MODULE PGBM01 FINANCIAL MANAGEMENT (1)

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1 MODULE PGBM01 FINANCIAL MANAGEMENT & CONTROL Submitted By Student Name: Student No: Submission Date:

2 Contents Part A Analysis of Financial Reports ........................................................................................................... 3 Task1A .................................................................................................................................................... 3 i. Ratio Analysis ................................................................................................................................... 3 Task1B ..................................................................................................................................................... 3 Part B ........................................................................................................................................................... 3 Task 2A: Investment Appraisal Techniques ............................................................................................. 3 Task 2B: Benefits and Limitations Investment Appraisal Techniques ..................................................... 3 Task 2C: Factors to Consider in Choosing Between Making or Buying Blue-drums .............................. 3 Task 2D: Factors to Consider for Suitable Sources of Finance ................................................................ 3 Task 3A: Impact of Budgeting Process on Potential Projects and the Relationship with Objectives and Strategic Plans ......................................................................................................................................... 3 Task 3B .................................................................................................................................................... 3

3 Part A Analysis of Financial Reports Task1A i. Ratio Analysis Profitability Ratios Investors use profitability ratios to gauge whether the firm is profitable or not. Year ( All numbers in thousands) 2020 2021 2022 Revenue € 50,724,000 € 52,444,000 € 60,073,000 Net Income € 5,581,000 € 6,049,000 € 7,642,000 EBIT € 8,733,000 € 9,047,000 € 11,155,000 Gross Profit € 22,040,000 € 22,185,000 € 24,167,000 Average Assets € 67,659,000 € 75,095,000 € 77,821,000 Average Equity € 21,701,000 € 19,746,000 € 21,701,000 Total Capitalization € 15,266,000 € 17,107,000 € 19,021,000 Cashflow From Operation € 9,058,000 € 7,972,000 € 7,282,000 Profitability Ratios Formula 2020 2021 2022 Gross Margin Gross Profit / Revenue 43.45 % 42.30 % 40.23 % Operating Margin EBIT/Revenue 17.22 % 17.25 % 18.57 % Return on Assets Net Income/Assets 8.25% 8.06% 9.82% Return on Equity Net Income/Equity 25.72 % 30.63 % 35.21 % Return on invested capital (ROIC) Net Profit/Total Capital 36.56 % 35.36 % 40.18 % Cashflow Margin Cashflow From Operation/Revenue 17.86 % 15.20 % 12.12 % Net Profit Margin Profit (after tax) / Revenue 11.00 % 11.53 % 12.72 %

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4 1. Gross Margin The gross profit margin dropped from 42.3% to 40.23% between 2021 and 2022. COGS increased as a proportion of revenues, showing a negative trend for the organization. If this continues, Unilever may struggle to pay operating expenses and make a profit ( Rahman, 2017). Unilever may reverse this trend by minimizing supply chain costs, renegotiating supplier conditions, and changing product pricing to maintain a healthy gross margin. 2. Operating Margin Unilever's operating Margin rose from 17.25% to 18.57%. Unilever controlled operating expenses better in the second year. This positive trend has boosted the company's primary operations. Unilever must cut costs and raise productivity to retain its profit margin. Regularly reviewing and optimizing internal processes may save costs and increase profitability. 3. Return on Asset Unilever's assets were more productive in 2022, with ROA rising from 8.06% to 9.82%. Net profit margin and operational efficiency boosted this. To boost ROA, Unilever should concentrate on assets with higher returns, evaluate its present holdings, and sell underperforming ones. 4. Return on Equity Unilever increased its return on equity from 30.63% in 2021 to 35.21% in 2022. Revenues increased because the corporation effectively used shareholder equity. Higher net profit margin and asset utilization explain this. To sustain its return on equity (ROE), Unilever must focus on net income growth and capital structure. Careful debt and equity management may boost the company's ROE sustainably. 5. Return on Invested Capital (ROIC)

