BSM017 Assignment Sample : Finance For Managers

BSM017 Assignment Sample : Finance For Managers 2022

Topic 1-Review of financial performance of Maxway

Financial Position statement

The statement of financial position is an additional term for the balance sheet. This requires assets, liability, and the equity shares of an organization as the report date. These materials on the statement of financial situation can be used for several financial analyses, such as associating debt to equity or comparing current assets to current liabilities (Ragas and Culp 2021).

It is one of the financial statements, and so is commonly obtainable together with the income statement and statements of cash flows.

Income Statement

An income statement is a financial statement showing that the business makes profit or loss with the forecast which indicates the revenue and expenses (McCosker, 2021). The income statement and the balance sheet and cash flow statement help you appreciate your company’s financial stability.

Statement of cash flows

Cash and cash equal, which companies spend or collect by creditors’ payments, are known as cash flow (Mishchuk et al., 2021). In the statement of accounts of the balance sheet, it shows that the negativity is lower when compared to the opening balance at the start of the business at the end of the particular period.

Non-current assets

Non-current asset means firms for which entire costs are not recognized in the accounting year for long-term assets. Examples of out-of-date assets include investment in other businesses, intellectual property, copyright, or patent rights.

Current assets

Current assets mean assets that are estimated to be transformed to cash within a year.

Current Liabilities

Current Liabilities are the company’s short-term financial obligations that are due within one year or a normal operating cycle.

Managing Working Capital

Companies would generally aim for a high working capital ratio. A well-managed firm with a higher capacity for growth has a high degree of working capital. It has many advantages, including greater liquidity, productivity, and higher earnings, to have a high degree of working capital.

The management of work capital is particularly critical as it constitutes a precise barometer for evaluating a company’s long-term financial safety and ensures sufficient cash flows are kept to satisfy its short-term obligations. Such financial security is of critical importance in times of economic instability.

Enhanced cash

Organizations maintain that sufficient cash levels for any possible forthcoming prospects or situations are accessible by securing reliably high working capital. It also provides companies with greater flexibility in managing their activities, enabling them to satisfy customer requests, grow and invest more quickly in new goods.

Efficiency of operations

Any potential obstacles incorporate processes would avoid optimal use of working capital management. There is a ‘buffer net’ to guard against shipment delays or payment delays earned.

BSM017 Assignment Sample : Finance For Managers

Enhanced profits

A large degree of working capital can only be carried out where areas such as accounts payable and receivable run successfully. To work successfully, both agencies must ensure that they pay their workers on a contractual basis, which leads to early payment rebates and increases in cash profits.

Manage Procurement and Inventory

Careful resource management is a vital element in leveraging job resources. Excessive inventories will overwhelm any company with its cash capital. Inadequate inventory can, however, result in sales being lost and customer relationships being damaged. When looking at inventory, it’s essential to follow what you buy and what you sell. The biggest challenge for companies is to maintain an optimum supply volume, to avoid physical storage and insurance costs and stock waste as they take time.

The goal is to encourage better cooperation and forecasting between ministries. When stock values are unknown, the optimum level cannot be regulated and because of material scarcity, the business suffers from sales loss. Periodic stock monitoring help to monitor stocks and warn financial outlets of recurring excesses or over-comprehension issues.

It is really important to regulate what is purchased. Investments in procurement automation will greatly improve working capital. A coordinated approved procurement system aims to prevent spending by ensuring that procurement officials can only order authorized products/services from preferential suppliers.

Enhance the framework for claims

Organizations need a good collection scheme to be in place to minimize the receivables time. The sending of bills as quickly as possible is a vital part of working capital. Companies should reassess the method of invoicing and avoid inefficiencies that may lead to delays in sending the debtors’ invoices. Manual sorting, loss of invoices, and a high number of management invoices may involve such inefficiencies.

Deloitte, a company that provides professional services, advocates using receivable technology to electronically distribute invoices to speed up payment and processing and potentially shorten the time of cash conversion. It is also essential to ensure that the facts are correct before sending them to the debtors to prevent payment delays. Keeping an accurate debtor leader means that you are up to date and can deliver bill notices to your clients promptly.

