Strategic Financial Management - London Stock Exchange

Buddhika D.

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Strategic Financial Management - London Stock Exchange

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Themes

Financial management, LSE London Stock Exchange, financial analysis, Unilever, consumer goods, HSBC, banking and financial services, Penco, stationery products, Exciteco, investment, ROE Return On Equity, economic growth, ROI Return On Investments, turnover, EPS Earnings Per Share

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Abstract

This report examines the financial analysis of two companies on the London Stock Exchange (LSE) as listed companies, namely Unilever PLC and HSBC Holdings PLC. The objective is to examine their financial soundness, stability and chance of failure so that they fit into Penco's investment strategy, favouring low-risk return investment companies. Unilever is a well known and established player in the field of consumer goods and has a very prominent position and could be seen as a potential target of investment, while HSBC is also a known and leading player in the area of banking and financial services. This report will concentrate on the important financial metrics like revenue growth, profitability, return on equity (ROE), debt levels and liquidity ratios used by Penco to identify investments with consistent returns with low risk. It will be assessed as to whether Unilever and HSBC satisfy Penco's criteria for stability and long-term growth. HSBC will be considered the macroeconomic factors affecting the financial services sector and Unilever in the consumer goods industry. It will analyse these aspects to be able to recommend the most suitable types of investments for Penco in terms of what their risk appetite is and in line with its strategic investment objectives what will be the best return on investments.

Task One
1. Introduction
2. Company overview
3. Financial performance comparison
4. Analysis and interpretation
5. Investment recommendation
6. Conclusion
Task Two
1. Introduction
2. Short-Term Working Capital Funding
3. Long-Term Funding
4. Recommendation
5. Conclusion
Task Three
1. Introduction
2. Key concepts, features and importance of cost accounting
3. Weaknesses in Exciteco's current budgeting system
4. External factors contributing to Exciteco's poor performance
5. Conclusion

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[...] 2.2 Trade Credit In trade credit arrangement Penco can buy goods or services from its suppliers and delay paying them for some time or 90 days. This type of financing enables the businesses to efficiently manage their working capital by kind of avoiding cash outflows on one hand while they have access to the goods or services which they need for the operations on the other hand. Pros: Trade credit does not attract interest charges as is the case in overdraft and loans and as long as Penco keeps to the payment terms. [...]

[...] Irons & Robert The Fundamental Principles of Finance. [Online] Available at: https://web.archive.org/web/20211111150837/https://play.google.com/store/books/details/Robert_Irons_The_Fundamental_Principles_of_Finance?id=tzr3DwAAQBAJ&hl=en_US&gl=US PLC, A. C Annual Reports. [Online] Available at: https://acl.lk/annual_reports PLC, H. F Annual Report. [...]

[...] This makes it a low-risk investment with consistent returns. - HSBC, while financially strong, is exposed to macroeconomic risks, such as interest rate fluctuations, economic downturns, and regulatory changes that could impact banking profits. 5. Investment Recommendation 5.1 Unilever PLC - Recommended for Investment Unilever is a very safe, very boring, but has a strong branding power and growth of revenue. With such a solid profitability (11.9% net profit margin) and high ROE it offers good value for long-term investors. [...]

[...] To improve, Exciteco should adopt a more flexible, dynamic budgeting method with scenario planning and in real time modifications thereby changing in line with external factors. In addition, performance reporting systems should be further developed for analysis of variances further, thereby facilitating decision making and having greater impact on both operational and strategic management as a result. The adoption of these changes will enable Exciteco to better confront competitive environment and perform better in the future. References Anderson, K., & White, T. [...]

[...] Another big external factor was the price of silver, a basic raw material for the products of Exciteco. The silver supply available has been reduced on a global basis and G Division therefore had to pay much higher prices to secure the material. Meanwhile, the major part of silver was in large inventories of silver purchased at considerably lower prices, of which P Division had no knowledge of division. This meant that the inventory levels were not used by G Division, and therefore they missed the opportunity and added production costs as a result. [...]

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