Effectiveness of Human Resource Management Practices at RMC Global
In this era of global competition, the importance of Human Resource Management practices in the context of organizational performance has been realized to a great extent. In last few decades, great research has been conducted in the field of HRM and its relation to organizational performance. The researchers have found a strong positive relationship between human resource practices and enhanced organizational performance. Primary purpose of this research was to investigate the relation between human resource activities and organizational performance at RMC Global Company. Data was collected through mail questionnaire sent to employees of HR department of RMC Global Company, UK. 51 filled responses or questionnaires were received and utilized in the analysis of this study.
Overall research methodology of the study was based on onion model presented by Sounders. According to analysis, employees believed that they are provided an opportunity to participate in decision making, of business which affected their performance. Findings of the study show a positive relationship between human resource management practices and organizational performance. It depicts that RMC employees participate in innovative technologies to a great extent in order to contribute positively in the organizational performance. Further, the findings can draw a road map for the managers of UK insurance companies in order to appreciate the efforts of human resources to get sustaining competitive advantage in the industry. In conclusion, HR practices have positive relation with the organizational performance.
However, it is recommended that RMC Global Company should provide employees with more conducive and learning environment. Entire HRM activities should be executed in a best way in order to enhance the organizational performance. Aims and objectives of the study have indispensable importance and define various implications of this study, its beneficiaries, as well as the study outcomes. The main aim of the study is to examine how HR activities impact on performance of RMC Global Company.
Dissertation Objectives
Identification and investigation of various aspects of human resource management practice
Investigation of the impact of HR activities on individuals’ performance at RMC Global Company
Examination of the impact of HR activities on RMC Global Company’s performance
Suggesting of an effective implementation plan of HR practices to future performance of RMC Global Company and other insurance companies
All of these objectives are specific, measurable, reliable, attainable, and actionable that will contribute to the enhancement of RMC Global Company’s performance. These will also help the RMC Global Company to gain enduring growth in insurance sector.
Human Resource Management Practices
As a result of growing forces which appeared in response of rapid change in the business environment, the direction of the policy is steered towards an assortment of reactions between industrial organizations, the rate of technological invention, variation in consumer demand as well as Globalization of markets. Manufacturers are the features that amplified the vitality of the competitive environment within which organizations are required to retort. Today a competitive and efficient human resource is important for the power of organizations that is facing the trials of business. Nowadays, the implication of containing a competitive human resource is equal to the achievement of organizations. An effective and competent human resource would produce productive and quality individuals that will ultimately decrease the difficulties associated with human resource just like absenteeism, turnover and job dissatisfaction of employees. What is meant by human resource management? Actually Human resource management is a philosophy, a policy, practice and a system which can stimulate individuals who are working in an organization. Activities of HRM are composed of staffing, development, performance appraisal, training and compensation management, health and safety as well as industrial relations.
HRM practices are the activities which can inspire the workers also enhance employees’ levels of job satisfaction and organizational commitment. In the early 1980s the Concept of HRM became prevalent, there was growing educational concern in the area of research and concept. Initial models of HRM were mostly conceptual lacking considerable experimental indication for their rationality. Decade of 1990s perceived a considerable change in the concept as experiential research began which initiated the process to probe link between performance and HRM practices. In modern times the research provides empirical confirmation of the relationship among performance and practices of HRM. Many researchers also contain a cumulative concern in the notion of HRM practices as well as the strongest connection among organizational performance and HRM practices. Basically, the concept of HRM surfaced in the 1980s from outdated personnel management practices. Typically personnel management was mostly considered a connecting the recital of simple functions of staffing, frequently steered, devoid of concern to other organisational actions as well as devoid of arrangement of administrative objectives. HRM is like a business that is progressed as an allowance of the typical role of personnel in the form of a very operative organisational action.
A human resource audit is a single system that is used to assess and evaluates all the activities in the arena of human resource management. Its sub-grouping is not perfect and methods of human resource assessment are not acknowledged evenly in the textbooks of modern times. Though, the literature of the combination of human resource auditing along with some other HRM assessment methods contain indication for the determinations of comparison and discussion.
I do hope you enjoyed reading this post on human resource management practices at RMC Global. There are many other titles available in the HRM Dissertation Collection that should be of interest to human resource management students and CIPD professional. There are many dissertation titles that relate to other aspects of HRM such as employee engagement, HRM Theory, absenteeism, training and development to name a few. It took a lot of effort to write this post and I would be grateful if you could share this post via Facebook and Twitter. Feel free to add your thoughts in the comments section. Thank you.
An Examination into the Threat of Fire to Timber Frame Construction in the UK
Since the dawn of early man timber has been used as a construction material. As the human race developed so did their buildings. As its name suggests, timber frame construction is a method of building that relies on a timber frame as a basic way of structural support. Many scholars remind us timber for constructional purposes varies widely throughout the world. He also claims that countries have tended to develop their own methods of construction depending largely on the availability of local raw materials and to a lesser extent on climate. This can be seen to be true of countries which have large areas of forestry such as North America, Canada and the Scandinavian countries. Approximately 95% of all homes built in the US and Scandinavia are of timber frame construction. The market share for new homes in the UK is just over 20% and that figure is expected to rise to over 30% in the next few years.