5 Unilever increased ROIC from 35.36% in 2021 to 40.18% in 2022. The company's shareholder returns should improve. To maintain this ROIC rise, Unilever must focus on high- return projects and evaluate past investments (Seo and Soh, 2019). Reinvesting in promising sectors may boost ROIC for the company. 6. Cashflow Margin For Unilever, revenues fell from 15.20% in 2021 to 12.12% in 2022. Unilever's 2022 cash flow was lower as a proportion of sales. The company may struggle to reinvest in growth and meet its financial obligations ( Lu and Yu, 2020). Working capital management, inventory control, and fast customer collections may help Unilever boost its cash flow margin. 7. Net Profit Margin Net profit margin rose from 11.53% in 2021 to 12.72% in 2022. Unilever's earnings increased after taxes and interest. To sustain its net profit margin, Unilever must decrease costs, streamline operations, and raise sales. Unilever's profitability indices have improved, indicating good management and increased profits. Management should emphasize reducing expenditures, optimizing resources, and allocating capital to boost profitability. Investors should not hesitate to invest in the firm since they will get a nice return. Liquidity Ratios The liquidity ratios evaluate a company's ability to meet short-term financial obligations. The metric is useful in determining if the current assets are enough to cover current liabilities (Banerjee and Mio, 2018). The three common liquidity ratios are current, quick, and operational cash flow. The table below represents the calculation of the three ratios. Year ( All numbers in 2020 2021 2022

6 thousands) Current Assets € 16,157,000 € 17,401,000 € 19,157,000 Inventory € 4,462,000 € 4,683,000 € 5,931,000 Net Cash Flow from Operation Activities € 9,058,000 € 7,972,000 € 7,282,000 Current Liabilities € 20,592,000 € 24,778,000 € 25,427,000 Liquidity Ratio Formula 202 0 202 1 202 2 Current Ratio Current Assets/Current Liabilities 0.78 0.70 0.75 Quick Ratio (Current Assets-Inventory)/ Current Liability 0.57 0.51 0.52 Operation cash flow ratio Cash flow from operation/Current Liability 0.44 0.32 0.29 1. Current Ratio Unilever increased its current ratio from 0.70 in 2021 to 0.75 in 2022. The corporation had a ratio below 1 in both years, indicating it had trouble satisfying short-term commitments. Unilever's current ratio may improve by increasing current assets or lowering current liabilities ( Nur'aidawati, 2018). Improved inventory management, faster accounts receivable collection, and better supplier payment terms may achieve this. Short-term finance may help the company enhance liquidity. 2. Quick Ratio The quick ratio removes inventory value, making it a stricter liquidity gauge than the current ratio. The fast ratio for Unilever increased from 0.51 in 2021 to 0.52 in 2022. This ratio was below 1, suggesting that Unilever cannot satisfy its short-term obligations ( Suryanengsih

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7 and Kharisma, 2020). That firm should grow cash and cash equivalents to boost this ratio. The corporation should also borrow slowly. 3. Operation cash flow ratio Operating cash flow determines the company's short-term commitments. 2021's ratio was 0.32, and 2022's was 0.29. Like the previous two ratios, these low values imply that operating cash flow is insufficient to meet short-term commitments. To maximize cash flow, Unilever should improve operational efficiency. Based on these liquidity ratios, management should prioritize current assets and delay borrowing. Shareholders should collaborate with management to improve liquidity. Finally, Unilever's poor liquidity ratio should caution creditors. Asset Utilization Ratios Asset utilization ratios are useful when gauging the company's effectiveness in using assets to generate revenues. Common asset utilization ratios include Asset Turnover, Inventory Turnover, and Fixed Assets Turnover ratios. The calculation is presented below Year ( All numbers in thousands) 2020 2021 2022 Revenue € 50,724,000 € 52,444,000 € 60,073,000 Average Assets € 67,659,000 € 75,095,000 € 77,821,000 Inventories € 4,462,000 € 4,683,000 € 5,931,000 Cost of Goods € 28,684,000 € 30,259,000 € 35,906,000 Fixed Assets € 51,502,000 € 57,694,000 € 58,664,000

