GMBA MAY 2020

MANAGERIAL ACCOUNTING
&
FINANCIAL REPORTING
MD. JAHANGIR ALAM
ID – Q1010257
SUBMISSION DATE: 13/10/20

SUBMITTED TO:

CHAD MANIAN

INTERNAL VERIFIER:

ALEXANDER GRAY
 Table of Contents
1. INTRODUCTION ------------------------------------------------------------------------------- 3
2. ANALYSIS ON FINANCIAL RATIO --------------------------------------------------------- 4
3. PROBABILITY ---------------------------------------------------------------------------------- 4
3.1. GROSS PROFIT MARGIN -------------------------------------------------------------- 5
3.2. OPERATING PROFIT MARGIN --------------------------------------------------------5
3.3. PRETAX MARGIN ----------------------------------------------------------------------- 5
3.4. NET PROFIT MARGIN ------------------------------------------------------------------6
4. EFFICIENCY RATIO ----------------------------------------------------------------------------6
4.1. WORKING RATIO ----------------------------------------------------------------------- 6
5. LIQUIDITY RATIO –--------------------------------------------------------------------------- 7
5.1. CURRENT RATIO –---------------------------------------------------------------------- 7
5.2. QUICK RATIO –-------------------------------------------------------------------------- 7
5.3. CASH RATIO –--------------------------------------------------------------------------- 7
6. DEBT STRUCTURE --------------------------------------------------------------------------- 8
7. COST STRUCTURE --------------------------------------------------------------------------- 8
8. ASSET WORTH ------------------------------------------------------------------------------- 8
9. RECOMMENDATION –-------------------------------------------------------------------- 10
10.CONCLUSION –------------------------------------------------------------------------------ 12
11. REFERENCE ---------------------------------------------------------------------------------- 13

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AN ASSIGNMENT ON MANAGERIAL ACCOUNTS AND FINANCIAL REPORTING

1. INTRODUCTION:

To start with, Managerial accounting refers to use the provisions of accounting information in
order to better inform themselves before they decide matters within respective organization by
a manager. financial analysis is to know companies’ health through financial ratio. Now when its
need to know these ratio. First of all to know companies condition and compare other
companies .when an individual invest in any share market he or she can buy other companies
share by calculating financial ratio. Fundamental ratios are divided in mainly five categorized.
Respectively, profitability, liquidity, debt structure, asset worth. Including five ratios of a
company or an individual can know companies profit margin. Also can know short term long
term debt positions. Then he can focused on his or her financial activities properly. Now come to
the point, what was said to write in question. In question has to said to write as a business
advisor of any financial institution. Where you have to convinced by upper statement an
investor who would come for his or her invest. I have to show that investor all sorts of
calculation and rules over that institution and his investment. Then, I have to give ensure to him
to get more profit than his investment. An investment is an important part of a financial
institution of the whole world. Beginning with a big budget business like, Garments Industry
Commercial Institution, Corporate Industry and other things. Depends on investment and sales a
company gain their profit or lost. Any company also can have determined their risk through
calculating these fundamental ratios. Basically a profit comes out on sales and investment. So
these terms are so important for an organization.

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2. ANALYSIS ON FINANCIAL RATIO:

Already I have discussed that there are main five categories fundamental ratios to find a
company’s performance. As a business advisor, I have to show detail with clear examples to an
investor. After 5 or 6 years what would be raise or down either profit or loss can be known
clearly. Now, let’s discuss with an investor and provide a forceful rules and regulation of
company. A company includes an ample of activities and regulations based on distinctive
actions. It also can be related any Europe country. Of course it would be accordance your
business wideness. Foreign investment make a gigantic impact in an organization.

3. PROBABILITY:

It is divided in two parts. how a company can earn very fast also a company can know
competitive position in market. profit is profitability based on sales and investment. Risk also
can that means how much time or how percentage of profit can be earned by selling over items.
It depends on selling. Under gross profit margin, operating profit margin, net profit margin,
return on capital of employed. Here any developed country will can invest an organisation to
raise their profit. These rules helps to raise any organisation. It is calculated by operating profit
divided sales revenue then it is too multiplied by hundred. To start of with, according to this
question pattern has to answer based on importance of managerial accounting and financial
reporting in the capital market. We have already profitability heard the name of capital market.
This capital market is an essential part in business area. Capital markets are venues where
savings and investments are channelled between the suppliers. Capital markets seek to improve
transaction efficiencies.

