BUS7B30 Financial Insights and Business Intelligence Assignment Sample 2023
Introduction
Financial insight and business intelligence deal with the evolution of various aspects of business such as internal and external factors which mainly aim to run the business in a smooth way. With the help of this technology, a business can not only be able to manage its activity but also be able to secure its future through differences in planning.
This study is based on a UK based company named Marks & Spencer’s Group Plc which deals in the retail industry. Management of the business proposed a capital program to boost its performance in the market. The aim of the study is to shed light on various aspects of this capital project and its benefits and impact on business performance.
Project ideas
Marks & Spencer’s Group Plc currently generates a total amount of sales of 9145 million pounds and its net income from the revenues incurred a loss of 198 million pounds (marksandspencer.com, 2021). Through which it can be seen that the current performance in the business is not as good as its other competitors. Apart from this, there is a decrease in sales of 10.19% as compared to the previous years.
As opined by Lim et al. (2020), a decrease in sales and net income of the business has a negative impact on both customers as well as employees of the business. Thus, in order to boost the financial position of the business a capital project of 200 million. The sources of the capital are being proposed to have by issuing equity shares capital in the market. Management decided to allocate funds from its capital due to its current performance.
As the business currently incurred loss and has the least amount of sales in the year 2021 managements choose to issue its capital as it would not increase any further amount such as internet income which charges against its profitability. Thus, this capital project seems to benefit the business model. In the capital project management decided to purchase new plants and equipment through which businesses can be able to produce a better quality of products and services.
Purchase of plants includes various digital tools and techniques which enables them to increase business performance in terms of attracting and retaining its customers. The proposed cost of purchasing plant and equipment incurred an amount of 40 million. On the other hand, business management also decided to purchase a new production plant in the UK which increased its business expansion.
The cost of this production plant amounted to 80 million pounds which produced clothing and food which is one of its major productions. Through this, they can be able to procure its product and services to its customers at a large scale. An increase in business expansion and its areas of activity strengthens its business and financial performances (Bouwman, et al. 2019).
In the business, they also aim to renovate its existing product and manufacture sites which budget an amount of 60 million. Renovation in the existing plant and manufacturing sites enables them to increase the productivity and quality of a product. Moreover, businesses also have a reserve amount of 20 million kept for uncertain expenses.
| Capital budget | |
| issue of Equity share | 200 million |
| purchase of new tools and technology | 40 million |
| renovation expenses | 60 million |
| cash reserve for uncertainty | 20 million |
| purchasing of a new production plant | 80 million |
| depreciation on plant and machinery | 10% straight-line methods |
| increase in profitability | 1.50% |
| increase in sales | 10% approx |
Table 1: Capital project
(Source: MS excel)
The capital projects seem beneficial for the business as the purchase of new digital techniques and plants enables them to attract customers through its various strategies. On the other hand, new production plant establishment also enables them to increase their productivity which increases its business sales volume.
Through this project, the overall profitability of the business increased by 1.5%. Furthermore, an increase in sales volume, of 10% is also expected through the implementation of these capital projects. As stated by Laczko et al. (2019), an increase in profitability and revenue boosts the financial position of the business and ensures a longer life span for the business.
Through this project, the business cash flow also increases as it has a positive impact on business profitability. Thus if the business implemented this capital project on the business activity it helps management to boost its employee as well as customer engagement. Furthermore, a business financial position can be strengthened through this project which helps to attract and build strong relationships between its stakeholder and management.
Financial analysis of the business
The implementation of this capital project changes in various financial statements of the business such as balance sheet, income statement and cash flow statement. This part of the report sheds light on changes in these financial statements.
Income statement: The income stream of the business shows detailed income and expense of the business which occurred during a specific period of time. An income statement shows a business gross profit, net income as well as the total amount of revenue earned by the business (Aithal, 2017). Marks & Spencer’s Group Plc currently has a total revue for its operation that stood at 9145 million pounds and its gross profit earned during the year 2021 stood at 2390 million pounds.
