Theoretical basis of Finance Paper

Theoretical basis of Finance
Theoretical basis of Finance

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Theoretical basis of Finance


  • Critically assess and evaluate the theoretical basis of finance.
  • Critically analyse, interpret financial data, by the integration of theory and practice investigate and apply relevant tools to the assessment of a variety of organisational problems.
  • Systematically evaluate and synthesise the problem solving mechanisms in relation to financial decision making, utilising application of relevant tools and techniques.

Assessment Task:
Using the FAME database, choose a publicly quoted company of your choice.

Write a business report of 2,400 words on the company from the stance of a potential investor. Your review of the company should discuss which key areas you are considering and why. The use of ratios should be accompanied with the limitations associated with their use and what additional data would be required for a full financial review. Your review should incorporate a commentary as to how well the company is performing within its industry sector and/or against a main competitor.

Theoretical basis of Finance

Consider why there may be differences. Looking to the future, discuss what main risks and opportunities the company is facing and how they are addressing these. This section of your report could include both a financial and a non-financial analysis. Appendices may be used to contain information to support your report. It would not be expected that a full set of accounts should be included in the appendices, but extracts from the accounts may be appropriate. One of the appendices should contain your bibliography. The appendices are not included in the word count.

Write a business report, maximum number of words 2,400, to evaluate a public limited company (PLC) of your choice. Your report should detail the areas that you would consider necessary to review and why, including limitations of the analysis. The report should finish with conclusions and recommendations for the investor.



Please refer to the Assessment Guidance (on moodle page) for detailed information on:

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Theoretical basis of Finance

University Generic Marking Criteria  

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Theoretical basis of Finance

Jaguar Land Rover Automotive PLC is a holding company for the automotive company by the same name. The company, headquartered in Coventry, UK is a subsidiary company to Tata Motors. This paper focuses on the financial analysis for Jaguar Land Rover PLC by looking into the various metrics of financial performance. These metrics used in this analysis include the measures of profitability such as the net profit margin, the return to shareholders’ fund, and the return on capital employed. Other metrics used are the analysis of the company’s liquidity and gearing.

Net profit margin

Net profit margin is the ratio that analyses the company percentage of revenue left after all the expenses have been deducted. It shows the company profit earned from the sales it has made. Net profit margin is calculated as: net profit divided by sales multiply by one hundred. Higher net profit margin is an indicator that the company has a good pricing strategy and control any cost incurred effectively. “Jaguar Land Rover Automotive PLC” can use this ratio to compare its performance with other companies in the same industries since firms in the same industry experience almost same environmental change, has got similar cost structure and common customer base (Kraft, 2014).

The net profit margin of a company that is higher than 10% is considered to be better, however, the rage of best net profit margin depends on the industry that the company operates in. in the case of “Jaguar Land Rover Automotive PLC,” it will be good if the company would have been having 10% or more. In general conclusion, the higher the profit margin, and the more profitable the firm is and this margin is affected by the operating expenses (Brigham & Ehrhardt, 2013).

 In the years 2009 and 2010, the company made losses and therefore was not having a net profit margin. This implies that the company expenses in the years 2009 and 2010 are proportionately higher than the years after, it also indicates poor pricing and model and ineffective control of business costs. In the years 2011, 2012, 2013, 2014 and 2015 the company profit margin shoots to over ten percent that is, 11.30%, 11.15%, 10.61%, 12.90% and 11.95% respectively. This indicates a perfect improvement by the company as compared to the previous years.

In these three years, the management of the company seems to have formulated good pricing strategies and exercised effective cost control. This, in turn, has caused the company profit to increase by larger amount hence increased profit margin (Fitó et al., 2013). The company expenses during these five years are observed to be proportionately lower than in the years 2009 and 2010. The company profit margin has decreased by a relatively bigger margin in 2016 and 2017; profit margin has dropped to 7.01% in 2016 then further to 6.27% in 2017 provided the company turnover is higher in those years. Company’s costs have increased in these two years as compared to…….

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