Introduction
Accounting is an essential process of communicating financial data regarding a business entity to users that are associated with internal departments of an organisation. communication is basically presented on the basis of financial statements which indicate flow of money that is invested by stakeholders and managers. It is an effective theory or system which is helpful for a business organisation to maintain and audit their accounting books of gambling industry. This seems to be an effective art of evaluating overall financial position and operational outcomes for gambling sectors. (Scott, 2015).
The project report is providing vital information about present position of company by using various financial ratios. On the basis of their performance, examination of more powerful company is being determined. Understanding of various key process of capital investment decision-making and its role of investment appraisal stages are discuss under this project Method of investment appraisal in gambling sectors are covered under this particular project.
SECTION A
QUESTION 1
(a): Selection and justification of financial ratios
The Gambling industry is increasing at faster rate in UK. There is tremendous increment in casino attendance in Britain. As well as total earning yield from various gambling sectors in UK are relatively higher as compare to other. This will indicate a definite flexibility of betting as predominant earning sources. Gambling financial data are published twice in a year and deliver current information which consist of online gambling services which is being offered to customers in UK. There is a wide market for such kind of business in competitive sports at sporting shops or licensed industry. This metastasising into specific notion that gambling is not so effective or consider bad thing and should be banned. This particular statistic comes from the data provided through licence holders in order get regulatory returns (Hilton and Platt, 2013).
Such kind of reports are more useful for anyone to analyse performance and profitability in gambling sectors which consists of academic researchers and local authorities. A ratios evaluation as a quantitative analysis of financial data that contain specific data of gambling statements are helpful to analyse performance of an organisation (Staff turnover ratio, 2018). This will be helpful to analyse various aspects of a company's total operating and financial performance in order to attain liquidity, profitability and efficiency position of company. In is necessary to analysis overall financial position of cited company through using those specific ratios. Some of them are discussed underneath:
|
Non-financial Ratio (LADBROKES CORAL GROUP PLC) |
2016 | ||||||
|---|---|---|---|---|---|---|---|
|
Staff turnover ratio |
(number of staff who left ÷ total number of staff) x 100 |
61.75 |
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|
Absenteeism ratio |
Number of worker- days lost through job absence/Average number of employees* number of workdays*100 |
0.833939023 |
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Particular |
William Hill plc. |
Ladbrokes Coral Group plc. |
Paddy Power Bet-Fair Public Limited |
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Profitability position |
According to the financial ratios, it has been found that gross margin of 81% is generated by the company. It has been decreased from last year. It has been seen that net profit position of the company is 11.20% which is consistence in last two year. |
Under this particular study, it has been seen that gross profitability rate is 85% during the time. It is much better from William hill plc. Net profit margin of the company is providing negative with -14.15%. The profitability position of this particular company is not so effective in relation to other one. |
The financial account of the company is more reliable or effective with having 76% of total gross profit ratios. This company is delivering much lower results in comparison to other two gambling industry. Net profitability position of company is .79% during the year which is much lower from last year financial information. |
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|
Liquidity position |
According to the short term fulfilment of cash return, it has been seen that 0.71 time rotation of cash during the time. It has increase from last year. Whereas the liquid position of this specific company is stronger and similar to current ratios. |
The liquidity position of the company is much lower as compare to other two companies. As they are not able to meet out their short term obligations those are associated with the company. While in case of acid test ratio, it is also at minimum with only .33:1 from last year. |
In accordance with this company, current ratios is more effective with 0.99:1 and much closure to their ideal ratios. Whereas liquidity ratio of the company is much strong as compare to other two companies. |
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|
Operational ratios |
The position of the company in respect to assets turnover rate is about 0.80% which is much higher from other two same businesses. Whereas the interest coverage rate is about 4.51 percentage return for the company during the time. |
The total net assets turnover of company is about 0.62 % which has come down from last year. While interest coverage ratios is in negative with -0.19. It accordance to stock turnover ratios a total of 942 days times is taking to rotated during the year. |
Net assets of company are kept during the year which is about 0.33 %. Whereas, interest coverage ratios is 2.64. There is no any reliable data regarding stock turnover position of the company. |
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Performance in last three year |
According to the set financial statements, it has been seen that the their more balance among total profit and liquidity position of the company. Position of this gambling industry is very closing fluctuating in last three years. |
On the basis of overall comparison from total financial statements of the company, it has been seen that return of equity is not so effective as they are generating negative return from last two years. The other aspects about this company is much weaker in accordance with the other two respective industries. |
Under this particular sector, it has been seen that net profitability position is not so great in last three years of total earnings. Collection period for making recovery of total payment they are taken only 2 days time. While other positions are also more effective. |
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Ranking |
First(1) |
Third(3) |
Second (2) |
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PADDY POWER BETFAIR PUBLIC LIMITED COMPANY
|
Financial performance |
2016 |
|---|---|
|
Sales |
706500 |
|
Gross profit |
551300 |
|
Net profit |
102500 |
From the above project report, it has been seen that with the total sales done by teh company in 2016, they are getting total gross profit of 551300 during the year. Whereas total net profit generated with that particular sales is about 102500. By making proper anlaysis, it has been observed that performance of paddy power company is more effective in 2016.