Timber Frame Construction Dissertation
Timber frame is now a mainstream method of house building in England as it has been in Scotland for quite some time, where over 70% of homes are built using timber frame. Timber frame building is a simple concept and is well within the scope of anyone who has a working knowledge of general building practices. It uses plywood nailed to a timber framework to form a robust structural shell. They can be finished with a wide variety of external claddings such as brick, stone; cement based rendering systems, tile hanging, wood or plastic either singly or in a combination. The frame is completed first and then the cladding is applied. Plasterboard is used to internally line the building as soon as the building is watertight, and this can then be finished with many different materials.
Dissertation Aims and Objectives
This dissertation aims to provide a background into the development of the timber frame construction industry and investigate the threat of fire during the construction stage, and also to prove that timber can still be considered as a major construction component.
To provide a background into the history, evolution, advancements and modern methods of timber-frame construction
To provide an insight into the fire issues that has to be dealt with during the construction of timber-frame multi-story buildings
To examine the new procedures that are being considered as a solution to the recent concerns with the fire safety of timber-frame buildings
To find what Members of the construction industries views are towards the fire safety of timber-frame buildings
To determine whether timber frame buildings can still play apart in the future of construction.
I do hope enjoyed reading this post on fire and timber frame construction. There are many other titles available in the construction dissertation collection that should be of interest to construction management students and building professional. There are many dissertation titles that relate to other aspects of construction such as project management techniques, environmental management, building and construction methods to name a few. It took a lot of effort to write this post and I would be grateful if you could share this post via Facebook and Twitter. Feel free to add your thoughts in the comments section. Thank you.
The aim of this case study research was to explore the dynamics of parent professional collaboration for education of children with autism in a mainstream primary school. Effective partnership between school and parents is gaining currency in the legal documents concerning inclusion of children with special educational needs. Partnership with parents of children with autism is especially vital considering the core difficulties of children with autism in communication and socialization. Parent-professional collaboration can contribute tremendously in increasing the effectiveness of any educational program for children with autism. Moreover lack of collaboration between parents and professionals may cause a delay in achieving developmental progress in children with autism. This research was conducted in a special autism unit within a mainstream primary school in London. The participants of the study were a Special Educational Needs Coordinator (SENCO), 5 teachers, 5 teaching assistants (TAs) and 5 parents of children from the autism unit within a mainstream primary school. The use of questionnaires, observation and interviews aided in ‘data- triangulation’ that enhanced the validity of the study. The findings of the study were grouped under three core themes namely autism, inclusive education and parent-professional collaboration. Firstly, the findings indicate that the autism unit within mainstream school supports inclusion of a very low percentage of children with autism in the mainstream school. It was clear that those children with mild behavioral and learning difficulties had a greater possibility of being included in the mainstream.
autism-education-dissertation
Secondly, the findings suggest that there exists a good level of communication and co-operation between the professionals and parents of children in the Key Stage 1 of the autism unit. However the level of contact with parents of Key stage 2 was poor. The reasons behind poor interaction between school and parents of the key stage two were not very clear. Finally, the study revealed that TAs appear to be excluded from the process of collaboration with parents. The TAs were not equally included in the process of collaboration and therefore shared different views about parents as compared with teachers. Overall, the results of the study indicate that there is a need to generate and reinforce holistic collaboration between parents and professionals, among professionals and between special autism unit and mainstream school for mainstreaming children with autism. Thus, holistic collaboration can be considered a key aspect in the process of inclusive education.
Dissertation Objectives
Having discussed the background and rationale of this research study this section spells out the research questions that directed this research. This study was carried out in an autism unit within a mainstream primary school in London. The research questions presented below were aimed at understanding the nature of parent–professional collaboration for education of children with autism. The special focus of this research was on autism however some sub-questions do not contain the phrase ‘for children with autism’ to keep the length of the questions short.
What is nature of the difficulties of children with autism and how are they included in the mainstream school?
To what degree are the views of parents and professionals working in collaboration similar and to what degree are they different?
What channels do parents and professionals use to communicate for collaboration and what is the quality of communication?
What strengths and problems are perceived by teachers and parents in the process of collaboration?
What suggestions do teachers and parents propose to improve the partnership?
Did you find any useful knowledge relating to autism in mainstream primary schools in this post? What are the key facts that grabbed your attention? Let us know in the comments. Thank you.
International Organization for Standardization (ISO) states that product realization includes: Product and service provision; product control and service provision, validating the process of service provision and production, traceability and identification, property of customer, preservation of product; purchasing process, purchasing, information of purchasing. verification of purchasing product; design and development planning, design and development inputs, design and development review, designs and development outputs, design and development verification, verification of development and design, validation of design and development, control of changes in design and development. Planning of product; processes related to customer, determination of requirements and related to the product; control of devices for monitoring and measuring. (Cobbett et al 2005).