8 Efficiency Ratios Formula 2020 2021 2022 Asset Turnover Ratio Revenue/Assets 0.75 0.70 0.77 Inventory Turnover Ratio Cost of Goods/Inventory 6.43 6.46 6.05 Fixed Asset Turnover Ratio Revenue/Fixed Assets 0.98 0.91 1.02 1. Asset Turnover ratio Unilever reported a slight increase in the Asset Turnover ratio from 0.70 in 2021 to 0.77 in 2022. The rise indicates the effective use of its assets in generating revenues. The management should focus on streamlining operations, improving production efficiency, and exploring new markets to increase further . 2. Inventory Turnover ratio The regularity with which things are sold and restocked shows how successfully a company manages its stock. Stock management improves ratios. Inventory turnover fell from 6.46 in 2021 to 6.05 in 2022. The declining ratio indicates that Unilever keeps inventories longer, resulting in tied capital and holding costs. It also suggests the corporation is not accurately predicting product demand. To enhance this ratio, the organization could improve inventory management. 3. Fixed Assets Turnover ratio The fixed Assets Turnover ratio measures how the company effectively utilizes its fixed assets in generating sales. The company reported an increase in fixed asset turnover ratio from 0.91 in 2021 to 1.02 in 2022 ( Tissen and Sneidere, R2019). The increase signifies that Unilever is effectively its fixed asset for generating revenues. To improve this ratio further, the company should regularly maintain fixed assets to improve efficiency. Gearing Ratios

9 Investors use these ratios to determine a company's financial leverage. The common gearing ratios include debt-to-equity ratio, Debt ratio, and Times Interest Earned. The calculation is reported below: Year ( All numbers in thousands) 2020 2021 2022 Assets € 77,821,000 € 75,095,000 € 77,821 Total Debt € 50,004,000 € 55,349,000 € 56,120,000 Equity € 17,655,000 € 19,746,000 € 21,701,000 EBIT € 8,733,000 € 9,047,000 € 11,155,000 Interest Expense € 737,000 € 491,000 € 818,000 Gearing Ratio Formula 2020 2021 2022 Debt-to-Equity Total Debt/Equity 2.83 2.80 2.59 Debt Ratio Total Debt/Assets 0.64 0.74 0.72 Times Interest Earned EBIT/Interest Expense 11.85 18.43 13.64 1. Debt-to-Equity The debt-to-equity ratio measures the proportion of debt to equity used to finance the company's assets. There was a slight decline in Debt-to-Equity from 2.80 in 2021 to 2.59 in 2022. The decline indicates that Unilever reduced its reliance on debt (Maulita and Tania, 2018). The company should consider the cost of debt and seek alternative financing options. 2. Debt Ratio The debt ratio decreased from 0.74 in 2021 to 0.72 in 2022, indicating that Unilever has effectively managed its debt burden. The company should align the debt level with the company's overall strategy. 3. Times Interest Earned (Interest Coverage Ratio)

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10 The interest Coverage Ratio decreased from 18.43 in 2021 to 13.64 in 2024. This indicates that Unilever's ability to cover its interest expenses has declined. If Unilever wants to raise its EBIT, it has to prioritize increasing its profitability and operational efficiency. The company's capacity to pay interest on debts will improve as revenues rise. Investment Ratios These ratios measure what the investors stand to gain from their investments. Year ( All numbers in thousands) 2021 2022 Net income € 6,049,000 € 7,642,000 Capital € 17,107,000 € 19,021,000 Current Assets € 17,401,000 € 19,157,000 Inventory € 4,683,000 € 5,931,000 Year Formula 2021 2022 Return on Investment Net Income / Total Capital Employed 35.36% 40.18% Working Notes current assets – inventory € 12,718,000 € 13,226,000 1. Return on Investment Unilever reported an increase in Return on Investment from 35.36% in 2021 to 40.18% in 2022. This increase indicates that investors will get more on their investments. Unilever's performance is strong. 2. Working Notes