LADBROKES CORAL GROUP PLC
|
Financial performance |
2016 |
|---|---|
|
Sales |
308400 |
|
Gross profit |
1287800 |
|
Net profit |
-199200 |
According to the above information, it has been seen that financial performance of ladbrokes coral group plc is indicating total sales estimation of last two year whcih is about 308400. from this particular sales they are getting gross profit of 1287800 in 2016. While total net profitability is going into negative at that particular time. They are not standing at strong position as compare to other in last three years (DRURY, 2013).
WILLIAM HILL PLC
|
Financial performance |
2016 |
|---|---|
|
Sales |
12900 |
|
Gross profit |
-41100 |
|
Net profit |
-25400 |
In accordance with William hill plc., it essential to determine total profitability by determining overall sales during the time. The total sale of 12900 in last two years. Thy are able to get negative gross and net profit during the time. The overall position of the company is not so effective in respect to other two companies.
Justification:
From the above information which are provide over three gambling companies, it has been determine that all three of them are suitable with their own places in respect to their profitability position. From the other two company's, only William hill plc. is more effective in every segment of their financial stability (Flamholtz, 2012). There accounting position is much reliable and sufficient enough to make better decision-making. If as a perfect account officers any decision would be made after evaluating all three company current position, then is effective to select that company which is having more sufficient capital and healthy return during the time. As per the analysis, William Hill plc is healthier in terms of their overall financial positions in last three years as compare to other two companies.
(b): Reason on the basis of selected company
According to the above analysis which has been done by taking information from their overall financial position of the company. As the financial stability and profitability situation they are provided certain ranks. It has been done by evaluating their current position in the UK market in gambling business. This seems to be biggest discuss that impact investing has become more valuable topic in financial situations. Customer are increasingly collecting necessary information from investors to not focus on their financial returns but to take in account all environment and social situation in case of formulating an effective portfolio of an organisation. On the basis of ranking which is being provided to all three gambling company's. Impact on investments can yield to higher financial return to William Hills plc. (Johnson and Noguera, 2012).
It is so because there financial condition is much better as compare to other two companies. The return they are getting over their total investments with 14% on equity funds, while in capital employed they are getting 11% of total return in 2016. This would be more reliable and sufficient enough for investors to making their upcoming planning. Return on assets (ROA) is also effective as 7.42% as per their income statements produce by the company during the year. The majority of investors are using those outcomes which are more reliable in near future and that is having more positive return in terms of maximum gains. The liquidity position of William Hills Company is more effective as they are sufficient amount of capital to meet out their short term debt obligations those are being arises during an accounting period of time. The future investment opportunities would only be gather from investing their capital amount in William hills business operations projects. They can earn maximum return at the end because of high rate of return margin (Lennox, Francis and Wang, 2011).
(c): Recommendations to improve financial performance
In accordance with determining overall financial accounts of all three companies those are dealing in same gambling business. After making proper analysis of their overall performance and total return they are generating in last three years, it has been found that two company's, such as “Paddy power” and “William plc” are more comfortable position as they are having more sufficient amount of capital and return to manage and control their upcoming losses. Only “Ladbrokes coral group plc” is not so reliable or strong position in terms of total return or net profitability during last couple of years (Libby, 2017).
If investors look over there return on equity portion then they would get to known that in last two years they are continuously providing negative return to their stakeholders. Whereas in case of total return on assets would also provide -14.24% of return on their total investments. Earning margins are also not at valuable position as they are delivering just -.50% of total sales. In case of structure ratios, there current ratios are not also effective as only 0.33 time of its total assets. They are much lower as per their ideal ratios. In order to make specific improvement in their overall financial position, it is necessary to follow certain points that are mentioned underneath:
It would be said that providing crucial ideas to conduct some sort of financial housekeeping before requirement of external capital. Getting finance in respect to deal with financial issues will have huge chance of success during an accounting period of time. As a business advisor or management consultant, it is essential to make investments in that particular sector which would provide maximum return in near future.
Recover outstanding debt obligations: In order to cover up all outstanding payments as much as helpful for the investors to cover all their valuable losses. Before making any sales it is always necessary to make sure that company need to have proper sales agreement in respect to terms and conditions (Hall, 2012).
Reduce and rearrange expenditure: It is necessary to determine all disbursement and amount which would be helpful in reducing all expenses. Some valuable options are:
- Arranging a deferred or periodic payment strategies for wide expenditure.
- Modification in total quantity and delivery timing of their inventories to happen with maximum cash-flows during the time.