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 Financial institution is a company which engaged in the business deal with financial and
monetary transaction like deposits, loans, currency exchange, investment and so on. Financial
institution enclosed a board range of business action within the financial services sector
including banks, trust companies, insurance companies, brokerage firms, investment dealers. In
this question has to mention to be a business advisor of any eminent organisation or company in
the world, It can be Europe continent. Investing a foreign company is a big opportunity of an
investor. He or She can converted her currency into foreign currency. An investor is to deal
internationally. For dealing internationally, a company will need foreign exchange. Advisor will
try to made particular companies fix client and convinced her or his to invest those organisation.
Without any profit or merits, nobody comes to your organisation. That is why advisor should to
show to client all sort of rules and regulation. Because there is, an ample of financial institution
in the world. It can be bank, insurance companies and so on. Companies has several types of
strategy to find companies profit or loss. In this statement some fixed matter has to selected to
discuss. Which are ratios. Ratios are techniques to determine company’s future condition. As a
business advisor should to describe in detailed all fundamental ratios. Ratio is a crucial part in
business area. Business holder also try to know a company performance through these.

As per initial investment we can find out company profitability by using following calculations –

Gross Profit
a) Gross profit margin = ¿
Net Sales

3000 0000
¿
4000 0000

¿ 0.75 %

Operating Profit
b) Operating profit margin = ¿
Net Sales

21500000
¿
40000000

¿ 0.5375

¿ 0.537 %

PBt
c) Pretax margin= ¿
Net Sales

20000000
¿
40000000

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 ¿ 0.50

¿ 50 %

Net Profit
d) Net Profit Margin = ¿
Net Sales

18000000
¿
40000000

¿ 0.45

¿ 45 %

4. Efficiency ratio:

It can be said when a company wants to know how efficiency to generate sales term by short
term and long term assets. Generally it depends on stocks another material like how much
product are sold .according to this efficiency a company can derive as a knowable organisation.
How much assets manage can a company sells would be raise profit. Efficiency ratio indicates
speed. How much speed assets convert into sell? There are many short-term assets in
organisation. These assets are included account receivable, prepaid expenses.

In the efficiency using the less input to get the same output as well as less waste labour cost,
time, materials and quality focus is the important part. As an example –

- Learn Production just in time

- Defect prevention systems

Working system:

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 Cost of good sold
So, efficiency = ¿
Average Inventory

30000000
¿
6000000

¿ 0.5

¿ 50 %

5. Liquidity ratio:

It means short-term financial position of any organisation. Here short term means one year. This
ratio determined a company’s ability to pay short-term debt obligation this ratio helps to
company’s position of short-term asset and liabilities liquidity. Liquidity is converting system. It
is to convert asset into cash. To a Liquidity ratio has several types -

a) CURRENT RATIO:
It is calculated by all current assets divided all current liabilities. This ratio is simplest
liquidity ratio to calculate. Any company can find the current assets and current liability
from combine’s respective balance sheet.

b) QUICK RATIO:
Quick ratio and cash ratio refers respectively a company’s total Cash, all accounts
receivables, marketable securities has to added and divided by all current liabilities of a
company.

c) CASH RATIO:

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 Cash ratio determined all cash of a company and marketable securities has to address by
current liabilities. Liquidity ratio often use to like some assets in accompany find our

How comfortable a company paying things in the short terms –

Current Assets
Liquidity Ratio = ¿
Current Liabilities

18000 000
¿
35 00000

¿ 5.14 %

6. Debt structure:

It refers to a company’s liabilities, indicating to investors the maturity dates to corporate debts.
This debt structure concept comes from debt, which is a sum of a cash, which a borrower must
repay through periodic instalments. If a company takes more loan then company faces a risk.
Without free debt any company cannot established. Debt is to take any financial institution.

We also can find out the debt ratio by the following way –

Totl Liabilities
Debt Ratio = ¿
Total Assets

3900000
¿
18000000

¿ 0.216 %

7. Cost Structure:

It depends on necessary expenditures that must be made in order to run any business a
monetary value. Every factory of production has an associated cost. There are several cost are
exist in an organisation including labour cost, electricity cost, production cost, utilities cost and
other things. The cost vary during production. Depending cost a firm can ideas companies loss
and profit also. If a company spend according their production capacity like if fixed cost is 50
thousand on the contrary production 10 thousand. Again production cost 20 thousand fixed cost
50 thousand. If production cost were, raised fixed cost per unit would be lowed. Fixed cost are
always inversely related to the production. All cost are vary in production. How much
production need a firm according to that’s has to spend material, labor cost and so on.

