Managing Financial Resources and Decisions Assigment 2

This report provides the analysis and evaluation of the budgets, costs in F05 Ltd, investment and project appraisal; the financial statements and many kinds of ratios of Associated British Foods. This finding uses some methods like budgetary control, breakeven analysis; several formulas about accounting like accounting rate of return, present value and net present value. Results of this analysis help evaluate the business performance and making right decisions.

Managing Financial Resources and Decisions Title page Prepared for: Mr JUN ALEJO BATHAN (Professor) Financial Decisions and Financial Performance Analysis Banking Academy, Hanoi BTEC HND in Business (Finance) Prepared by: A2TV group Class: F05B Number of words: 3,351 (not include the table) Submit day: 10th, January 2013 MANAGING FINANCIAL RESOURCES AND DECISIONS Managing Financial Resources and Decisions Executive summary This report provides the analysis and evaluation of the budgets, costs in F05 Ltd, investment and project appraisal; the financial statements and many kinds of ratios of Associated British Foods This finding uses some methods like budgetary control, breakeven analysis; several formulas about accounting like accounting rate of return, present value and net present value Results of this analysis help evaluate the business performance and making right decisions This report finds the difference between flexible budget and actual budget in F05 Ltd is quite high and it is not good for the future decisions of the company Besides, the contents and the functions of the main financial statements Associated British Foods of are discussed This brings many useful data for the investors and debtors Recommendations discussed include: - Evaluate the costs carefully to have the most reasonable flexible budgets Use several analysis to have the right price Use more investment appraisal methods to judge the viability of the projects Sources of information: - Scenario Libraries Source on the internet Company’s data However, in this report, there are several limitations: - Because of time’s limitation, some parts cannot be more deepened in content - The limitation of public company’s data MANAGING FINANCIAL RESOURCES AND DECISIONS Table of Contents MANAGING FINANCIAL RESOURCES AND DECISIONS Introduction The report aims to provide the information obtained through the analysis about budgets, costs of F05 Ltd and investment and project appraisal Additionally, the financial statements of Associated British Foods (ABF) are presented The scope of this report includes: - Analyze budgets and make appropriate decisions of F05 Ltd Explain the calculation unit costs and make pricing decisions using relevant information - of F05 Ltd Assess the viability of a project using investment appraisal techniques for two projects Discuss the main financial statements of ABF Compare appropriate formats of financial statements for different types of business of - ABF Interpret financial statements using appropriate ratios and comparisons both internal and external 3.1: The analysis budgets and apposite decision-making 3.1.1 The flexible budgets and budgetary control: variance analysis A budget is defined as a ‘comprehensive and coordinated plan, expressed in financial terms, for the operations and resources of an enterprise for some specific period in the future (Khan & Jain, 2007, p8-2) The table below will show the budgetary control (variance) analysis of F05 Ltd: Fixed Flexible Actual Budget budget budget results variance (b) 6,000 £ (c) 6,000 £ (b)-(c) £ (a) 4,000 £ £3.00 £0.5 £2.00 12,000 2,000 8,000 18,000 3,000 12,000 10,500 2,500 8,500 7,500(F) 500(F) 3,500(F) £1,500+£2*x(5) 9,500 13,500 5,000 8,500(F) 3,000 3,000 3,000 3,500 -500(A) Standard costs units Production (units) Variable costs Direct material(1) Maintenance(2) Direct labor(3) Semi-variable costs Other costs(4) Fixed costs Rent and rates MANAGING FINANCIAL RESOURCES AND DECISIONS £ Depreciation Total costs 4,000 4,000 38,500 4,000 53,500 4,500 34,500 -500(A) 19,000(F) Table 1: The budgetary control (variance) analysis of F05 Ltd (A): Adverse (F): Flavor Notes The formula to calculate the flexible budget (1) Direct material = £3(standard cost units of direct material) * production (units) (2) Maintenance = (£2000/4000 units) * production (units) (3) Direct labor = £2 (standard cost units of direct labor) * production (units) (4) Other costs = £1,500 + £2 * production (units) (5) x: production (units) It can be seen clearly that actual cost are lower than expected While predictable costs are £53,500; the actual costs are only £34,000 As the result, this is favorable - less than expected £19,000 Variable costs should have been greater than the £22,000 in the fixed budget because the company produced 6,000 units instead of 4,000 units Costs should have been increased by 2000* (3 + + 0.5) = £11,000 However, actual variable costs (£21,500) are less than expected costs (£33,000) It means that this is favorable with £11,500 less Actual semi-variable costs are much lower than what F05 Ltd expected While it predicted that semi-variable costs are £13,500; actually it only stood in £5,000 This is also favorable when less than expected £8,500 Finally, actual fixed costs (£8,000) are higher than expected costs (£7,000) Therefore, it is adverse with £1,000 3.1.2 Summary of the possible causes of variance Variance Material Price Usage Labor Rate Favorable Substitute the old materials by another different material The price reduces Use higher quality than standard The number of experience workers go up A number of worker increase MANAGING FINANCIAL RESOURCES AND DECISIONS Adverse High inflation rate Restrict laws of governments Failure to purchase the anticipated quantity material Unsuitable quality of materials Workers sickness or vacation time Labor strike Efficiency Fixed overhead price Sufficient training of workers Good working condition High retained workers rate Sale orders increase Efficient utilization of existing capacity Machines break out or use of not working equipment Poor workers performance Failure to utilize normal capacity Improve quality of machines or equipment Table 2: Summary of the possible cause of variance (Lal, 2009, p.687) 3.2: Explanation the calculation unit costs and pricing decision- making using pertinent information 3.2.1 Classifications the different costs Functional classification system under which costs are classified according to the function they perform within the business; for example, manufacturing, selling, general and administrative or financial costs (G Siegel & K Shim, 2006, p.476) Assuming that F05 Ltd is a car manufacturing company: • • • Production cost: steel, assembly line wages Administration cost: salaries, personnel department Marketing, selling, distribution: advertising, transporting costs A cost center is a business’s section to which cost can be charged It may be a location, a person or an item of equipment Each business will choose cost centers relevant to its particular circumstances (Lzhar & Hontoir, 2001, p.190) This table below shows some examples about cost center: Direct costs A cost center Indirect costs Material Labor Expense Material Labor Expense Steel, glass, paint Salaries Buying machines Glue, air tool Supervisors, cleaners, salespeople Advertising, administrative costs Table 3: A cost center and some examples MANAGING FINANCIAL RESOURCES AND DECISIONS 3.2.2 Pricing decision making a) The Terminology of CIMA defines cost unit as ‘a quantitative unit of product or service in relation to which costs are ascertained (Dutta, 2003, p.1-7) Following the data of F05 Ltd: An expected cost unit: £53,500/6000units £8.92/unit An actual cost unit: £34,500/6000units = £5.75/unit Based on this result, F05 Ltd will set higher price than actual so it will lose competitive price in the market Consequently, F05 Ltd.’s market share and sale revenue can be cut down and the company will have loss b) Breakeven analysis: is a method identifying the relationship between costs, volume of output and profit It indicates the breakeven point, the point where sales revenue equals total cost (the sum of fixed and variable costs) and there is neither profit nor loss (Armstrong, 2006, p.391) The formula for using breakeven analysis to set the price is: Breakeven Price = (Total Fixed Costs + [Variable Costs Per Unit Volume]) Volume (J Penner, 2004, p.157) Apply this formula for F05 Ltd: Total Fixed Costs: £8,000 Variable Costs per Unit: £21,500 6000units £3.58 Volume: 6000 units  Breakeven price £4.91 Based on this, a product must be sold at least £4.91 without generating profit 3.2.3 Cost should be used for decision making So far economically relevant costs for