Analysing internal and external financial data

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"Financial Management is the process of planning decisions in order to maximize the owners wealth .Financial managers have major role in cash management, in the acquisition of funds and all aspects of raising and allocating financial capital, taking in the acquisition of funds, and in all aspects of raising and allocating financial capital, taking into account the tradeoff between risk and return. Financial managers need accounting and financial information to carry out their responsibilities".

Financial Management goals:-

Optimizing the organization net worth (Share holders capital appreciation ) and financial reputation

Maximizing the profit and also maintaining the sustainable growth of the organization

Robust the financial decision making system

FM ensures effective monetary controls to meet the global financial regulatory standards and protect the customer interests

Risk management and assist to gain competitive advantage

**Time value of money** -this is critical factor for investment decisions and long term returns

Managing cash flows, funds flows and stock management by moderating risk

SECTION 1

Q1.a) Internal and External Financial data

The data collected from the internal and external auditing sources is the reliable and valid financial data and also the data from security exchange commission is correct data.

The main external source is websites like Bloomberg terminals and private financial vendors.

The internal sources like "total cash flows in the firm, balance sheets, profit & loss accounts, pathological report and capability confound".

Primary (basic) Data: - firm financial information of widely scheduled companies is usually the simplest to achieve and be able to attain from a large number of financial data websites. Main information from the "United States Securities and Exchange website (www.sec.gov)", in addition to "FreeEdgar.com". Company annual reports are also available from these sources, periodical reports, and all remaining SEC fulfilling. These data is our 1st selection for data. The GSK own websites is additionally a input for the these primary sources. Mind that some websites get the information from the main SEC websites and kept it in own blogs into their possess styles, because of this type action we may be lost and changed very important data.

Secondary (derivative) Data:- "(Wall Street Research). One of the best local sources of good Wall Street information is the BYU Library. Go to the BYU Home page, Libraries, Harold B. Lee Library, Find Articles, the click on the "Find Articles by Subject." Select Business". From this we got a more and more data. In depth research on "firm outlines, magazines/news, histories like old records, saving and venture reports, banks, rank of the company, rules and policy claims, number of and quality of products/out puts, industry impression, and relations. These are all give data of the company.

Organization accounting system, from managers and line managers, from customers, dealers, contractors, traders, sellers and brokers from these we get reliable internal data.

Q1.b) Market take advantage of diminish the entire item, beginning from the fundamental ethics the entire applicable facts is under at the present imitate by asking price. Rates are affecting in to development.

efficiency

cash flows and liquidity in the company

spending

monetary structure /monetary process

initial investors - depositors ratios

profit and loss accounts/Balance sheets

Q1.c) The foremost carrying out in the business is computer. "Information technology (IT)" distorted the technique or logic of accounting methods, records/facts store up, restore the data, and organising. This hottest format head to entirely altered inspection pathways. The riot revolves into an energetic expansion of the processer company manipulated everlasting, quick automatic progress.

Computer big business world, other IT tasks-linked actions

*opening reviews by means of Information technology

* Full precedence of processers

* AUDITAPE: go from side to side checking from Information technology, as of the starting, checkers from outside the company had a complication period in inspection through the processor. Mainly, the higher division of checkers inspection presently just about the processors give no want, the major section, and the output of "EDP" on the review.

Q2) All though extra complicated evaluation methods like "IRR, CFROI, and DCF modelling have come along, ROE has proven enduring".

At first stage, this creates intelligence. ROE concentrate on arrival to the investors of the firm. This Para gives fast and simple to recognize. But ROE is difficult to understand because lots of likely problems.

Q3.a) Financial performances are analysing to greet the external treatment responsibility and also used purposes of decision making. This analysis plays a vital position in making the structure of professional decisions.

" Vertical and Horizontal Analysis, Ratios Analysis" are the two methods for evaluating the financial performances. . A ratio analysis is a numerical measure by way of which connection involving two or a range of statistics can be evaluated or calculated. Ratios are finding out by dividing one figure by another figure.

