Sample Assignment on Accounting and Finance

1. ACCOUNTING AND FINANCE TOLL-FREE NO: +61 879057034 EMAIL: help@assignmentprime.com WHATSAPP NO: +61 424715655 WEBSITE: http://www.assignmentprime.com/ ASSIGNMENT HELP & WRITING SERVICE AUSTRALIA

2. Table of Contents INTRODUCTION......................................................................................................................1 Financial performance analysis..................................................................................................1 Analyse the performance and financial position...................................................................1 Preparation of Charts.............................................................................................................3 Recommendation to Hennes & Mauritz................................................................................6 Limitation of ratio analysis....................................................................................................7 CAPITAL INVESTMENT APPRAISAL TECHNIQUES.........................................................7 Cash inflow............................................................................................................................7 Payback period......................................................................................................................8 Net present value...................................................................................................................9 Accounting rate of return (ARR).........................................................................................10 Limitations of investment appraisal techniques..................................................................10 CONCLUSION........................................................................................................................10 REFERENCES.........................................................................................................................12 TOLL-FREE NO: +61 879057034 EMAIL: help@assignmentprime.com WHATSAPP NO: +61 424715655 WEBSITE: http://www.assignmentprime.com/ ASSIGNMENT HELP & WRITING SERVICE AUSTRALIA

3. Illustration Index Illustration 1: Gross profit ratio of Next PLC............................................................................3 Illustration 2: Gross profit ratio of H & M business..................................................................4 Illustration 3: Net profit of Next PLC........................................................................................4 Illustration 4: Net profit margin Of H & M................................................................................5 Illustration 5: Current ratio and quick ratio of Next PLC..........................................................5 Illustration 6: Current ratio and quick ratio of H & M...............................................................6 TOLL-FREE NO: +61 879057034 EMAIL: help@assignmentprime.com WHATSAPP NO: +61 424715655 WEBSITE: http://www.assignmentprime.com/ ASSIGNMENT HELP & WRITING SERVICE AUSTRALIA

4. THIS IS A SAMPLE ASSIGNMENT BUY COMPLETE ASSIGNMENT TO SCORE A+ GRADES CONTACT US: TOLL-FREE NO: +61 879057034 WHATSAPP NO: +61 424715655 EMAIL: help@assignmentprime.com WEBSITE: http://www.assignmentprime.com/ TOLL-FREE NO: +61 879057034 EMAIL: help@assignmentprime.com WHATSAPP NO: +61 424715655 WEBSITE: http://www.assignmentprime.com/ ASSIGNMENT HELP & WRITING SERVICE AUSTRALIA

5. INTRODUCTION Accounting and finance plays a significant role in every organization to take qualified decisions. Asol Ltd. is a large fashion retailer company considering to purchase shares in either Next PLC or Hennes & Maurtiz Company. In this report, financial analysis has been done for both theses two cloth retailing company that are listed on London Stock Exchange. Through making financial as well as non financial analysis, the CFO of Asol Ltd. will be able to take appropriate investment decisions. In addition to it, capital budgeting tools also will be applied to take long term investment decisions for Hilltop Limited. FINANCIAL PERFORMANCE ANALYSIS Analyse the performance and financial position Analysing the business performance through financial ratios is explained here: Gross profit ratio: The excess of total business revenues over the total cost of goods sold is known as gross profit margin (Kaplan and Atkinson, 2015). The gross profit ratio of Next PLC business shows an increasing trend. In the year 2011, the gross margin was 29.27% get increased to 33.59% in the year 2015. However, the gross profit ratio of H & M business shows an declining trend as it get decreased from 62.93% to 58.81% respectively. The ratio indicates that Next PLC is generating greater gross profitability for the business implies that the business is performing better as compare to the H & M. Net profit ratio: Net profit is the difference between gross margin and total of indirect business expenses. It represents the net operational results of the business operations (Ward, 2012). The net profit margin of H & M business shows a decreasing trend. In the year 2010, the net profit margin was 17.22% get decreased to 13.19% in the year 2014. However, the net profit margin of Next PLC business gets increase from 11.93% to 15.87% in the year 2015. It implies that Next PLC is earning higher net profits indicate better business performance. Operating profit ratio: In H & M Company, the operating margin gets declined from 22.73% to 16.90% in the year 2014. However, in Next PLC the ratio get increased from 17.19% to 20.62%. Thus, it can be said that Next PLC Company is generating higher the operating profit from its operating functions. Return on equity: Hennes and Mauritz business is earning return on equity of 41.27% while return on equity for Next PLC business is 208.75%. It indicates that Next PLC business is getting larger amount of profitability on its equity. Thus, the performance of Next PLC Company is quite better than Hennes and Mauritz (Gadoiu, n.d). TOLL-FREE NO: +61 879057034 EMAIL: help@assignmentprime.com WHATSAPP NO: +61 424715655 WEBSITE: http://www.assignmentprime.com/ ASSIGNMENT HELP & WRITING SERVICE AUSTRALIA

