7AC002 Accounting And Finance Management Essay.

The overall assignment mainly helps in identifying the overall performance of TrainLine from 2013 to 2016, which could help in portraying the fiscal trend. In addition, relevant projected cash follow statement is mainly developed from 2017 to 2019, which could help in detecting cash availability of the company in future. Furthermore, adequate investment analysis method is also depicted in the study for effectively helping management of TrainLine to detect scope of new investment. Moreover, different source of finance is also identified, which is been used by TrainLine in each financial year. Furthermore, impact of entrepreneurial ecosystem in developing business of TrainLine is also depicted in the assignment. Lastly, the overall ethical consideration, which needs to be conducted by TrainLine before the initiation of IPO is effectively depicted.

Table 1: Depicting the financial ratio of TrainLine from 2012 to 2016

(Source: As created by the author)

Profitability ratio:

Figure 1: Depicting the profitability ratio of TrainLine from 2012 to 2016

(Source: As created by the author)

Figure 1, depicts relative increment in overall gross profit margin 2012 to 2015, while a decline is witnessed in 2016. This decline in overall revenue is due to low selling price quoted by TrainLine to its customers. However, the total ticket sold by TrainLine has mainly increased in 2016, while its overall gross margin declined. Moreover, net profit margin of TrainLine only increased from 2012 to 2013, while from 2014 to 2016 it has been gradually declining. This only indicates that costs of conducting activities has mainly increased, which reduces ability of TrainLine to accommodate higher profits (Delen, Kuzey & Uyar, 2013). The overall increasing difference between gross and net profit margin mainly indicates that administrative expenses and finance expenses of the company has been rising rapidly.

Liquidity ratio:

Figure 2: Depicting the Liquidity ratio of TrainLine from 2012 to 2016

(Source: As created by the author)

The overall figure 2 mainly helps in depicting the overall quick ratio of TrainLine, which has been declining since 2013. In addition, this decline in overall liquidity condition of the company could mainly hamper its ability to support the short-term obligations. This decline in overall quick ratio is due to the non-accumulation of high-end current assets and increment in the overall current liabilities. Moreover, relative increment could be witnessed from 2014 to 2015, whereas again a decline in 2016 is witnessed. This declining ability of TrainLine to supports its short-term obligation indicates that adequate steps needs to taken by the management (Atoom, Malkawi & Share, 2017). The times interest earned ratio of TrainLine has mainly deceased over the tenure of five years, which indicates accumulation of reduced operating profit of the company.

Financial Leverage ratio:

Figure 3: Depicting the financial leverage ratio of TrainLine from 2012 to 2016

(Source: As created by the author)

With the help figurer 3 overall debt ratio has increased from 0.557 in 2012 to 0.744 in 2016. In addition, the rising debt of TrainLine could indicate a wwarning signal for the investors, as activities of the company is mainly supported by high-end debt. This rising debt accumulation could also increase the overall risk from investment. On the other hand, equity ratio of TrainLine has mainly declined over the tenure of 5 year. Thus it is an indication that overall investors capital is not been used by the company for conducting its activities (Giordani, Jacobson, Schedvin & Villani, 2014). The use of financial leverage ratio mainly depicted the declining financial stability of TrainLine from 2012 to 2016.

Efficiency ratio:

Figure 4: Depicting the efficiency ratio of TrainLine from 2012 to 2016

(Source: As created by the author)

Table 4 mainly depicts the efficiency ratios, which gradually improved over the tenure of 5 years. Both asset turnover ratio using tickets sales and sale amount increased effectively. This mainly indicated that the asset deployed by the company was effectively been used to generate the maximum number of sales from 2012 to 2014. However, in 2015, problems related to revenue generation and ticket sales increased, which in turn reduced ability of TrainLine to utilise its available resources. In addition, accounts receivable turnover ratio of the company effectively declined from 41.122 to 28.837, which indicates that company is able to receive payments much quicker. Moreover, decline in payment receiving days mainly allowed the company to generate quick cash and supports its activities (Kaspina, Molotov & Kaspin, 2015).

Table 2: Depicting the projected cash flow of TrainLine from 2017 to 2019

(Source: As created by the author)

The overall table 2 mainly depicts the projected cash flow of TrainLine from 2017 to 2019. In addition, overall increment in cash accumulation could be seen from 2017 to 2019, as estimation of cash sales is taken. Kaspina, Molotov & Kaspin (2015) mentioned that projected cash flow mainly allows the organisation to understand the future growth of the company.

There are relevant major sources of cash, which is used by TrainLine from 2013 to 2016 and could be used from 2017 to 2019. The major sources of cash, which was used by TrainLine, are depicted as follows.

TrainLine also accumulates cash from bank interest, which allows the company to support its activities. In addition, relative decline in interest income could be seen from 403,000 in 2015 to 250,000 in 2016. Moreover, the company has effectively conducted adequate investments in banks for generating higher cash. Furthermore, decline in overall bank deposit could be witnessed, which is effective in supporting its activities (Kaspina, Molotov & Kaspin, 2015).

