Report on how to judge the performance of the company and different methods and tools helpful for the management of organization

Executive summary of how to judge the performance of the company and different methods and tools helpful for the management of organization

This assignment is help to explain how to judge the performance of the company and different methods and tools helpful for the management of organization. Different analysis helps the organization to explain its all the financial points and manage them for improving the performance of the company. Many financial tools used by the organization to manage its all the financial issues and activities in most effective way.

Question 1: (45 marks)

Introduction of how to judge the performance of the company and different methods and tools helpful for the management of organization

·         A short introduction:

This task is help to explain the performance through ratio analysis and explain all the important areas of the organization that can be settle down according company’s requirements.

·         A short profile :

Omani packaging is one of the best organizations that provide high quality products and services in all over the world. The organization profitability explains that how it can be explaining the overall performance of the organization.

Task A: ratio analysis - calculations (10 marks)

Compute the following ratios for each year.

·         Liquidity Ratios – minimum of two ratios

·         Profitability Ratios – minimum of two ratios

·         Efficiency Ratios – minimum of two ratios

·         Capital Structure Ratios (Gearing) – minimum of two ratios

·         Market Ratios (dividend, PE etc.) – minimum of two ratios

(WSJ, 2020)

Task B: Analysis and LR:

Literature review of how to judge the performance of the company and different methods and tools helpful for the management of organization:

Ratio analysis explains comparison of different numbers. Ratios are the correlation between two numbers or two accounts. So any ration obtains from the financial statements explain better understanding about all the performance of the organization. Ratio analysis is used only when two number is compare to make sense and provide better understanding related to financial statements of the organization. In an entity, all the stakeholders are essential for interpreting the financial statements and other financial data. For financial analysis and financial management, ration analysis become a vital tool in the organization. Ratio analysis is related to different areas of the financial statement and manage different areas according to explain in clear terms. Ratio analysis is normally used in different areas as liquidity, profitability, efficiency, capital structure and marketing ratios. The company use the ratio analysis to compare its all the numbers and small terms according to better explanation of the financial area.  Normally, company use the ratio analysis to explain every element as compare to previous year and manage the all the flaws and obtain maximum benefits. Ratio analysis throw lights on many problems related to organization. And also high light positive aspects of the organization. Attention of management capture toward the issues of the organization. Ratio analysis helps the organization to take comparison between different firms and industries to determine the performance level. It helps the organization to provide better understanding related to fiscal position of the organization. It also identifies problem areas and bring attention to such areas that need more concern. Sometime major and complex information is lost in other analysis but in ratio analysis it pinpoints all the small areas that need proper attention. Ratio analysis convert the complex accounting statements and financial data in to the ratios like long term position, solvency, financial efficiency and operating efficiency. Ratio analysis also helps to explain the operating, investment and financing decision in the organization. It converts the financial statements into comparative figures and helps the management to evaluate and compare the financial position and explain better decision for the company. Management get lots of help in making the financial decision with the ratio analysis and it also explain that how the company is perform in which area and where need more improvement for making performance more effective. Ratio analysis use almost all the companies according to their feasibility and manage all the issues that highlighted through the ratio analysis in most effective way.  (Topper, 2019)

Liquidity position:

Liquidity ratios help to explain the short term debt obligation of the company. These ratios help to measure the capability to pay off its short terms liabilities according to company’s requirements. By the short term borrowing and current liabilities, the liquidity rations are a result of dividing cash and other liquid assets. By the cash and liquid assets, they show the number of times the short term debt obligations are covered. Short term obligations are fully covered if the value is greater than 1. The higher the margin of safety that the company possesses to meet its current liabilities, the higher the liquidity ratios. when the liquidity ratios show results more than 1 that its show that company has good financial health and if less than 1 then the company is facing the financial difficulties. By different analysts, different assets are considering to be relevant. Cash is considering the basic relevant assets that can be resolve many issue of the company and manage its many debt responsibilities. All the current assets are part of the financial strategy of the company. Company must have ability to manage the short term debts of the company and through cash and current assets the company has to cover its all the issues related to finance and manage according to profitability condition. so the liquid ratios help the organization to manage its all short term financial need and cover them in most effective way. Liquidity ratios help the organization to manage its cash utilization and manage them according to requirements of the company. Liquidity ratio explain that how can company has to manage its short term requirements through proper utilization of its assets and specially cash so company should not move toward the debts and it can manage needs without any other help in most effective way. According to liquidity ratios, the current ratio is rapidly increase in every year and its cash ratio fluctuate according to requirement of company.

