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1.1 Examine the factors (both financial and non-financial) that drive
decisions making in business.
The strategic and administrative decisions of the company are complex and they have
to overcome various barriers in their way. Administrative and technological business
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BM L6 – Financial Decisions Making
decisions have large impact on the upcoming growth of the company and it can also
affect the management and the Administrative structure of the organization. There are
certain internal and external environmental factors which can affect the decision
making of company. The human resource of the organization is the major internal
factor which decides about budget, finance and marketing. Whereas, competitors are
the external factor which can control the growth and customers of the organization.
1.3 Explain the differences between the accrual and cash flow approaches
in financial reporting, and how it might help impact business decision
making.
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BM L6 – Financial Decisions Making
Cash flow and accruals are the major accounting methodologies acquired by the
organizations. There are certain differences between the two and it is only about the
timings at which the sales and purchase are recorded in the accounts. Cash flow
method will required when the cash is received and expenses are paid while the
accruals are acknowledged the expenses and revenues when they are earned. Both of
the methods have immense impact on the business decisions.
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BM L6 – Financial Decisions Making
The balance sheet is showing the equity, liabilities and assets for the year 2015 and
2014. Non-current and current assets of the organization are stated in the Asset
section, non-current assets are also known as long term assets which are more reliable
for the future. Current assets are also known as short term Assets and they are
convertible to cash in the time period of one year. The liabilities section of the balance
sheet is showing noncurrent and current liabilities of the company. The long term
liability is also known as noncurrent liabilities and they are for more than 1 year.
Current liabilities are short term and both the liabilities are added up to get the total
value of the company’s liabilities. The revenues and capital section of the organization
balance sheet is known as the equity or the book value of the organization. It is known
that because the owner's equity is probably equal to the assets minus the liability of
the organization. According to the income statement poundland organization had made
profit for the year 2015 and it was increased in the revenue. Profit before and after tax
was compared with the figures of 2014. Balance sheet had shown that for the year
2015 the organization has increased the total Assets and managed the liabilities and
increased the net assets.
2.3 Assess the value of EPS, ROCE and other overall indicators for the
sustainability of Poundland.
The values of EPS, ROCE, ROE and ROA for 2015 have increased indicating that
Poundland has increased its profit 1.82 in 2014 to 11.36 to 2015, used its capital more
effectively in 2015 which is at 14.87% compared from 11.70% in 2014, has better in
generating effectively in 2015 which is at 12.53% compared from 7.43% in 2014 and
is better at converting its investments to profits in 2015 which is at 7% compared from
3% in 2014.
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BM L6 – Financial Decisions Making
location, purchasing machines for the office use, all the cost of leasehold land or
business.
Major examples of revenue and expenditure that the organization could incur are
wages, paid rent for the land, electricity cost for computers and other machinery, and
the paid salaries of the employees.
2.6 Based on the data for poundland; estimate its source of long term and
financing and working capital financing.
The long term source of financing and working for the organization are the equity
financing which involved the selling of stocks and financing from the retained
earnings or profits of the organization.
2.7 Looking at the balance sheet weigh the pros and cons of off-balance
sheet financing.
The balance sheet is very beneficial for off balance sheet financing because it can help
the organization in finding more profitable organizational re-investment opportunities
for the growth in terms of generating additional income by decreasing the liabilities.
Although, there will be a disadvantage to the investors because they may not have the
proper information about the organizational total debt and they cannot make investors
to determine if the company is going into giving them profit or not.
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BM L6 – Financial Decisions Making
Poundland
Employees Customers Management Shareholders Government
The employees are the Without customers the They are responsible to They might well have put These are less important
ones who create and company cannot survive so the owners. Ultimately forward the seed capital stakeholders but we want to
deliver the products or in almost all situations the the board, acting on which we need to get keep on the right side of
services that the customer needs have to come behalf of the started so their needs are them. We want to be
first. The customer can compliant with regulations
customers consume. If always to choose to take his
shareholders, can replace important. They will only and avoid disputes and
we want to attract and business to a competitor so it the CEO and the take action when things prosecutions.
retain top talent at all is essential that we continue executive team are going badly wrong so
levels then we have to to innovate, to offer good we do not need to always
offer terms and products and good value for act to please them.
conditions that are money.
attractive.
According to studies about 90% of the FTSE 350 complies with all but one or two
provisions of the UK Corporate Governance Code. The highest rate of non-
compliance is related to board independence. Furthermore, the Code requires half of
the board not including the chair to be independent NEDs. 9.4% of the FTSE 350 does
not comply with this provision. Disclosure quality around company engagement with
shareholders has decreased year on year since 2010. 36% of companies delivered
good or detailed explanations of how they understand the views of shareholders.
ICAEW further stated that the Corporate Governance guidance unlisted private
limited companies summarizes the duties of organization directors, giving guidance on
how large boards should be and the structures that companies can adopt and it
provided advise for larger and more diverse complex companies. It has been adjusted
to address the specific necessities of littler organizations and not at all like the Code,
there is no lawful commitment for private/unlisted organizations to fit in with it, in
spite of the fact that it is prescribed that they do as such.
On the bases of different researches, 55 organizations in the FTSE 350 have shaped
councils with distributed terms of reference, and around 67% were uncommonly
accused of exhorting the board on morals and qualities and how these can be inserted
inside the organization. The boards of trustees fill various distinction needs, for
example, reputational issues around corporate obligation to consistence with non-
money related direction, for example, wellbeing and security and enactment to do with
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BM L6 – Financial Decisions Making
pay off. Also, the council is solicited to screen the execution from the organization
regarding the set up models, for example, the UN Global Compact. It is likewise
worried about consistence with enactment, prominently the UK Bribery Act, yet
frequently additionally other enactment and control, including the Financial Conduct
Authority posting rules. FTSE 100 organizations are foreseeing for expenses coming
from conflicts with administrative bodies to stay away from issues that may prompt
credit crunch. Besides overseeing expenses of outside law offices to clear an issue up,
another push to guarantee lawful issues doesn’t emerge. For unlisted private restricted
organizations, lawful and administrative condition assumes a significant job in the
smooth activity of the budgetary segment and in the productive administration and
incorporation of capital streams and household funds. It can give a system that
empower advancement of economical markets, encourage observing and
implementing of guidelines and guarantee speculator assurance.
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