ISO 9001 : 2008 requires department to perform the roles in planning product realizations, Recap of ISO 9001 requirements in planning of product realization are planning and developing the process required for product realization and keeping the consistency of the planning, and documentation should be done in an suitable form, i.e. confirming the names of the plant and determine how best to cultivate or procedure or collect the materials of the plant. Determination if the planning is appropriate i.e. determining the key physio-chemical features of the material and establish the parameters. Here we need product requirement and quality objectives, need for document, process and resources. Validation, verification measurements monitoring, test activities and inspection i.e. establish and determine a good dosage from based on the findings that are confirmed and the legal requirement of the customers for the prospective products, procedure for the product acceptance. Record are required as evidence that the resulting product And the process meet the requirements. The industry pharmaceuticals would establish after determining a suitable dosage form based on confirmed findings and legal customer requirements for the prospective products then registration dossier to be finalized by PTRMD with other departments assistance majorly MCQC.
ISO 9001 Process
As per ISO 9001 : 2008 department role in customer related process there are three QMS processes or requirements under sub close 7.2. It should entail. 1).the requirement connected to the product: customer requirement should be determined, like if it is decided that given medicine should be powder, tablet or capsule others will feature in the a head task, regulatory and statutory requirements needed to the product, not specified for given product though needed for intended or specified use that is known and any requirement that is considered necessary should be given. 2) The industry pharmaceuticals should review the requirement above, the product requirement should be reviewed before supplying the product to the targeted customers for the purpose of ensuring the exact definition of the product requirement, maintaining any subsequent follow up action and the review result, ensuring its ability of meeting the requirements, when the given requirements have not been documented, before any acceptance they must be confirmed, if there is any change in the requirements of the product, ensure amendment of the relevant documents and the personnel who are relevant, are informed of the requirements changes. In situation like, if the report from TL to the CEO gives support for further action on given procedure the CEO will give direction for the TL to proceed with customer-related processes as per sub-clause 7.2. (3) customer communication; the department should be a well implemented and determined for communication with the customers on inquiries, information of the product, handling of the order plus the amendments, feedback of the customer plus the complains made by the customers. (ISO 9001). For instance the team may or may not be reconstituted but the new incoming directions of the given medical research may call for a wide range of expertise from the various units or may be from outside of the team. 4) customer communication is determining and implementing proper ways of communicating with the customers for the purpose of product information, contracts, inquiries or handling of orders including amendments, feedback of the customer plus the complains of the customer.
Role of industry pharmacy department in development and design process as per ISO 9001 : 2008.Recap of ISO 9001 requirements in respect of development and design processes. The roles are: 1) Design and development planning, the team should plan and have control of the design of the product and development for determination of the; stages of development and design consist of verification, appropriate view, and the validation activities for every given stage. The industry pharmacy should produce the highest customer friendly and legal acceptable form of dosage, authority and responsibility for the development and the design, managing the interfaces between the groups that are involved for ensuring effective and clear responsibility assignment, update as appropriate the output planning during the development and the design, the development and design may involve any unit or department depending with the situation. 2) Design and the development input; designing the requirement of the product maintain record and the inputs. The industry pharmacy would strive to provide animal facilities and come up with the most appropriate study model. Applicable legal requirements, and the applicable information derived from the same design, essential requirements for the development and design, review of the input for adequacy, resolving of ambiguous, incomplete or requirements that conflict. The industry pharmacy should strive in providing the highly efficient and economic procedure for the raw materials qualification and the finished product. 3) design and the development output; the output of the design and the development should be documented in a way that they are suitable for verification against the input to the process, and the output should; provide purchasing information service and products, meet the requirements of the design and development, reference or contain the criteria of product acceptance, define the essential characteristics for proper and safe use, the products should be approved before their release, like the industry pharmacy would study design for trials in clinical rest with the CEO office who may utilize expertise from in or outside.
Industry pharmacy role in the development design and processes as per ISO 9001 : 2008. There are 7 QMS processes or requirements under 7.3 (Magaji et al 2012). should be within; development and design review, where the team should perform systematic design review and development at the appropriate stages in accordance with the arrangements that was planned in evaluating the ability of the given results, to requirements as the design review and development are important in discovering the efficient and economic procedures within the industry pharmacy department concerned with the development and design, identifying problems and stating the necessary actions, the result of the reviews should be maintained and do follow up actions subsequently . 2) Development and design verification in accordance with the planned arrangements, the team should conduct verification for ensuring the input requirements are met by the output, and put in maintenance. The result of the verification and continuous follow-ups, for instance the industry pharmacy should give most efficient and economic procedures for qualifying the given raw materials and the end product. 3) Control of design and development changes; identifying changes of the design and development and maintaining the records, verify, validate and review the given changes and make appropriate approval before they are implemented, i.e. when the given products or services fail to pick up as it was planned they have to be re-designed. Evaluating the changes in form of their effects on constituent parts and products already delivered, put in records of the changes result and continuous follow up actions.
Industry pharmacy role in purchasing processes as per ISO 9001 : 2008 which is associated with: 1) purchasing process, the industry pharmacy should ensure that purchased products fulfill their its specified purchase needs in consideration of the type of the products on subsequent process of realization or final product (Magaji et al 2012) i.e. even if there is central purchasing unit supplier department and administration responsible with special and general purchases the criteria for the latter in product realization are furnished by industry pharmacy. Select and evaluate suppliers upon their ability to make supply in accordance with the requirements, establish the procedure of selection (Pharmaceutical, Inc.), re-evaluation and evaluation, and Keep the result of evaluation and subsequent follow up actions. Like the industry pharmacy should provide or source the procedure for the purchase starting materials plus other goods and reagents. 2) Purchasing information requirements to ensure that information of purchase contains the information describing the product to be purchased plus the requirements. Product approval processes, equipment and procedure.
