Finance for Decision Making

Covid-19 has had a significant impact on business over the last two years.  Some businesses, such as supermarkets, have done well but with additional costs, many other businesses have gone into liquidation.  The last year has seen shortages in skilled labour and logistics problems.  It will be necessary for all businesses to re-assess their plans for the immediate and foreseeable future.  The world has changed since 2019 and many people have changed their habits and preferences.
To help with this planning, you should use four ratios (not more than one from each category) to report on which aspects of the business have been most affected.  Using this information suggest how the main budget may be used to plan activities for the next year.  Explain how Performance management can be used to monitor the plans and guide decision making throughout the next twelve months.
With mass vaccinations gradually being rolled out across the world, your business is looking to develop a new product or service for the post Covid-19 world.  The investment proposed is £50 million and should have a lifespan of ten years.  You are to suggest a suitable project, and, using NPV and IRR appraisal methods, show how (or if) the investment will benefit your company.

Required: 
Suppose you are appointed as the CFO for ONE of the companies listed below.
Associated British Foods
The Company is a diversified international food, ingredients, and retail group. The Group conducts business in China, South America, Africa, Europe, Australia, New Zealand, Asia, and the United States.
BHP Group PLC
The principal activities of the Company are exploration, development, production, processing and marketing of minerals (in respect of iron ore, metallurgical and energy coal, copper, aluminium, manganese, uranium, nickel, silver and potash), and exploration, development, production and marketing of conventional and unconventional oil and gas.
Easyjet PLC
The Company is a low-cost airline carrier operating principally in Europe.
Galliford Try Holdings PLC
The Company is a is a housebuilding and construction group, primarily operating in the UK.
Grainger PLC
The principal activities of the group are property trading, investment, development and management.
HSBC Holdings PLC
Bank holding company.
[The descriptions are taken from the Osiris reports, so you can check that you have the correct business.  Include the latest accounts – some December reporters may not publish before March.]
You are required to write a report to the senior management team, fully referenced, and addressing the following: 
Ratios

Evaluate financial performance: Choose FOUR categories from the list of five categories of financial ratios below and use ONE financial ratio from each category to assess the financial health of your chosen company using past 5-year financial information:

• Profitability 
• Efficiency 
• Liquidity 
• Financial gearing 
• Investment 

Note: Analyse your chosen financial ratios using information from financial statements. Considering word limit, Choose ONE financial ratio from FOUR different categories listed above; therefore, you should focus on four ratios in total in this part of analysis. Critical analysis of the four ratios under four categories is required for good work. Citically evaluate past five-year firm performance, using your chosen ratios and discuss the problems and limitations of financial ratios as a tool of financial analysis before make recommendation to the board of directors. Create your own small tables, diagrams and charts in your analysis and present professionally. Financial ratios can be collected using Osiris and Fame through ARU (Anglia Ruskin University) library (https://anglia.libguides.com/az.php?a=o (Links to an external site.)), annual reports or other professional resources.
Comparison with competitors and industry will be helpful. Suggested wordcount: 800 – 900 words.

2. Budgeting
Discuss the advantages and disadvantages of making a budget for the next year.  Do the results of the ratio analysis indicate any aspects worthy of special consideration?
Explain two different approaches to drawing up a budget for the business.
Critically evaluate how performance management can use the budget to make better financial decisions.
Suggested wordcount: 750 – 800 words.

3. Investment appraisal:
You plan to use NPV and IRR techniques to evaluate an investment project for your chosen business. Critically discuss NPV and IRR techniques and the implications of the investment on the Company. Risk and uncertainty in investment appraisal should be considered before you make your recommendation. For this exercise use a discount rate of 10%.  (Ignore inflation and taxation). Discuss the best way to finance this project.
Note:Present NPV and IRR results using small tables.  You need to make the decision on which investment appraisal format that you will choose. The project will be based on your chosen company, therefore, you have the flexibility to decide the project using your ESTIMATE. The investment should be around £50m, but how the money is invested would depend on the nature of the investment.
Sensitivity analysis will be helpful to analyse different scenarios for the appraisal. Suggested wordcount: 650-750 words.

4. Appendix:
Supporting information to help the senior management team make their final decision. Present your own tables and do NOT copy and paste annual report in your appendix.  Make sure that you include all information which attracts marks in your main report.