Its EBIT and interest expenses amounted to 304 million and 222 million pounds respectively (wsj.com 2021). If the business plans this capital project in their activity the revenues jump to 10000 million pounds which are expected to increase by 10%. On the other hand, the business gross income also increases due to an increase in sales margin (Nemlioglu and Mallick, 2017).
Apart from this, the net profit margin of the business which currently stood at -2.16 will turn positive and is expected to earn 1.5 % of total net income (marksandspencer.com, 2021). The impact on the changes in the income statement has a positive impact on the financial position of the business. The purchase of new digital tools and production plants also increase the number of expenses due to an increase in depreciation and other maintenance charges.
However, an increase in depreciation seems beneficial for the business context as it reduces the amount of tax paid in the business profit. These changes in the income statement occurred if the business implemented this capital project in the business.
Cash flow statement: The cash flow statement of a business shows the movement of cash during the financial years (Auerbach et al. 2017). Issue of shares in the market increases cash inflow, on the other hand, purchase of new tools and technology increase movement of cash outflow for the business and the renovation expenses also increase cash outflow.
This outflow fall impacts the business investing activity of cash life. The maintenance charges and increase in current expenses impact cash flow from the operating activity and increase cash outflow. However, an increase in sales and profit causes positive cash flow for the business as it increases the number of debtors and cash sales (Afrifa and Tingbani, 2018).
The company has currently cash flow from operating activity stood at 661 million pounds which increased and positively impacted the business cash flow. On the other hand, cash outflow from a financing activity and investing activity stood at 25 million and 202 million pounds respectively. The purchase of new plant, manufacturing and issue of shares and reserves cash for uncertainty cause changes in the acuity of business
Balance sheet: A balance sheet is a snapshot of a business on a specific date. Through the balance sheet business, the overall performance can be measured. As stated by Ma (2017), a Balance sheet business shows net worth as well as the total amount of debt and its total own capital. Apart from this, it is an important instrument that provides the necessary information to both stakeholder holders and management to further the decision-making process.
On the other hand, it also shows the position of the company in the market. On the analysis of the Marks & Spencer’s Group Plc, it has been found that its total amount of current assets stood at 1595 million pounds and the total amount of current liability stood at 2296 million pounds (marksandspencer.com, 2021). Through which it has been found that it has a current ratio of 0.69 and its total asset stood at 8637.
On the implication of this capital project, the current ratio has been increased which causes changes in both current assets and liability as well as working capital of the business (Godswill et al. 2018). Furthermore, the amount of total assets also changes which cause an increase in property ratio and asset turnover ratio.
Financial plan and its impact
On the implication of this capital project business, overall financial performance will be enhanced. Through the table, the changes in the financial performance of the business is being shown by using ratio analysis of the current year and proposed years.
| Calculation of ratio | ||
| current year | proposed | |
| Debt equity ratio | ||
| debt/ Equity | 2021 | 2020 |
| debt | 3660 | 3660 |
| equity | 2286 | 2433 |
| Debt equity ratio | 160.104987 | 1.5043157 |
| Net profit ratio | current | projected |
| net profit/ sales | 2021 | 2022 |
| net profits | -198 | 150 |
| sales | 9145 | 10000 |
| Net profit ratio (%) | -2.1651176 | 1.5 |
| Assets turnover ratio | ||
| sales / total assets | 2021 | 2022 |
| sales | 9145 | 10000 |
| total assets | 8637 | 8777 |
| Assets turnover ratio | 1.05881672 | 1.1393415 |
| Current ratio | ||
| current assets/ current liability | 2021 | 2022 |
| current assets | 1595 | 1650 |
| current liabilities | 2296 | 2310 |
| Current ratio | 0.69468641 | 0.7142857 |
| Proprietary ratio | ||
| shareholders equity/ total assets | 2021 | 2022 |
| shareholders’ equity | 2286 | 2486 |
| total assets | 8637 | 8777 |
| Proprietary ratio | 0.26467523 | 0.2832403 |
Table 1: Changes in the financial performance of a business
(Source: MS excel)
In the table business stakeholders, liquidity profitability and debt ability of the business is being analysed. The debt-equity ratio of the year 2021 stood at 1.60 which was reduced in the proposed year and shows 1.50 after implementation of this capital project which seems beneficial for the business (marksandspencer.com, 2021).