Q3.b) R&D is the one of the important part of the form, they need high money to introduce demand, unique and quality products, due to the cost of chemicals and research equipment are very high, they should be needed financial information.

Marketing directors are also need financial information to advertise the products within the budget. The remaining stakeholders are also financial information based on their requirement

And the other stake holders like supplies of the firm, government ect. All of the stakeholders required financial information.

Q3.c) Below are the some compulsory elements to describe the annual reports.

Revenues and cost of capital:- Revenue generation and cost of the production -total expenditure that has incurred from procurement of raw material to the consumer

Retained Earnings:- It is a most significant element to discuss in board meetings-issuing dividends to share holders and for the future investments and also for the mergers and acquisitions.

Q4) The principal objective is to establish sound foundation for financial frame works and also create accessibility for the global markets.

Companies should always adhere to compliances polices ect

FASB

Protect stake holders interest

Tax allowances and subsidising and Gauzing the financial performance of the company ect

IFRS (international financial reporting standards) and FASB (financial accounting standard board) these two are very useful to maintain the accounting standard in Japan.

SECTION 2

An) Comparisons:-

. Budgets are calculated for major section of the industry -"Purchases, Sales, Production, Labour, Debtors, Creditors, and Cash".

It is used to examine and manage. An essential cause for constructing a budget is that organisation is capable to apply budgetary control to examine and manage the actual production. It means the charge can be undertaken to amend the process of the organisation as time exceeds, or probably to modify the budget if it happen to unattainable.

A budget is a branch of the method for motivating directors and other labour to attain the goals of the firm.

Contrast:-

It may run to worthless management. For example a manufacturing department might accomplish additional production that the retail division discover problems to selling. To prevent such worthless management, budgets require to be fixing at practical stages and correlated and synchronized over all sections inside the business.

The budget may slow down - employees who are not participating in assenting and preparing a budget, it is forced upon those employees, they will experience that they are not have it.

2. Tools available for Budget preparation

"Payback Period Method

Cost benefit analysis

Breakeven Analysis

Net present value

Internal rate of return

Weighted average cost of capital"

These 6 are the tools for budgeting , consider the every situation NPV for calculating the budget and the best tools for enter in to the Japan market.

3. a) SALES BUDGET)

Sales budget = Units per annum * Selling price

Selling price of M is 10% increased every month and R is 20% increased every month

In month October the sales budget is 2400*4.4=£10,560

Table1:- six months Sales budget-- from October

October

November

December

January

February

March

Miracure

£10,560

£12,584.3

£14,907.02

£18,155.4

£19,326.32

£22,321.67

Rotarix

£16,560

£22,118.34

£28,512.46

£39,813.34

£47,775.47

£58,227.22

Total

£27,120

£34,702.64

£43,419.48

£57,968.19

£67,102.79

£80,549.89

3. b) LABOUR BUDGET

The labours are skilled and unskilled labour. £30 for skilled and £15 for unskilled.

Number of hours for Miracure is 800 and product Rotarix is 900 for each month.

Product M skilled labour can work 400 hr, unskilled labour can work 400 hr. Product R skilled labour can work 450 hr, unskilled labour can work 450 hr.

Labour budget = hours worked * wage per hour

In October Miracure Skilled = 400hr*£30= £12,000

Unskilled = 400hr*£15=£6,000

Table2:- six months Labour budget-- from October

October

November

December

Skilled

Un skilled

Skilled

Un skilled

Skilled

Miracure

£12,000

£6,000

£12,000

£6,000

£12,000

Rotarix

£13,500

£6,750

£13,500

£6,750

£13,500

Total

£38,250

£38,250

£38,250

January

February

March

Skilled

Un skilled

Skilled

Un skilled

Skilled

£12,000

£6,000

£12,000

£6,000

£12,000

£13,500

£6,750

£13,500

£6,750

£13,500

£38,250

£38,250

£38,250

3. c) TRADE RECEIVABLES BUDGET

Trade receivable budget or closing debtors = (Opening debtors + Credit sales (or) Sales budget) - Cash received

