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Penston Academy of International Studies

Finance for Managers
Course# 703

Student: Md. Azizul Hakim

Course Title: PGD in Strategic Management and Leadership
Deadline: August 15, 2022
Words count: 1300 (+/-10%)

Contents: page #

Introduction
3
Task 1.

1.1: Determine what financial information is needed and assess its validity.……………………………………… 3
1.2: Analyse different financial documents and information and formulate conclusions about financial
4
performance levels and needs of stakeholders.

1.3: Conduct a comparative analysis of financial information and

data……………………………………………………………………………………………………………………………………………….
4
1.4: Critically review and question financial information and data 4

Task 2.
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2.1: Identify how a budget can be produced taking into account financial constraints and achievement of
targets and accounting conventions
5
2.2: Be able to assess a budget

2.3: Identify how a budget for a complex organization can support organizational objectives and targets
whilst taking into account financial constraints and accounting conventions
6
Task 3.

3.1: Identify criteria by which proposals can be judged. 6

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3.2: Critically analyse the viability of a proposal for expenditure
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3.3: Identify the strengths and weaknesses of a proposal and give feedback on the financial proposal 8

3.4: Analyse the viability of a proposal for expenditure

 In-text Referencing for the complete assignment and Harvard style of referencing for the
reference list.
 For the first question, you have mentioned the ratios but could have included the ratio
analysis also.
 Task Two is relatively fine. In-text referencing required.
 The Third task needs to be redone in a few places, which I will cover next week.

Introduction: -

The financial statement is produced through a systematic and organized gathering of data using logical
and consistent accounting techniques major goal is to offer a clear grasp of certain of a business's
financial characteristics. It can indicate a situation at a specific point in time, such as a balance sheet, or it
can show a set of operations over a specific time period, such as an income statement. Financial
statements are crucial because they provide crucial information about a company's financial health.
Financial statements assist businesses in making informed decisions by highlighting which sections of the
business generate the best return on investment (return on investment) financial statements indicate a
company's financial performance and strength.

To identify what financial information is required and to analyse its veracity, I chose the Amazon
Corporation. We will take a look at some financial statements from Amazon Company for a more in-
depth look at the accounts and line items presented on financial statements.

1.1: Determine what financial information is needed and assess its validity.

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Most companies begin their financial statements with the income statement.

Income statement: The income statement, commonly known as the profit and loss account, which
displays the net profit or loss made during a specific time period.

Balance sheet: It gives information on assets owned by the company and her liabilities at any one time.

A source and application of funds: A source and application of funds statement often show the various
sources of funds received and how those funds were spent during the time period.

Profitability ratios: Profitability is a measure of how efficiently a company's operations are carried out.
Due to a lack of control over operations and expenses, reduced profitability may result. Amazon's PPE
turnover ratio has been steadily decreasing over time, implying that the corporation has more PPE on the
balance sheet for every dollar of net sales generated.

Efficiency Ratios: These ratios aid in determining a company's long-term solvency.

Liquidity Ratios: Liquidity Ratios are also referred to as "working capital ratios" or "short-term solvency
ratios."

Stability ratio: The stability ratio is calculated by dividing the fast flocculation rate “ko” by the slow
flocculation rate “k”. The rate of flocculation is diffusion regulated in the absence of an energy barrier,
and the process is described by second-order kinetics.

Investor ratios: Investor ratios are used to measure the ability of a business to earn an adequate return for
the owners of the business.

1.2: Analyse different financial documents and information and formulate conclusions about
financial performance levels and needs of stakeholders

In conclusion, Amazon's financial statements show us that over the last five years the company has
greatly improved. The company is strong when it comes to its high profitability growth. However, it
struggles when it comes to solvency and must take measures to ensure it pays off its debts more quickly.
After examining Amazon's management incentives and accounting quality, as well as conducting
financial and prospective analysis, I highly recommend going long with Amazon due to the significant
upside and outperformance of competitors in almost every significant measure. When comparing the
financial ratios of Amazon with its competitors, Amazon is clearly leading the industry.

1.3: Conduct a comparative analysis of financial information and data.

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We have conducted a comparative analysis of the balance sheet and the income statement of
Amazon.com for the year 2020 and submitted to the U.S. Securities and Exchange Commission (SEC).
The financial condition of Amazon.com, Inc. in 2020 is better than the financial condition of half of all
companies engaged in the activity "Catalog and Mail-Order Houses". The comparison is performed using
the eleven key financial ratios. Company's financial ratios are compared with the median values of ratios
of all companies and of companies within the same industry, and also with the quartiles of those ratios.

1.4. Critically review and question financial information and data.

Amazon has drawn criticism from multiple sources, where the ethics of certain business practices and
policies have been drawn into question. Amazon has faced numerous allegations of anti-competitive or
monopolistic behaviour, as well as criticisms of its treatment of workers and consumers. Amazon's
extreme pursues of high performance has led to a relatively high turnover, which inevitably damages the
company's reputation and increases human costs.

In conclusion, Amazon's approach to people management has both strengths and drawbacks. The
company implements effective SHRM practices and standardized recruitment and selection process with
a focus on profit.

2.1: Identify how a budget can be produced taking into account financial constraints and
achievement of targets and accounting conventions.

The budget is a financial plan for the future concerning the revenues and costs of an organization.

The budget constraint measures the combinations of purchases that a person can afford to make with a
given amount of income. A budget is usually limited by a certain income, therefore a financial constraint
could by any issue that can reduce the quality of the investment options, for example unexpected costs for
a project, stretched deadlines, clients changing the business goals.