6. Current ratio: Financial strength can be analysing by comparing the financial ratios. Current ratios are a measurement of business liquidity and measure business ability to discharge short term business obligations (Erasmus and et. al., 2016). H & M current ratio get declined from 2.96 to 2.11 in the year 2014. However, current ratio of Next PLC business gets increase from 1.28 to 1.82 in the year 2015. It indicates that Next PLC business is improving its liquidity position to meet its short term liabilities in an effective manner. Quick ratio: It represents the relationship between quick assets and current liabilities of the business. The quick ratio of Next PLC business tends to incline from 0.72 to 1.16 in the year 2015. However, the quick ratio of H & M business gets decreased from 2.06 to 1.07 in the year 2014. It implies that in Next PLC business, the amount of liquid assets get increase over the period. However, H & M business liquidity position is declining over the period. Assets turnover ratio: It measure the business ability to use business assets effectively and efficiently (Rahman and Ramli, 2016). In Next PLC business, the assets turnover ratio get decrease from 1.89 to 1.81 while H & M business assets turnover ratio get increase from 1.91 to 2.14 in the year 2014. It represent that H & M business is using its business assets effectively and efficiently. Inventory turnover ratio: Next PLC business inventory turnover ratio is 6.62 in the year 2015 while in H & M business the inventory turnover ratio is 3.46 indicate that Next PLC is using its inventory efficiently. Return on assets: H & M Company’s return on assets gets declined from 32.91% to 28.28% in the year 2014. However, in Next PLC business return on assets get increased from 22.55% to 28.68% in the year 2015. It indicates that Next PLC is getting larger the return on its total assets. Operating cash flow/Share: In H & M business, the ratio gets declined from 1.20 to 1.25 in the year 2014. However, in case of Next PLC business the ratio tends to increase from 2.49 to 4.86 respectively. It is higher in Next PLC business implies that Asol Ltd. should invest in Next PLC Company. Analysing the performance through non financial ratios is explained as under: Revenue/Employee: It got increased from 114727 to 135729 in next PLC Company. However, In H & M, the ratio get decreased from 166639 to 138467 respectively. TOLL-FREE NO: +61 879057034 EMAIL: help@assignmentprime.com WHATSAPP NO: +61 424715655 WEBSITE: http://www.assignmentprime.com/ ASSIGNMENT HELP & WRITING SERVICE AUSTRALIA

