Management Decision Making Financial Figures

Question: Describe about the Management Decision Making for Financial Figures. Answer: 1 (a) In the current case, Mr. Brad Shelton, who works as consultant for Software Solutions Ltd, has been given a task to find out a suitable software package for job costing. For this purpose, he has been given a duty to analyze different software packages available in the market and finalize the one. Thus, Mr. Brad is in a position where he has the highest authority in respect of finalization of the software package. This position could encounter some ethical issues. For example, Mr. Brad Shelton could be bias in taking decision as regards software package and he may give preference one over another due to some freebees being offered to him. For instance, Jennifer Jolie, who works as salesperson for Pitt Ltd, a software developer, could offer him some sort of inducement to finalize her companys software package. Further, since Mr. Brad is the only person, so it is also possible that he faces allegations for being unethical despite discharging his functions ethically and honestly. Therefore, considering the sensitivity of the matter and ethical concerns, it is advisable that Mr. Brad should not take that trip offered by Jennifer Jolie (Bredeson Goree, 2012). 1 (b) No, the management of software solutions should not allow Mr. Brad to go on the trip to analyze the software of Pitt Ltd. If the company allows Mr. Brad to go on this trip, it may give rise to many ethical issues as discussed on question 1 (a) above. Jennifer Jolie is offering the trip to Mr. Brad on behalf of her company, Pitt Ltd. For this trip, Pitt Ltd is offering to bear all expenses of the trip that Mr. Brad will incur. Further, Pitt Ltd is also offering Mr. Brad to take his family along with him on this trip, the expenses of which will also paid by Pitt Ltd. This is clearly an inducement given by Pitt Ltd to Mr. Brad so that he can finalize its software for sales to accounting firms. In this case, it is likely that Mr. Brad would be biased and despite being of lower quality, he may finalize the software package of Pitt Ltd. Therefore, considering the above situation and facts of the case, the management of Software Solutions Ltd should not allow Mr. Brad Shelton to go the trip (Bredeson Goree, 2012). 1 (c) A code of conduct is necessary to guide the employees and infuse in them a culture of ethics. Every company needs to have a proper code of conduct in place for its employees so that their activities could be guided in the right direction. Thus, Software Solutions Ltd should also have code of conduct for its employees. The properly drafted code of conduct helps to inculcate the ethical behavior in the employees and creates a positive atmosphere within the organization. It reduces inequality by providing safeguards against any kind of biasness. Further, the code of conduct reduces the vulnerability and brings in stability in the operations of the organization. It is not only advantageous for strategic decision making, but it also benefits the day to day management of the affairs (Engle, 2006). In addition to the above, companys reputation is also strengthened when the activities of the employees are guided by the code of conduct. The positive reputation of the company in market is handy from financial view point also. Further, code of conduct also provides legal backing to the company against the criminal conducts of its employees (Engle, 2006). Although, code of conduct is advantageous to the company in all respects, but in some instances, its advantages may reverse. For example, code of conduct may limit the employees ability speak up against something noticed wrong. The employees may, because of fear to lose their jobs, not speak up against something unethical done by the top management. Further, improperly drafted code of conduct may create chaos among the employees (Engle, 2006). 2 (a) The consolidated profit and loss account is prepared to by the parent company taking its subsidiary companies together. It is prepared to present the financial performance of the group as a whole. The statement of profit and loss of Greencross Limited for the financial year 2016 presents the consolidated financial performance of the Greencross group as a whole. 2 (b) S.No. Item As at 30 June 2016 $000 Classification with reason i. Cash and cash equivalents 62,583 Asset: Simply asset means cash or other resources owned by the entity which can be converted into cash. ii. Marketing cost 17,821 Expense: an item which is incurred in one period and does not benefit over two or more periods is classified as expense. iii. Occupancy costs 10,880 Expense: an item which is incurred in one period and does not benefit over two or more periods is classified as expense. iv. Cost of goods sold 324,949 Expense: an item which is incurred in one period and does not benefit over two or more periods is classified as expense. v. Provisions 10,118 (5,601+4,517) Liability: Provisions are obligations on the company to be paid out in future. vi. Inventories 92,002 Asset: Inventories are resource controlled by the company that can be converted into cash in future by selling off. vii. Property, plant and equipment 156,867 Asset: Property, plant and equipment are the resources controlled by the company that generate economic benefits over the number of periods and these can be converted into cash in future by selling off. 2 (c) Item 2016 2015 % Change Summary (what this means for Greencross Ltd) Gross margin percentage 55.73% 54.42% 1.31% Increment in gross profit margin by 1.31% indicates operational efficiency and savings in the cost of goods sold. Operating expenses 339,404.00 302,219.00 12.30% Revenue Growth 734,009.00 (Greencross, 2016) 645,016.00 13.80% Revenues grew by 13.80%, which indicates that the company is growing and demand of its products increasing (Bohm, 2008). NPAT 54,649.00 35,723.00 52.98% Substantial increase in NPAT is the result of increased sales and savings in cost of goods sold. It indicates improvement in the profitability. Finance cost 15,986.00 13,580.00 17.72% Increase in finance cost indicates that the company has raised more borrowings Non-current assets 726,404.00 682,509.00 6.43% Increase in Non-current assets appears to be due to additions in the property plant and equipment, which indicates that the company is expanding (Bohm, 2008). Number of stores and veterinary clinics at the end of the year 440= (220 stores+120 clinics) 332= (200 stores+132 clinics) 108 The increase in the number of stores and clinics indicates that the company is expanding the business operations. Cash flow from operating activities 78,636.00 14,691.00 435.27% Substantial increase in cash flow from operating activities indicates improved liquidity position of the company. 2 (d) In order to analyze the trend in the financial progress of the company, it is essential to compare the figures of current year with the previous year(s). This is the primary reason that the organizations give comparative figures in the financial statements. Further, the comparative analysis is also crucial for the investors in analyzing their investment decisions. Analyzing the current years financial figures and comparing them with the previous year gives an understanding of the direction which the companys business is running in. Taking these things into consideration, Greencross Limited has presented corresponding financial figures of the year 2015 in the financial statements of the year 2016. This information is vital for the shareholders of Greencross Limited because it provides relevant information for investment decision making to them (Bohm, 2008). References Bohm, A. (2008). Interpretation of key figures in financial analysis. GRIN Verlag. Bredeson, D. Goree, K. (2012). Ethics in the Workplace. Cengage Learning. Engle, E. 2006. Private Law Remedies for Extraterritorial Human Rights Violations. Eric Engle. Greencross. (2016). Annual report of Greencross Limited. Retrieved November 22, 2016, from https://www.greencrosslimited.com.au/Docs/2045-GXL0002-_Greencross-Annual-Report-2016.pdf