decision-making have been defined as future, avoidable costs but in economic theory the correct cost for evaluating a decision is termed opportunity MANAGING FINANCIAL RESOURCES AND DECISIONS cost Opportunity cost can be defined as accepting the value of the next best alternative (Lucey, 2003, p.326) By considering these costs carefully, F05 Ltd will have the most suitable pricing decision making to make more profit and have a strong position in the market 3.3: The viability of a project using investment appraisal methods Project A Income from Net Cash Flow Year operations £ Total Project B Income from Net Cash Flow Operations £ 6,000 9,000 10,000 8,000 11,000 44,000 £ 22,000 25,000 26,000 24,000 27,000 124,000 £ 13,000 10,000 8,000 8,000 3,000 42,000 29,000 26,000 24,000 24,000 19,000 122,000 Table 4: The data about two projects 3.3.1 Accounting rate of return (ARR) method ARR = 100% (Röhrich, 2007, p.29) Project £ Total profits Average profits (5years) Value of investment initially Average value of investment ( 2) Project £ 44,000 8,800 80,000 40,000 42,000 8,400 80,000 40,000 Table 5: The data for calculating ARR The accounting rate of return is: In project 1: ARR = = 22% In project 2: ARR = = 21% This investment appraisal method is the easy and simple way to calculate and data can be collected from accounting information Additionally, companies can directly compare the different projects’ results of ARRs and make suitable decisions for the development Furthermore, project’s entry life is taken into account (Bendrey & West, 1996, p.553) MANAGING FINANCIAL RESOURCES AND DECISIONS Otherwise, this technology also has some disadvantages like the timing of profit flows is ignored and it takes no account of time value of money According to Needles, et al (2010, p.1167), this method is unreliable if estimated annual net incomes differ from year to year 3.3.2 The net present value (NPV) method The present value formula: PV: present value A: annual cash flow R: discount rate : risk rate n: number of years R: (1+r) PV = The net present value formula: NPV: net present value CF: cash flow k: discount rate t: number of years (A.Kennedy, 1990, p.412) NPV = This table below shows the result: Year Net value presented (NPV) Present value of £1 at 15% 1.000 0.870 0.756 0.658 0.572 0.497 Net cash flow Project (80,000) 22,000 25,000 26,000 24,000 27,000 Project (80,000) 29,000 26,000 24,000 24,000 19,000 Present value of net cash flow Project Project (80,000) (80,000) 19,140 25,230 18,900 19,656 17,108 15,792 13,728 13,728 13,419 9,443 2.295 3.894 Table 6: The PV & NPV One of the advantages of NPV is to provide the better forecast about the activities of the companies in the future Differ with ARR; this method recognizes the time value of money Additionally, by accepting only projects with positive NPVs, the company will also increase its value (A.Groppelli & Nikbakht, 2006, p.160) MANAGING FINANCIAL RESOURCES AND DECISIONS Otherwise, a disadvantage of it is based on future cash flow and discount rate which are difficult to estimate Moreover, NPV usually assume that the discount rate is the same over project’s life; therefore, any change can make it wrong Another disadvantage is requiring calculation of future cash flows of the investment proposal The cash flow estimations are used to calculate the NPV of the investment Any error in these results will make mistake Actually, based on ARR results, the project should be chosen because its ARR is higher than project However, through NPV table, the project has higher positive result so it should be chosen Two results are conflict; it means this company should more methods to have the most suitable decision-making 4.1: The discussion of the primary financial statements Associated British Foods (ABF) has three primary financial statements One of them is balance sheet statement It has this name because there are two parts needed equaling to each other (Albrecht et al., 2007) Assets = Liabilities + Owner’s equity Firstly, through AFB’s balance sheet (Appendix1), the assets can be shown clearly There are two types of assets are current and non-current assets including cash, inventories, biological assets, receivables, property, plants, equipment, and investments in joint venture and associated Furthermore, the total liabilities also are presented in the balance sheet Liabilities also have current and