11 Working notes of Unilever increased from €12,718,000,000 in 2021 to 13,226,000,000 in 2022. ii. DuPont Analysis model Year 2021 2022 ROE Net Income/Equity 30.63 % 35.21% Reconstructed ROE Net Income/Sales x Sales/Asset x Assets/Equity ROE Profit Margin x Asset Turnover X Financial Leverage 2021 11.53% X 0.70 X 380% 30.63 % 2022 12.72% X 0.77 X 359% 35.21 % The table above resulted from an increase in profit margin from 11.53% in 2021 to 12.72% in 2022 and an increase in Asset Turnover from 0.70 in 2021 to 0.77 in 2022. Task1B Breakeven of sales in unit Breakeven Sales in Units: Breakeven Sales (in units) = Total Fixed Costs / (Sales Revenue per unit - Direct Costs per unit) = €160M/(€10M-6M) Breakeven of sales in cash Breakeven Sales (in cash) = Breakeven Sales (in units) * Sales Revenue per unit Breakeven Sales (in cash) = 40 Units X 10M

12 =400M = 400, 000 € 400,000 (All values in thousands) Contribution Margin Ratio Contribution Margin Ratio = (Sales Revenue per unit - Direct Costs per unit) / Sales Revenue per unit Contribution Margin Ratio = (€10,000,000 - €6,000,000) / €10,000,000 =0.4 or 40% Operating Leverage Operating Leverage = 0.4 / (1 - (€160,000,000 / (70,000,000 * €10,000,000))) Operating Leverage = 0.4 / (1 - (€160,000,000 / €700,000,000)) Operating Leverage = 0.4 / (1 - 0.22857) Operating Leverage ≈ 0.5575 or 55.75% Discussion Break-Even Point At the breakeven threshold, a business's entire income equals its total expenses, and the firm makes no money. The minimum number of units required to break even at a cash price of €400,000 is 40 ( Jastrzebski and Geras, 2020). The corporation would profit for orders above 40 units or €400,000,000 in cash, but losses would be incurred for orders under this threshold. Contribution Margin Ratio The contribution margin ratio measures how much each euro earned in sales goes toward defraying fixed expenses and turning a profit. Because of this, €0.40 of every €1 in sales is

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13 available to pay for fixed expenses and contribute to profit, making the contribution margin ratio 40%. Operating Leverage A company's operational leverage measures how its operating income (EBIT) responds to changes in sales revenue. Increased operational leverage magnifies the effect of a change in sales volume by the same factor (Younas and Sarmad, 2020). If real sales volume increased by 10% (to 70M units), operating income would rise by 5.575% (given the current operating leverage of 55.75%). Impact on Profitability Ratio A company's operational leverage measures how its operating income (EBIT) responds to changes in sales revenue. Increased operational leverage magnifies the effect of a change in sales volume by the same factor. If real sales volume increased by 10% (to 70M units), operating income would rise by 5.575% (given the current operating leverage of 55.75%). Part B Task 2A: Investment Appraisal Techniques a. Payback Period Year Personal Care Cashflow(€M ) Cumulative Cash Flows 0 -600 -600 1 300 -300 2 250 -50 3 200 150 4 150 300 5 100 400

14 6 95 495 PBP = Minimum year + Amount to be recovered/maximum year =2 +50/200 = 2.25 years Year Home Care Cashflow(€ M) Cumulati ve Cash Flows 0 -600 -600 1 95 -505 2 100 -405 3 150 -255 4 200 -55 5 250 195 6 300 495 PBP = Minimum year + Amount to be recovered/ maximum year = 4+ (55/250) = 4. 22 years Based on the calculation above, personal care is the best project because it has less payback than home care. Hence, personal care represents a less risky project. b. The Discounted Payback Period Year Personal Care Cashflow(€M) PVIF (8%) PV Cumulativ e Cash Flows 0 -600 1 - 600.00 -600.00 1 300 0.9259 277.77 -322.23 2 250 0.8573 214.33 -107.91

