Business Finance and Economics-3

Business Finance and Economics (ST-3) Introduction Financial activities of the company are the most important part of the entire business. The economic factors that impact on the business are also important to evaluate. The present report has developed to evaluate the significant financial activities of any company along with the economic factors either micro or macro that have a larger impact on its financial process. To analyze these things, XYZ Plc has selected and its budget, accounting, and different financial statements have analyzed to know which year is the best for the company and how it needs to make better decisions for the financial improvement. Task 1: Influence of Micro and Macro economics Business economics relies on the two main analyses. The first analysis is known as micro-economics and the other is known as macro-economics. Both of these analyses have an impact on the overall economic decisions and development of the company. Microeconomics Microeconomics is related to the internal analysis of the organization in which it assesses the individual behavior of employees, stakeholders, customers, and shareholders. It is necessary for every company to analyze the behavior of its internal environment to know how they affect and organize the culture of the entire environment. XYZ Plc’s economic discipline has affected by its internal human resource and it can be analyzing through the microeconomics of the company.  Employees : The main organizational culture of the company relies on the employees’ collaboration, working experience, communication, and cooperation. XYZ Plc has effective organizational culture as the employees are cooperating and working as a team within the company which makes the company possible to achieve its goals.  Shareholders: These are the members who mostly hold most of the company’s control as they have majority of stake. No matter if the shareholder has small share, it has influence on the company through its shareholders’ rights.  Customers: The most important part of the present business environment are customers. The growth and development of the company relies on customers. They make the progress for the company. The XYZ Plc’s products are in demand of the customers and can improve relative profitability for the company.  Suppliers: The raw material for the company has been given by suppliers to organize it and manufacture for the company. They are the key players who provide less expensive material than the market.  Competitors: The business does not achieve its goals, unless it does not have any competition. The competitors of XYZ Plc help the company to get better product and services and compete the market to get more market share. They have influence over the company’s entire process. Without having a competitive environment the companies cannot make progress. Macroeconomics Likewise, microeconomics, macroeconomics also has larger impact on the business activities of the company. However, the only difference between microeconomics and macroeconomics is that, it analyzes the external environment of the company. The four important external factors that impact the company are:

 Political factors: It includes the political stability or instability of the country where the company is working. Currently, it is important to analyze the UK’s political stability. However, it has evaluated that UK has stable political appearance in the world. It is one of the countries where governments do not change abruptly or without completing their tenure. Therefore, the working capacity is better than other countries. Business have more opportunity to grow.  Economic Factors: The economic factors of UK have helped the companies to grow the business. Though the present inflation and economic recession has made it difficult for the companies to survive or retain their position. The XYZ Plc has get the 2.3% of its interest rates on the investment. The change of this interest rate has affected its overall environment.  Social Factors: In UK, now people have become more technology-oriented. Companies like XYZ Plc are encouraging to cater the needs of the customers who make the society and contribute to the society. The corporate social responsibility has become an essential part of the businesses. So, customers get attach to the companies that have CSR operations.  Technological Factors: After covid-19, most of the companies have shifted their services to the online platforms. XYZ Plc is already working through the technology frameworks, however, it needs to imply technological change quickly to meet the present changing needs of the market and customers. Task 2 The Role of Accounting The most important role of the accounting in a company is to control the financial activities of the company. It depends on the company’s size, the process ranges from data collection, data entry, recording, organizing, and making reports about the financial operations. It helps in providing the financial information that shares to every stakeholder of the company to attracts more investors, creditors, and management. The records have been conducted through statements and documents that are updated regularly. Accounting is the most important operations of the entire company, creating one mistake, may lead the company towards huge loss. XYZ Plc also has efficient accounting operation that relies on the following important processes:  Identify transactions: The main process of the accounting is to identify the transactions. Throughout the accounting cycle, the company makes several transactions. Identifying them and keeping the record of these transactions is highly important so that no payment should be skipped or if any transaction has missed by the clients, the company may claim for that.  Recording: The accounting must consider the documenting of the organizational revenues, transaction, and other expenditure processes. This recording helps the company to compile the information and evaluate the business conditions. Before technology introduces to the business, the financial records were kept in the files through manual process. The risks of mistakes were higher. However, the technology has made it easier to keep the financial records and no one can make false transaction or other reports. XYZ Plc uses cloud computing to keep the financial records and enhances its safety.  Generate reports: Once the information about the financial operations have been done, the next important thing is the generate reports to make financial decision easily. The reports may generate by involving several statements such as cash flow statement. These reports help the company’s finance department to summarize the transactional processes of the organization. In XYZ Plc, financial teams create these reports to analyze the company’s

OperatingProfit Margin ( 2020 )= 15 2750 Operating Profit Margin ( 2020 )= 0.005 Inventory Days ( 2019 ) = Average Inventoriesheld Cost of Sales ∗ 365 Inventory Days ( 2019 ) = 350 1850 ∗ 365 Inventory Days ( 2019 ) = 69.05 Days Inventory Days ( 2020 ) = Average Inventoriesheld Cost of Sales ∗ 365 Inventory Days ( 2020 ) = 350 + 410 2 2375 ∗ 365 Inventory Days ( 2020 ) = 380 2375 ∗ 365 Inventory Days ( 2020 ) = 58.4 Days Payable Period ( 2019 ) = Average Trade Payables Credit Purchases ∗ 365 Payable Period ( 2019 ) = 210 + 165 2 1850 ∗ 365 Payable Period ( 2019 ) = 187.5 1850 ∗ 365 Payable Period ( 2019 ) = 37 Days Payable Period ( 2020 ) = AverageTrade Payables Credit Purchases ∗ 365