Successfully manage debtors

The easiest way to ensure that you have sufficient working capital is to ensure that money arrives on time. It could be appropriate to revalue the contracts and loan agreements on debtors and ensure that the credit flow of your own business is not too large for debtors to pay for goods and services.

While a high level of working capital must be maintained continuously, it is also important to recognize that the level is perceived to be ‘too high.’ A very high level can show that the corporation has more capital than is required, that the money is not spent properly or that the growth of the business is ignored in favor of high liquidity. The aim is to keep positive work resources constantly but prevents achieving excessive waste and inefficiency levels.  It is worth looking at several recent developments in working capital before undertraining structural reforms for the successful management of your working capital to see where errors and profits have been made.

Topic 2-EcoBox proposal

Item Capital Non-Current assets Current assets Non-current liabilities Current Liabilities
Land xxxxx
Inventories xxxxx
Ordinary Shares xxxxx
Long term loan xxxxx
Trade creditors xxxxx
Cash xxxxx
Patents xxxxx
Trade receivables xxxxx
Retained earnings xxxxx
Trade payables xxxxx
Debentures xxxxx
Share premium xxxxx
Plant & Machinery xxxxx
Other payables xxxxx

Income Statement

One EcoBox operator can ship one complete bike, fold it down and return it to the sender for re-use in Taiwan at a moment’s notice. The cost of shipping for EcoBox carriers when including a bike is calculated to be a 10% premium. On the return voyage shipping costs would be £5 per box for empty EcoBox containers. EcoBox carriers may be reused, but it is estimated that they have a lifetime of one month with usual wear and tear.

Then each carrier can be returned to EcoBox and renovated to receive f10 from Roadstar. One bike per journey will be required for every EcoBox carrier. Until EcoBoxes have to be replaced, they can make four (Americas) or five (Europe and Oceania) journeys. In exchange for a different new or previously renovated package, Roadstar returns the box to EcoBox at the end of the month. In this step, there is no time delay.

As it already carries and ships, the company will continue to ship the same amount of motorcycles every month. Also, to cope with any overdue deliveries, Roadstar would like to retain stocks of excess of 10 percent EcoBox bike carriers. It is estimated that additional personnel, buildings, and equipment cost £ 370,000 a month to facilitate bike finishing in Taiwan.

To date, the Ecobox plan has been subject to the scrutiny of £15,000 by Roadstar. The EcoBox insurance premium should stay the same, with no adjustment in customs fees if EcoBox is adopted.

Other factors that Roadstar should consider as part of this decision-making process

Investment Return

The impact on profitability is one of the obvious factors influencing business decisions. It can test this in many ways, but it is also the easiest way to calculate a return on investment. The return on an investment is the amount of profit that an operation gains or loses.

Effect on Resources

If profit is calculated, the full impact on revenue, human resources, payroll, manufacturing, and information technology employees should also be taken into consideration. It could miss other chances to benefit if a single commodity draws workers away from other operations. It could lose key workers if employees get overloaded. In addition to the expense of producing and marketing a commodity for dollars, the effect on the activities will be reviewed.

Decisions on investment

The basic analysis is highly dependent on accounting information, including the balance sheet, revenue, and cash flow account, that are reported in the financial statements of a firm. To decide on the valuation and creditworthiness of a firm and for them to set price goals and to assess if a share price is equally priced and not, investors and analysts use the details from the financial reports.

Topic 3- Product profitability

The three bikes mentioned in the report are MB80, MB93, and MBX pro.Mb80 has been a profitable bike and it has earned a profit of £ 2940 and MB93 has given a loss of £ 1750 while MBX Pro has given a profit of £ 21706.  Overall there has been a profit of £ 22896 but if the MB93 bike is continued the total profit will go up to £ 24646.

CVP Analysis is also known as break-even analysis and companies can determine the changes in costs and how that affects companies’ profit and companies can also make an analysis of their performance based on the bikes they sold and how they will reach their break-even point (Hani, 2021).

CVP can also be calculated as break-even analysis so the formula for that is-:

Break-Even Point ( in units) = Fixed costs / (Price – Variable Costs)

MB93 has a total fixed cost of £ 14500 variable cost of £ 1150 per bike and its price is £ 1300. If we calculate all of this we will get the break-even point after which the bike will start generating profit is 97 bikes but it has sold only 85 bikes which is way less so it will be viable to discontinue the sale of MB93 bikes.