15 3 200 0.7938 158.76 50.86 4 150 0.735 110.25 161.11 5 100 0.6806 68.06 229.17 6 95 0.6302 59.87 289.03 Discounted PBP = Minimum year + Amount to be recovered/ PV of CFAT of maximum year =2+(107.91/158.76) =2.68 years Year Home Care Cash flow(€M) PVIF (8%) PV Cumulative Cash Flows 0 -600 1 -600 -600.00 1 95 0.9259 87.9605 -512.04 2 100 0.8573 85.73 -426.31 3 150 0.7938 119.07 -307.24 4 200 0.735 147 -160.24 5 250 0.6806 170.15 9.91 6 300 0.6302 189.06 198.97 Discounted PBP = Minimum year + Amount to be recovered/ PV of CFAT of maximum year =4 +(160.24/170.15) =4.94 years Based on the calculation above, personal care is the best project because it has a lower discounted payback period than home care. Hence, personal care represents a less risky project. c. The Accounting Rate of Return. For Both Machines ARR=Average Profit/Average Investment Depreciation = (Cost – Salvage/Scrap Value)/ Life of the Asset = (600-60)/6 =90M

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16 Depreciation= 90x6 Depreciation=540M Total Annual revenue= 300+250+200+150+100+95 =1095M Profit = 1095-540 =555M Average Profit = 555/6 =92.5M Average investment= (600+60)/2 =330M ARR=92.5/330 =28.03% ARR cannot determine the best project here because they had the same total cash flow and residual value. Therefore, they have equal ARR. d. The Net Present Value Year Personal Care Cashflow(€ M) PVIF (8%) PV 0 -600 1 -600.00 1 300 0.9259 277.77 2 250 0.8573 214.33 3 200 0.7938 158.76 4 150 0.735 110.25 5 100 0.6806 68.06 6 95 0.6302 59.87 NPV 289.03

17 Year Home Care Cashflow(€ M) PVIF (8%) PV 0 -600 1 -600 1 95 0.925 9 87.960 5 2 100 0.857 3 85.73 3 150 0.793 8 119.07 4 200 0.735 147 5 250 0.680 6 170.15 6 300 0.630 2 189.06 NPV 198.97 05 Based on the above calculation, Personal Care is better because it has a bigger NPV Value, meaning it will be more profitable. e. The Internal Rate of Return Year Personal Care Cashflow(€ M) 0 -600 1 300 2 250 3 200 4 150 5 100 6 95

18 IRR 26.95% Year Home Care Cashflow (€M) 0 -600 1 95 2 100 3 150 4 200 5 250 6 300 IRR 16.25% Based on the tables above, personal care is better because it has a bigger IRR. Overall, the management should consider Personal Care. Task 2B: Benefits and Limitations Investment Appraisal Techniques a. The Payback Period. Benefits . Simplicity: The payback period is easy to calculate and understand, making it accessible to all stakeholders. ii. Quick assessment: Investors can easily assess how long it will take to recoup their investments. Limitations i. This appraisal method does not consider the time value of money. ii. Cash flow after the payback period is not given any attention.

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19 Small firms and projects with limited time for investment often employ the payback period. It is useful for gauging the effect on liquidity and getting a quick read on the risk related to how long it will take to get your money back. b. The Discounted Payback Period Benefits i. Considers the time value of money: This strategy is superior to the conventional payback time since it considers the discounted cash flows. ii. Risk assessment: Taking into account the present value of future cash flows, it aids in the identification of initiatives that may swiftly recoup the initial investment. Limitation i. Complexity: The deferred payback time is more complicated to calculate and may be difficult for certain stakeholders to grasp. ii. Subjectivity: The findings are very susceptible to the subjectivity used in determining the discount rate. When evaluating investments, companies that factor in the time worth of money employ the discounted payback period. It's especially useful for assessing endeavors or projects with long-term time horizons and substantial swings in cash flow. c. The Accounting Rate of Return. Benefits i. Simplicity: ARR is easy to compute, primarily based on available accounting information. ii. Useful for financial reporting: It is a common tool for reporting on the financial success of a project. Limitation

