FINANCIAL DECISION MAKING

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 Table of Contents

Introduction 3

Company analysis 3

Section A 3

Ratio Analysis 3

Section B 12

Corporate governance 12

Financial strategies 12

Conclusion 13

Reference list 14

Appendices 16

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Introduction

In this report an attempt is made to analyse the “ACCSYS TECHNOLOGIES PLC” with

respect to financial aspects and provide a detailed analysis of the strategic “financial goal of

the company”. The aim of the company is to expand their business and achieve the goal of

FTSE 100 companies by implementing proper growth strategies. This assignment analyses

“financial status” of the “ACCSYS TECHNOLOGIES PLC” and ratio analysis of the

company.

Company analysis

ACCSYS deals in the chemical tech industry and this particular report deals with the

financial aspects related to the company with the aim of the firm is “to combine chemistry,

technology and ingenuity”. This helps to combine the "high-performance wood products" to

be extremely durable. This helps to build a new environment with lots of opportunities. The

company is the mixture of minerals with the construction, which helps to build a better

environment. It was founded in 2005 in the UK. The company has around 1567 employees

who are working for the betterment of the environment. As per the current data, the net

income of the company is "GBP-2.71m”. There is a huge potential for this sector to grow

which provides ample opportunities.

Section A

Analyzing Ratio’s

Financial ratio’s or normally as they are termed as the Accounting ratio’s shows the
representation form the company’s balance sheets which helps measuring the different
aspects related to the company and also helps in quick decision making which determines the
financial stability of the company and brings the investors faith in the organization. Also used
in accounting, many common calculations are used to try to measure a company or other
organization's overall financial position. Current and future shareholders (owners) of a
company can be used for financial ratios of managers in the business and the borrowers of a
business. In order to do the SWOT analysis for the company within different businesses ,
analysts use their financial ratios. In measurement of ratios, values employed being taken

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from balance sheets, cash flow statements, income statement, equity statement. Which
include "accounting records" of the financial statements of the company. The details in the
documents were the basis of the organisation's transparency strategy and accounting
principles. These ratios are an essential component of an examination of other facets of an
organization. As they are categorized by the financial aspect measurement company that
determines the ratio. Cash available to pay debt tests liquidity ratios.

Profitability ratio - It is being defined as the earning capability of any firm with respect to

that company’s revenue, assets, equity, deferred tax liabilities, other cash flows, operating

costs and related margins over a stipulated period of time to gauge the matrix of profit for

that particular individual firm. This ratio is usually calculated after looking at the balance

sheet numbers and then making use of them to calculate the profitability ratio of the

company.

Margins defined with the help of ratios also indicate the profitability that the organization

gains by the increase in revenues. The calculation and use of different ratios/margins are used

by companies to know the financial health of them at any moment of time and to know the

other measures like liquidity to solve the business problems and take key decisions.

(Bhattacharya et al. 2016). The increase in revenue helps the company to lower its losses by

covering for the operating costs involved in the business operations.

Operating income margin also known with the other names such as margins earned from

return on sales or EBITDA margins is determined by calculating the operating profit with the

net sales of the company which is a presentation made in the profit percentage. This net profit

shows the profitability of the company after concluding for the net sales for that financial

year of that company. The various costs which come under the operating cost for any

company includes the wages and labour cost, the variable costs, the raw material costs etc to

be accounted for during the calculation of the operating costs for any company.

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Return on total assets is also known as ROTA which is determined as the ratio of

EBITDA/total assets of the company during any financial assessment year. The ROTA is also

indicative of the operating earnings of the company which in case of Accysys was -7% in

year 2015, whereas in 2019 was -2%. This improvement is because of the lowering of losses

by increasing revenue and an increase in the value of assets. By comparing it with

competitors company like “Billington” is doing great business and its return is getting better

every year.

Return on equity or “ROE” is determined by measuring the net income of the company to the

ordinary issued shares in the public with the IPO or FPO. The ROE of Aaccsys” in 2015 was

-20.0%, when compared in 2019 it was -15.9%., which is an indicative of the decrease in the

ROE of the company. This is because of the increase in equity and lowering the losses of the

company. This helps to generate profit without adding a high amount of capital.