non-current liabilities ABF has some liabilities like loans and overdrafts, payables, provisions, employee profit liabilities Finally, the balance sheet represents the equity of the business In general, the purpose of a balance sheet is reporting the financial position of ABF at a certain point in time help the investors or debtors have the right decisions about the abilities for solvency of ABF The income statement (also known as profit and loss statement) (Appendix2) is one of the three primary financial statements used to assess a company’s performance and financial position The income statement summarizes the revenues and expenses for a fiscal period (Ingram and Albright, 2006) MANAGING FINANCIAL RESOURCES AND DECISIONS 10 The basic equation an income statement based on is: Revenues – Expenses = Net Income Expenses are used to pay interest on debt, taxes and other incurred costs After the costs of doing business are paid, the amount left over is called net income Net income is theoretically available to shareholders, though instead of paying out dividends, the firm’s management often chooses to retain earnings for future investment in the business It is useful to evaluate management decision influencing payments to stockholders and stock value A cash flow statement (Appendix3) explains difference between profit and cash and shows where a business gets and uses its capital Only large companies like ABF are required to make a cash flow statement, though smaller companies it is optional It supports the company to meet scheduled financial obligations by helping owner plans and control the flow of income It also helps investors and lenders evaluate a company's financial condition (Heisinger, 2009) The main items in a typical cash flow statement of ABF are: - Cash flow from operating activities - Cash flow from investing activities - Cash flow from financing activities - Capital expenditure and financial investments The cash flow statement should be prepared on a monthly basis during the first year, on a quarterly basis for the second year, and annually for the third year 4.2: The comparison of appropriate formats of financial statements for different types of business There are various formats of financial statements harnessed at the moment The more appropriately formats the companies choose, the more successful they will get With the diverse patterns, the firms can elect suitable approaches to functionally and naturally show its expenditures, investments, profits… There are accounting criteria such as GAAP (Generally Accepted Accounting Principles) and IFRS (International Financial Reporting Standards) that are internationally used and asserted Simply speaking, there are three types of business including sole traders, partnerships, MANAGING FINANCIAL RESOURCES AND DECISIONS 11 corporations (public limited liability companies, PLC) The different kinds of businesses in divergent sectors practice different formats Firstly, take a sole proprietor for example, he/she would prepare a plain profit and loss account contrast to a public limited liability company arranging depend on IFRS or GAAP because the report is only provided to firm’s owner who is personally liable for all the firm’s obligations covering all the debts and other liabilities Therefore, it is not too intricate; it might not have the balance sheet or income statement, cash flow statement That is why hardly it collates with the others Merely, the bottom of the balance sheet would have one-line form: Capital £ 500,000 Otherwise, it may express profits earned or losses in certain periods, also at the end of the year as follows: Opening capital Profit for the year end Ending capital May 2011 30 April 2012 30 April 2012 £30,000 £ 5,000 £ 35,000 Concerning partnerships, it has many professional businesses They contain the large accounting, legal, and management consulting firms Most enormous investment banks like Morgan Stanley, Smith Barney, and Citibank began life as partnerships or renowned companies, like Microsoft and Apple although ultimately these organizations and their financing requirements are skyrocketed too large for them to organize as partnerships In correlation to the interests and the profit of members who contributes the capital of the business They aim at precise measurement of the financial statement is appeared on the balance sheet, profit, income, outcome