20 i. Ignores the time value of money: ARR might provide erroneous conclusions since it ignores the value of money over time. ii. Ignores cash flows: The investment's economic reality may not be reflected in its emphasis on accounting profits rather than cash flows. An organization's ARR is a standard metric used in financial statements and internal assessments of business success. It's not ideal, however, for making sophisticated financial choices. d. The Net Present Value Benefits i. Considers time value of money: NPV accounts for the time value of money by discounting future cash flows to the present value. It can easily be used to compare the profitability of various projects and make informed information. ii. Considers all cash flows: It factors in the original investment and expected incoming and outgoing cash flows. Limitation i. Requires a discount rate estimation: A project's perceived level of risk might affect the discount rate that should be used. ii. Complexity: Calculating NPV can be more involved than other techniques. Corporations often utilize net present value (NPV) when making investment decisions. It is liked since it's a straightforward monetary assessment of the project's worth that also considers the passage of time. e. The Internal Rate of Return Benefits

21 i. It considers the time value of money and attempts to calculate the expected rate of return for the project. ii. The IRR can be compared with the company's cost of capital. Limitation i. Multiple IRRs: In certain cases, a project's cash flow pattern might lead to multiple IRRs, making it challenging to interpret the results. ii. Reinvestment rate assumption: However, it is not always possible to reinvest intermediate cash flows at the project's rate of return, which is what IRR does. The Internal Rate of Return (IRR) is a popular metric company use to evaluate various investment options' profitability. Although it has several drawbacks, it is widely used in investment analysis. Task 2C: Factors to Consider in Choosing Between Making or Buying Blue-drums When deciding whether to manufacture or purchase Blue Drums, Blue-Drum PLC must carefully weigh several criteria to choose the best course of action. Consider the following when you make your decision: i. Conducting Cost Analysis An accurate cost analysis must be performed. Blue-drum PLC must weigh the cost of making Blue-drums in-house against purchasing them from an outside source. Indirect expenses, including depreciation, supervisors' salaries, and general manufacturing overheads, should also be included in this analysis alongside direct costs (materials, labor, variable overheads). Blue- drum PLC must also consider the economies of scale of producing 30,000 drum packs annually. This volume may affect the total cost comparison if they can negotiate a lower price with the supplier.

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22 ii. Capacity and Demand Blue-drum PLC should evaluate current production levels in light of projected future demand. An external supplier may be the most cost-effective option if the company's manufacturing capacity is underused or demand fluctuates widely. However, if demand is great and production capacity is already at capacity, it may be preferable to keep production in-house. iii. Quality and Control The caliber of the Blue-drums has a major role in the final verdict. Blue-drum PLC may have the edge over its competitors if its production method guarantees a higher-quality product than the one the supplier offers. In-house manufacture also allows Blue-Drum PLC to resolve any quality concerns that may develop during production. iv. Supply Chain Risks When a company relies on a third-party provider, supply chain risks increase. Blue-drum PLC must determine whether the supplier can be relied upon, is financially stable, and can reliably fulfill delivery deadlines. Blue-drum PLC's operations and customer satisfaction are vulnerable to supply chain interruptions. v. Long-Term Strategy Blue-drum PLC's long-term strategic goals should inform the company's manufacturing or purchasing choice. Making things in-house might be the best option if vertical integration and tight production supervision are priorities. On the other hand, outsourcing to the supplier may be more appropriate if the company aims to concentrate on its core capabilities and simplify its operations.

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23 Task 2D: Factors to Consider for Suitable Sources of Finance Blue-drum PLC, the company investing, must carefully consider several criteria for the financing it will receive. Three important considerations are as follows: i. Cost of Capital Each possible source of funding has to have its cost of capital calculated. Interest rates, dividend expectations, and other expenses may differ depending on whether funding is secured via debt or equity. To maximize profits and reduce costs, Blue-Drum PLC should choose the funding mechanism with the lowest cost of capital. ii. Risk Tolerance and Financial Stability The shareholders of Blue-Drum PLC need to take stock of the company's risk tolerance and financial health. Financial risks may develop if the firm takes on too much debt or depends too much on external funding, particularly if it experiences market downturns or unanticipated obstacles. The long-term success of a business depends on its ability to keep its capital structure stable and in line with the level of risk it is willing to take. iii. Flexibility and Repayment Terms The payback lengths and adaptability of various financing options differ. Repayment terms on long-term loans may be set in stone, and securing equity funding may necessitate compromising some control of the company to a third party. Blue-drum PLC has to weigh the adaptability of each financing choice against its cash flow forecasts and expansion goals.