7. EBITDA/Employee: In Hennes & Mauritz company, the ratio was 42580 tends to declined to 28008 in the year 2014. On contrary, in Next PLC Company, the ratio tends to increase from 23869 to 31864 respectively. Thus, on the basis of above comparison, it can be recommended to the CFO that the firm should make investment in Next Plc business. The reason for this decision is that the company is growing in the market due to increasing the profitability. Moreover, the company is strengthening its financial position as its liquidity ratio gets increased. Therefore, company is more able to pay its short term obligations. Further, the business is earning good rate of return on equity (Otley and Emmanuel, 2013). Another, both the non financial ratios are increasing in Next PLC business. Thus, it can be said that investing in Next Plc business will be more beneficial for Asol ltd. Preparation of Charts Charts are prepared here as under Gross profit 2011 2012 2013 2014 2015 Next PLC 29.27 30.38 31.48 33.16 33.59 34 33.59 33.16 33 32 31.48 31 30.38 30 29.27 29 28 27 1 2 3 4 5 Illustration 1: Gross profit ratio of Next PLC TOLL-FREE NO: +61 879057034 EMAIL: help@assignmentprime.com WHATSAPP NO: +61 424715655 WEBSITE: http://www.assignmentprime.com/ ASSIGNMENT HELP & WRITING SERVICE AUSTRALIA

8. Gross profit 2010 2011 2012 2013 2014 H & M 62.93 60.13 59.5 59.13 58.81 64 62.93 63 62 61 60.13 60 59.5 59.13 58.81 59 58 57 56 1 2 3 4 5 Illustration 2: Gross profit ratio of H & M business Net profit 2011 2012 2013 2014 2015 Next PLC 11.93 12.62 14.34 14.79 15.87 TOLL-FREE NO: +61 879057034 EMAIL: help@assignmentprime.com WHATSAPP NO: +61 424715655 WEBSITE: http://www.assignmentprime.com/ ASSIGNMENT HELP & WRITING SERVICE AUSTRALIA

9. 18 15.87 16 14.79 14.34 14 12.62 11.93 12 10 8 6 4 2 0 1 2 3 4 5 Illustration 3: Net profit of Next PLC Net profit 2010 2011 2012 2013 2014 H & M 17.22 14.38 13.96 13.3 13.19 20 17.22 18 16 14.38 13.96 13.3 13.19 14 12 10 8 6 4 2 0 1 2 3 4 5 Illustration 4: Net profit margin Of H & M Next PLC Current ratio Quick ratio TOLL-FREE NO: +61 879057034 EMAIL: help@assignmentprime.com WHATSAPP NO: +61 424715655 WEBSITE: http://www.assignmentprime.com/ ASSIGNMENT HELP & WRITING SERVICE AUSTRALIA

10. 2011 2012 2013 2014 2015 1.28 1.54 1.48 1.76 1.82 0.72 0.91 0.97 1.18 1.16 2 1.82 1.76 1.8 1.54 1.6 1.48 1.4 1.28 1.18 1.16 1.2 0.97 1 0.91 0.72 0.8 0.6 0.4 0.2 0 1 2 3 4 5 Illustration 5: Current ratio and quick ratio of Next PLC H & M 2010 2011 2012 2013 2014 Current ratio 2.96 2.71 2.66 2.25 2.11 Quick ratio 2.06 1.69 1.49 1.22 1.07 TOLL-FREE NO: +61 879057034 EMAIL: help@assignmentprime.com WHATSAPP NO: +61 424715655 WEBSITE: http://www.assignmentprime.com/ ASSIGNMENT HELP & WRITING SERVICE AUSTRALIA

11. 3.5 2.96 3 2.71 2.66 2.5 2.25 2.11 2.06 2 1.69 1.49 1.5 1.22 1.07 1 0.5 0 1 2 3 4 5 Illustration 6: Current ratio and quick ratio of H & M Recommendation to Hennes & Mauritz The financial analysis of H & M business indicates that its performance tends to declining over the period. The profitability ratio shows that it is generating good margin but shows a downward trend. Thus, for improving the business performance, company should increase its revenues and decrease its cost through regular monitoring (Ding, Booth and Roscoe, 2016). Increasing the business profits lead to increase the business return on equity and return on assets. Furthermore, business will be able to increase gross margin, net margin and operating profit margin. This in turn, Hennes and Mauritz business can improve its operational performance. Another, liquidity ratio of the company gets decreased hence, it should be advised that business has to improve its current assets and decrease current liability. By doing this, H & M business will be able to pay off its short term obligations more frequently (Dehnavi and et. al., 2015). Moreover, using the company's inventory in an efficient manner, H & M business can improve its liquidity and the business revenue to a great extent. Company should make strategic and competitive policies so as to improve their financial strength. Furthermore, company should increase its non financial ratio through providing better quality of services to the customers. It helps to increase customer satisfaction level. Furthermore, providing good monetary benefits and working environment, business will be able to enhance its employee turnover ratio. This in turn, business can achieve higher the success and survive for a longer time period. TOLL-FREE NO: +61 879057034 EMAIL: help@assignmentprime.com WHATSAPP NO: +61 424715655 WEBSITE: http://www.assignmentprime.com/ ASSIGNMENT HELP & WRITING SERVICE AUSTRALIA