A debt-equity ratio shows a business total long term debt and the amount of its equity with the proportion of it. As stated by Amanda, (2019), a lower debt-equity ratio attracts investors as it shows a lower amount of risk. Business liquidity capacity is also increased due to an increase in current assets. Issue of shares also impacts on the proprietor’s ratio of businesses as it enhances the amount of shareholders equity.
The proprietor’s ratio of the business increased from 0.26 to 0.28 which enables a wider range of scope to provide better services to its stakeholders. Through this, a strong relationship between business management and stakeholders can be possible (Tanted and Jain, 2020). Moreover, business profitability also increases in which business current year loss which amounted to 198 million pounds converted into a profit of 150 million pounds in the proposed years. Through the implication of this capital project business overall profitability also increased.
Furthermore, the implication of new technology and digital tools increase business efficiency in terms of attracting customers and providing them a good quality of services (Attaran et al. 2019). Renovation in the production plant and purchasing a new production plant enable a business to provide great quality of products and services at a great price.
Though there are new arouse benefits of this capital project there are still some limitations which may affect business performance. Due to pandemic business whole activity has been affected at a large scale and its profitability is also reduced through sime period.
In this situation, the issue of new shares may affect stakeholders’ trust towards business. Furthermore, the purchase of new plants and machinery, as well as new manufacturing sites, may attract large amounts of expenses which reduce business profitability.
Conclusion
Based on the whole calculation and analysis which has been done throughout the assignment it can be concluded that the implication of the project seems beneficial for the Marks & Spencer’s Group Plc. The financial performance of a business can be enhanced as it can be able to increase its business profitability.
Moreover, based on ratio analysis it has been found that the implication of this capital project increases business cash flow and well as liquidity capacity which provides a wide range of opportunities to capture the market and compete with rival companies in an effective way.
References
Journals
Lim, D.S., Morse, E.A. and Yu, N., 2020. The impact of the global crisis on the growth of SMEs: A resource system perspective. International Small Business Journal, 38(6), pp.492-503. available at: https://journals.sagepub.com/doi/full/10.1177/0266242620950159
Bouwman, H., Nikou, S. and de Reuver, M., 2019. Digitalization, business models, and SMEs: How do business model innovation practices improve performance of digitalizing SMEs?. Telecommunications Policy, 43(9), p.101828. available at: https://research.tudelft.nl/files/71714818/1_s2.0_S0308596117304238_main.pdf
Laczko, P., Hullova, D., Needham, A., Rossiter, A.M. and Battisti, M., 2019. The role of a central actor in increasing platform stickiness and stakeholder profitability: Bridging the gap between value creation and value capture in the sharing economy. Industrial Marketing Management, 76, pp.214-230. Laczko, P., Hullova, D., Needham, A., Rossiter, A.M. and Battisti, M., 2019. The role of a central actor in increasing platform stickiness and stakeholder profitability: Bridging the gap between value creation and value capture in the sharing economy. Industrial Marketing Management, 76, pp.214-230. available at: https://researchportal.port.ac.uk/portal/files/11737822/BATTISTI_2018_cright_IMM_The_role_of_a_central_actor_in_increasing_platform_stickiness_and_stakeholder_profitability.pdf