Ensure the quality of being sufficient of the given requirements before making communications to the supplier, and the various department or units should be responsible in verifying purchased items supplied to them. 3) Verification of purchase product is to implement and establish the inspections or other necessary activities for confirming that the products purchased meet the indicated requirement of purchase i.e. Units or departments are responsible for verification of items purchased to them. Should be responsible if the customers or the organization proposes for product verification at the location of supplier they should give the intended verification arrangement and the method of releasing the product in the information for purchase.
Recap of ISO 9001 requirements, there are 5 QMS requirements and processes under sub-clause 7.5 (Megaji et al) the processes are: 1) control of service provision and production. Services provision should be planned and control should be carried out in controlled condition to be applicable. In industry pharmacy every department can provide different data such as taxonomic data and the department can provide highly specialized services as chemical synthesis and forensic analysis, efficacy or toxicity data or data of comparative effect of non-economic or economic species or the antimicrobial potential of a given herb. The information of given product characteristic should be available. Necessary instruction for work should be available i.e. the department responsible should put into writing dossier for registering and regulatory agency of medicine. Suitable equipment should be used. Measuring and monitoring equipment should be available. Monitoring and measuring activities should be implemented. Implementation of delivery, product release and activities of post-delivery. 2) Validation of process for service provision and production, it entail validating service provision or any production in which continuous measurement or monitoring may not verify the given output. This validation consist of processes in which deficiencies may turn out apparent only after service delivery or product use. Through validation, it demonstrates the ability of the process to achieve the planned outcomes. Arrangement of validation should be established including applicable; equipment approval personal qualification, records requirements approval and process review criteria, using defined procedure and methods and re-validation i.e. where herbal medicines and pharmaceuticals needs to pass a battery of test like disintegration test (Capsules and tablets) and before being approved identification.
ISO 9001
Industry pharmacy roles in production and service provision as per ISO 9001 : 2008. The recap of ISO requirements there are 5 QMS requirement process under sub-clause 7.5 (Megaji et al 2012), in respect of service provision and production process are: 1) identification and traceability; where appropriate identify the product using best means during the product realization, the key role of the department should be to help establish or propose probable route of production to be done on pilot scale since in chemical medicine production, several in-process quality procedures control are needed.
The department should identify the status of the product with respect measurement and monitoring requirements throughout the product realization it requires that the industry pharmacy should be able to make identification of the product by using appropriate means throughout product realization. Traceability requires that, maintain records and have control of product unique identification as this process is important for regulatory processes and product realization. This are essential strategies that will help in tracing a given problem to their various sources hence every department must take great care with property of customer which are under their control.
2) Customer property; the industry pharmacy should exercise care with any property of the customer while it is still being used or under the control of the department, customer property should be verified, identified, safeguarded and be protected. Any damaged, lost, or unsuitable customer property should be recorded and be reported, this an essential approach for addressing regulatory concerns and accountability concerns which are associated with given pharmacologic agents like poisons and narcotics.
Product preservation should be done during the internal processes and delivery to the required destination for the purpose of maintaining the requirements conformity since applicable preservation consist of handling, identification, packaging, storage and protection i.e. product status should be identified with respect to measurements and monitoring requirements, the departments are required to have defined reference active crude extract, market substance which is defined.
Industry pharmacy department’s role in control of the measuring and monitoring equipment as per ISO: 2008 recap of ISO 9001 requirements, some of the equipment’s in need of re-calibration and calibration are: volumetric wires, refractometers, gravimetric instruments, photometers, electronic devices and various electronic equipment’s.
Summary
The recap of ISO 9001 requirements in respect of monitoring and measuring equipment’s processes include. 1) Control of monitoring and measuring equipment’s the department is to determine the measurement and monitoring to be made and the needed equipment for production of product conformity evidence. like the practise of standard’s needs, all units and departments to do calibration to their equipment’s as it is described by procedures for operating and in performing this other control measure needed assessing and recording prior result validity if the method or equipment are observed to conform to the requirements, verification and calibration result records should be maintained, re-confirm or confirm the ability of any software or the used programmes for measurements or monitoring before its initial usage.
2) Control and use measuring and monitoring devices for ensuring that capability of the measurements is consistent with measurements and monitoring requirements, and ensure for the validity of the result in situations where it is necessary; the equipment’s should be calibrated to international or national standards, verify or calibrate the equipment’s for measuring prior to use or at specified intervals, the equipment’s should be safeguarded from improper adjustments, they should be re-adjusted or adjusted as necessary, they should be protected from deterioration and damages.