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24 Task 3A: Impact of Budgeting Process on Potential Projects and the Relationship with Objectives and Strategic Plans Budgeting is vital to any endeavor's success, as it sets out the financial plan and distributes resources fairly. Let's look at Unilever PLC as an example to see how possible initiatives are affected by budgeting: i. Resource Allocation Unilever uses budgets to distribute funds amongst initiatives depending on each one's strategic significance, expected return, and cost projections. It guarantees that the money is allocated wisely and that the initiatives with the highest priority and strategic alignment get the most money. ii. Goal Setting A company's budget is created by its goals and priorities. Unilever's goals might include targeting new demographics, developing innovative products, and penetrating untapped markets. These goals are monetized via budgeting by outlining the necessary investment and anticipated rewards. iii. Risk Management Unilever may use budgets to measure the potential monetary impact of certain initiatives. The corporation can anticipate problems and develop solutions by projecting expenses and expected earnings. This aids in reducing the impact of monetary surprises and setbacks. iv. Performance Measurement Budgets are used as a yardstick by which initiatives and the business as a whole may be evaluated. By comparing actual numbers to planned ones, Unilever may spot areas of under or over-performance and take appropriate action.

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25 v. Alignment with Strategic Plans Unilever's strategic plans are integral to creating the company's budget. The budget's spending plans must be consistent with the company's long-term objectives and strategic ambitions. This guarantees that the organization's long-term goals are considered while making financial choices. vi. Decision Making The company's budget influences Unilever's decision-making. The ability to make well- informed decisions is greatly enhanced by the budgeting process, which aids in the identification of economically feasible options during the evaluation of prospective initiatives. Task 3B a. Significance of Business Plan A business plan is a formal document that details an organization's goals, strategy, and financial predictions. Providing a precise financial road map for the firm's future, the financial plan component of a business plan, is crucial. i. Sets objectives and benchmarks In the long run, a firm will benefit from careful planning since it can establish reasonable objectives and allot sufficient time to achieve them. This method makes developing Key Performance Indicators (KPIs) and other critical metrics necessary for achieving an organization's goals easier. ii. Maximizes resource allocation A well-thought-out business plan is essential for any firm serious about maximizing its available resources. Decisions on activities like opening more sites, hiring more employees, or modifying production levels may be made with a better knowledge of the prospective outcomes

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26 thanks to this tool. The plan's analysis aids the organization in assessing the financial ramifications of these steps for more precise budgeting and preparedness. A business plan is a helpful tool for optimizing the effective use of resources and directing strategic decision-making. iii. Enhances viability Successful concept implementation requires the development of a well-considered plan. While every organization must develop its unique strategy, prospective business owners may learn a lot by observing how successful companies operate. These well-established businesses also have the marketing chops to launch new offerings. iv. Aids in decision making Decisions such as where to advertise, where to set up shop, what to offer, and how much to charge crop up often in company management. A company that has put out a thorough business plan will be better prepared to deal with the unexpected challenges that may arise in the future. They may anticipate these problems and prepare for them accordingly. v. Fix past mistakes Firms should develop strategies while remembering their mistakes and successes to save time, money, and resources. Businesses may benefit from such programs if they consider the lessons they've already learned. b. Key Elements of its Financial Plan Section 1. Executive Summary: An executive summary paints a concise yet accurate image of your company's strategy and objectives. Its importance in forming the readers' first impression of a company is frequently underestimated. This might shape customers' and investors' first reactions.