TrainLine also uses receivable from other group companies as an effective source of cash, which could be helpful in supporting its activities. Moreover, focus on receivable from other group companies could mainly help in raising the overall cash accumulation of the company (Robinson & Sensoy, 2016). In addition, relative change of receivable from other group companies has mainly increased by 8,255,000 in 2015 to 9,744,000 in 2016.

Rail revenue:

The revenue received from rail services is the major source of cash, which allows TrainLine to support its activities. In addition, the rail revenue has mainly been increasing over the time, which has helped the company generate the required cash. In addition, relative change of rail revenue has mainly increased by 103,963,000 in 2015 to 116,710,000 in 2016. Focus in overall revenue from rail services is essential for generating higher cash, which could support its future activities (Bollerslev, Xu & Zhou, 2015).

Other income:

Moreover, the turnover is also supported by other income, which is been accumulated by TrainLine. This overall increment of other income has mainly helped TrainLine to generate the required cash for improvement (Guenther, Njoroge & Williams, 2015). In addition, relative change of other income has mainly increased by 13,670,000 in 2015 to 17,854,000 in 2016.

New investment project:

From 2017 to 2019, overall cash could be generated from new investment. This source of income could mainly help in raising the cash accumulation of the company, which in turn could support its activities. In addition, overall investment in new project could only be conducted if adequate viability of positive cash flow could be identified (Florysiak & Goyal, 2016).

There are relatively tow sources of finance, which could be detected from the annual report of TrainLine Company. In addition, the sources of finance are depicted as follows.

Issuing shares:

TrainLine Company has mainly used share as an effective source of finance for supporting all its activities. The company raise the required funds from shares, which could effectively be used in day-to-day operations. Caglayan & Demir (2014) stated that with the help of equity funding companies are able to reduce the interest expenses, which could arise from debt accumulation. On the contrary, Bernstein (2015) argued that extensive use of equity funding could reduce the organisations ability to evade tax, which could be conducted with the help of debt funding. TrainLine only use part of its capital requirement from equity funding, while the other funding requirements is conducted from debt

Group undertaking:

The second source of finance, which is available to TrainLine Company, is from group undertaking, which provides maximum of the funding. These group undertaking mainly provide relevant funds on which adequate interests is been paid each year. Relative funding provided by groups undertaking is mainly as debt, which are being paid on each fiscal year. Gray & Cooley (2015) mentioned that high accumulation of debt could mainly increase interest payment, which could reduce profit retention capacity of the company. However, debt accumulation TrainLine is substantially high, as evaluated from financial leverage ratio, which is increasing interest payment and reduce profitability of the company.  

Furthermore, relative measures could be taken into consideration, while choosing the appropriate investment proposal is depicted as follows.

Table 3: Depicting an example of NPV and IRR

(Source: As created by the author)

Net present value:

The overall net present value method could effectively be used for evaluating the overall efficiency of the new project. The net present value mainly allows the company to estimate the future cash flow with investment outflows. Oladele, Oloowokere & Akinruwa (2014) mentioned that investment appraisal techniques allow companies to detect viability of the project for increasing value of the firm. On the other hand, Sandhu, Scott & Hussain (2016) criticises that any increment in the inflation rate could nullify the projected gains and reduce viability of the project. The viability of new project could be detected, as the NPV is positive. In addition, the NPV of the new project is £559,239.53, which depicts that new project could effectively help in increasing value of the firm.

Internal rate of return:

The overall internal rate of return allows companies to detect attractiveness of the investment proposal. In addition, higher the IRR higher will be the attractiveness of the investment scheme, which could help the company to attain higher profits. Pradhan & Thokchom (2014) mentioned that IRR is mainly evaluated with cost of capital, which could help in understanding viability of the project to generate the required returns. On the other hand, Tadesse (2014) criticises that payback period does not accommodate the inflation rate, which reduces the actual value of gains attained by the company in future. IRR of the new project is 12%, which is relatively higher than cost of capital associated with the new project. This increment in the overall internal rate of return could effectively help in generating higher income for the company.

The positive NPV and higher IRR rate mainly depicts that continuing with the new project could be valuable to TrainLine, as it might hep in increase its future value. Moreover, the project could effectively help in generating additional cash, which might increase the cash inflow in future. Thus, the company should go with the acquisition of new project.

Entrepreneurial ecosystem mainly helps organisation for improving their overall social and economic condition. In addition, this ecosystem has effectively helped TrainLine to improve its current endeavours and effectively manage its organisational activities. The UK based entrepreneurial ecosystem has mainly helped small organisation to develop the required skills for improving their profitability. Miesing, Tang & Li (2014) mentioned that adequate help in mainly needed by entrepreneurs for effectively conducting with the new venture. On the other hand, Lamidi, Mswaka & Smith (2015) argued that seeing the high risk involved in new ventures, entrepreneurs are not provided with the adequate funding, which could effectively support the new business.

