Name – Mg Ye Yint Nyi

Module Name – Financial Management

Email – yyn1710001@gmail.com
Ph.no – 09957212753
Batch – SFU-DFM-02-01

THE SCENARIO: 1

Basic Concept of Accounting

1. Accrual Concepts (Basic Concept)

Accrual is taking int o account or matching income and expenditure occurring period, whether
actual each is received or paid during the time or not.

2. Going Concern Concepts

This assumption infers that the business is going on steadily trading from year to year without
reducing its operation.

3. Consistency Concepts
It involves using unvarying accounting treatments from one accounting period to the next.

4. Prudence Concepts
Prudence is proper caution in measuring profit and income.
The two main aspects of this concepts are that:
-Income should not be anticipated and all possible losses should be provided for.
-The methods of valuation of an asset which gives the lesser value should always be chosen.
There are also other concepts of accounting and the above concepts that I mentioned are the
fundamental concepts of accounting.
Duality
Each item in a business has two accountancy aspects.
This means there will be affected on both aspects when you make business transaction. For
example, if you sell the assets on credit, there will be decreased in inventories and increased in
trade receivable.
Historical Cost
Each item has a cost. The value of an asset is determined by reference to its purchase price.
The Importance of double entry bookkeeping system

1. Easier to Find Inconsistencies

You can check debit and credit total amounts. We can know that the accounts are balanced if
debit and credit totals are equal. If they aren’t balanced, we can easily find inconsistencies in
transaction records.

2. Large Companies
Large organizations and businesses must use the double-entry accounting system because it will
minimize the chances of errors in accounting, and it will become easy for the authorities to evaluate
the records. Clear and unambiguous financial records are essential at the time of company
registration in Singapore, and double-entry accounting provides you with an efficient way of
maintaining your records.

3. Comprehensive Records
Double-entry accounting allows you to keep records of all types of transactions. As a result, every
penny is accounted for in this system, and hence, it is the most accurate way of bookkeeping.

4. Prevents Frauds

By using double entry bookkeeping system, we can minimize the errors in transaction records.
There are very few chances of a fraud happening in a double-entry accounting system. With a large
organization, it is expected that a great number of workers will be hired and given different
responsibilities.In an ordinary accounting system, it is quite easy for the workers to make some
changes in the records after embezzling money, if they have access to the records. Double-entry
accounting has inbuilt protocols to avoid such issues from happening in the first place.
(Tyteoh, 2022)
Financial Performance Analysis
An Interpretation of financial statements with ratios. There are five broad categories:

• Profitability
• Liquidity
• Efficiency
• Capital Structure
• Investment
There are also some ratios that can be used to calculate them.
The following ratios are used for calculating profitability of business.
● return on ordinary shareholders’ funds
Profit for the year less any preference dividend
( ROSF = × 100 )
Ordinary share capital+ Reserves
● return on capital employed
Operating Profit
(ROCE = × 100 )
Share Capital+ Reserves+ Non−current liabilities
● operating profit margin
Operating Profit
(Operating Profit Margin = ×100 )
Sales Revenue
● gross profit margin
Gross Profit
(Gross Proffit Margin = × 100 )
Sales Revenue

To calculate liquidity,
● current ratio
Current Asset
( Current Ratio =
Current Liabilities
)
● acid test ratio
Current Asset−Inventories
( Acid Test Ratio = )
Current Liabilities
For the efficiency,
● average inventories turnover period
Average inventories held
( Average Inventories Turnover Period = × 365 )
Cost of sales
● average settlement period for trade receivables
Average trade receivables
( Average settlement period for trade receivables = × 365 )
Credit sales revenue
 ● sales revenue to capital employed
Sales revenue
(Sales revenue to capital employed ratio =
Share capital + Reserves+ Non−current liabilities

We can use above ratios to calculate efficiency.

(Atrill, 2012)

The basic concept of Accounting is appropriate with some required information as well as the
important of double entry bookkeeping but the writing seems like ‘copy’ and don’t use the ‘I, We,
You’ in your writing of assignment because this topic is based on the theory concepts and you need
to consider by combining the case – Myanmar new star. In the explanation of financial performance
measurement of Myanmar new star, you should mention the information about financial analysis
with benefits and drawbacks rather than the description of ratios formulas.

Statement of Cash Flow for Myanmar Star Co.Ltd for 2022

Cash Flow from Operating Activities MMK’000

Operating Profit 6,400,000

Adjustment for Non-cash item: (wrong information)

Depreciation of Land and Building 100,000 (xxxxxx)
400,000 (xxxxxx) 500,000
Depreciation of Plant and Machinery
6,900,000

Changes in Working Capital:

Decrease in Inventories 100,000
Increase in Trade receivable (1,000,000)
(100,000) (1,000,000)
Decrease in Trade payable
Cash generated from Operating Activities 5,900,000
(-) Interest Paid (400,000)
(-) Tax paid (wrong information) (1,600,000) (2,000,000)
Cash Inflow from Operating Activities 3,900,000
Investing Activities:
Payment for purchase of Land & Building (2,200,000)
Payment for purchase of Plant & Machinery (1,900,000)
Cash Outflow from Investing Activities (4,100,000)
Financing Activities:
Increase in Loan 2,000,000
Dividend Paid (1,800,000)
Cash Inflow from Financing Activities 200,000
Increase in Cash & Cash Equivalent 1,500,000
Opening Balance of Cash & Cash Equivalent 400,000