Table3:- six months Trade receivables budget-- from October

October

November

December

January

February

March

Opening debtors

£2,800

£28,820

£61,822.64

£78,121.12

£101,386.67

£125,069.98

Credit sales

£27,120

£34,702.64

£43,419.48

£57,968.19

£67,102.79

£80,549.89

Total

£29,920

£63,522.64

£105,242.12

£136,089.31

£168,489.46

£205,619.87

Cash received

£1,100

£1,700

£27,120

£34,702.64

£43,419.48

£57,968.19

Closing debtors

£28,820

£61,822.64

£78,122.12

£101,386.67

£125,069.98

£147,651.68

3. d ) TRADE PAYABLES BUDGET

Trade payables budget = (Opening creditors + Credit purchase) - Cash payments

The Credit purchases are £2,400 in October is increased by £500 per month up to December and reducing 12% in January and remaining constant thereafter.

Table4:-six months Trade payables budget-- from October

October

November

December

January

February

March

Opening creditors

£4,900

£6,300

£7,400

£8,700

£9,292

£9,382

Credit

purchase

£2,400

£2,900

£3,400

£2,992

£2,992

£2,992

Total

£7,300

£9,200

£10,800

£11,692

£12,284

£12,376

Cash payments

£1,000

£1,800

£2,100

£2,400

£2,900

£3,400

Closing creditors

£6,300

£7,400

£8,700

£9,292

£9,384

£8,976

3. e ) PRODUCTION BUDGET

Production budget = (Sales + Closing stock) - Opening stock

We get sales values from sales budget table.

Closing stock is 40%of sales value.

The opening stock is closing stock of previous month.

Table 5:-six months Production budget-- from October

October

November

December

M

R

M

R

M

Sales

£10,560

£16,560

£12,584.3

£22,118.34

£14,907.02

Closing stock

£4,224

£6,624

£5,033.01

£8,847.12

£5,963.03

Total

£14,784

£23,184

£17,617.31

£30,966.46

£20,870.05

Opening stock

£1,200

£1,100

£4,224

£6,624

£5,033.01

Production budget

£13,584

£22,084

£13,393.31

£24,342.46

£15,837.04

January

February

March

M

R

M

R

M

£18,155.4

£39,813.34

£19,326.32

£47,776.47

£22,322.67

£7,262.14

£15,925.16

£7,730.26

19,110.38

£8,929.39

£25,417.54

£55,738.50

£27,057.58

£66,886.85

£31,252.06

£5,963.03

£11,405.13

£7,262.14

£15,925.16

£7,730.26

£19,454.51

£44,333.37

£19,795.44

£50,961.69

£23,521.80

SECTION 2. B)

1. an) Values flexible budget = values in standard budget * (Units sold /unit)

For example: Revenue in flexible budget = £120,000*(7,000/7,600)

= £130,286.8

Variance=actual result - flexible budget

For example: In Revenue =132000-130286.8=1714.2

The below table represents total flexible budget values calculated based on actual production values

Standard budget

Flexible budget based on actual results

Actual results

Variance

Units sold

7,000

7,600

7,600

Revenue

£120,000

£130,286.8

£132,000

A 1,713.12

Variable costs:

Direct materials

£40,000

£43,428.6

£45,500

S £2,071.4

Labour

£30,000

£32,571.43

£34,200

S £1,628.57

Variable overheads

£21,000

£22,800

£26,000

S £3,200

Total

£91,000

£98,800.03

£106,700

Contribution

£29,000

£31,486.77

£26,300

Fixed costs

£23,000

£2,4971

£2,5150

A £178.57

Operating income

£6,000

£6,515.34

£1,150

S £5,365.34

B.2 Caused of Variance:-

From the above table the below factors are the causes of the variance.

No specification is prepared for rubbish, spoilage, equipment fails, and the like.

The degree of implementations that directors can complete by reasonable amount of attempt.

Development in one section could tend to development in remaining sections and vice versa.

Based on the above points to improve the performance and profit result of the company.