and the loss statement Once making financial statements, initially the income statement is often arranged as the net income or loss becomes a part of the statement of partners’ capital After that, the statement of partners’ capital is prepared next since the ending partners’ capital balances become part of the balance sheet Also, they might use capital accounts for long-term investment; current accounts to record profit shares, drawings, salaries, and interest on capital accounts… The statement will MANAGING FINANCIAL RESOURCES AND DECISIONS 12 particularly emphasize the analyses of the capital and profits of the company which are distributed confidentially For example: Partner’s capital: £ Capital accounts - Joe 4,000 Capital accounts - Bat Ami Joe 2,500 5,500 7,000 - Bat Ami 1,500 9,500 21,000 The third view is that regarding corporations, the financial statement must reflect the current, non-current assets, liabilities, sales, profits, cost of income tax payable and earning per share Some businesses prepare a single step income statement format where all expenses classified by function and are deducted from total income to give income before tax The other is a multi-step format where cost of sales is deducted from sales to show gross profit, and other income and expense are presented to give income before tax The difference between these two formats is that the single format does not show the margins while the multi-step format gives the margin by classifying what is direct cost and indirect cost These classifications are important in making good financial decisions The single step format leads to low quality accounting information In a balance sheet some businesses match assets to equity and liabilities Here equity and liabilities represent the amount invested in the form of owner’s investment plus borrowings from lenders and creditors Assets refer to the amount of tangible and intangible properties belonging to the business In most businesses the balance sheet is prepared matching assets less liabilities represent the owner’s equity MANAGING FINANCIAL RESOURCES AND DECISIONS 13 Figure 1: A part of ABF's balance sheet 4.3: Interpretation of financial statements using applicable ratios and comparisons both internal and external 201 1.Profitability Profit margin (%) Assets turnover ROCE (%) 7.05 1.60 11.2 2011 2010 20112010 Hilton Food Group plc (2012) 7.62 1.44 8.30 1.42 (0.57) 0.16 24.97 1.49 11.01 11.78 0.28 37.41 39.47 38.16 (0.22) 55.33 4.15 2.81 (0.88) 5.54 1.24 5.93 5.92 0.16 1.24 0.68 1.31 0.73 0.02 0.08 1.02 0.87 41.53 38.74 (4.71) 35.17 68.7 24.7 69.3 23.8 1.6 3.8 24.7 11.10 2.Borrowing ratios Liabilities ratio (%) Capital gearing ratio Debt/Equity ratio Interest cover 3.Liquidity and working capital ratios Current ratio Quick ratio Debtor days 4.Shareholders’ investment ratios EPS (p) Dividend per share (p) 39.2 3.27 0.32 6.08 1.26 0.76 36.8 70.3 28.5 MANAGING FINANCIAL RESOURCES AND DECISIONS 14 Dividend cover ratio P/E ratio Dividend yield (%) 2.47 22.5 1.8 2.78 2.91 (0.31) 2.23 17 5.57 11.03 2.2 (0.4) 4.07 Table 7: The ratios 4.3.1 Profitability and return on capital (ROCE) ROCE is the most superior profitability ratio It can appropriately calculate the efficiency and profitability of Associated British Foods (ABF) Specifically, ROCE can enable ABF’s investors to crystallize growth forecasts, furthermore it can provide as a trustworthy measure of corporate performance (Lucey, 2003) Overall, ROCE reflects a company's ability to earn a return on all of the capital it employs ROCE is calculated by determining what percentage of a company's utilized capital it made in pre-tax profits, before borrowing costs Besides, ROCE is also an efficaciousness measurement of types Unlike profit margin ratios that only gauge profitability, ROCE can measure profitability after factoring in the amount of capital harnessed As far as concerned pure profitability, Hilton Food Group PLC has 24.97% profit margin and is far ahead of ABF, which has a 7.05 % margin Hilton Food Group PLC has an ROCE of 37 41% while ABF has an ROCE of only 11.29% The ROCE measurement expresses that Hilton Food Group Plc makes better use of its capital rather than ABF Otherwise, ABF must press more earnings out of every dollar of capital it employs With lower ROCE, ABF can have smaller chunk of profits that can venture back into the firm for