Closing Balance of Cash & Cash Equivalent 1,900,000

Myanmar Star Co.Ltd

Ratio Formula 2021 2022

(a) Gross Profit Margin Gross Profit 7700000 10600000
× 100 ×100=¿44.5% ×100=¿51.2%
Sales Revenue 17300000 20700000

(b) Net Profit Margin Net Profit 3600000 6000000

× 100 ×100=¿20.8% ×100=¿28.9%
xxxxxxxxxxxxxxxx Sales Revenue 17300000 20700000
x
(c) Expense to Sales Expense 4200000 4600000
× 100 ×100=¿24.2% ×100=¿22.2%
ratio Sales Revenue 17300000 20700000

(d) Sales to Capital Sales 17300000 20700000

=¿1.4 times =¿1.5 times
Employed Capital Employed 12000000 14000000

(e) Receivable Trade Receivable 1600000 2600000

× 365 ×365=¿34 days ×365=46 days
Collection Period Revenue 17300000 20700000

(f) Payable Payment Trade Payable 3800000 3700000

×365 × 365=¿145 days ×365=¿134 days
Period Cost of Sales 9600000 10100000

(g) Current Ratio Current Asset 4500000 6900000

=¿ 1.1 : 1 =¿ 1.5 : 1
Current Liability 4200000 4500000

(h) Quick Ratio Current Asset−Inventory 2000000 4500000

= 0.5 : 1 =1 : 1
Current Liability 4200000 4500000

(i) Return on Capital Operating Profit 3800000 6400000

× 100 ×100=¿31.6% ×100=¿45.7%
Employed Capital Employed 12000000 14000000
(j) Return on Equity Profit after Tax 2800000 4400000
×100 ×100 =21.5% ×100 =28.2%
Equity 13000000 15600000

(k) Gearing Ratio Debt 2000000 4000000

× 100 ×100 =15.3% ×100 =25.6%
Equity 13000000 15600000

(l) Interest Cover Profit before Intrest 3800000 6400000

= 19 times = 16 times
Intrest 200000 400000

The Net Profit Margin of Myanmar Star Co.Ltd is greater in 2022 in the comparison. This shows
that the company is more profitable, efficient and flexible. We can also see that ROE ratio in
2022 is also higher than in 2021. It is good for the company because it shows how much
company is earning for each of the shareholders’ investment. But the company takes a bit risk
because we can see that gearing ratio in 2022 is greater than in 2021 and the company should
beware about it. Even though receivable collection period is higher, payable payment period in
2022 is lower than in 2022 and it shows that the company has more efficient in 2022 than in
2021.

THE SCENARIO: 2

NPV for Project A

Year Cash Flow Discount factor Present value of Cash flow

£ K=20% £
1 480000 0.833 399840

2 420000 0.694 291480

3 610000 0.579 353190

4 450000 0.482 216900

5 345000 0.404 139380

 1400790

1200000
Less initial outlay

Wrong calculation 200790

Net present value

NPV for Project B

Year Cash flow Discount factor Present value of Cash flow

£ K=20% £
1 430000 0.833 358190

2 400000 0.694 277600

3 800000 0.579 463200

4 700000 0.482 337400

5 530000 0.404 214120

1650510

Less initial outlay 1300000

 Wrong Calculation Net present value 350510

The more desirable project is Project B with higher NPV which can generate the maximum of
shareholders’ wealth. Following the NPV’s description, we have to choose the project with the
higher NPV although two or more projects have positive NPV.
 The importance of Financial management in organizations
The businesses exist to make money for their owner o shareholders. Finance is intimately
woven into any aspect of the business that involves the payment or receipt of money in the
future. The finance function within a business exists to help managers to manage for survival,
success, sustainable growth. Managers can expect their company’s share price to respond
quickly to the decision they make. Good decision will result in higher stock price. Bad decisions
will result in lower stock price. To make a successful business, we also need to have a good
financial management too. With proper financial management, a company is able to divert its
funds to save investments. A financial manager invests the company’s funds in profitable assets
and activities providing it with financial stability and security. Financial management can also
reduce risks and optimize the capital that a company has in hand. Financial managers employ
capital budgeting techniques to evaluate the feasibility and the risk of undertaking any
investment before a company puts their money in any big and long-term project. Financial
analytics and tools are also used by financial managers to decide the volatility and risk
associated with any investment. Financial management helps to take good financial decision in
the business. Financial decision will affect the entire business operation of the concern. Because
there is a direct relationship with various department functions such as marketing. Production
personnel , etc.
(Atrill, 2012)

Reference Lists

www.tyteoh.com. 2022. Tyteoh. [online] Available at: <https://www.tyteoh.com/businesses-use-

double-entry-accounting#:~:text=Double%2Dentry%20accounting%20allows%20you,most
%20accurate%20way%20of%20bookkeeping.> [Accessed 14 July 2022].

Atrill, P., 2012. Financial management for decision makers. 6th ed. Harlow, England: Peter Atrill, pp.74-
81.

Atrill, P., 2012. Financial Management for Decision Makers. 6th ed. Harlow, England: Peter Atrill, pp.2-
20.

Myint, H., 2020 Financial Management (Lecture), Module 1: Financial Management. Strategy First
University. 11 May