Payable Period ( 2020 ) = 165 + 200 2 2375 ∗ 365 Payable Period ( 2020 ) = 182.5 2375 ∗ 365 Payable Period ( 2020 ) = 28 Days Recievable Period ( 2019 ) = Average Trade Recievables Credit Sales ∗ 365 Recievable Period ( 2019 ) = 250 + 240 2 2500 ∗ 365 Recievable Period ( 2019 ) = 245 2500 ∗ 365 Recievable Period ( 2019 ) = 35.77 Days Recievable Period ( 2020 ) = Average Trade Recievables Credit Purchases ∗ 365 Recievable Period ( 2020 ) = 240 + 280 2 2750 ∗ 365 Recievable Period ( 2020 ) = 260 2750 ∗ 365 Recievable Period ( 2020 ) = 34.51 Days Acid Test Ratio ( 2019 ) = Current Assets ( excludinginventory ) Current Liabilities Acid Test Ratio ( 2019 ) = 595 − 350 190 Acid Test Ratio ( 2019 ) = 1.29

The major problem of progress happens in 2020 is due to the Covid-19 when every business was shut down or hardly survive. Task 4 Management accounting Likewise, other departments and activities of the company, it is also important to manage the accounting activities of the company. The management of accounting has aimed at helping the organization and assist the other departments to enhance their working process and improve the quality through investing more wherever it is required or reduce the excessive spending to create the balance in the organization. The management of accounting helps the company to have control over the financial activities, plan future developments, and also make influential decisions that contribute in improving profits and revenues for the future. Controlling The most important part of managing accounting is the control over financial activities. The company must have frequent overlook on the expenses and their spending according to the company’s requirements. Controlling helps in analyzing the spending of every department and also evaluate the over charging or excessive cost that spend on any activity without any reason or concern. At that time, the controlling identifies the issue and if any fraudulent activities are happening, it also helps company to prevent from these suspicious activities. However, controlling excessive spending of the money helps the company to manage and create a balance in its overall financial process. Shareholders require a proper evaluation framework of the company’s expenses, so controlling keeps the record and maintain the trust level of shareholders over the company. XYZ Plc is also taking advantage from the controlling process of management accounting to create a balance in its financial resources and prevent the company from excessive expenses. Planning It is the most vital part of the accounting management process. Planning always saves time and money for the companies. Without planning, companies cannot achieve their goals and results in the collapse of the company. Financial planning is highly important for companies to analyze where and in which area, how much expenses are required, so the company may reduce the risks of wasting the money. In this process, accounting team takes necessary initiatives to plan everything according to the market trend, company’s requirement for production and services process, and other operations that need certain budget for everything. Once the planning has made the company save and control the budget in more effective manner. XYZ Plc’s accounting department is working effectively as a team to assess the expenses of every operation for the company and then allocate certain budget so that the company may not suffer from less expenses or shortage of capital resources issue. Decision-making The last contribution that management accounting has made for the company is to make powerful and successful decisions about the future financial resource planning. The above two processes persuade decisions that are necessary for the company to made before implementing anything. XYZ Plc is also aware of the significant of decision-making process. Therefore, it develops a proper assessment about the financial activities of the company, analyze previous flaws in decisions, and make more appropriate decisions and planning about the financial activities and keeping the financial records of the company to make it more sustainable and improve its current position in the market.

Conclusion The above research report of the XYZ Plc has concluded that financial activities, decisions, budgeting, and accounting all of these are highly important for a company. The two years of financial processes of the company has analyzed to know which year creates more revenue for the company compares to the other. However, it has analyzed that 2019 has shown better results than 2020. Furthermore, the economic factors impact has also evaluated in which social issues like pandemic has seemed badly influenced the company. The financial position of the company was affected in 2020 due to the pandemic. All of the above assessment helps the company to make better future decision about the financial activities of the company. References Altig, D., Baker, S., Barrero, J.M., Bloom, N., Bunn, P., Chen, S., Davis, S.J., Leather, J., Meyer, B., Mihaylov, E., Mizen, P., Parker, N., Renault, T., Smietanka, P. and Thwaites, G. (2020). Economic Uncertainty Before and During the COVID-19 Pandemic. Journal of Public Economics , 191(104274), p.104274. doi:https://doi.org/10.1016/j.jpubeco.2020.104274. Banks, J., Karjalainen, H. and Propper, C. (2020). Recessions and Health: The Long‐Term Health Consequences of Responses to the Coronavirus*. Fiscal Studies , 41(2), pp.337–344. doi:https://doi.org/10.1111/1475-5890.12230. Comelli, M., Féniès, P. and Tchernev, N. (2008). A combined financial and physical flows evaluation for logistic process and tactical production planning: Application in a company supply chain. International Journal of Production Economics , 112(1), pp.77–95. doi:https://doi.org/10.1016/j.ijpe.2007.01.012. Coleman, L. (2010). Losses from Failure of Stakeholder Sensitive Processes: Financial Consequences for Large US Companies from Breakdowns in Product, Environmental, and Accounting Standards. Journal of Business Ethics , 98(2), pp.247–258. doi:https://doi.org/10.1007/s10551-010-0544-8. Correia, C., Flynn, D., Uliana, E., Wormald, M. and Dillon, J. (2015). Financial management . Lansdowne: Juta. Coulthard, P., Thomson, P., Dave, M., Coulthard, F.P., Seoudi, N. and Hill, M. (2020). The COVID-19 pandemic and dentistry: the clinical, legal and economic consequences - part 2: consequences of withholding dental care. British Dental Journal , [online] 229(12), pp.801– 805. doi:https://doi.org/10.1038/s41415-020-2406-9.