The target achievement is an important factor as it provides a sense of direction. This involves the setting
of performance standards and measurable time-targeted objectives in advance.

There are four main accounting conventions in practice:

- Conservatism: when two values of a transaction are available, the lower-value transaction is

recorded, therefore profit cannot be overestimated, as a provision for losses

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- Consistency: the use of the same accounting principles from one period of an accounting cycle to the
next, so that the same standards are applied to calculate profit and loss

- Full disclosure: the revelation of all information, both favorable and detrimental to a business

enterprise, and of value to creditors and debtors

- Materiality: all material facts should be recorded in the accounting

All this has important effects on budget planning as it improves a company’s ability to grow and

stay in the market.

2.2: Be able to assess a budget.

 
A budget is based on a standard price for a predetermined level of sales demand or manufacturing
activity. The budged cycle may usually be prepared in the same period yearly; however, it may be broken
down into quarters or months depending on the organization and it may have the following structure:
1. Identify Business objectives.
2. Estimate the economic conditions.
3. Establish sales budgets using geographic territories and customer’s profiles.
4. Arrange production budgets by mentioning the settled levels of inventory.
5. Assign the non-production budgets.
6. Prepare the capital expenditure budget.
7. Arrange the cash forecasts and analyze financial demands.
8. Establish the master budget using the profit and loss, balance sheet and cash flow statements.
9. Present and obtain the board approval.
 

2.3: Identify how a budget for a complex organization can support organizational objectives
and targets whilst taking into account financial constraints and accounting conventions.

A budged for a complex organization can support the organizational objective and targets. Some
examples may be:
 Predicting cash flows. Being able to obtain a view of the cash flow is not only a reasonable budgeting
objective, but a necessary objective.
 Developing sales budget by the analyzing the marketing sectors, territories and of course researching
the customers’ behavior and needs. This may predict losing business by overproducing.
 Developing locally-oriented commercial structure for improving speed and reducing complexity.

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 Reducing production and assessing more of it budget for developing new marketing strategies that will
have the purpose of maximizing profit.

3.1: Identify criteria by which proposals can be judged.

 
• Relevance – for any budget, relevance comes first. It is to judge how relevant the budget is for the
purpose.
 
• Cost of the Project - Cost of the project involves all the needed materials, manpower and other things
that must be researched first before the implementation of the project.
 
• Effectiveness - this criteria gives the approver of the proposal a view of the over-all benefits that will be
derived from the project.
 
• Sustainability – sustainability of a project needs to be seen clearly. The budget for a long-term benefits
and short-term benefits will not be the same.

3.2: Critically analyse the viability of a proposal for expenditure.

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These are presented, as the document provided above by Amazon, in cash flow statements. Expenditure
proposals present plans for funds that are used by a company to purchase, improve or maintain long-term
assets.
Due to costs and long-term effects, expenditures proposals decisions are critical to an organization. The
expenditure proposals can however bring issues as measuring the costs is not always exact. The costs
predictions cannot be precise and can cause a potential loss.
 
3.3: Identify the strengths and weaknesses of a proposal and give feedback on the financial
proposal.

Strengths:
-Strong Brand recognition.
-Original Business idea that may innovate online marketing.
-Low cost of developing the project.
Weaknesses:
-The number of inactive users on Facebook rises. People with the age up to 30 tend to migrate to other
apps.

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-The project requires only two employees, this may be a risk due to a high workload.
Opportunities:
-The project’s core concept is new, therefore it has high potential.
-The project would implement also a payment system that would not require approvals making the
transaction instant.
Threats:
-The project may end up creating a negative outcome for the advertisers.
-Competitive companies that have their number of users rising may copy the concept.
 
3.4: Analyse the viability of a proposal for expenditure.
 
The cost for developing the project is approximately 1.2 M, which represents a low cost compared to the
value of the platform based on which has a worth of 33B GBP. Some issues that the project may
encounter could be:
-Development issues that may cause delays to the project.
-The budget allocated may not be sufficient for ending the project.
-Number of employees developing the project may not be sufficient.
Based on the risk and viability assessment matrix the project may be classified as: Moderate Risk.

Reference:
1. https://ir.mondelezinternational.com/node/21756/html
2. https://www.finance.gov.au/procurement/procurement-policy-and-guidance/
3. https://www.ru.nl › publish › pages › nice_09108
4. https://www.accountingtools.com/articles/types-of-financial-statements.htm l
5. https://ir.mondelezinternational.com/news-releases/news-release-details/
mondelezinternationalreports-

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6. https://www.marketwatch.com/investing/stock/mdlz/financials/balance-sheet
7. https://ir.mondelezinternational.com/stock-information/investment-calculator
8. https://www.nibusinessinfo.co.uk/content/measure-your-financial-performance
9. Books: Accounting for Managers: Interpreting accounting information for decision-making by
Paul M. Collier
10. Course: Introduction to bookkeeping and accounting – The Open University
11. ACCOUNTING CONVENTIONS AND STANDARDS
(http://download.nos.org/srsec320newE/320EL3.pdf)
12. Finance and Accounting for Nonfinancial Managers By Eliot H. Sherman
13. Libby, R., Libby, P. A., Short, D. G., Kanaan, G., & Gowing, M. (2014). Financial
accounting (p. 864). McGraw-Hill/Irwin.

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