Qualification - Higher National Diploma in Business (Level 5)
Unit Name - Advanced Management Accounting
Unit Number - Unit 14
Unit Level - Level 5
Assignment Title - Analyze the purpose for developing and presenting financial information
Learning Outcome 1: Analyze the purpose for developing and presenting financial information
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Assignment Brief: You are the Assistant Accountant of Fast Cars Limited, an automobile manufacturing company based in Sultanate of Oman.Your responsibility is to oversee the management accounting function for Fast Cars Limited and assist Mr. Chris Paul the Finance Manager in drawing up costs and advising on new and existing projects, as required.
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Requirement:
As the Assistant Accountant of Fast Cars Limited, you are required to prepare a report addressing to Financial Manager by,
Critically evaluating the purpose and presentation of financial information from the perspective of different stakeholders of Fast Cars Limited by addressing the reason for the development and appropriate presentation of financial information to support financial planning and decision-making.
Solution:
Introduction
Financial information is the recording of the financial transaction of the business and assessment of the financial position and performance of the business in a particular period. This report is being made by an assistant accountant addressing financial manager. In this report, the purpose and the presentation of the financial information from the perspectives of different stakeholders of Fast Car Limited's like suppliers, management, investors and employees will be analysed.
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Purpose of the financial information from the perspective of different stakeholders
The purpose of the financial information for Fast Cars Limited's management and board of members are listed below.
• To evaluate the performance of the business and assess how well they have been able to achieve the goals of the business.
• To evaluate the performance of different departments of the business.
• To evaluate the business financial capabilities to expand its business.
The purposes of the financial information for Fast Cars Limited's investors and potential investors in the market are listed below.
• To evaluate the risk and the return of the business.
• This financial information is also used to take any investment decision of the investors regarding the business (Bragg and Bragg, 2019).
The purpose of the financial information for Fast Cars Limited's suppliers is listed below.
• To evaluate whether the business is reliable for giving goods or service in credit.
The purpose of the financial information for Fast Cars Limited's employees is listed below.
• To evaluate the business financial profitability and position of the business for assessing their growth prospect and security in the business.
The purpose of the financial information for Fast Cars Limited's customers is listed below.
• To assess that the business will be able to supply goods and services constantly and adequately (Accounting-simplified.com, 2019).
The purpose of the financial information for Fast Cars Limited's competitors in the market is listed below.
• To compare its performance with Fast Cars Limited and build strategies to better the growth of it.
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Presentation of financial information from the perspective of different stakeholders
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In The Book of Fast Cars Limited
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Balance Sheet as on 31st December 2018
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Particulars
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Amount (OMR'000s)
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Assets
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|
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Current Assets
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|
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Cash & Cash Equivalents
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1000
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Account Receivables
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3000
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Closing Stock
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2500
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Pre-Paid Expenses And Other Current Assets
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300
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Time Deposits
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200
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Total Current Assets
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7000
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Noncurrent Assets
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|
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Land & Building (NBV)
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13000
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Machinery And Equipment (NBV)
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8700
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Motor Vehicles (NBV)
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5500
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Total Noncurrent Assets
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27200
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Total Assets
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34200
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Liabilities
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|
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Current Liabilities
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Account Payables
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4400
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Tax Payables
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500
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Bank Overdraft
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400
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Other Accrued Expenses Payable
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300
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Accrued Wages
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100
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Total Current Liabilities
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5700
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Noncurrent Liabilities
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|
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Long Term Debt
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3000
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Total Noncurrent Liabilities
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3000
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Total Liabilities
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8700
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Net Assets
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25500
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Equity
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|
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Additional Paid-In Capital
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3500
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Retained Earnings
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11800
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Common Stock
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10200
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Total Equity
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25500
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Total Liabilities And Equity
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34200
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Table 1: Balance Sheet Statement
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In The Book Of Fast Cars Limited
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Income Statement For The Year Ending 31st December 2018
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Particulars
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Amount (OMR'000s)
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Total Sales Revenue
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15000
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Cost of Goods Sold
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6400
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Gross Profit
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8600
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Expenses
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|
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Administration Expenses
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2200
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Distribution Expense
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1500
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Operating Profit
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4900
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Interest Expense
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500
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Profit Before Tax
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4400
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Tax Expenses
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900
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Profit After Tax
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3500
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Table 2: Income Statement
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Ratios
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Times/ percentage
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Profitability Ratios
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Percentage
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Gross Profit Margin
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57.33%
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Net Profit Margin
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23.33%
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Liquidity Ratios
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Times
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Current Ratio
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1.228070175
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Quick Ratio
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0.736842105
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Gearing Ratio
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Times
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Interest Coverage Ratio
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8.8
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Debt To Equity
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0.34
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Table 3: Financial Ratio
All these above tables are presentations of the financial information of Fast Cars Limited to the different stakeholders of Fast Cars Limited, and these are used by different shareholders for different purposes. Table 1 and Table 2 will be highly significant from every shareholder's perspectives. Table 3 ratio which also is important to the different stakeholders but some ratios will be more important for each stakeholder specially. For example, debt investors will be interested in profitability ratios and interest coverage ratio.
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Conclusion
In this report, different purposes of the different stakeholders for using financial information had been defined, and presentation of the financial information for the different stakeholders had been shown.