3) The validity of prior results should be assessed and recorded to find if the device conforms to requirements, in ensuring the result validity the department would; verify or calibrate the measuring equipment’s at prior to use or at specific intervals, equipment’s to be safeguarded from improper adjustments and damages, do the necessary adjustments and re-adjustments, record the equipment’s appropriate basis and do the identification of the equipment’s for measurements for determining their calibration status. 4) Conforming the software used ability for measuring and monitoring for the application that is intended before its initial use.
In conclusion accompany that certifies the level of ISO 9001 : 2008 has got numerous advantages compared to the others, since the companies outsourcing sponsors and customers will also benefit from this .It will help the company to assure their customers that they will meet their needs for product development, product design, servicing, installation and product developments beside meeting the needs of cGMP requirements. (Pharmaceutical, Inc.) And compliance to ISO standards is normally voluntarily though many pharmaceutical companies view it to be hard because of the added level of quality system oversight that that FDA current good manufacturing practises.
References
Quality and Compliance – Pharmaceuticals, Inc.
ISO Survey 2009 (cited 2014 November 11)
Corbett CJ, Montes-Sancho M J, Kirsch DA (2005). The Financial Impact of ISO 9000 certification in The United States. An Empirical Analysis. Management Science 2005.
Grba Magaji, et al (2012). Production realization and Service Provision in Herbal Drug Research and Development According to ISO 9001. Journal of Pharmaceutical and Scientific Innovation.
Ratio Analysis And Financial Reporting – According to IAS 7 net cash flow from operating activities can be calculated using either of two methods; direct method and indirect method. The direct method shows operating cash receipts and operating cash payments; including cash receipts from customers, cash payments to and on behalf of employees, cash payments to suppliers; all resulting in the net cash flow from operating activities. The indirect method begins with profit before tax and adjusts for non-cash charges and credits such as depreciation and for the movement in working capital items.
In simpler terms, the direct method looks at all actual cash transactions, while with the indirect method you look at the balance sheet items in relation to the previous year to find the cash inflow and outflows from operating activities while adjusting for non-cash charges and credits such as depreciation and goodwill revaluation rather than look at specific transactions.
The main advantage of the direct method is that it shows the operating cash receipts and payments, this specific knowledge of the sources of these cash receipts and for what purposes cash payments were made is especially useful when trying to forecast future cash flows. The preference of IAS 7 is that the direct method be used but does not require it. The main benefit of the indirect method is that it shows the difference between reported profits and net cash flow from operating profits.
There are differing views among national standard setters as well as within the business community. The main issue of disagreement being whether in all cases the benefit to the user outweighed the costs to the company of providing this type of reporting. The ASB in the UK has generally held the indirect method to be preferable, and has only encouraged the use of the direct method when the possible benefit of the users outweighs the cost of providing it in the new revised version of FRS 1.
This is different to the general view of the IASC as well as the FASB in the USA who hold the view that the direct method is preferable. I’m of the opinion that this difference will result in companies giving greater consideration to which method suits them best considering the relevant costs rather than just relying on the advice of a particular standards board; which I think is a positive effect.
David Alexander and Simon Archer the authors of National Accounting/financial reporting standards guide 2013 are of the view that this issue should be viewed from the perspective of the user rather than the prepared and therefore the most beneficial method is the direct method. In an article released by the Institute of Certified Public Accountants in Ireland (CPA) discussing international standards, the CPA expressed the view that most Irish companies are unlikely to adopt the direct method as it requires the segregation of VAT from cash receipts and payments during the year. This is likely to be expensive due to system changes as the accounting programmes are designed to identify VAT at the point of sale or purchase, rather than at the point of cash receipts or payments.
Cash From Operating Activity
2013
£0
Cash received from customers (W1)
30071
Cash paid to suppliers and employees (W2)
-18886
Other cash operating expenses (W3)
-6033
cash generated from the operations
5152
interest paid
-126
tax paid
-823
Net cash from operating activities
4203
proceeds on disposal of property, plant & equipment
3
interest received
8
acquisition of property, plant & equipment
-2641
Net cash used in investing activities
-2630
proceeds from the issuing of share capital
0
repayment of borrowings
-400
payment of finance lease liabilities
0
dividends paid
-1634
Net cash used in financing activities
-2034
Net (decrease)/increase in cash and cash equivalents
-897
cash and cash equivalents at 1 January
432
Effect of exchange rate fluctuations on cash held
136
Cash and cash equivalents at 31 December
-329
**workings are included in the appendix
Below I would like to provide a summary of Zotefoams Plc.s financial position and operating performance and in doing so analyse the liquidity, profitability, efficiency and gearing of the company.
From looking at the five year trading report it is clear to see that Zotefoams Plc has managed to steadily increase turnover from £25.2m in 2011 to £30.1m in 2013 that is an increase of £4.9m which is a 16.27% over two years. Also operating profit (excluding exceptional items) has increased from £1.6m in 2011 to £2.8m in 2013; that is an increase of £1.2m or 42.86% rise over two years. Furthermore, earnings per share (excluding exception items) has risen from 3.2 in 2011 to 5.4 in 2013, that is an increase of 2.2 which is a rise of 41% over two years.
