Importance of Financial and Non-Finacial Information Essay Sample free essay sample

John Keells Holdings PLC ( JKH ) is Sri Lanka’s largest listed pudding stone in footings of market capitalisation. Company has been able to tag its presence in all major industry spheres it operates including Transportation. Leisure. Property. Consumer Foods A ; Retail. Financial Services and Information Technology. among others. The aim of this study is to critically discourse whether fiscal information is likely to give a better indicant of the likely future success of the concern than non fiscal information. The aim will be achieved through a elaborate survey get downing from placing the strategic planning. commanding and determination doing procedure of JKH Leisure sector. managed through John Keells Hotels ( Pvt ) Limited and. analysing the extent of the usage of fiscal and nonfinancial indexs. tools and information within the procedure. The analysis will be supported by the published literature on the usage of fiscal and nonfinancial information in determination devisin g with related illustrations. We will write a custom essay sample on Importance of Financial and Non-Finacial Information Essay Sample or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Related informations will be gathered from the company web site. one-year studies and the internal beginnings. Upon completion of the analysis countries to be improved will be highlighted with appropriate recommendations. The whole procedure is designed with the purpose of heightening the cognition of application and utility of fiscal and nonfinancial information in the procedure of informed determination devising. 1Introduction to John Keells and its Leisure BusinessJohn Keells Holding ( JKH ) is the Sri Lanka’s largest capitalized company listed on Colombo Stock Exchange ( CSE ) . It is an AAA ( lka ) recognition rated company by Fitch Ratings Lanka Ltd. Presently the company involvement in major concern countries of Transportation. Leisure. Property. Consumer Foods A ; Retail. Financial Services and Information Technology. The beginnings of the company lies in a green goods and exchange broking concern started by two Englishmans. Edwin and George John. in Colombo. in the early 1870s. In October 1986 a freshly incorporated John Keells Holdings Ltd. ( JKH ) acquired a commanding interest in John Keells Limited and obtained a citation on the Colombo Stock Exchange amidst a to a great extent over-subscribe/d public portion issue. The companies procedure of variegation today has resulted in a 70-member pudding stone. The parent house. now known as John Keells PLC. became a populace quoted company in 1974. Share information of the group Beginning: JKH Aannual Report 2011/2012 JKH became the pioneering Sri Lankan company to be listed in a foreign state. through the issue of Global Depository Receipts ( GDRs ) . which are listed in the Luxemburg stock exchange. The Group’s investing doctrine is based on a positive mentality. bold attack. committedness to bringing and flexibleness to alter. ( JKH Group Highlights. 2011/12 ) JKH is an active member of the United Nations Global Compact enterprise and a full member of the World Economic Forum. The leisure sector is the JKH’s individual largest net plus exposure. The sector operates locally and internationally via City Hotels. Sri Lankan Resorts. Maldivian Resorts. Destination Management and Hotel Management. Company owns two metropolis hotels which represents 40 % of Colombo’s five star room capacity and renders its services through its two trade names ‘Cinnamon Hotels and Resorts’ and ‘Chaaya Hotels and Resorts’ . JKH Corporate Vision Building concerns that are leaders in the part.Valuess†¢Innovation – Changing invariably. re-inventing and germinating †¢Integrity – Making the right things ever†¢Excellence – Constantly raising the saloon†¢Caring – Fostering a great topographic point to work†¢Trust – Building strong relationships based on openness and trust Group Share Information *Adjusted for the sub-division and redemption of portionsBeginning: JKH one-year Report 2011/2012 1. 1Leisure Sector Financial profile for the fiscal twelvemonth 2011/2012 ?Key Indexs 1. For associate companies the capital employed is representative of the Group’s equity investing in these companies 2. No of employees and EBIT per employee are excepting the employees of associate companies 3. Carbon footmark is calculated excepting associate companies Beginning: Management Analysis and Discussion 2011/2012 ?Leisure sector part to JKH Group Beginning: Management Analysis and Discussion 2011/2012 Harmonizing the graph above 20 % of the gross is being generated soon by the leisure sector. In footings of the composing. the Leisure sector is the primary subscriber with 33 % of EBIT as consequence of the improved profitableness. ?Group Capital Assets and Liquidity Beginning: JKH one-year Report 2011/2012 ?Group Economic value added Beginning: JKH Group highlights 2011/2012 1. 