the benefit of its shareholders than those of Hilton Food Group Plc The capital reinvestment is employed again at a higher rate of return that will support ABF to produce higher earnings-per-share growth and confirm the firm growth success Yet, the corporation should consistently invest in potential and trendy projects to avoid the sudden drop of ROCE incurred like in 2011 MANAGING FINANCIAL RESOURCES AND DECISIONS 15 4.3.2 Borrowings ratios Borrowing ratios seems worries of large corporations like ABF because liabilities always mean burdens no matter how light or heavy they are On the other hand, with loft liabilities, the firm probably cannot lend banks or even though other lenders who may stem from capital black markets Profits before interest and tax as well as huge borrowings also considerably influence retained earnings or dividends for ABF’s shareholders Once the interest rates increase, ABF may suffer interest charges over overdrafts and loans dilemmas is that the net profits before interest and taxes (PBIT) may substantially reduce More seriously, the firm can be stuck in lack of liquidation and likely bankruptcy Liabilities ratio expresses the proportion of ABF's assets which are financed through debt If the ratio is less than one, most of the company's assets are financed through equity ABF with 39.25% is "low leveraged," and could be safe with the potential risks the company faces in terms of its debt-load Furthermore, the ratio has increased from 39.47% to 38.16% between 2011 and 2010, yet, ABF increasingly enhances its position in the market (Lucey, 2003) Capital gearing ratio is also called capitalization ratio or leverage ratio It is the connection between that includes fixed rate of dividend or interest and that doesn’t It’s measured as: (Lucey, 2003) ABF has low-geared capital structure that indicates over-capitalization, trading on thick equity and the amount of capital is disproportionate to the needs gauged by ABF’s volume of activities The firm has to uphold a uniform dividend policy to strengthen its capacity during harsh trading periods like in 2008 - Debt/Equity ratio measures ABF’s solvency and capital structure Depending on the ratio, ABF’s investors and creditors can judge the firm’s ability to borrow and repay money ABF’s lenders such as banks are particularly sensitive about this ratio due to ABF’s low ratio of debt MANAGING FINANCIAL RESOURCES AND DECISIONS 16 to equity their loans are safe and securely repaid Yet, ABF can more easily raise capital to expand business (M Bragg, 2010) - Interest cover ratio measures of the number of times a company could make the interest payments on its debt with its earnings before interest and taxes, also known as EBIT, expressed as: (M Bragg, 2010) ABF can cover its interest payments with less defaulting at 6.08 Therefore, the firm uses this ratio as a safety gauge for banks and bondholders to insure the probability of least losses on the money By the interest cover ratio of 6.08, ABF can prove its consistency of earnings and effective payment of interest obligations 4.3.3 Liquidity and working capital ratios Current ratio is the most widely used liquidity ratio It measures the ability of ABF to meet its current liabilities out of current assets It’s the ratio of: (M Bragg, 2010) With a current ratio of 1.26, it demonstrates that ABF has $1.26 in current assets for every $1 in current liabilities and thus has 1.26 times the current asset, or its current liabilities covered 1.26 times over Besides, this also exhibits that ABF might hold larger quantities of raw material stocks Hilton Food Group PLC of 1.02 Otherwise, ABF has higher stock turnover rather than Hilton Food Group PLC means more liquid assets and the cash cycle is shorter Quick ratio or acid test ratio is: a more conservative measure of liquidity for ABF It is similar to the current ratio except inventory is excluded from the current assets in the numerator MANAGING FINANCIAL RESOURCES AND DECISIONS 17 (Lucey, 2003) ABF’s current ratio and quick ratio 1.26 and 0.76, relatively have been quite stable and consistent compared with the other rivals, say, Hilton Food Group PLC over the past three years That illustrates the firm has average debtors so ABF needs to raise capital for further expansion projects and production lines, equipment to boost outputs, high cash, medium stock turnover There is an