Profitability position:

Profitability ratios are the financial tools that used by different analysts to evaluate and measure the ability of company to develop the profit of the company through managing its equity, operating costs, balance sheet and revenue of the organization. It explain that asset of the company utilize in effective way to generate the value of the shareholders and profit of the company. By many companies, a higher ratio of value is utilized in most effective way. It also explains that by utilizing the asset of the company the profit will be generated. By generating revenues, profits and cash flow, this means that businesses are performing very well. Many profitable ratios are used in most effective way to generate the profit of the company. Profitability ratios are help to compare the performable of companies in the profitability terms and manage according to current and latest information of the company. The profit is the most important part of every organization. The basic purpose of the organization is to produce the profit according to more effective way. Company has ability to manage its all profitability according to changing requirements. There are lots of issues that company has to manage for managing its profitability. So the profitable ratios explain the profitable condition of the company at every level and enhance the performance by consider its expenses at every level. Profitable ratio is utilize many companies to determine that profit level and compares its current profit with the previous one to determine its performance according to its profit. Company has to manage lots of problems to increase its profit so profitability ratio help to explain that how to overcome the expenses and costs that become a hurdle in the path of profit and make the company more successful. Profitability ratio help at every level to generate more profit and earn maximum revenue. According to profitability ratio, gross profit ratio show fluctuation according to company cost of capital and its expenses and its net profit margin also showing the same scenario according to performance of company.

Efficiency position of how to judge the performance of the company and different methods and tools helpful for the management of organization:

Efficiency ratios are the major terms used in the company. Efficiency ratios include receivable turnover ratios, inventory turnover rations and asset turnover ratios. These rations help to explain that how the company efficiently generate the revenue and manage its assets by using its effective abilities. In the financial ratios, it is better to compare the performance of the organization with its best competitors in the same industry. Basically the efficiency rations help the organization to determine its ability and skills to utilize its assets and manage its liabilities in the short period or current time periods according to its requirements. These rations help the organization to determine that in how many days the company recover its cash or generate its cash from its inventory or recover from clients. Efficiency explains the abilities of the company to manage its liabilities by utilizing its assets in most effective way. These abilities make the company different and prominent to others. Its competitors may have no such ability or rather better than it but still company need to improve its efficiency and manage its assets utilization according to its liabilities in most effective way. So these type of rations help the organization to manage its all issues and provide a better way that how to get maximum benefit for the company and maintain its position in the market for long term. Company efficiency depends on its management and effective decision making. Right decision provides long term benefit and wrong decision face loss and bad reputation in the market. If the skills of the company are questionable then no one can rely on the performance and its effective utilization of assets. Efficiency ratio help the company to enhance its performance level and overcome its all the problems that raise a big question on the performance of questions and effect the market reputation of the company. In the efficiency ratio, inventory turnover ratio explain that its utilization of inventory increase with the passage of time and its asset turnover also show that company utilize its assets according to its generating revenue capability.

Task C:

Capital structure of how to judge the performance of the company and different methods and tools helpful for the management of organization:

Capital structure ratios are a kind of financial rations that can contrast the financial metrics according to company debt relative like its equity. These types of ratios used by different investors to explain that how much the amount of risk involve in the structure of the company and how to assess the structure of the company according to latest requirement of the company. Normally the gearing ratios are those that explain the financial structure in most effective way. These are leverage ratios of the company that explain how much the company utilize its own money in the form of equity and how much the company lend from outside in form of debt or liability. Financial leverage of the company explains the borrowed money of the company that help in increasing its sales. For any requirement like purchases of equipment, the owner of the business increases their financial leverage through bank loans. When a company expands its use of financial leverage the financial risk explains the additional risk of default. Financial risk and its leverage are not the same terms but they are interrelated. Company provide an easy way to calculate its financial risk by measuring the degree to which the company uses the financial leverage and growing its business with borrowed funds according to its requirements. So these ratios help to explain the structure of the company in the form of debt and equity and explain how much the company depend on its own equity and how much they take the debts from the outside resources. According to capital structure ratio, debt to equity ratio clearly explains that its debt is going to minimize with the time and company generate enough profit to overcome its expenses and financial requirements. Equity ratio show that its equity rapidly increase in every years ac compare to its assets .