2Nonfinancial information All around the universe the concern and client focal point is driven towards edifice and pull offing sustainable concerns. This freshly emerged concentration is due to the diminishing resource degrees. negative environmental impacts and the increased influence of concern organisations on the planetary economic system than most of the authoritiess. Harmonizing to the United Nations statistics about 60 % of organisations are among the highest subscribers of the planetary Gross Domestic Product ( GDP ) . In other words. about 60 % of the concern organisations are more influential on the economic. societal and environmental facets of the universe than the authoritiess. Fiscal information entirely is refering to the baseline foundation of a sustainable concern. the economic facet. An organisation is unable to accomplish sustainability without the economic ability and strength to ease the operation of other two facets of the ternary bottom line. viz. societal and economic. At the same clip . the modern twenty-four hours organisations will non be able to accomplish any economic success if they lose concentration of the other two facets. Hence. a concern can be successful if all three factors are being secured in harmoniousness. the connexion between the ternary bottom line is reciprocally good. Presented below are some of the information which will supply a better penetration to the public presentation of JKH and its leisure sector. towards a sustainable concern. ?Sector high spots Beginning: Management Analysis and Discussion 2011/2012 John Keells Maldivian Resorts Private Limited ) won the gold decorations for service excellence from TUI. the parent company of many taking circuit operators. This was a consequences of the accomplishments development attempts took topographic point refering to service. ?Ratings†¢Fitch Ratings Lanka affirmed JKH’s National Long-Term evaluation of â€Å"AAA† on history of its strong balance sheet and steady public presentation. †¢In August 2011. JKH was ranked foremost in the LMD Magazine’s ‘Most Respected Entities in Sri Lanka. ’ Company held this evaluation consecutively for six old ages. since the origin of the study in 2005. †¢Secured the Business Today magazine’s ‘Top 20’ rankings for the seventh clip. †¢Ranked as the figure one of ‘Top 50’ Sri Lankan listed companies for 2010/11. by the LMD magazine. ?Risk Management and Sustainability JKH has established a cardinal map unit for Sustainability and Enterprise Risk Management. turn outing the fact the company has given necessary accent to run as a sustainable entity doing certain the ternary underside line ( economic. societal and environmental ) of the company is strengthened. ( the organizational construction is attached as an annexure ) The sustainability indexs of JKH are as follows: Beginning: JKH Group highlights 2011/2012 JKH’s attempts towards sustainability were commended at the 2011 ACCA Sustainability Awards as the first in the ‘large graduated table. ’ On the other manus JKH manages the hazards of the operations for the best involvement of its stakeholders and the Sri Lankan economic system as a whole. placing the domain of influence of its operations. Consequently. the company publishes its comprehensive sustainability study yearly so that the interest holders can acquire a better image of the company’s hereafter waies. 2Literature Reappraisal The universe experienced the negative planetary impacts stemmed from the accounting failures of some corporate giants such as Enron. Worldcom. Xerox. and AOL/Time Warner who were able to window-dress first-class fiscal public presentation indexs. In twelvemonth 2000. Fortune magazine’s study on Most Admired Companies. rated Enron as the most advanced big company. Unfortunately in the undermentioned twelvemonth. the Enron’s stock monetary value touched the close nothing underside from $ 83. 13. Palepu and Healey. 