Aithal, P.S., 2017. An effective method of developing business case studies based on company analysis. International Journal of Engineering Research and Modern Education (IJERME), ISSN (Online), pp.2455-4200. available at: https://www.researchgate.net/profile/Sreeramana-Aithal/publication/315333687_An_Effective_Method_of_Developing_Business_Case_Studies_based_on_Company_Analysis/links/58ccca284585157b6dac18aa/An-Effective-Method-of-Developing-Business-Case-Studies-based-on-Company-Analysis.pdf
Nemlioglu, I. and Mallick, S.K., 2017. Do managerial practices matter in innovation and firm performance relations? New evidence from the UK. European Financial Management, 23(5), pp.1016-1061. available at: https://qmro.qmul.ac.uk/xmlui/bitstream/handle/123456789/28983/Nemlioglu%20Do%20Managerial%20Practices%20Matter%20in%20Innovation%20and%20Firm%20Performance%20Relations%3F%20New%20Evidence%20from%20the%20UK%202017%20Accepted.pdf?sequence=1&isAllowed=y
Afrifa, G.A. and Tingbani, I., 2018. Working capital management, cash flow and SMEs’ performance. International Journal of Banking, Accounting and Finance, 9(1), pp.19-43. available at: https://repository.canterbury.ac.uk/download/b07af66cb9736109c0ebc4f662c351b74ee6f0ee4fbff6c9aeb08129dbc0b001/478460/16816_2578411036910001000%20%281%29.pdf
Auerbach, A.J., Devereux, M.P., Keen, M. and Vella, J., 2017. International tax planning under the destination-based cash flow tax. National Tax Journal, 70(4), pp.783-802. available at: https://www.ntanet.org/NTJ/70/4/A04_Vella.pdf?v=%CE%B1
Ma, C.M., 2017. An actuarial balance sheet approach to assessing the sustainability of target benefit plans. Canadian Institute of Actuaries. The document, 217045. available at: https://www.cia-ica.ca/docs/default-source/2017/217045.pdf
Godswill, O., Ailemen, I., Osabohien, R., Chisom, N. and Pascal, N., 2018. Working capital management and bank performance: Empirical research of ten deposit money banks in Nigeria. Banks & bank systems, (13, Iss. 2), pp.49-61.. available at: http://www.irbis-nbuv.gov.ua/cgi-bin/irbis_nbuv/cgiirbis_64.exe?C21COM=2&I21DBN=UJRN&P21DBN=UJRN&IMAGE_FILE_DOWNLOAD=1&Image_file_name=PDF/banks_2018_13_2_7.pdf
Amanda, R.I., 2019. The Impact of Cash Turnover, Receivable Turnover, Inventory Turnover, Current Ratio and Debt to Equity Ratio on Profitability. Journal of research in management, 2(2). available at: https://pdfs.semanticscholar.org/8665/844b09d9758fd638a5f3ee63312502b1ebfd.pdf
Tanted, N. and Jain, Y., 2020. The Impact of Ratio on Stock Return of IT Companies After Applying of IFRS. GIS Business, 15(4), pp.253-282. available at: https://www.gisbusiness.org/index.php/gis/article/download/19794/14633
Attaran, M., Attaran, S. and Kirkland, D., 2019. The need for digital workplace: increasing workforce productivity in the information age. International Journal of Enterprise Information Systems (IJEIS), 15(1), pp.1-23. available at: https://www.researchgate.net/profile/Mohsen-Attaran/publication/329844969_The_Need_for_Digital_Workplace_Increasing_Workforce_Productivity_in_the_Information_Age/links/5c48f4f892851c22a38c1581/The-Need-for-Digital-Workplace-Increasing-Workforce-Productivity-in-the-Information-Age.pdf
Websites
wsj.com 2021 Marks & Spencer Group PLC available at: https://www.wsj.com/market-data/quotes/UK/XLON/MKS/financials/annual/income-statement [ accessed on 8 November]
marksandspencer.com, 2021 Marks & Spencer Group PLC https://corporate.marksandspencer.com/msar2021/m-and-s_ar21_full_210602.pdf [ accessed on 8 November]
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