Effective Project Financial Management Tools Case Study

Effective Project Financial Management Tools - Case Study Example However the above mentioned studies will not be discussed in details. This paper will only evaluate the effectiveness of using cost estimations and budget in financial management project of the two companies. Project financial management is a process which brings together planning, budgeting, accounting, financial reporting, internal control, auditing, procurement, disbursement and the physical performance of the project with the aim of managing project resources properly and achieving the project's development objectives (world bank group). Financial management is the main character for the success of a project process. An accurate and relevant financial information provides a basis for better decisions, thus speeding up the progress of the project and the availability of the funds. An effective financial management provides the following: An effective financial management system is vital for projects because of the need to deliver services to target groups quickly over a large geographic area to a wide variety of stakeholders. One of the tools in financial management that is widely used is the Cost estimation and budget. Budgets are the financial work plan for projects, programs and organizations. Budgets that work are based on realistic assumptions, use good cost estimates and come from organizational processes that include board and staff members (J. Rouse, P.Rouse). Project financial management processes are organized into five groups of one or more processes each: Initiating processes-authorizing the project or phase. Planning processes-defining and refining objectives and selecting the best of the alternative courses of action to attain the objectives that the project was undertaken to address. Executing processes-coordinating people and other resources to carry out the plan. Controlling processes-ensuring that project objectives are met by monitoring and measuring progress regularly to identify variances from plan so that corrective action can be taken when necessary. Closing processes-formalizing acceptance of the project or phase and bringing it to an orderly end. Cost Estimations and Budgets In the financial management done by the ISS (International Space Station) for NASA has shown that the cost growth is contributed to many factors that are beyond the control of the project manager. The Project Manager was not able to clearly communicate the justification for his budget requests and the rationale for the cost growth because NASA has lacked a single standardized accounting system and the program has not developed and maintained a baseline lifecycle cost estimate. Past efforts to control costs through budgetary constraints have failed to achieve their stated purpose and have probably exacerbated the cost growth. The Arizona Department of Transportation (ADOT) was not able to determine the reasons for the cost increases because the data is not readily available from the Federal Highway Administration.

Allan's Repair Services Essay Example | Topics and Well Written Essays - 2250 words

Allan's Repair Services - Essay Example Mitre 10: Metcash sells hardware under this brand name. It also involves home improvement solutions for the end consumers. Metcash Ltd operates in the areas of distribution, fresh food, liquor, fast moving consumer goods and hardware. 2: a) Sale of goods accounting for $11517.4 million was the main source of revenue for the Metcash group. b) Cost of sales was the largest expense for Metcash group. It was $10435.3 million in the year 2010. c) The total comprehensive income for the Metcash group was $229.6 million in the year 2010. d) Return on assets= Net income /Total Assets Return on assets for 2009= 203.2/3286.5 =6.18% Return on assets for 2010= 230.3/3639 =6.33% e) Gross profit margin= Gross profit /Revenue Gross profit margin for 2009=1116.6/11067.5 =10.09% Gross profit margin for 2010= 1172.8/11608.1 =10.10% f) There has been a very slight improvement in the profitability of Metcash Ltd. The return on assets increased from 6.18% in 2009 to 6.33% in 2010. This can be attributed t o the higher sales revenue that Metcash earned in the year 2010 compared to the revenue in the year 2009. Although Metcash purchased more assets to generate the higher revenue, the increase in revenue was more than the proportionate increase in total assets. The gross profit margin of Metcash remained relatively stable at 10.1%. This indicates that costs of Metcash remained relatively stable. Even if there was an increase in the costs, it was matched by a similar increase in the selling price to retain the gross profit margin that was earned by Metcash in 2009. 3. a) The total current assets for the Metcash group were $1974.7 million in the year 2010. b) The total current liabilities for the Metcash group were $1448.4 million in the year 2010. c) Current Ratio= Current Assets /Current Liabilities Current Ratio for 2009=1802.4/1309.8 =1.38 times Current Ratio for 2010= 1947.7/1448.4 =1.34 times d) Quick Ratio= Current Assets-Inventory /Current Liabilities Current Ratio for 2009= (180 2.4-680.5)/1309.8 =0.86 times Quick Ratio for 2010= (1947.7-747.2)/1448.4 =0.83 times e) Liquidity ratios measure the ability of a company to pay off its short term debts. The current ratio of Metcash fell from 1.38 times to 1.34 times. This is due to the increase in the trade payables of Metcash Ltd. The reasons of this increase should be investigated since making timely payments to the creditors is essential to obtain trade discounts. Quick ratio includes only the most liquid of the current assets to assess if a company can cover its current liabilities. Metcash Ltd’s quick ratio also fell slightly from 0.86 times in 2009 to 0.83 times in 2010. A quick ratio of less than 1 indicates that Metcash does not have ample liquid assets to cover its short term obligations. Metcash Ltd’s most of the cash is tied up in inventory and Metcash Ltd should take measures to improve its liquidity position. f) Days inventory= (inventory/cost of sales)*365 Days inventory for 2009= (680 .5/9950.9)*365 =24.96 days Days inventory for 2010= (747.2/10435.3)*365 =26.14 days g) Days Debtors= (Account receivables/Revenue)*365 Days Debtors for 2009= (967.7/11067.5)*365 =31.91 days Days Debtors for 2010= (1008/11608.1)*365 =31.70 days h) The days inventory ratio indicate the number of days it takes to sell the inventory. In the case of Metcash Ltd, the inventory days increased from 24.96 days to