12. Limitation of ratio analysis Although ratio analysis is a best way of analysing the financial performance but still it has certain limitations. One of the most important limitations is that it analyse the historical performance of the business hence, cannot be used to measure future business performance. Another, different business organization use distinct accounting standard and policies to record business transactions (Ratio analysis: application, Limitations and Dangers-A perspective, n.d.). Thus, it impairs the comparability between the companies. Furthermore, some elements of balance sheet recorded at historical cost while income statement elements are recorded at current cost. In that case, ratio analysis does not provide significant and meaningful results. In addition to it, different organizations operate with distinct market environment which is not considered by ratio analysis method. Moreover, in context to profitability analysis, the inflation rate also impacts business profits which are not considered by profitability ratios. CAPITAL INVESTMENT APPRAISAL TECHNIQUES Hilltop Limited is a medium sized manufacturing company. As per the scenario, there are two potential and mutually exclusive projects available for the Hilltop Ltd. Each project consists of purchasing machines with amounted to 120000£. Investment appraisal techniques help to identify the potential of each investment project so as to select appropriate investment proposal (Upton and et. al., 2015). The scenario indicates the net profits from both the projects for upcoming 6 years from 2016 to 2021. Cash inflow Cash inflows from both the projects are calculated here as under: Table 1: Cash inflow from project A Machine 1 (net Machine profit) 40000 40000 40000 30000 30000 20000 Depreciation 33000 33000 33000 10000 10000 10000 Sale of machine purchase Cash inflow 73000 73000 44000 40000 40000 30000 21000 -50000 Total = 200000 Table 2: Cash inflow from project B Machine 2 ( net profits) TOLL-FREE NO: +61 879057034 EMAIL: help@assignmentprime.com WHATSAPP NO: +61 424715655 WEBSITE: http://www.assignmentprime.com/ Year Depreciation Cash inflow ASSIGNMENT HELP & WRITING SERVICE AUSTRALIA

13. 2016 2017 2018 2019 2020 2021 Total 10000 20000 30000 60000 70000 55000 245000 20000 20000 20000 20000 20000 20000 30000 40000 50000 80000 90000 75000 Payback period The time period required to get back the initial cash outflow of 120000£ will be known as payback period. The selection criteria on the basis of this method is that the investment project that has lower the payback period should be prefer by Hilltop Limited (Götze, Northcott and Schuster, 2015). Table 3: Payback period of project A Cash inflow -120000 73000 73000 44000 40000 40000 30000 Year 0 2016 2017 2018 2019 2020 2021 Cumulative cash inflow -120000 -47000 26000 70000 110000 150000 180000 Payback period = 1 year + (47000£/73000£ * 12) = 1 year + 7.72 months = 1 year 8 months Table 4: Payback period of project B Cash inflow -120000 30000 40000 50000 80000 90000 75000 Year 0 2016 2017 2018 2019 2020 2021 Cumulative cash flow -120000 -90000 -50000 0 80000 170000 245000 Payback period of Project B = 3 years TOLL-FREE NO: +61 879057034 EMAIL: help@assignmentprime.com WHATSAPP NO: +61 424715655 WEBSITE: http://www.assignmentprime.com/ ASSIGNMENT HELP & WRITING SERVICE AUSTRALIA