increase in quick ratio in 2012, rationally ABF’s inventory decrease The corporation has to logically consider the finance of inventory because currently, decreases in inventory affect directly in ABF’s liquidity and overall performance 4.3.4 Shareholders’ investment ratios Earnings per share ratio: EPS (p) determines for a series of years to understand ABF’s performance, more specifically EPS ratio calculated for a number of years indicates whether or not the earning power of the firm has risen ABF has had a constant or increasing trend from 69.3in 2010 to 70.3 in 2012 to prove best results for the investors in investment decisions EPS can provide the potential and existing investors, shareholders easier access to compare ABF’s successful performance with the other rivals, like Hilton Food Group Plc for make right decisions (Sheeba, 2011) Dividend per share (DPS) (p) is a simple and intuitive number It is the amount of the dividend that ABF’s shareholders have or will receive for each share they own Dividend per share does not usually to be calculated by investors as it is usually disclosed Yet, ABF’s readers like shareholders, investors should be careful when read this ratio to avoid confusing the final dividend with the total paid over the years Conclusion This finding indicates the important of the budgets and variance analysis to help the business evaluate the efficiency in its work and have the right decisions about the product price to compete with other rivals Furthermore, by applying investment appraisal methods, the companies can choose the most profitable project to finance Additionally, through the main financial statements, the current status of a business could be shown and they help the stakeholders have right evaluation about this business to make decisions MANAGING FINANCIAL RESOURCES AND DECISIONS 18 Reference Lal, J (2009) Cost Accounting 4th ed Tata McGraw-Hill Education, p.867 Khan and Jain (2007) Financial Management 5th ed Tata McGraw-Hill Education, p.8-2 G Siegel, J and K Shim, J (2006) Accounting Handbook 4th ed Barron's Educational Series, p.476 Izhar, R and Hontoir, J (2001) Accounting, Costing and Management Oxford University Press, p.190 Dutta, M (2003) Cost Accounting: Principles And Practice Pearson Education India, p.1-7 Armstrong, M (2006) A Handbook of Management Techniques: A Comprehensive Guide To Achieving Managerial Excellence & Improved Decision Making 3rd ed Kogan Page Publishers, p.391 J Penner, S (2004) Introduction to Health Care Economics and Financial Management: Fundamental Concepts With Practical Application Lippincott Williams & Wilkins, p.157 Lucey, T (2003) Management Accounting 5th ed Cengage Learning EMEA, p.326 Bendrey, M and West, C (1996) Accounting & Finance in Business 4th ed Cengage Learning EMEA, p.553 Röhrich, M (2007) Fundamentals of Investment Appraisal: An Illustration Based on a Case Study Oldenbourg Verlag, p.29 E Needles, B et al (2010) Financial and Managerial Accounting 9th ed Cengage Learning, p.1167 A Kennedy, B (1990) Surface Mining 2nd ed SME, p.412 A Groppelli, A and Nikbakht, E (2006) Finance 5th ed Barron's Educational Series, p.160 Sheeba, K (n.d.) Financial Management Pearson Education India, p.390 M Bragg, S (2010) Business Ratios and Formulas: A Comprehensive Guide Cengage Learning EMEA, p.115 MANAGING FINANCIAL RESOURCES AND DECISIONS 19 Appendix – The ABF balance sheet (Associated British Foods, 2012) MANAGING FINANCIAL RESOURCES AND DECISIONS 20 Appendix – The ABF income statement (Associated British Foods, 2012) MANAGING FINANCIAL RESOURCES AND DECISIONS 21 Appendix – The ABF cash flow statement MANAGING FINANCIAL RESOURCES AND DECISIONS 22 (Associated British Foods, 2012) MANAGING FINANCIAL RESOURCES AND DECISIONS 23 ... 9,000 10,000 8,000 11,000 44,000 £ 22 ,000 25 ,000 26 ,000 24 ,000 27 ,000 124 ,000 £ 13,000 10,000 8,000 8,000 3,000 42, 000 29 ,000 26 ,000 24 ,000 24 ,000 19,000 122 ,000 Table 4: The data about two projects... 39 .2 3 .27 0. 32 6.08 1 .26 0.76 36.8 70.3 28 .5 MANAGING FINANCIAL RESOURCES AND DECISIONS 14 Dividend cover ratio P/E ratio Dividend yield (%) 2. 47 22 .5 1.8 2. 78 2. 91 (0.31) 2. 23 17 5.57 11.03 2. 2... 37.41 39.47 38.16 (0 .22 ) 55.33 4.15 2. 81 (0.88) 5.54 1 .24 5.93 5. 92 0.16 1 .24 0.68 1.31 0.73 0. 02 0.08 1. 02 0.87 41.53 38.74 (4.71) 35.17 68.7 24 .7 69.3 23 .8 1.6 3.8 24 .7 11.10 2. Borrowing ratios