In this discussion I have only considered figures excluding the impact of exceptional items as I believe these figures give a clearer view of its true performance and help forecast for the future more accurately, this is a company that is still at a very early stage of its development and hence is likely to have exceptional items more often now than in the future. A figure that should be taken in to consideration is the profit after tax, in 2011 it was £1.2m, in 2012 it was £2.4m, and then £1.2m in 2013, this does not shown a pattern of a down turn as the great increase in 2012 was caused by an exceptional item, this can be further understood by looking at the profit before tax (excluding exceptional items) whish was £1.3m in 2011, then £1.8m in 2012 and finally £2.7m in 2013; this clearly shows a pattern of strong growth over the last three years. Below, I have done ratio analysis in the areas of liquidity, profitability, efficiency and gearing to illustrate better the company’s performance in these areas.
Profitability Ratios
Return on Capital Employed (ROCE)
Year
Result
2012
9.52%
2013
5.41%
ROCE shows the company’s net profit before interest and tax in relation to total capital invested as a percentage. Generally a decrease in the ROCE percentage from one year to the next could signify various internal or external factors affecting their business, externally a more difficult economic climate for the company which could be caused by a general down turn in the industry or fierce competition, internally it is usually due to poor utilization of its total assets by those entrusted to run the company, either way it is the duty of the management to utilize the assets of the company to gain maximum profits.
The ROCE has decreased from 9.52% in 2012 to 5.41% in 2013, this is a very major decrease, this would normally lead one to think that the management have severely underutilized the assets of the company showing a poor performance on their part, but on closer inspection it is clear that the results have been skewed as the 9.52% figure for 2012 is largely inflated, as the PBIT of £3.472m was inflated by £1.499m of exceptional items (reduction in administration costs) in the profit calculation, and a decrease in profits in 2013 of £1.074m due to exceptional items (increase in administration costs), had these exceptional items not been considered in calculating the ROCE it would have shown a strong increase between 2012 and 2013.
Gross Profit Margin Ratio
Year
Result
2012
22.65%
2013
25.94%
Ratio analysis – The gross profit margin ratio shows the gross profit as a percentage of its sales revenue. This shows that it has increased from 22.65% to 25.94%, this is a positive increase of 3.29% from 2012 to 2013.
Net Profit Margin Ratio
Year
Result
2012
11.75%
2013
5.32%
The net profit margin shows the net profit before tax as a percentage of its sales revenue. It has decreased from 11.75% in 2012 to 5.32% in 2013; that is a decrease of 6.43%. This would normally be a serious issue to consider, but as explained previously the results have been skewed due to negative exceptional items in 2013 and positive exceptional items in 2012, had these items not been considered in this calculation it would have shown a positive increase.
Liquidity Ratios
Current Ratio
Year
Result
2012
2.412949
2013
2.1780673
The current ratio is one of the best measures of liquidity. It is generally accepted that a ratio of 2:1 is a strong position to be able to meet the company’s short term liability responsibilities; the higher the ratio is; the more liquidity the company has, making it more likely to be able to cover its short term liabilities. Although it has decreased from 2.41:1 in 2012 to 2.18:1 in 2013, it is still over the accepted 2:1 ratio, therefore there is no reason for investors or the company to fear liquidity problems.
Quick Asset Ratio
Year
Result
2012
1.51
2013
1.36
Conventional it is held; the most ideal quick assets ratio equals 1. In 2013 and 2012 the quick asset ratio was comfortably over 1, although it has decreased to some extent. It is not good to have too high a current ratio analysis or quick assets ratio, as this would signify the under-utilization of the company assets.
Efficiency Ratios
Debtors Collection Period (DCP)
Year
Result
2012
80.658803
2013
74.853421
The debtors’ collection period ratio analysis shows the average amount of time taken to collect debts from credit sales. In 2012 it is at 80.7 days which has decreased to 74.9 days in 2013, these positive results show that the DCP has significantly decreased from the previous year signifying an improvement in efficiency, this supports the view that its credit control system has functioned more efficiently.
Stock Holding Period (SHP)
Year
Result
2012
66.337569
2013
62.071483
The stock holding period ratio analysis shows the average amount of time stock is held before being sold, it has decreased from 66.3 days in 2012 to 62.1 days in 2013, again it shows a improvement in efficiency showing that the company’s stock control systems are running more efficiently than the previous year.
Gearing Ratio
Year
Result
2012
35.32%
2013
31.02%
Gearing is calculated to show what proportion of a company’s total capital is provided by loans capital as opposed to equity. The greater the proportion of total capital is provided by loans the greater the vulnerability to a down turn in profits. This is because the interest on a loan must be paid regardless of the company making a profit.
33.3% gearing is conventionally accepted as medium/high gearing, although this does vary from industry to industry. The gearing ratio of 35.32% in 2012 is not considerably high, this has decreased to 31.02% for 2013; it has been brought down firmly in to the area conventionally accepted as medium gearing thus decreasing the company’s gearing vulnerability to a down turn in profits meaning it is not considered to be a high risk investment.
Ratio Analysis – Part Two
Ratio analysis in the areas of liquidity, profitability, efficiency and gearing are very important when trying to understand the financial position of a company, all of the data required for calculating these ratios are taken from the balance sheet and income statement.