14. Net present value It is the discounted cash flow method that considers the time value of money. The method assumes that money has time value over the period therefore; all the projected cash inflows should be discounted using an appropriate discount rate. However, the difference between discounted cash outflows and discounted cash inflows is known as net present value of the project (Chan and et. al., 2001). The selection criteria says that such investment project that has higher or positive the net present value should be prefer by Hiltop Ltd. The reason behind the selection is higher the net present value indicate greater availability of profits for the business. As per the scenario, Hiltopn Ltd. is using 20% cost of capital for discounting purpose. Table 5: Net present value of project A Discounted value of Year 0 2016 2017 2018 2019 2020 2021 Cash inflow -120000 73000 73000 44000 40000 40000 30000 1£ @20% 1 0.8333333333 0.6944444444 0.5787037037 0.4822530864 0.401877572 0.3348979767 Discounted cash flow -120000 60833.3333333333 50694.4444444444 25462.962962963 19290.1234567901 16075.1028806584 10046.9393004115 NPV = 62402.9063786009 Table 6: Net present value of project B Discounted value of Year 0 2016 2017 2018 2019 2020 2021 Cash inflow -120000 30000 40000 50000 80000 90000 75000 1£ @20% 1 0.8333333333 0.6944444444 0.5787037037 0.4822530864 0.401877572 0.3348979767 Discounted cash flow -120000 25000 27777.7777777778 28935.1851851852 38580.2469135803 36168.9814814815 25117.3482510288 NPV = 61579.5396090535 Accounting rate of return (ARR) It represents the average rate of return on the projects. Higher the ARR indicate more benefits for the business and vice versa. ARR = Average net profit/initial investment*100 TOLL-FREE NO: +61 879057034 EMAIL: help@assignmentprime.com WHATSAPP NO: +61 424715655 WEBSITE: http://www.assignmentprime.com/ ASSIGNMENT HELP & WRITING SERVICE AUSTRALIA

15. Project B = (245000£-120000£/6)/ (120000£)*100= 17.36% Project A = (200000£ - 120000£/6)/ (120000£)*100 = 11.11% Recommendations: Thus, on the basis of above computation, it can be said that senior management of Hilltop Ltd. has to invest their funds in project B. Company should purchase machine 2 of 120000£. The reason behind such decisions is that payback period of this project is lower to 1 year 8 month. Thus, it can be said that within 1 year 8 months, company can generate its initial investment of 120000£ lower than project B. Moreover, the net present value of project A is higher amounted to 62402.90£ as compare to project B. It indicates that through purchasing machine 2, Hilltop business can generate greater amount of profits for the business. In addition to it, accounting rate of return on project A is 17.36% while project B has accounting rate of return of 11.11%. It is higher in case of project A hence, it can be said that project A will be more beneficial for the business. Thus, through investing funds in project B, Hilltop business can maximize its profits to a great extent. Limitations of investment appraisal techniques Accounting rate of return: The limitation of the method is that it considers the net profits not the cash flows of the project. It does not help to take appropriate investment decisions to the business. It is undiscounted cash flow method hence, fails to consider the time value of money. Pay back period method: The disadvantage of this method is that it does not consider the time value of money (Lakew and Rao, 2015). Furthermore, it does not consider the post pay back profitability of the project. Furthermore, the method ignores the project profitability. Net present value: Deciding an appropriate cost of capital is very complex for the businesses. Moreover, estimating future cash inflows from the project is a difficult task (Götze, Northcott and Schuster, 2015). For instance, higher the cost of capital may reduce business profits and fails to take better investment decisions. CONCLUSION The present project report concluded that by financial and non financial performance analysis helps the organizations to take qualified and strategic business decisions. It helps to increase the business turnover and generate greater the profitability for the business. Furthermore, Investment appraisal techniques such as payback period, net present value and accounting rate of return measure the possible return for the entire investment proposal. It helps to take long term investment decisions for acquiring fixed assets in the business. TOLL-FREE NO: +61 879057034 EMAIL: help@assignmentprime.com WHATSAPP NO: +61 424715655 WEBSITE: http://www.assignmentprime.com/ ASSIGNMENT HELP & WRITING SERVICE AUSTRALIA