BSM017 Assignment Sample : Finance For Managers

Non-financial factors that should be considered as part of the decision-making process

Diversified human capital risk

If a firm relies on a client, employee, or provider, it can be equally damaging. If a customer pays more than half of the revenue for one owner, for example, the owner becomes a contractor rather than a business owner. Also, if a client stops asking for the services of the firm, it poses a major risk. One dilemma is whether certain main workers are dependent on an organization too much.

The corporation was responsible for selling an enterprise for fracking, of which two big workers had no golden handcuffs. The problem with attempting to sell the company was that the buyer had no assurance that the workers would remain with the company after the sale. This is a common issue — 33% of employees left in the first year of a business selling in one report. Reduce your dependence on any person, customer or service provider as an owner.

Growth potential for customers, markets, and products

While financial statements can demonstrate a business’ growth prospects, other non-financial aspects can offer a future view. Potential investors or purchasers want a consistent strategy for economic development including consumer base expansion, markets, and maybe even goods in their business plan. They want then to see if revenue and the bottom line will be affected. Financial and non-financial problems are difficult to weigh.

It certainly will not have any worth if an enterprise does not make any profits. But too many owners of financially profitable firms do not know that because of a non-financial problem they are potentially unsellable.

Topic 4- Investment in Aspire Apparel Ltd 

RESULTS FOR THE SECOND YEAR

PRODUCT COST- £ 1204770

SALES- £ 2184000

DEP- £ 67000

AA- £65000

ADVER- £ 199400

RESULTS FOR THE THIRD YEAR

PRODUCT COST- £ 1265009

SALES- £ 2293200

DEP- £ 67000

AA- £ 65000

ADVER- £ 50000

RESULTS FOR THE FOURTH YEAR

PRODUCT COST-1328260

SALES- £ 2407860

DEP- £67000

AA- £ 65000

ADVERTISEMENTS- £50000

RESULTS FOR THE FIFTH YEAR

PRODUCT COST- £ 1394673

SALES- £ 2528253

DEP- £ 67000

AA- £ 65000

ADVERTISEMENTS- £ 50000

PROFIT IN FIVE YEARS

PROFIT FOR  1ST YEAR- £ 600000

PROFIT FOR 2ND YEAR- £ 647830

PROFIT FOR 3RD YEAR- £ 846191

PROFIT FOR 4TH YEAR- £ 897600

PROFIT FOR 5TH YEAR- £ 951580

Total profit in 5 years-  £3943201

Total profit needed in 5 years-  £4200000

 

Accounting rate of return = 788640 /700000 =  1.13

Total cash inflow for 1st year- £ 667000

Total cash inflow for 2nd  year- £ 714830

Total cash inflow for 3rd  year- £ 913191

Total cash inflow for 4th year- £ 964600

Total cash inflow for 5th  year- £ 1018580

Cash flow per year- £ 855640

Initial investment- £ 3500000

Therefore, the total payback period will be 4 years. (3500000 / 855640)

And we have a net present value of over £ 493624.

Strengths and Weaknesses of Accounting rate of return

Strengths

  • Return on accounting is very simple to measure and very straightforward to comprehend and takes for some time the cost of net gains or loss and helps to calculate the total income.
  • This approach facilitates comparison with cost-reducing programs and other competitive projects with emerging product projects.
  • This approach gives a clear overview of the feasibility of a project.

Weaknesses

  • The machine time factor is overlooked. The only downside of the return approach is that the assessment of funds is ignored in case of alternate fund uses.
  • The ARR cannot determine a fair rate of return. This is the discretion of the board.

Strengths and weaknesses of Payback Period

Strengths

  • The device has relatively little feedback and is comparatively easier to measure than most capital budgeting approaches. You all need to measure the payback date on the original project expense and yearly cash flow. Although the same feedback is used in other approaches, further assumptions are always necessary.

Weaknesses

  • The money earned earlier would be greater than the one that comes later because of its ability to gain extra income if it is reinvested, as per the definition of the time value of money.

Strengths and weaknesses of Net Present Value method

Strengths

  • The major advantage of using NPV is that it considers that today, due to its profitability, the dollar is worth more than a dollar tomorrow. To calculate its feasibility, the NPV calculation considers the reduced net Cash Flows of an investment.