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 8. Asset worth
It is a total asset of a company except all kinds’ liabilities. Running a high qualitied company, will
need high quality production. Production is a crucial part for an organization. When a company
would not deliver product on time, any dealers or customer will not gather that organization.
When a company would not deliver product on time, any dealers or customer will not gather
that organization. A company has to keep in mind all categories of raising production. Upper
definition all can vary to develop a production area. All long term and short term asset valuation
has to verified under profitability, liquidity, efficiency, cost.

¿ Assets
Asset Worth ¿
Net Worth

10 M
¿
6.7 M

¿ 1.49 %

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Question two is making a final recommendation about the customer on whether the firm is
worth investing in or not which is linked and depends on question no one.

RECOMMENDATION:

I have already accounted for devoted to investment in a firm, company or any financial institution.
Based on which a investor can decide whether he invest or not. Here investor also try to know whether
that firm is worth investing or not. An investor would know how much profit comes on his or her
investment. As an advisor, I had explained an ample of fundamental of analysis that is why an investor
can have decision about her investment. In previous question has shown several kinds of fundamental
analysis also known as ratios. Depending fundamental analysis an investor can determine if he or she
invest or not. That firm is appropriate or not also, ability to earn more profit and their competitor
position in the market all this could know by this fundamental analysis.

To know how much return have an investor can earn. An investor also can know how much ability to
make money that firm. An investor would invest in a company based on companies share prices. Which
an essential item for an investor and a company. Share price is to change any time due to a company’s
production or consuming. Every single day the particular companies share prices difficulties. A successful
trader always keeps an eye on another firm to compare profit, risk and sustain in market. When a
particular firm does not move keeping peace with everyone in business area, then other competitor
have merits of opportunities. All competitors keep in touch each other share prices rated. When a
company because of causes does share prices low. Then another company instantly sell that share in
high rated. An investor also is to know as regards of corporate governance in a firm. It is a criterion of
rules, practice and process of a firm. Corporate governance essentially involves balancing the interests
of a company’s stakeholder. Stakeholders keeps important rules in a firm. Stakeholders is a member
groups without whose support of the organization would cease to exist. A stakeholder can be an
individual, group of any firm or company. Who is impacted by the outcome of a project? There also has
to written a lot elements as regards financial analysis. Profitability, efficiency, debt, liquidity, cost, and
asset including these a company also an investor build a high profitability and low risk industry or firm.
Surely, an investor would try to invest returnable company than profit.

If a company Holder, Shareholder, CEO, Stakeholder not all kinds of company owner can use properly
those analysis in finance, they would not alleviate their risk and debt position. Through this fundamental
analysis an investor know a company’s condition to earn money, also a company and an investor can

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concept company’s position in the market .Fundamental analysis is a method of evaluating the intrinsic
value of an asset and analysing the factors that could influence its price in the future. By fundamental
calculating an in profitability ratio consist of two items which are sales on investment another is sales on
return. Sales on investment includes four metrics, which are gross profit margin, operating profit
margin, pre-tax margin, net profit margin. These items are comes out by a company’s income statement.
There company’s gross profit is to divide by sales revenue. Then operating profit margin comes by
operating profit divided net sales .Net profit sales is to calculate by net profit divided net sales. Now
what kind of concept can have through this metrics an investor as a recommendation?

Well, when a company want to compare with another company then owner wants to know companies
gross profit position. All companies intend to get high gross profit margin. How a company can have high
gross profit margin. When a company’s product is high, pricing then company would try to demand
premium. Besides a company’s product, cost would be lowed. When a company included with a superior
product, branding, exclusive technology .Brought about a firm can sell their product high prices. On the
contrary, lower costs can be happened economics of scale, standard perform of operational efficiency.
For this, a firm can earn best profit margin also can compare than other firms to sustain in the market. If
that firm is full with this action then an investor can invest this firm. In operating profit margin a firm
can understand, when a firms operating margin profit is increasing. Other side gross profit are same that
means companies can control operating cost very well. If it does inverse then a company could not
control operating cost. In net profit margin all sorts of expenses are deduct. Each firm compare with net
profit margin with other firm that does not expose whole story.