SECTION 3

2. an) Net present value (Cost of capital is 10%)

Total in flow

Initial capital is £4.1millions

Revenue from operation is in year one = £1,800,000 it is raising by 4% in each year

In 2nd year £500,000 granted from Japan government

Residual value at end of the year is £1,500,000

Revenue of 2nd year is = £1,800,000+ {£1,800,000*(4/100)}.

The table shows total income:

Y1

Y2

Y3

Y4

Y5

Y6

Residual value/income

-

-

-

-

-

£1,500,000

Grant from Japan government

-

£500,000

-

-

-

-

Revenue from operation

£1,800,000

£1,872,000

£1,946,880

£2,024,755.2

£2,105,745.41

£2,189,975.22

Working capital

£550,000

-

-

-

-

-

Total in flow

£2,350,000

£2,372,000

£1,946,880

£2,024,755.2

£2,105,745.41

£3,689,975.22

Cash schedule:-

The labour expenditure is £60,000 in 1st and 2nd year there after it is raised by 3%.

The cost material is £500,000 in 1st year thereafter it is raised by 5%.

Administration cost is £50,000 it is same for every year.

Marketing cost in 1st year is £150,000 and 2nd year to 4th year is £250,000 after onwards 2% go up every year.

Cost R&D of the company is expected to be £350,000 in 1st year after it is raise by 3% in each year.

The below table represents total 6 years cost schedule of the project

Y1

Y2

Y3

Y4

Y5

Y6

Labour cost

£60,000

£60,000

£61,800

£63,654

£65563.62

£67,530.91

Material

£500,000

£525,000

£551,250

£578,812.5

£607,753.12

£638,140.78

Administration

£50,000

£50,000

£50,000

£50,000

£50,000

£50,000

Marketing

£150,000

£250,000

£250,000

£250,000

£255,000

£260,100

R&D

£350,000

£360,500

£371,315

£382,454.45

£393,928.08

£405,745.93

Total

£1,110,000

£1,245,500

£1,284,365

£1,324,920.95

£1,372,244.82

£1,421,517.62

Net cash flow = total income - total cash schedule

Present value = net cash flow*cost of capital

Net present value = - initial value + total present values

NPV (cost of capital is 10%)

Net cash flow

Discount factor 10%

Present value

Initial capital + working capital

-1

-£4,650,000

Y1

£1,240,000

0.9091

£1,127,284

Y2

£1,126,500

0.8264

£930,940

Y3

£662,515

0.7513

£497,746

Y4

£699,834.25

0.6830

£477,986.79

Y5

£733,500.59

0.6209

£455,430.51

Y6

£2,268,457.6

0.5645

£1,280,544.31

Net present value

-4,650,000+4,769,934.61

119,934.61

3.an) the discount factor is altered to 8% the NPV is

Net cash flow

Discount factor 8%

Present value

Initial capital + working capital

-1

-£4,650,000

Y1

£1,240,000

0.9259

£1,148,116

Y2

£1,126,500

0.8573

£965,748

Y3

£662,515

0.7938

£525,904

Y4

£699,834.25

0.7350

£514,378.17

Y5

£733,500.59

0.6806

£499,220.50

Y6

£2,268,456.6

0.6302

£1,429581.34

Net present value

-4,650,000+5,082,948.01

432,945

Likely causes

If your organization project or loan is not in risky then a firm is going to cost you a lower rate of return on the money- hence you pay less for the money

When the money in the bank is low it will reduce the interest rate.

To reducing the cost of labor and

They create payment for usual failing, spoilage, rubbish, and destructive time.

In short periods develop the new demand products and decrease the marketing cost, producing the value products by using the less and cheap value of raw materials

4. an) Internal rate of return

"IRR= NPV at lower rate + {NPV at lower rate/(NPV at lower rate - NPV at higher rate)}"

"Here IRR is = £432,946.47"

5. an) Strategic repercussion

1. Possible advantages

2. Possible troubles

Net present value is greater than zero so this is possible benefits

So many conditions are simple problems they are financial condition, labour cost in the Japan, sources for raw material, political condition may be possible troubles.

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