The balance sheet statement summarizes the value of total assets and liabilities, as well as owners’ equity at a specific date. The balance sheet gives the user a good understanding of the company’s value as you can see what it owns and owes. The balance only provides a snapshot of this information on the date of reporting as the items in the balance sheet could change the next day, furthermore the balance sheet can be manipulated in various ways such as incorrectly valuing assets such as work in progress inventory or incorrectly valuing buildings, plant and machinery.
It is not straight forward how all items in a balance sheet are calculated. There are many ways that firms try to hide debt by not recording it on the balance sheet such as the well documented case of Enron who were keeping debts off the balance sheet by offloading the debt to special purpose entities (SPEs). It is important to any investor to know that the company they are buying a share into actually owns tangible assets (less liability) that back up the value of the company’s shares; this reduces the risk of the investment.
Beyond risk to investment capital; the investor will look at profitability as this is the objective behind making an investment, for this purpose the income statement is very useful; as it shows net profit for the previous year as well as a breakdown of how this was calculated including figures for revenue, cost of sales and expenses etc.
Analysis of previous income statements and the five year trading summary will help the user to get a good understanding of how well the company has been performing in the past. The income statement can also be manipulated, such as the abuse of one time charges in the income statement when the usage of one time charges is misused to result in reported profits being lower than expected in one year, and then be seen to dramatically increase the next year, resulting in share prices rising allowing managers and related individuals to cash in on shares purchased at a lower price the previous year.
The cash flow statement shows all cash and cash equivalents entering and leaving the company for the reporting period. It allows investors to see how money is being spent and where it is coming from. It is generally held to be one of the more reliable financial statements as it is less open to manipulation as it deals with simpler and clearly tangible accounting items. Given this there are still ways to manipulate it such as dishonesty in accounts payable by counting cheques in the mail as cash in hand rather than money paid out or the choice of making payments late on purpose.
Efforts have been made by the introduction of further legislation and tightening of regulatory frameworks as well as implementation of further standards; such as international auditing standards (IASs); to counter act these problems namely the Sarbanes Oxley act 2002 in the USA and similar provisions in the UK.
By providing all three financial statements the user will be able to gain a good understanding of the company’s financial position and profitability; each of them provides different useful information. Furthermore it is more difficult to manipulate one financial statement and not result in contradictions with the others. The cash flow statement helps to back up the balance sheet and income statement. Reporting based on international reporting standards are very important, as it means that prepares of reports must treat accounting items as set out by international standards leading to more reliable and comparable financial statements for the user.
Due to international auditing standards one would expect that auditors will find the cases where manipulation and fraud has taken place; which gives the investor more confidence in the financial statements that he must rely upon to make decisions. I would still advise any potential adviser to fully read all reports and notes beyond just the three financial statements.
In this section I will discuss how Zotefoams Plc provides segmented information under IAS 14 and how this will change upon the adoption of IFRS 8 as well as consider the relevance of this information to the company’s current and potential investors.
I would like to begin by explaining IAS 14 and segment reporting. Companies often carry on several types of business or operate in many different geographical locations, with varying opportunities of growth at different levels of risk relative to the geographical location or type of business. It is very difficult for a reader of financial reports to make judgement about the nature of different activities carried out by a company or what impact each activity has on the financial situation of a company unless some segmented analysis of the financial statements are provided.
Segmented reporting is required to help the users of financial statement to more thoroughly understand the past activities of the company and thus make a more informed assessment of the company’s future prospects; as well as be aware what impact will occur on the company if there are significant changes in components of the company. All of this helps to assess better the risks and potential returns for the investor.
IAS 14 was set out to standardize segmented financial reporting by companies. IAS 14 only applies to publicly quoted companies or those that are about to be. Zotefoams Plc is a publicly quoted company and therefore should comply with the provisions of IAS 14. IAS 14 does encourage non-publicly quoted companies to report segmented information, and if they do they should comply with its provisions.
According to IAS 14 a company should report on business and geographical segments showing the groupings of products and services provided by each company segment as well as the composition of the geographical segments. One type of segmentation can be deemed as primary; chosen from either business or geographical, the second should be regarded as secondary. This is usually decided based on the company’s internal management and organisational structures as well as the internal financial reporting system for management. Geographical or business segments can be judged to be reportable when the majority of its sales revenue is gained through sales to customers who are external, plus also:
The revenue is 10% or above of total revenue of total segments
Its profit or loss is 10% or more of the combined total of profits or losses
It assets are 19% or above of total assets of the company (combined total of all segments)
Other segments should be reported if the total external revenue from segments that have been deemed reportable does not reach 75% of total company revenue; more segments should be recognized until 75% of the total consolidated revenue is shown as reportable segments. The following is to be disclosed for each primary reportable segment:
Revenue, sales to external customers and inter-segment sales disclosed separately, the basis of price setting should be disclosed for inter-segment sales.
Profits before interest and tax for continuing operations and discontinuing operations should be disclosed separately
Carrying amount of segment assets
Segment liabilities
Cost applicable to the period for acquiring property, plant and equipment as well as intangibles;
Depreciation and amortization charges, as well as other significant non-cash expenses or otherwise cash flows from operating, investing and financial activities in line with IAS 7 cash flow statements.