2003. in the publication â€Å"Enron† . have identified the grounds for Enron’s failure due to the restrictions of fiscal coverage restrictions and administration and intermediation failures. Listed below is a brief treatment of the fiscal coverage restrictions listed by the writers ; ?Mark-to-mark accounting Enron was spread outing its concern theoretical account through come ining in to trading understandings with other companies and adopted the mark-to-market accounting to acknowledge and describe the income of those trading understandings. In other words the present value of the expected hereafter hard currency flows of the trading understandings were matched with the present value of the expected hereafter costs of put to deathing the same understanding. in geting at the profit/loss of the contract. The accurate appraisal of the hereafter hard currency flows of these long term contracts was questionable and the unfulfilled additions were non hedged. ?Skirt accounting regulations in describing for Special Purpose Entities ( SEPs ) In making the Enron’s trading theoretical account it had created 100s of SEPs. These entities have been created to hedge accounting regulations. so that Enron’s liabilities ( debt ) were understated and the equity and net incomes were overstated in the fiscal statements. ( e. g. Acquisition of a spouses interest in a joint venture utilizing the particular purpose entity Chewco ) . As a consequence Enron had to reinstate the fiscal statements from 1997 to 2000 which included a 23 % ( $ 613 million ) decrease of reported net incomes. 6 % ( $ 628 million ) addition of reported liabilities and 10 % ( $ 1. 2 billion ) decrease in reported equity. Further. Enron disclosed minimum information about these off-balance sheet particular purpose entities to stockholders whilst pass oning a incorrect image about fudging the downside hazards of investings where. there was no existent hedge from a 3rd party. In decision. in the instance of â€Å"Enron the chief jobs were failures by the company and its hearer to unwrap contingent liabilities of the SPEs. non consolidation per Se. ( Litan. 2002 ) ?Other accounting jobsIn October 2001. Enron had to compose off 22 % ( $ 1011million ) of its capital outgo as non-performing SPEs. His is a contemplation of hapless investing analysis procedure of Enron. which has considered merely the forecasted hereafter gaining without sing the non-financial information to endorse the investing determination. The article â€Å"Enron: Did the fiscal coverage theoretical account truly neglect? † 2003. suggests that. if commercial entities unwrap more relevant information apart from fiscal information. such dirts may non reiterate in future. Here raises the inquiry. what is relevant information apart from fiscal information? Harmonizing to the writers. the relevant information can be non fiscal public presentation indexs such as the rates of client growing and keeping. open hazards of an entity ( such as procedure hazards. environmental hazards and hazards associated with sensitive information ) Demand for corporate revelation arises from the information dissymmetry job and bureau struggles between direction and outside investors ( Healy and Palepu. 2001 ) . In 1994. The American Institute of Chartered Public comptrollers ( AICPA ) appointed a particular commission on Financial coverage came up with the thought that its of best involvement of all stakeholders if the concern entities use a more comprehensive theoretical account for describing instead than a fiscal study. The suggested comprehensive theoretical account in their sentiment has to be comprised of advanced non fiscal information covering the facets of hazard direction. This thought of describing non merely historical information but futuristic information every bit good has been confirmed by Epstien and Palepu. 1999. How the universe can minimise the chance of reoccurrence of such corporate failures which puts in to oppugn the acceptableness and regard of accounting and scrutinizing professionals. Litan ( 2002 ) suggest that the universe should hold one set of accounting criterions to heighten the comparison of information to investors across national boundary lines. In the twelvemonth 2002 Financial Accounting criterions Board ( FASB ) and the International Accounting Standards Board ( IASB ) . the chief accounting criterion compositors announced their purpose to extinguish the major differences between the two sets of criterions by 2005. The modern-day direction Peter Drucker. one time highlighted the importance of public presentation measuring utilizing one of his celebrated expressions ‘what gets measured gets managed’ . He emphasizes that no individual step can supply a clear public presentation mark or concentrate hence attending on the critical countries of concern public presentation of today’s complex organisations is indispensable. This created the demand for a balanced position of concern public presentation which provided the basic logic or principle for the Balanced Scorecard ( BSC ) . Robert Kaplan and David Norton developed the BSC in the early 1990s. Today it is a hot subject among the concern community and faculty members worldwide. BSC is more than a public presentation measuring technique and considered it to be a direction system ( Butler et al. . 