The overall entrepreneurial ecosystem has mainly helps TrainLine in developing its overall business, as it provides relevant data regarding costs, sales and marketing strategies, which could be adopted by the company. In addition, the relevant prices of train tickets are also provided to the TrainLine, as entrepreneurial ecosystem present relevant consumer demand. In addition, the ecosystem effectively helped TrainLine to gather the required data, which helped in generating higher revenue. Lawton & Rudd (2016) stated that entrepreneurial ecosystem mainly allows small business to adapt with the changing business environment. On the other hand, Sandhu, Scott & Hussain (2016) criticises that the fair distribution of data among different business mainly increases the competitive level, which hampers its overall profit generation capacity. Moreover, TrainLine with the help of Entrepreneurial ecosystem are able to develop their business.

Moreover, entrepreneurial ecosystem also helps in developing the financing and accounting system of TrainLine. The entrepreneurial ecosystem mainly allows TrainLine to develop and adopt adequate accounting system, which helps in improving its overall operational capability. In addition, the change in accounting system also helped in reducing the excess administrative expenses, which might be conducted to maintain the level of activities. La, Ozorio & de (2014) stated that detection of appropriate financing measures mainly allow organisation to improve their business performance by reducing costs and increasing profitability. Furthermore, overall accounting needs of TrainLine are effectively provided by entrepreneurial ecosystem, which helps in reducing its overall administrative expenses. The overall accounting management of TrainLine is also improved, which helps in generating higher revenue.

Entrepreneurial ecosystem has mainly helped in improving the overall research and development of TrainLine, which enabled the company to achieve higher profitability. In addition, the changing business environment has effectively been depicted by entrepreneurial ecosystem, which allowed TrainLine to develop mobile application for attracting more customers. The company developed the use of adequate advertisement scheme and bar code printing by understating the data provided by entrepreneurial ecosystem. The TrainLine also launched websites for attracting potential investors, which was provided by entrepreneurial ecosystem. This overall development and research data provided by entrepreneurial ecosystem has mainly helped TrainLine to adapt with the changing business environment and effectively generate higher revenue from operations. Bock & Johnson (2015) argued that rapid change in operation could mainly raise the expenses and might reduce the overall profit retention capacity of the company.

TrainLine has effectively conducted the change in overall human capital management for improving motivational level of its workforce. In addition, entrepreneurial ecosystem also helped TrainLine to identify opportunities, which could help in generating higher revenue. Furthermore, the effective human capital management mainly helped TrainLine to improve its overall productivity and employee skilled labour force. In this context, Karlsson, Wigren-Kristoferson & Landstrom (2015) mentioned that effective human management is essential for companies to improve their level of productivity and profitability. On the other hand, Peluso (2016) criticises that without appropriate human capital management companies are not able to conduct the required level of activity to support their activities.

The overall use of ethical consideration has mainly helped companies for smoothly conducting their IPOs. In addition, maximum of the investors mainly need ethical consideration like full disclosure provided by the IPO initiating companies. McGuinness (2016) mentioned that displaying the overall activities of the company mainly help in attracting relevant investors for the IPO. On the other hand, Drover, Wood & Fassin (2014) criticises that majority of the banks who act as the underwriters does not disclose relevant information if high end share are not allotted from the company. There are relevant factors, which play a vital role for ethical consideration taken into account before and during the process of IPO initiation. The relevant factors are depicted as follows.

TrainLine mainly needs to select an effective IPO underwriter, who will effectively conduct the share issue process. In addition, full disclosure to both investors and IPO undertaker could effectively improve ethical consideration conducted by TrainLine Company. Furthermore, the overall financial condition of the company and future scope, which could increase overall growth could is effectively provide by the company. Wu & Wan (2014) mentioned that depiction of full disclosure mainly increases trust of the investors, which in turn increases the capital attained from IPO activity. On the other hand, Hoskinson & Kuratko (2015) criticises that maximum of the IPO shares are mainly provided to the undertaker banks, who are responsible to conduct the bidding and distribution process of the IPO.

TrainLine could effectively provide accurate disclosure of the future scope, which could be used by the investors during the bidding process. This disclosure could effectively help TrainLine to raise the capital, which might be collected from the bidding process. Furthermore, this disclosure could mainly reduce the manipulations, which is mainly conducted by IPO understating banks for obtaining the shares at discounted prices. On the other hand, Fassin & Drover (2015) criticises that companies by providing additional benefits are able to force banks for buying the left out shares after the bidding process.

Fair Dealings:

Moreover, TrainLine mainly needs to conduct fair dealing process during the IPO initiation, which could allow investors equal chance in the IPO. In addition, fair dealing practise could mainly help the investor in making adequate biddings, which could allow TrainLine to improve capital requirement. In this context, Yoo (2014) stated that bankers use IPO share allocation to compensate institutional investors for offering share are low prices. On the other hand, Rahman (2015) criticises that underwriters do not conduct fair dealings for increasing their accumulation of shares at discounted price. In addition, TrainLine could effectively use adequate underwriter banks, who will conduct the IPO dealing efficiently and fairly.

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