Sell assets: It is essential to make selling of unwanted assets which can be positive indication to get some effective cash and eliminate storage costs of the company. Leasing total assets would assist the total costs incurred over the period of time.
SECTION 2
QUESTION 2
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MEMO To: All Employees and investors From: Finance Departments Date: April 16, 2018 Topic: “Investment appraisal” Stages of capital investment decision making process and role of investment appraisal processCapital investment: It includes funds which are invested in organisation for the purpose of fulfilment of long term objectives. Such funds are used by organisation for purchase of capital and fixed assets such as plant and machinery. It is the duty of management is to allocate the fund in most appropriate manner to attain best possible returns. There are many different aspects which are need to oversee while making capital investment making decisions. Sources from which such funds can be raised by organisation includes equity investors, banks, financial institutions, venture capital etc (Zadek, Evans and Pruzan, 2013). The steps which need to fulfil in the process of capital investment decision · Identification of project · screening of project · Evaluation and acceptance · Implementation · monitoring · Post audit Role of investment appraisal There is huge role is played by investment appraisal techniques regarding selection of best project for investment. This includes the different tools which are used by the management for the purpose of identification of effectiveness of investment. There are many factors which are considered while assessing the viability of project which includes: · Financial: This helps to ascertain the return from project · legal: Investment need for enabling the organisation to meet current and future legislation · Risk: The operational risks which are associated with project Method of investment appraisal used in DCFDiscounted cash-flows is said to be an effective method which is being used to estimate total attractiveness of overall investment opportunities. This must be use as future cash-flows estimation and provide valuable discounts. It can be use for the purpose of annual rate to arrive at current value of projections. Investors uses this particular DCF methods in such a manner to determine net terminal value approach and internal rate of return of an organisation. Adoption of these tools and techniques are entity depend on overall size of an organisation in order to make capital decisions in order to increase their overall goodwill in the market. Discounting is known as effective reduction of total value of estimated cash-flows or return that make direct comparison to real value at current time. It is related with basic operations of any DCF approaches. The main issue is that pound value in current time worth is more than the same pound during the years. The rate at which total estimate cash-flows are reduced to their current value is determine as discount rate (Smith, 2017). There are various methods used in investment appraisal techniques are more helpful in taking more reliable outcomes in near future. The two main investment appraisal techniques which helps to assess the most profitable project includes NPV and IRR. Some of them are defined below: NPV: It helps in ascertaining the difference between present value of cash inflows and outflows over a fixed period of time. It provides about time period which is taken to recover investment amount from investment. In finance, the total net present value is being measure out of profit gather from subtracting present value of net cash outflows. Advantages: · This would indicate total value which will indicate total assets of a firm through taking proposed investment with a particular rate of discount. · It would recognise the time value of money and take into account all cash-flows over total life of a projects. Disadvantage: · Sometimes, it is very difficult to determine and use. Thus, it would need accurate cash-flows with having discount rate. · This cannot provide satisfactory answer in case project is being compare in various amounts of investments. IRR: This method helps in ascertaining the profitability which is associated with potential future project. IRR is a discount rate which makes NPV of all cash flows which is going to receive from particular project equal to zero. Merits: It would recognise total time value of money and take into consider cash-flows over the over life of a projects. Demerit: This seems to be hard to use in practice as it involve very complicated issues related with the company.
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Also Read: Unit 9 Accounting Software Regent College
Conclusion
From the above project report, it has been concluded that accounting is an essential aspect which will be helpful to make proper analysis of financial information produced by gambling industry. For this purpose, data would be analysed by using financial and non-financial ratios of an organisation. Further, this report is based on total evaluation of investment appraisal techniques and method of DCF using data evaluation is being done. This would provide more effective chances to increase the overall profitability of an organisation.
References
- DRURY, C. M., 2013. Management and cost accounting. Springer.
- Flamholtz, E. G., 2012. Human resource accounting: Advances in concepts, methods and applications. Springer Science & Business Media.
- Hall, J. A., 2012. Accounting information systems. Cengage Learning.
- Hilton, R. W. and Platt, D. E., 2013. Managerial accounting: creating value in a dynamic business environment. McGraw-Hill Education.
- Johnson, R. C. and Noguera, G., 2012. Accounting for intermediates: Production sharing and trade in value added. Journal of international Economics. 86(2). pp.224-236.
- Lennox, C. S., Francis, J. R. and Wang, Z., 2011. Selection models in accounting research. The Accounting Review. 87(2). pp.589-616.
- Libby, R., 2017. Accounting and human information processing. In The Routledge Companion to Behavioural Accounting Research (pp. 42-54). Routledge.
- Scott, W. R., 2015. Financial accounting theory (Vol. 2, No. 0, p. 0). Prentice Hall.
- Smith, M., 2017. Research methods in accounting. Sage.
- Zadek, S., Evans, R. and Pruzan, P., 2013. Building corporate accountability: Emerging practice in social and ethical accounting and auditing. Routledge.
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