1997 ) BSC measures organisational public presentation across four different but linked positions that are derived from the organization’s vision. scheme and aims. Those are: ?Financial Perspective – How do we look to stockholders? ?Customer Perspective – How do clients see usInternal Business Perspective – What must we stand out atInnovation and Learning perceptive – Can we go on to better and make value? Below is a graphical representation of a BSC Beginning: Balancedscorecard. org BSC is a comprehensive direction tool ( Ahn. 2001 ) . which helps to derive a better apprehension on cardinal issues faced by an organisation. to obtain a balanced position of public presentation. to assist to turn scheme into action. to better direction information for planning. commanding and determination doing 3Financial Analysis and Strategic Decision Making Process The company performs an in depth analysis of fiscal information with regard to each sector it operates. This enable the comparing of sectors and doing determinations refering the person sector every bit good as the group. 3. 1Strategic Decision doing procedure and Analysis involved The strategic determinations such as concern enlargements. closings. investings and. Identifying Critical Success Factors ( CSFs ) and puting Cardinal Performance Indicators ( KPIs ) follows a really rational procedure and analysis with a focal point towards sustainability. The procedure involves following sequence: ?PESTEL Analysis This is a full environmental scanning. which enables the organisation to achieve a bird’s oculus position of the Political. Environmental. Social. Economic and Legal facets in which its traveling to run. The leisure sector is to a great extent affected by the societal environmental factors and the Macro Economic factors of the place state and mark markets. Leisure sector direction is good cognizant and ever does research to happen out international leisure sector CSFs and KPIs and construct and run concern harmonizing to the identified criterions. ?Financial Analysis The fiscal analysis contains an analysis of the fiscal facets of the specific determination to be made. All facets with respects to the public presentation. impact. and future value is analyzed in item utilizing a assortment of measurings. This fiscal analysis contains the Pay Back Period. Net Present Value ( NPV ) . Internal Rate of Return ( IRR ) . ROE. ROCE and other industry related measurings. ?Sustainability Analysis JKH has implemented a group sustainability policy and applies it across all concern sectors it operates. The sustainability indexs which are with the describing boundaries of the company. such as C emanations. economic value created. regard to the society it operates and employee battle in determinations are taken earnestly. These factors are being measured and compared with group criterions before finalising any economically feasible determination. 3. 2The fiscal and non-financial analysis of JKH Leisure sector ?PESTEL Analysis A elaborate economic analysis completed by JKH is provided as the annexure 4 of this study. It clearly shows that JKH has identifies the chief factors of the macro economic system which affects its strategic and operational determinations and analyses the impact of the same factors. The chief economic factors such as GDP Growth. Inflation. Local and planetary involvement rates and the exchange rate has been identified as most influential macroeconomic factors that affects the concern. E. g. Depreciation of Rupee had a positive impact on City Hotels as rate is being quoted in US dollars. ?Financial Analysis †¢Performance indexs for 2011/2012 ?Revenue Analysis Beginning: Management Analysis and Discussion 2011/2012 Overall gross of the sector has been increased by 26 per cent to Rs. 17. 42 billion from Rs. 13. 81 billion of the old twelvemonth. ?EBITThe EBIT which was Rs. 2. 80 billion in 2010/11. has grown by 59 per cent to Rs. 4. 45 billion. Beginning: Management Analysis and Discussion 2011/2012 ?ROCE and capital employed of each industry group and their comparative EBIT part. Beginning: Management Analysis and Discussion 2011/2012 The above inside informations depicts that the leisure sector earns the highest return for the capital employed compared to other sectors of the group. Consequently this indicates the management’s enterprises towards making value for its interest holders has paid off moderately as JKH is the largest net plus exposure of the group. The sector public presentation has been enhanced by the addition in tourer reachings and improved efficiency and effectivity of the sector. Tourist reachings were up by 31 % than in 2011. Management has justly identified new markets such as the Indian market which has shown a 35 % addition from 2011. ?Economic Value statementJKH as a group reports how much economic value concerns have generated an distributed amongst its stakeholders by pull offing its entire value concatenation as a responsible corporate citizen. The economic value of Rs. 85. 