Investor’s ratio

Financial position of any company is also indicative of the investor’s ratio. It determines the

sentiments of the investors for investing their money into the company’s operations. The

investors invest in the company to get a good return. The company provides a return with its

profit, which means a share of their profit goes to the investors, which helps the company to

strengthen the position. “Access" is not going through a good stage and is not making a profit

from the last few years (Janor et al. 2017). But according to the financial data, the company’s

overall progress seems to be there.

“Earning per share” is per share earnings of the company and is determined by the calculating

net profit by the ordinary share issued by the company till date in the market. The share price

“increases or decreases” depends upon the profit portion involved in the company’s share. In

2013 the EPS was -8.75, whereas in 2019 it was -6.80. This is because of the decrease in

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losses that the price of shares is improved. The competitive company “Billington” is doing

great performance and its earning is positive which shows that the company is doing good

business.

Price to earnings ratio of a company is determined as the current market price of the

company’s share/earnings per share. For Accsys, the P/E ratio was -7.73 in 2015 which

became -15.11 in 2019. This decrease is a measure that the price of company’s shares

decreased over the period of time which is a direct measure of the investors sentiments and

shows the low confidence of them in the company’s policies.

“Dividend yield" shows the dividend paid by a company to its investors as a token of extra

profit that the company shares from its profit. But "Accsys” is not paying any dividend from

the last five years because the company is bearing loss and trying to overcome their losses.

So, they are not able to pay any dividend to the investors.

Liquidity ratio

Any short term loan/debt of the company is dealt with the help of “Liquidity ratio”. This ratio

denotes the ability to pay the debts of the company by its acquired assets. This defines

"without raising external capital" of the company. “It shows the company's position in the

market as per the position of "assets and liabilities" it holds”.

Current ratio shows the connection between “assets and liabilities”. This shows the ability of

the company to pay the debts with its assets. The current ratio of “Accsys” in 2015 was 0.24,

whereas in 2019 it was 1.38. The increase in capacity of paying the debt is because of the

increase of assets of the company. This means that the company's business decisions are

working on its improvement.

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In order to understand the company financial position in the short term, use of quick ratio is

done which suggests about the company’s ability to pay for its short term debts or obligation,

which says that company should have assets that can be converted into cash immediately

whenever necessary. The quick ratio of “Accsys” in 2015 was 0.06, whereas in 2019 was

0.85. This ratio is helpful for the company’s position because of the increasing assets. The

high quick ratio is not good for the company. (markets.ft.com, 2020)

“Debt/equity” ratio or “Gearing ratio” serves the connection between the “debt and equity” of

the company. The ratio which is less than 1 is more favourable in such cases. The “debt to

equity ratio” of “Accsys” in 2015 was 0.44, whereas in 2019 was 1.81 (McCahery et al.

2016). Over the years, from the company’s balance sheet, it is being determined that the debt

has continuously been increasing for the company over the period of time, which needs to be

taken care of.

Efficiency ratio

The ratio which helps the company to determine the internal efficiency of the company in

terms of using its assets and liabilities. Normally it is determined by the ratio of revenue with

respect to some defined parameter which helps the company gauge the efficiency. The

normal practice is to minimize the efficiency ratio and this concept is widely prevalent

amongst the banks to determine their financial ratios.

“Receivables turnover” defines “no. of times company can “collect cash” in the year. The

“receivables turnover” in 2015 was 2.10, whereas in 2019 was 8.65. In this condition, the

higher ratio is more beneficial because it shows that the company is collecting its receivables

more frequently in a year (Nemlioglu and Mallick, 2017). This is because of the increased

revenue that the cycle of the collection has been improved.0

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Inventory turnover ratio is measured with the total inventory being replaced with the new one

during the period of one year, that means the sales is very efficient in case the inventory

turnover ratio is high and vice versa. In case of Accsys, this ratio increased a tad as it was

0.52 in 2015 and 0.62 in 2019, which shows increase in efficiency in sales also indicative of

the high inventory turnover ratio for the company.