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27 2. Business Description: This part ensures a comprehensive description of the organization. An outstanding company summary will include the firm's history, organizational structure, and current standing in the industry. Products and services offered by the organization are outlined as well. It also specifies if the firm is well- established or just getting started. What makes your product or service stand out from the competition is highlighted. 3. Market Analysis: When assessing a business's health and development prospects, a thorough examination of the market is necessary. By studying the marketplace, an organization may improve its spending, advertising, marketing, and distribution methods. The organization can now more successfully counter rivals and develop long-term development plans thanks to a more thorough understanding of the market environment. 4. Operations and Management: This statement differentiates the firm from the competition by highlighting that it can provide better goods at lower costs and in shorter time frames. 5. Financial Plan: To investors and sponsors, this is the most crucial part of a business plan. Disclosure of financial strategies and market research is necessary. In certain cases, a financial report covering the previous five years is also necessary to demonstrate success and profitability. The financial plan summarizes the company's strategy, anticipated growth, and expected value.

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28 References Banerjee, R.N. and Mio, H., 2018. The impact of liquidity regulation on banks. Journal of Financial intermediation, 35, pp.30-44. Jastrzebski, S., Szymczak, M., Fort, S., Arpit, D., Tabor, J., Cho, K. and Geras, K., 2020. The break-even point on optimization trajectories of deep neural networks. arXiv preprint arXiv:2002.09572. Lu, M., Shan, Y., Wright, S. and Yu, Y., 2020. Operating cash flow asymmetric timeliness in Australia. Accounting & Finance, 60, pp.587-627. Maulita, D. and Tania, I., 2018. Pengaruh Debt to equity ratio (DER), debt to asset ratio (DAR), dan long term debt to equity ratio (LDER) terhadap profitabilitas. JAK (Jurnal Akuntansi) Kajian Ilmiah Akuntansi, 5(2), pp.132-137. Nur’aidawati, S., 2018. Pengaruh Current Ratio (CR), Total Asset Turnover (TATO), Debt to Equity Ratio (DER) dan Return On Asset (ROA) terhadap Harga Saham dan Dampaknya pada Nilai Perusahaan. Jurnal Sekuritas, 1(3), pp.70-83. Rahman, A.A.A.A., 2017. The relationship between solvency ratios and profitability ratios: Analytical study in food industrial companies listed in Amman Bursa. International Journal of Economics and Financial Issues, 7(2), pp.86-93. Seo, K. and Soh, J., 2019. Asset-light business model: An examination of investment-cash flow sensitivities and return on invested capital. International Journal of Hospitality Management, 78, pp.169-178. Suryanengsih, T.D. and Kharisma, F., 2020. Pengaruh current ratio dan quick ratio terhadap harga saham pada perusahaan consumer goods yang tercatat di BEI periode tahun 2013– 2017. Borneo Studies and Research, 1(3), pp.1564-1570.

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29 Tissen, M. and Sneidere, R., 2019. Turnover ratios and profitability ratios calculation methods: the book or average value. Younas, K. and Sarmad, M., 2020. the Impact of Degree of Financial Leverage and Degree of Operating Leverage on the Systematic Risk of Common Stock. Malaysian E Commerce Journal, 4(1), pp.24-32.

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00 1. C. Show the impact (with amounts) of each of the following items on the horizontal equation. For the asset section, name the specific accounts impacted. i. Record Sales during the year on account of $205,000. ii. Show the impact of $190,000 cash collected during the year. iii. Establish an Allowance for Uncollectible Accounts at year-end. iv. In the following year, an account worth $6,000 is determined to be uncollectible, what is the entry? v. A receivable for $3,500 that was previously written off is collected. What is the 2 step entry? Assets Liabilities + Stockholders' Revenues Expenses Net Income Cash Equity Flow NA NA Increase NA Increase Assets Revenue in the Form of in the Accounts form of Receivable $ Sales 205000 Revenue $ 205000 2. 3. 4. O Focus O AW 68°F sur prt sc home f11 f12 delete f5 Oly 144 & backspace -> unu lock 7. 6. 5. 6. 4. { 99 enter

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