Market ratios:

Market rations help the organization to evaluate the economic status of the publicly traded companies and can play a role in identifying stocks that may be overvalued, priced fairly and undervalued. Many type of market rations are used in the companies to determine its market value but some common and famous values include price earnings ratios, book value per share and earnings per share values. It also includes market value per share, dividend yield ratio and price/cash ratio. These all type of measures is used in different way but also in the same way. They offer financial portrait of the companies according to changing requirement and market condition. Market value rations provide management an idea about the investors of firm according to its performance and future prospective. They also utilize to analyze the trend of stock in the market. For making any decision about the investment in the company, market value provide better guidance and give a better way to take right decision about the investment and its long term effects. So the market value of the firm explains its worth in the market and also explains that how much they have to generate in the profitable terms by more investing in its production sector and how strategies can be utilizing in most effective way according to management effective decision. Market ratio include EPS and price/earnings ratio. EPS explain that with the increase of profit its shares also increase in the market and having the same ratio with each other. Price/earnings ratio explain that company price of share also fluctuate according to its EPS and give reasonable profit to its shareholders. These ratios help the organization to take better decision about the position in the market and help the shareholders to explain that how the reputation of the company exist in the market.

Conclusion of task C:

At the end, we can say that structure of the company is very important to determine its worth and market value. Those companies who want to utilize its own capital have limited capacity to generate income but those companies who want to expand their business must take some loans or debts according to requirement of company and manage its issues.

Overall conclusion:

The overall performance of the company is good and the company has to increase its profitability through proper utilization of its assets and manage its all the operations through generating more production. The company has ability to manage its all issues with effective decision and taking right action. As compare to Sun Packaging Corporation is also one of the best corporation in Oman and it offer high quality products and services in the Oman and outside the Oman. Sun packaging corporation is also generating enough profit margin and manage its assets and liability in most effective way but still they are some issue and due to them they are less profitable as compare to Omani packaging. But having enough profit to overcome its all the expenses and costs of the company.

Question 2:

Task A: Calculations of how to judge the performance of the company and different methods and tools helpful for the management of organization

Evaluate the projects using,

1.      Net Present Value Method

2.      Profitability index method

Task B: Recommendation with LR (10 marks)

          Based on the above analysis and on the basis of the relevant literature review about the techniques used to analyze the projects, which project would you recommend and why.                                                                               

·         Literature review of the techniques used (NPV and PI)

There are many of the techniques are there that are used while making the project in financial analysis these techniques includes:

Comparative statements that are used to compare different departments including balance sheets, profit and loss accounts or other different items as there is a rule set by the financial advisors that you can present any financial statement in financial form for example comparative statement of working capital, profit and loss statement as well.

Making common size statements is the way of managing the workings in project based as many of the times the financial statements content value of rupee is not taken as consideration seriously. The thing which is considered only is the common size statement prepared with percentage. To the whole a common size analysis shows relationship with in the financial analysis.

Working capital statement of changes is another thing that helps in maintaining the projects working and which allows the things to be more demanding and more appropriately done in accomplishment of the project. By subtracting the sum of current assets from the sum of current liabilities amount of net working capital is calculated. The movement of cash and bank balances is based on the analysis of flow of cash.

Ratios are the main thing in evaluating the financial activities in the project accomplishment as these are the main things on the analysis that are going to be evaluated with the overall workings The fixed costs and the ratios are evaluated in a way that it makes you help in analyzing the facts and figures of the data you are working for. The external parties look over to your data in terms of analyzing your workings with the help of these to get idea about your workings. The ratios are important to analyses and for internal parties’ usage.

·         Recommendations based on calculations and LR

It is to recommended that the Nizwa project is going to be more responsive and this will increase the working performance of the organization. The company is working well in the efficient ways and the main thing is that the literate also explains that the financial analysis going to work in a way that it will increase the working capabilities more efficient and more productive in a way as they are going to make the workings more improved and more demanding. The organization is going to work in a w ay that its NPV value is going to work in a way that it will be going to take out the workings in this aspect that how to tackle the issues and how to improve the workings in this way that the company will grow more. This is the plus point that the company is having in its workings that allows the success implementation in the organization.