Assets turns or total assets turnover are the other names for the asset turnover ratio which

defines the revenues generated/ average assets. This shows how much inventory is being

utilized by the company to convert it into the sales revenues and how fast it is done. For

Accsys, this ratio was 0.89 in 2013 which came down to 0.52 in 2019, which says the

company is piling up the inventories and not able to market its products with the turnaround

time for the assets increased over the period of time.

Capital structure ratio

Short-term debt to long term debt proportion when determined, it makes way for calculating

the capital structure ratio for the company. The other means of estimating the capital structure

ratio for any company is to determine the debt/equity ratio for the company, that will provide

a closer look into the company’s risk appetite to leverage the risk of making it run operations

by taking more loans.

“Debt ratio” shows the ability of the company to pay its liabilities with respect to its assets.

The debt ratio is 2015 was 0.35, whereas in 2019 was 0.52 (Saputra and Yusuf, 2019). This is

not good for the business because the lower ratio is more favourable. It is because of the

increasing liabilities of the company.

Equity ratio being which comes under solvency ratio is defined as the owner's investment in

the company in order to finance the total assets of the company which means how much

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money the investors have put in for the company’s assets. Here for ACCSYS, the equity ratio

was 0.81 in 2013 which decreased to 0.29 in 2019. This indicates the owners interest in

putting money to the company is lessened which is not a great indicative for the company

future.

“Times interest earned” is defined as the ratio which shows the ability of the company to pay

its interest on time. In 2013 it was 318.07, whereas in 2019 it was 29.44. This is not

favourable because the company is not making a profit, and in such cases, a higher ratio is

more favourable.

Section B

Corporate governance

The corporate governance of “Accsys” is shows the importance of work in the organization,

as it shows the board of members and directors to take “important decisions of the company”.

But the company is loss-making since last years as per the data. The total of executive and

non-executive in the board are 10 members out of which 4 are the women. They try to attend

all the boards meetings and also use proxy for non-attended meetings. This is because the

company is not able to understand the market. The revenues of the company have been

increased and it helps in understanding that the organization is improving its abilities. This

helps to understand the affairs of the shareholders, employees, managers etc. for the

betterment of the company. The governance of the company helps in taking important

decisions of the organisation. The chairman of the company is “Patrick Shanley and CEO is

“Paul Hugh Clegg” The Company was started in 2005 in the UK for establishing a new era of

combing technology with environment. The company is facing issues with competitors like

"Rogers Corporation". The company is not making a profit for the last five years and dealing

with its losses. Such competitors affect the business of the company, and the members should

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make such planning that the company start making a profit soon. The planning should be

according to the market scenario of UK (Accsysplc.com, 2020).

Financial strategies

ACCSYS being listed in the LSE, but the dream of the company to come under “FTSE 100”

can only be fulfilled if the company understands the market properly and its strategies work

for them. The company strategies are not working well because the company is not bearing

profit for years (Sarjana et al. 2018). The market cap of the company is around £87.65, which

is good but not enough because the revenue of the company is increasing, but not its profit.

The revenue is bearing the previous losses of the company.  The company has made its brand

name and good reputation in the market. But because of the losses, such reputation is at stake.

The company should improve its communication skills because that will help to connect with

the customers and understand their needs. This will help to understand the changes required

for improvement of business processes in order to define the right profitable path for the

company.

Conclusion

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Here in this report, the financial aspect of “Accsys Technologies PLC" is being looked into.

The company is going through losses. But in the past five years, it is observed that the

“revenues of the company” have increased which means that the company is doing better over

time. For any company to remain established with a good value proposition being maintained

for the company, the need is for the follow the good corporate governance strategy. ACCSYS

should try making efforts towards reducing their loans & clear as much debts they can. This

will show the proper scenario of the company. The management should try to cut the cost,

which will help to gain profit for the company. The company should try to get more qualified

women with experience on their boards which will help in a new way of making plans and

strategies for the company. The company should focus on their cost structure which will help

in making profit. This will help in expansion of business in other areas and good for the

future of the company.

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Appendices

Appendix 1: “Profit and investor’s ratio”

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Appendix 2

(Source: https://www.essay48.com/term-paper/11975-Accsys-Technologies-Plc-Swot-

Analysis)

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Appendix 3

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Appendix 4: “Liquidity and efficiency ratio”

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