23 billion generated by the company was distributed amongst the concern spouses and the society whilst a 12 % has been kept for future enlargements and strategic investings. Rs. 29. 92 million has been spent on community investings via CSR undertakings. ?Sustainability Analysis ?Carbon FootprintThis is calculated harmonizing to the guidelines of the range 2 of the ‘GHG protocol and company is benchmarking its C footmark per invitee dark. against the major international hotel ironss. Presently the emanations are merely 40Kgs per invitee dark for all hotels of the JKH. Though the company re-launched Chaya Tranz hotel in the 3rd one-fourth. company has been able to cut down the sum sector C footmark by 1 % . Below graph shows the sector part of the C footmark of the group. Beginning: Management Analysis and Discussion 2011/2012 ?Water and Waste ManagementJKH implements group policies to cut down the reuse the H2O ingestion through on-site intervention and close monitoring. 2. 17 Kgs of waste per invitee dark has been sent to landfill and 41 % of waste has been recycled by the sector. ?Learning and DevelopmentCompany provides 38 hours of developing per employee for a twelvemonth. where the entire cell is 4500 employees. The entire figure of lost yearss due to occupational hurts are being continuously monitored as per the demands of the ISO 18000 OHSAS. where many of the JKH hotels have obtained the enfranchisement. ?Environmental and Community DevelopmentJKh hotels have launched several plans to protect the environment and the society it operates. Some of them are viz. . the ‘Project Leopard’ to salvage the Leopard population every bit good as unrecorded stock of husbandmans. Training of Wild Safari landrover drivers of environmental duty. beginning fresh green goods from husbandmans around the hotel locations and substructure development plans in the countries of operation. Training and consciousness plans are being conducted by the company about the serious diseases such as HIV and AIDs. These plans covers the employees. their households and the community the sector operates. Over 19. 000 people are being benefitted from this enterprise. 4Evaluation and Synthesis of Decision Making ProcessThe current determination doing procedure of John Keels Hotels is performed based on a really rational attack. which considers both fiscal and non-financial information. Major determinations taken during the twelvemonth such as closing of two hotels to the full and a portion of a metropolis hotel for renovation. increased usage of Information Technology in concern development. fudging against losingss due to involvement rate volatility and the committedness to â€Å"Sustainable Tourism† are all taken giving equal weight to fiscal every bit good as non-financial information. Tourism industry is really sensitive to planetary economic and societal tendencies and the JKH direction has clearly identified the fact and ever move proactively to procure the market leading and competitory advantage over rivals. E. g The factors that has been taken in to consideration in the hotel renovation determination are: Fiscal Information†¢The EBIT and ROCE growing†¢The expected bead in the plus turnover ratio†¢The Internal Rate of Return and the cost of external and internal fundingbeginnings †¢The expected addition of finance disbursals†¢Availability and extent of external financess Non-financial Information†¢Environmental facets such as addition in the C footmark. waste and energy ingestion †¢Increased criterions of the hotel suites and installations†¢Increased ability to run into the projected high demand However. the undermentioned non-financial facets have been over-sighted by the direction in measuring the determination: †¢effect on the impermanent cell who will be out of employment during refurbishment period †¢the loss for the community around who make a life through traffics with the hotels under renovation †¢the incontinency caused to clients through the inaccessibility of the hotel during the refurbishment period †¢the effects on the good will of the concern caused by inability to run into the full demand The above illustration vouch that the company is doing an attempt to strike the right balance between the fiscal and non-financial information used in determination devising. As company work stoppage to advance sustainable tourer organisation it focuses on environmental facets and some of the employee issues. yet some critical facets refering to the client and society is losing. due to some spread in the parametric quantities used in determination devising. 