Task C: Discussion with LR 300

Based on appropriate literature review, analyze the non-financial factors (minimum of 5 factors) to be considered while conducting project appraisal. 

Non-financial factors are those factors that also have a vital role in taking the decision making process as they are going to impact a positivity of success in the organization. These includes:

The future legislation and the current requirements, they use to match the industry trends and they impact good practise on the business workings. In order to improve the staff morals and making the recruitment and hiring of new people easier for the management. These techniques increase relationships among suppliers and customers along with improving the business reputation. As it increases the worth of keeping workings safe from the future threats. The non- financial factors include the capabilities of your business to grow and to work on such effective terms by making the business to grow more productively and more efficiently as well.

There are many of the other aspects are also included in the working regarding non-financial factors. Toward the end, we can say that structure of the organization is imperative to decide its value and market esteem. Those organizations who need to use its own capital have constrained ability to create salary however those organizations who need to extend their business must take a few credits or obligations as indicated by necessity of organization and deal with its issues. The general execution of the organization is acceptable and the organization needs to expand its gainfulness through legitimate use of its benefits and deal with its all the tasks through creating more creation. The organization has capacity to deal with its all issues with powerful choice and making right move. (NiBusinessinfo, 2019)

Question 3:

Task A, B, C and D: calculations

Compute the following,

A.      P/V ratio (3 marks)

B.      Fixed cost (3 marks)

C.      Sales required to earn a profit of OMR. 120,000. (3 marks)

D.     Profit when sales are OMR. 300,000. (3 marks)

Task E: Discuss the importance (5 points) of Break Event Point (BEP) in taking business decisions with appropriate literature review.

Near analysis of ratios that are utilized to analyze various divisions including monetary records, benefit and misfortune accounts or other various things as there is a standard set by the money related consultants that you can introduce any fiscal report in budgetary structure for instance similar proclamation of working capital, benefit and misfortune explanation too. Offering normal size expressions is the method for dealing with the functions in venture based the same number of the occasions the fiscal summaries content estimation of rupee isn't paid attention to as thought. The thing which is viewed as just is the regular size explanation arranged with rate. To the entire a typical size examination shows relationship with in the money related investigation.

Working capital explanation of changes is something else that helps in keeping up the ventures working and which permits the things to be all the more requesting and all the more properly done in achievement of the undertaking. By deducting the whole of current resources from the entirety of current liabilities measure of net working capital is determined. The development of money and bank adjusts depends on the investigation of stream of money. Proportions are the primary concern in assessing the money related exercises in the task achievement as these are the fundamental things on the investigation that will be assessed with the general activities The fixed expenses and the proportions are assessed such that it makes you help in dissecting the raw numbers of the information you are working for.

 The outside gatherings glance over to your information as far as breaking down your activities with the assistance of these to get a thought regarding your functions. The proportions are imperative to examinations and for inside gatherings' use. The future enactment and the present prerequisites, they use to coordinate the business patterns and the effect great practice on the business functions. So as to improve staff ethics and making the enrollment and employing of new individuals simpler for the executives. These procedures increment connections among providers and clients alongside improving the business notoriety. As it builds the value of protecting operations from future dangers. The non-money related elements incorporate the capacities of your business to develop and to take a shot at such successful terms by making the business to develop all the more gainfully and all the more productively also. There are a large number of different perspectives are likewise remembered for the working with respect to non-budgetary variables. (Luenendonk, 2014)

Reference of how to judge the performance of the company and different methods and tools helpful for the management of organization:

Luenendonk, M. (2014, november 9). Break-Even Analysis: What, Why, and How. Retrieved                   from https://www.cleverism.com/break-even-analysis/

NiBusinessinfo. (2019). Investment appraisal techniques. Retrieved from             https://www.nibusinessinfo.co.uk/content/non-financial-factors-investment-appraisal

Topper. (2019). Meaning, Objectives, Advantages and Limitations of Ratio Analysis. Retrieved    from https://www.toppr.com/guides/accountancy/accounting-ratios/meaning-objectives-             advantages-and-limitations-of-ratio-analysis/

WSJ. (2020). Omani Packaging Co. SAOG. Retrieved from https://www.wsj.com/market-            data/quotes/OM/XMUS/OPCI/financials/annual/income-statement