A company has to calculate all kinds of margin to choose and compare your company from another. To
be noticed, when a company compare than other company, they has to compare same sector. If your
company is a paints company, you have compare that categorize of business. A company has liquidity
term, which means how much company has short-term debt also comfortable to pay that debt. That is
why a company does not be bankrupted .sometimes it has noticed that company could not check
forcedly their liquidity term. Lack of poor checking a company could not gain their aim. All things has to
be noticed before investing in a company. Then a company has to analysis activity ratio, which manages
working capital and long term assets. Working capital is current assets and liabilities of a company. By
this working capital long-term assets a company increasing production. This ratio also known as
efficiency ratio, turnover ratio. When a ratio company complete operational activities efficiency then it
would be efficiency ratio. Off and on it also be asset utilization ratios ,brought about when a company
uses efficiently long term ,short term assets to produce more and more . How well a company
manages companies working capital, to know company management has to know about Inventory
Turnover Ratio which is calculated by cost of goods sold divided average inventory. For these turnover
ratio a company know how many times sells a product. Higher fast turnaround is batter for a company.
When a company can produce a plenty of products then profit would be increasing day by day. For
investing a company or firm wants to know company’s debt position. That’s why a company has not be
bankrupted.

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There are some ratio has by could know about their debt position. Liquidity ratio and solvency ratio also
known as debt ratio Under this company can ensure short term long term debt. Debt is a crucial side in
finance. Without debt company can’t operate. Controlling these debt position company has debt ratio.
Causing of these ratios company also pay those within few times. Separately a company can know how
much percentage debt in company’s assets, liabilities. A company’s debt position is low then company is
better to invest. Valuation ratio helps to an investor to know a company’s valuation means is that
companies good or bad to invest. When an investor invest in stock of a company, has to some financial
analysis. Under this some ratio has calculated to know a company’s financial condition and company’s
valuation. By earning per share a company can understand that companies stock is undervalued or
overvalued. EPS ratio can tell the room of a company has for increasing its existing dividend. Earnings
Per Share is significant and crucial tool for investors.

Earnings per Share of a firm should always be considered in relation to other companies in order to
make more informed and prudent investment decision. All categorized financial analysis has discussed
to easy an investor to select a comfortable company. When an investor positively perceives these
analyses and understand when a company flawlessly utilize this ratio they can approach their goal. By
which ratios company can raising their financial operations. After monitoring all assessment under an
advisor that investor would invest those companies which all are high calculating rated. Which aided to
help earn more profit than other company. That investor would comfortable to invest these types of
firm.

Eventually, an investor comes near to decision whether he would invest or not that particular firm. That
investor helped by those formula. If a firm intend to increase their profitability alleviate risk and their
solvency they can generate their fundamental analysis term from upper requirement. Now, it can be
said from upper statement if a firm is full of those requirement then an investor invest that firm. An
investor or company’s owner should to be knowledge the lower risk and the higher profit can make a
brightness future of a company.

CONCLUSION:

To sum up, from upper statement we can know an organization condition flawlessly through
fundamental analysis. An investor, who comes to an organization to invest, as an investor I have already
shown several types of analysis and rules-regulation with mathematically example. Through this
identification, an investor determined respective organization condition to invest. Before investing an
investor or any holder try to know companies condition of return from profit. That means how are able
to a company make money. I discussed a lot of analysis which sustain a company to earn fast also
reduce their liabilities term.

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 REFERENCES

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perspective page (15-23)
2. Andril Sedmiev, (2016), A world-class business system for creating successful business ideas,
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3. Donny Deutsch (with Catherine Whitney), (2006) The big Idea, perspective page – 102-107
4. Jeremy kourdi, (2003), Building customer trust and loyality, perspective page – 10, 11, 12
5. Particle Forsyth (2010), The best Assitant, perspective page – 44-47
6. Armstrong, M. AND Harrison, W.T (2008), Financial and Management Accounting, perspective
page – 62-67
7. Edwards, J.R (1989) London, Routledge, A History of Financial Accounting, Perspective page –
110-113
8. Honngren C.T. AND Harrison, W.T (2008), Financial and Managerial Accounting, Perspective
page – 61, 62
9. Needles, B.E. And CROSSON, S.V. (2011), Managerial Accounting Principles, Perspective page –
25-30
10. Collinge, S. AND Loughrar, M (2013), Financial Accounting for Dummics, perspective page – 71,
72, 73

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