Each secondary segment should disclose:
Revenue, disclosing separately how much is external sales and how much to other segments
Segment assets total
Cost applicable to reporting period for purchasing property, plant and equipment as well as intangibles
Zotefoams primary segment reporting is reported by business area, the company sells two main types of foam which are Polyolefin and HPP. All of the above disclosures listed above for the primary reportable segment are made in the annual report. Furthermore, the revenue from external customers, segment assets; as well as capital expenditure (on property, plant and equipment as well as intangibles) are reported in the annual report for the secondary segment report which is done by geographical location which is separated in to: UK, Europe, North America and the rest of the world.
All segment reporting is in accordance with IAS 14. HPP is a new product, it can be seen that the HPP segment is making a loss, this is expected as R&D is likely to cause expense to outstrip revenue at such an early stage, you can see from the segment report that the Polyolefin segment is making strong profits, this would not have been clear if segmental reporting was not provided.
I will try to only discuss the differences between IAS 14 and IFRS 8 that are relevant to Zoatfoams plc. IFRS 8 has affected three main areas of segment reporting, they are; the identification of segments, the measurement of segment information and disclosure.
In terms of identification of segments; IFRS 8 states that segments that sell primarily or exclusively to other operating segments of the company can still be deemed an operating segment if it is operated that way. This is different to IAS 14 which reduced reportable segments to be segments which gain most of their sales revenue from customers who are external, IAS 14 doesn’t oblige that the separate levels of a vertically-integrated company be deemed to be separate entities.
I do not believe this will have much effect on Zotefoams Plc as they do not do any inter-segment trade, nor could it be said that from their company structure that it is a vertically-integrated company with separate entities in such a vertical chain to be deemed as separate operating activities.
IFRS 8 requires that the information reported on each segment should be the same information that is provided to the chief decision maker for the activity of allocating resources to that segment and assessing its performance. This may mean for Zotefoams Plc that they may be required to provide more segmental information depending on their internal reporting practices.
Ratio analysis – A major difference between IFRS 8 and IAS 14 is that IFRS 8 requires an explanation of how profit or loss, assets and liabilities are measured for each operating segment, rather than define revenue, expense, result, assets and liabilities for each operating segment. This results in companies having more control over what is included in segment profit and loss in line with their own internal reporting practices. As companies are given greater choice over disclosure this could put investors at greater risk as there will be more room for manipulation of information.
Interest revenue and interest expense must be reported for each of the reportable segments separately if they are used to calculate segment profit or loss unless the majority of the segments revenue is earned by interest resulting in the chief operating decision maker making decisions to allocate resources or judging the performance of the segment based on information mainly on interest revenue.
The aim behind revising IAS 1 was to make it easier for users to be able to understand and compare financial statements and forms of key ratio analysis. Financial information that goes in to financial statements are to be aggregated on the basis of shared characteristics, as well as introducing a statement of comprehensive income. This is being done so that it is more visible to see the impact on the company’s equity resulting from transactions between the company and its owners in that capacity; such as share repurchases, separately from the impact caused by transactions between the company and non-owners such as third parties.
Comprehensive income can be displayed in either a single statement or be separated in to two statements including a income statement and a statement of comprehensive income statement. The ICAEW as well as the ACCA have both disagreed on giving the choice between the two as they believe it will lead to confusion amongst users making comparability more difficult. The ACCA also disagrees with the decision to change the name of the balance sheet to statement of financial position on the grounds that the definition of the balance sheet is well known; they feel this change will only result in more confusion especially when preparers are not obliged to use the new title which will result in some prepares taking it up and others not; making comparison more confusing for users.
The ACCA are also of the view that the decision to include a statement of financial position at the beginning of the reporting period is not needed and will again lead to further confusion; this information if needed could easily be looked up in the previous year’s report.
These changes are not likely to have a major impact on Zotefoams other than the effort required to make these new changes, as the changes have not been made to change how accounting items are treated but rather the changes have just been put in place to affect how some information is displayed as the change in name of the balance sheet, the choice in display of comprehensive income statements and the inclusion of the balance sheet from the beginning of the reporting period, these changes just provide the information to users in a way that it is easier for them to understand the financial position of the company. In the 2013 report a statement of recognized income and expense (SoRIE) was included, by 2009 when the IAS 1 revisions must be implemented; the annual report will have to include a statement of changes in equity in an addition to the SoRIE or choose to combine them into a single statement. This additional information already exists in the annual report in the notes section.
Ratio Analysis
References
ACCA 2.5 Financial Reporting (international stream) Study Text (2012), FTC – Ratio Analysis
David Alexander and Simon Archer, Miller International Accounting/Financial Reporting Standards Guide (2013), CCH
Barry Elliott and Jamie Elliott, Financial Accounting and Reporting: 11th Edition (2013), Financial Times/ Prentice Hall
Company Law, Jerry DeFreitas, 5th edition (2013), Castlevale Handbooks
Notes: All figures for workings are taken from the
balance sheet, income statement and cash flow statement
Did you find any useful knowledge relating to Financial Reporting and Ratio Analysis in this post? What are the key facts that grabbed your attention? Let us know in the comments. Thank you.