Weaknesses

  • The whole NPV calculation depends on discounting future cash flows using the appropriate return rate at their present value. However, the determination of this rate is not a guideline.

Topic 5- The value of budgets

Budgets provide short-term strategies for managers to operate the business. They include the methods for evaluating whether the actual output was as scheduled, and if not, why. The budgeting method is a key component of management control systems since it offers a management planning, scheduling, and control mechanism.

The management can improve its management accounting calculation by calculating cost accounting, fund flow analysis, standard costing, marginal costing, financial statement analysis, et,c these are effective and time-saving tools and they can help Roadstar for better financial decision making (Wahyuningsih and Marlina, 2021).

Roadstar can also use different online tools such as time-tracking which helps in the preparation of employee payroll and also tracking of costs. It provides easy access to custom invoices which helps in billing and thus saves time and it can also analyze billing and is also coupled with customized reports.

Another tool is lux for the flag which can be used to increase the productivity of employees in the business and it allows to customize colors and patterns which helps employers to get the best out of their employees. Another tool is a project and team management which helps in planning a new project from scratch which can be done with the help of new graphs and diagrams and charts and it can also allocate tasks to team members thus help in reducing the time of the organization.

The budgeting act lies at the heart of the financial data operation. Budgeting means allocating scarce resources to the organization’s priority needs. In certain instances, the budget is the legal authority to spend money on a public body. A budget in the public sector means that the Governing Board and the administrative authorities have taken a series of decisions culminating in the correspondence between government resources and the needs of the agency. The budget is also a product of the phase of planning.

The budget also provides an effective instrument for controlling and assessing resources and their use. Using the accounting system, managers can carry out and oversee budget-approved activities and assess financial results based on the comparisons of budget-approving and actual operations. The budget is thus indirectly related to financial responsibility and explicitly linked to the GASB’s financial reporting goals.

Evaluation of the performance of the assessment enables residents and taxpayers to keep elected officials and managers accountable. As citizens’ transparency is also expressly specified in State laws and constitutional laws, it is a pillar of fiscal and financial reporting. About the following goals, GASB recognize the value of accountable

  • Financial reporting should tell the public if current-year sales are enough to pay for current-year services.
  • Financial reporting should reflect the availability and use of resources in compliance with the legally authorized budget of the agency. It should also show that all financial legal or contractual conditions are complied with.
  • Financial reporting should provide consumers with information to measure the public entity’s efforts, expenses, and performance.

To achieve these goals, the preparation of the budget must be based on several transparency principles. Accordingly, these priorities are also incorporated into legal provisions requiring State and local public sector budgets

  • balanced to ensure adequate current revenues to pay for existing services;
  • prepare by federal, state, and local legislation applicable; and
  • Provide a framework for assessing the efforts, costs, and achievements of the government.

Although some kind of balanced budget requirements is usually required to guarantee long-term fiscal stability in any entity, variations such as the use of funds balance reserves for current services over a limited period can be acceptable. However, in general, all deviations from this basic goal must comply with the relevant legislation and local laws and policies.

As it is very important for the financial reporting system to demonstrate compliance with the authorized budget, it must monitor the use of the financial resources to ensure that the budgetary allocation is not exceeded. Accounting systems are normally run on the same basis for accounting for the preparation of the authorized budget to show compliance.

Therefore, the actual financial information collected by the accounting system is equivalent to the budget accepted. The financial accounting scheme is the prime instrument to demonstrate financial transparency using budgetary incorporation. Finally, the budget is assessed for its efficiency in achieving the specified priorities and objectives of the company.

The assessment usually includes an analysis of how the funds have been spent, the results of the expenses of the funds, and the extent to which they have reached the specified goals. This process is essential for the creation of the budget allocations for the following year. The budgetary preparation is not only an annual exercise for determining the distribution of the funds but also a continuous planning and assessment period for the achievement of the organization’s specified priorities and goals.

In performance budgeting models, a different emphasis is seen. The budgets are based on the typical production costs, as multiplied by the number of units of an operation to be delivered over the duration in a strict budgeting setting. The overall budget for an entity represents the amount of all unit costs, which are multiplied by the estimated units. While this strict approach may be useful in some types of operations, a flexible performance approach is required by many organizations.

