Analyis of financial objectives. financials projecttions and Essay

Analyis of financial objectives. financials projecttions and investment decisions - Essay Example Being employed in the finance department at Aztec Catering, this report analyses the tasks that Ms. Field, the Chief Financial Officer at Aztec Catering, has given and this report is aimed to review the three current objectives of the company, prepare and analyse the three year financial plan of Aztec Catering as well as evaluate the capital investment decision that the company can take and how this decision can add the value to the company. The report has been divided into three sections and each section aims to accomplish the three tasks that have been provided. The first section of the report critically evaluates the suitability of the current objectives of Aztec Catering. Moreover, this section analyses and compares the objective of the competing firm, Compass with the Aztec’s objectives. The second part of the report analyses and predicts whether the company would face any financing problem in the next three years. Moreover, this section also justifies the solution that t he company can implement in order to help itself from such problems. The third section of the report analyses and evaluates the capital investment decision that the company can take. This section analyses how this investment decision can be helpful in increasing the wealth of the shareholders of the firm and different investment appraisal techniques have been used in order to analyse whether investment should be made or not. Some of the techniques that have been used in order to analyse the investment decisions are: Net Present Value (NPV), Internal Rate of Return (IRR), Accounting Rate of Return (ARR), and Economic Value Analysis (SVA). Section 1: Critical Analysis of the objectives of Aztec Catering and Compass Group The first section of the report cortically analyses the objectives of Aztec Catering and its competitor Compass Group. It is important to know that Compass Group is an international brand and it is not only operating and serving the clients of United Kingdom but it ha s presence in different parts of the world. Therefore the objectives of Compass Group should be considered as the benchmark and the company should and can use the objectives of Compass Group to achieve more success in United Kingdom and even then expand its offerings to other parts of the world. The current objectives of Aztec Catering that have been decided at the end of 2012 board meeting are as follows: a. To maintain a profit margin of around 24% b. To ensure the current strong financial position is maintained c. To satisfy the shareholders by maintaining a dividend payout ratio of 50% It can be found that all the three objectives of Aztec Catering have been focusing and emphasizing on profitability and financial position of the company. The first objective of the company focuses on maintaining a minimum profit margin (Tucker, and Lean, 2003). Profit margin of the company is the ratio of net profit after to sales. Or it is the ratio that the company earns after deducting all the expenses and paying of interest expense as well as taxes to the revenue (Cravens, and Piercy, 2008).. Therefore, the first objective encourages the management to focus on achieving higher profitability regardless of how it has to be done. In order to meet the first objectiv