5Conclusions and RecommendationsThe major failing identified with respects to the information used in the determination doing procedure Idaho that. the CSFs and KPIs are non set as portion of a comprehensive BSC. The CSFs and KPIs are being identified indiscriminately based on research done on the market tendencies. Hence. the balance between all of import concern ingredients of financials. employees. clients and internal procedures are non maintained. The absence of the BSC in make up ones minding the strategic way of the company has made the company chiefly a follower but non a tendency compositor in the international cordial reception and leisure industry. Further. deficiency of a balanced overall CSFs and KPIs may force the organisation to do determinations chiefly based on the widely established and available fiscal facets and miss-out the of import qualitative facets which are non measured. This may dispute the corporate determinations made at present. in the long tally. The be st redress to set up a to the full informed strategic determination devising is to set up a BSC covering all critical facets of the concern which will give equal importance to puting up CSFs and KPIs with regard to Customers and Employees non merely Economic. Internal and Environmental Perspectives. In decision. what stemmed from this survey and the study is that both fiscal and non-financial information plays a critical function in strategic determination devising. The extent to which both information are used may change harmonizing to the aims and values of the organisation and direction. the Critical success factors and Key Performance Indicators identified and implemented. 6Post Report ReflectionThe procedure of fixing this study enhanced my cognition on fiscal analysis by placing the fiscal facets under different headers such as public presentation measurings. liquidness measurings. profitableness and capital construction. This apprehension will decidedly gives me a new and comprehensive position in my future determination devising as I have learnt that the non-financial information excessively plays a critical function in the declension doing procedure. The aggregation of information from the JKH company beginnings extended my professional web and was helpful in larning to gain religion. regard and aid from professional in other subjects out of my profession. which is IT. My chief determination was the of import function a BSC dramas in make up ones minding the strategic way of an organisation instead than being merely a public presentation rating tool. Hence. I believe that the successful version of BSC in any organisation may function as a strategi c direction tool which helps to make a strong competitory advantage for any organisation. Mentions †¢John Keells Holding PLC. Website hypertext transfer protocol: //www. keells. com/†¢John Keels Holdings Annual study for 2011/2012†¢John Keels Holdings Management treatment and Analysis for 2011/2012 †¢Barsky. Noah P. ; Catanach. Anthony H. Jr. ; Rhoades-Catanach. Shelley C. ; Thibodeau. Jay C. Enron: Did the Financial Reporting Model Really Fail ; ( 2003 ) 18 Com. Lending Rev. 5 †¢Epstein. M. J. . A ; Palepu. K. G. ( 1999 ) . Whatfiscal analysts want. Strategic Finance. ( April ) . 42-52. †¢Healy. P. M. . A ; Palepu. K. G. ( 2001 ) . Information dissymmetry. corporate revelation. and the capital markets: a reappraisal of the empirical revelation literature. Journal of Accounting and Economics. 31 ( 1-3 ) ( September ) . 405-440. †¢Healy. P. M. . A ; Palepu. K. G. ( 2003 ) . The Fall of Enron. Journal of Economics Perspectives. Volume 17. Number 2. ( Spring 2003 ) . pp. 3-26 †¢Litan. R. E. ( 2002 ) . National accounting regulations in a glo balised universe: Pro and Contra. CESifo Forum 3/2002 †¢Ahn. H. ( 2001 ) . Using the Balanced Scorecard construct: An experience study. Long Range Planning. 34 ( 4 ) . 441-461. †¢Butler. A. . Letza. S. R. . A ; Neale. B. ( 1997 ) . Associating the Balanced Scorecard to scheme. Long Range Planning. 30 ( 2 ) . 242-253. †¢Malmi. T. ( 2001 ) . Balanced Scorecards in Finnish Companies: a research note. Management Accounting Research. 12 ( 2 ) . 207-220. †¢Drucker. Peter F. . â€Å"The Practice of Management† . 1954. ISBN 0-06-011095-3 †¢ hypertext transfer protocol: //www. balancedscorecard. org