16. REFERENCES Books and Journals Chan, F.T.S. And et. al., 2001. Investment appraisal techniques for advanced manufacturing technology (AMT): a literature review. Integrated Manufacturing Systems. 12(1). pp. 35-47. Dehnavi, A. and et. Al., 2015. A new hybrid model using step-wise weight assessment ratio analysis (SWARA) technique and adaptive neuro-fuzzy inference system (ANFIS) for regional landslide hazard assessment in Iran. Catena. 135. pp. 122-148. Ding, F., Booth, C.D. and Roscoe, A.J., 2016. Peak-Ratio Analysis Method for Enhancement of LOM Protection Using M-Class PMUs. Smart Grid, IEEE Transactions on. 7(1). pp. 291-299. Erasmus, S.W. And et. al., 2016. Stable isotope ratio analysis: A potential analytical tool for the authentication of South African lamb meat. Food chemistry. 192.pp. 997-1005. Götze, U., Northcott, D. and Schuster, P., 2015. Capital Budgeting and Investment Decisions. In Investment Appraisal (pp. 3-26). Springer Berlin Heidelberg. Götze, U., Northcott, D. and Schuster, P., 2015. Selected Further Applications of Investment Appraisal Methods. In Investment Appraisal (pp. 105-159). Springer Berlin Heidelberg. Kaplan, R.S. and Atkinson, A.A., 2015. Advanced management accounting. PHI Learning. Lakew, D.M. and Rao, D.P., 2015. Financial Appraisal of Long Term Investment Projects: Evidence from Ethiopia. Asian Journal of Research in Business Economics and Management. 5(2). pp. 1-16. Otley, D. and Emmanuel, K.M.C., 2013. Readings in accounting for management control. Springer. Rahman, N.A.A. and Ramli, A., 2016. Entrepreneurial Orientation, Strategic Management Accounting Practices, Innovation, and Firm Performance: Craft Industry Perspective. In Proceedings of the ASEAN Entrepreneurship Conference 2014 (pp. 179-191). Springer Singapore. Upton, J. and et. al., 2015. Investment appraisal of technology innovations on dairy farm electricity consumption. Journal of dairy science. 98(2). pp. 898-909. Ward, K., 2012. Strategic management accounting. Routledge. Online Gadoiu, M., n.d. Advantages and Limitations of the Financial Ratios Used In the financial Diagnosis Of the Enterprise. <http://economic.upit.ro/repec/pdf/2014_2_9.pdf>. [Accessed on 28th January, 2016]. [Pdf]. Available through: TOLL-FREE NO: +61 879057034 EMAIL: help@assignmentprime.com WHATSAPP NO: +61 424715655 WEBSITE: http://www.assignmentprime.com/ ASSIGNMENT HELP & WRITING SERVICE AUSTRALIA

17. Ratio analysis: application, Limitations and Dangers-A perspective, n.d. [Pdf]. Available through: <https://www.finsia.com/docs/default-source/jassa-new/jassa-1976/ratio- analysis-applications-limitations-and-dangers-a-perspective.pdf?sfvrsn=2>. [Accessed on 28th January, 2016]. THIS IS A SAMPLE ASSIGNMENT BUY COMPLETE ASSIGNMENT TO SCORE A+ GRADES CONTACT US: TOLL-FREE NO: +61 879057034 WHATSAPP NO: +61 424715655 EMAIL: help@assignmentprime.com WEBSITE: http://www.assignmentprime.com/ TOLL-FREE NO: +61 879057034 EMAIL: help@assignmentprime.com WHATSAPP NO: +61 424715655 WEBSITE: http://www.assignmentprime.com/ ASSIGNMENT HELP & WRITING SERVICE AUSTRALIA