Expenses, for example, may simply be focused on operations or service levels and a contrast between the budgeted and historical levels of expenditure. The approach to results is usually regarded by higher standards as it offers more valuable knowledge for legislative consideration and administrators’ assessment. Also, Performance Budgeting provides narrative explanations of each program, i.e., it structures the budget into quantified expense and achievement projections and focuses on results measurement and evaluation.

Finally, the efficiency approach facilitates legislative budgetary adjustments because program operations and service levels can be estimated using standard cost inputs. However, the budget output is limited because government agencies have insufficient accurate standard cost information. Furthermore, the performance approach does not generally assess the adequacy or efficiency of facilities or results provided by the programs to achieve the objectives of an organization.

The performance method has thus become most useful in regular, discreetly observable tasks (such as maintenance of cars and accounting processing), which make up only a relatively modest part of the educational undertaking. But overall, when properly implemented, performance budgeting will significantly improve the line-item budget.

Financing processes should be examined following the decision to launch a capital acquisition program. This also includes some kind of bond debt, but construction projects may be financed with accrued operating funds. Capital leases and payments in installments can also be used. The bond measure must be examined and approved by the Board of Directors before it is cast to the ballot in cases where bond funding is used.

Estimated aggregate costs incurred during the planning phase may be calculated by the scale of the bonds initiative for a specific program and do not include comprehensive project budgets until funding is obtained. However, bond proposals can require comprehensive cost estimates, depending on the local political climate, to determine explicitly projects to be financed from proceeds before the issue of bond is voted on.

In the scale, applicable tax laws, marketing, and sale of bond problems financial advisors and bond lawyers can be consulted. Other considerations include tax rate limits or debt caps that can impact the amount of debt bonded to be borrowed. Detailed project budgets should be established when funding has been obtained. For the proper monitoring of the related activity, individual budgets covering the life of each project are needed.

Although projections of costs generated during the planning phase can be used to measure the scale of the bond program, the actual budgets of the project need to provide more detail. Architects, entrepreneurs, and staff should participate in budget preparation and recognize factors that can trigger a substantial difference in the actual project budget and cost projections, such as changes in student population, new facilities or site needs, and so on.

Managers with daily updates on each project’s progress to the Board can review the project’s budgets in a multiannual format annually. The development of the projects using debt funds must also be regularly advised by bond lawyers and financial advisors.

In short, the budgeting process is an important component of every organization’s sound financial management. Planning and managing the resources of the company adequately plays an important role as the drive for more transparency grows. Sound budgeting strategies like on-site budgeting are stressed because school district administrators and funding agencies need a stronger rationale for annual costs and decentralized decision-making.

The budgeting based on sites is gaining popularity among administrators because the management of the campus makes major resource allocation decisions. The ability to efficiently target resources. Whatever budgeting methodology is implemented, however, some advantages of budget preparation and management remain identical: increased control and transparency over financial resources and proof of the constructive planning by managers of the future needs.

References

Hani, S., 2021. [TURNITIN] Entrepreneur’s Understanding on MSME (Micro Small Medium Enterprises) on Concept of Sharia Financial Statements. KUMPULAN BERKAS KEPANGKATAN DOSEN.

McCosker, P., 2021. Interpretation of Financial Statements. Financial and Managerial Aspects in Human Resource Management: A Practical Guide, Emerald Publishing Limited, pp.23-37.

Mishchuk, I., Nusinov, V., Polischuk, S., Kutova, N. and Stolietova, I., 2021.Assessment of Environmentally-Oriented Stakeholders’ Coherent Security as a Prerequisite of Sustainable Enterprise Development and the Role of Non-financial Statements in that Regard.

Ragas, M.W. and Culp, R., 2021.Financial Statements and Valuation Essentials. In Business Acumen for Strategic Communicators: A Primer. Emerald Publishing Limited.

Wahyuningsih, E.K. and Marlina, S., 2021, April.The quality of financial statements in the public sector. In Synergizing Management, Technology and Innovation in Generating Sustainable and Competitive Business Growth: Proceedings of the International Conference on Sustainable Collaboration in Business, Information and Innovation (SCBTII 2020), Bandung, Indonesia, July 10, 2021 (p. 187). Routledge.

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