLC. Leeds PLC is the Group has been mainly engaged in textile processing, specialising in fabric printing and yarn dyeing, and by 1996 had manufacturing operations in UK, Holland and Italy.

Leeds Group’s trading operations are conducted by Hemmers-Itex Textil Import Export GmbH. Hemmers is based in Nordhorn, Germany and has a Chinese subsidiary based in Shanghai. Together these companies employ some 120 people and achieved fabric sales of 13.1 million linear metres in the year ended 30 September 2009 (Leeds Group 2012). Inferring from the annual report of Leeds PLC, it can be said that the company is conservative in applying its cost. Conservative in applying cost meant providing generous allowance for expense to have a more accurate and realistic cost of the company.

In fact, Leeds PLC may be one of few companies who are “honest enough” to reflect a s of ?454,000 in the fiscal year 2012 (Leeds Group PLC 2012) that would be seen by its shareholders. It is tough for the company to reflect a loss on annual report because it may not sit well with the shareholders who might withdraw their investments in the company and leave the company broke affecting not only its liquidity but also its financial position. The company recognized its loans and receivables at its fair value and subsequently carried at amortised cost using the effective interest rate less provision for impairment (19).

Impairment is the difficulty of the part of counter party or default or significant delay in payment. This is significant to mention because Leeds PLC recognize the risk associated in loans and receivables with the provision of impairment which a typical company may not recognize because this could mean an expense that will deduct income. It also reflect as current liabilities cash and cash equivalents that have maturities of three months or less which a less prudent company may hesitate to reflect it in their current liabilities because it will adversely affect their profitability ratio.

The company can also be construed as prudent and perhaps more ethical in its expenditure because it made no contributions to political parties but rather donated to UK charities amounting to ?250,000. It also tests its goodwill whether it has suffered any impairment which is a good business practice because it helps the company to remain a going concern in the future. III. Theory  Corporate governance is the business practice of organizations being more mindful to their responsibilities to future generations as well as stakeholders, government and the general public.

Until recently, there is a growing trend that organizations success’ are not only measured in financial terms but also in the socially responsible practice of f corporate governance because such practice has also economic value (Kemp 2011). Such ethical corporate governance are also to be incorporated in Company Social Responsibility (CSR) which Moir defined as the ‘‘enlightened self-interest or a moral approach linked to social expectations’’ (2001: 17). IV. Relation between performance and corporate governa