Case Study Of London Biscuits Company

The profitability ratio is a class of financial metrics that are used to assess a business's ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time (Investopedia, 2014). It is used to determine how profitable a company is over a period of time, generally one year. The profitability ratio for Grace Kennedy group is shown below for 2009 through to 2013.

Capital Budgeting is the planning process used to determine whether an organization's long term investments are worth the funding of cash through the firm's capitalization structure.

Profitability ratios are basically figures to measure if the company is doing well in the terms of profit[13]. ROCE ratio has increased in 2011 but in 2012 it deteriorates by 3%. This fall indicates that company was not successfully getting high returns as a percentage of its resources available, compared to 2011.

1. The net present value is the projects present value of inflows minus its cost. It shows us how much the project contributes to the shareholders wealth. The NPV of each franchise are:

Capital budgeting is the process of evaluating and selecting long-term investments that are consistent with the firm's goal of maximizing owner wealth. A firm using capital budgeting, their goal is to see if there fixed income will cover itself for profit. Fixed incomes are things such as land, plant and equipment. When a firm using a machine to produce its good or service. They most of the time what the machine to

As seen in (Exhibit 2-6), the inventory turnover ratio dropped in the year 1996 which indicates a problem in distribution or a downturn in consumer demand. Another problem indicated in the days’ sales outstanding ratio which indicates a

“There are two relevant financial aspects of inventory. First, the accounting measures of inventory stocks and flows affect both the income statement and balance sheet. Second, the level of inventory held affects the amount of capital needed as well as the income of the period” (Bierman &

These decisions involve commitment of huge funds that too for a longer period which also changes the risk complexion of business. This decision, if undertaken judiciously, helps in providing the benefits of maximization of wealth not only for the concerned organization and industry but also for the economy as a whole. On the other hand, if this decision is not given its due importance, it will ultimately lead to the decline and demise of even a growing prosperous organization. Capital budgeting decision is considered to be the most important and crucial decision among the four decisions mentioned above because it, to a great extent, influences the survival, growth and value of a business enterprise. In the words of Porwal (1976), “Capital budgeting is one of the important vehicles to achieve objectives of a business concern”. Van Horne (1994) provides an argument according to which capital budgeting decision is the most important of the three decisions when it comes to the creation of value. It is considered under inorganic growth of an organization. Organic growth is brought about by daily investments in the business in terms of financial resources, hard work, careful investigations of quality, proper planning, serious team work, research and development, acquisition of technical knowhow etc. Inorganic growth in terms of acquisitions of new business may lead to quick growth without investments in any of the items mentioned above apart from financial resources. Capital

According to Investopedia, capital budgeting is “the process in which a business determines whether projects such as building a new plant or investing in a long-term venture are worth pursuing” (Investopedia, 2015). Capital budgeting is very important topic when managing a company and its finances. It could cause a significant amount of damage or it could further solidify the company’s foundation in their respective field. Companies have a variety of ways to manage their money and projects, whether is through qualitative analysis or information. This analysis or information may come from the cash inflow/outflow and the company’s assets.

In todays economic climate every company or organization is looking for a way to get ahead of its competition. Every owner, CEO, or president is looking for away to keep his or her company or organization on solid financial ground. The one thing that they realize is, in order for a company or organization to stay solvent they will need to find away to stay competitive in their perspective markets. They have found that this may be done by some type of investment(s), in the form of acquisition, and or merger. In the world of business, capital budgeting is one of the most important steps that a company or organization can take. This process is called Capital budgeting. Capital budgeting is a process that attempts to determine the future.

Capital budgeting allow businesses determine best profit generating investment plan and evaluate its profitability. The Capital Budgeting process involve distinct departments and authorities such as, the marketing department for analyzing the market potential for selected plan. Similarly financial analyst for analyzing and recording the cash outflow and cash inflow, and to ensure shareholders get benefitted.

Regardless of the industry, any organization that is navigating their operations without observing all directions is putting themselves in an enormously risky situation since for a company to succeed they must be constantly aware of their financial situation. Capital budgeting is the process of planning expenditures that generate cash flow and that are also expected to go beyond more than a year. Any organization that is taking on a new project, or making a new investment, needs to determine whether this will be the most efficient use of their funds and whether this course of action will lead to an increase of wealth for the organization. Throughout this process, several principles should be kept in the forefront of the decision makers’ mind because they can serve as a form of guidance to avoid losing focus as they establish their budgeting plans. The four principles evaluated, and their importance, consequences, and benefits will be determined to understand their significance in this process better.

SF does not want the product overproduced, provide timely reporting of product sales in order to avoid this problem. For this reason, the company's inventory becomes a serious problem.

Capital Budgeting gives us the answer to “if it is worth putting money or capital into a project”. It is a decision making tool for a company or an individual who is looking to invest his capital and has multiple options which can be mutually exclusive or not. For example if a company is looking forward to buy a machine for its factory then is it worth it to put money into that machine and how much beneficial will that machine be to the company. All these answers are given by capital budgeting. Lets say you are thinking of borrowing

Higher ratio indicates that the company is able to replace its inventory at a faster rate and hence the holding cost decreases. The number of inventory turns has decreased for Godrej and this is clearly indicated by the increase in the total inventory of the company. The number has decreased for both Emami and Dabur indicating both have improved their inventory management performance.