manage finances - sample assignment · 1.3 financial statement comprise according to aasb 3 1.4...
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MANAGE FINANCES
Table of Content
1.0 Introduction 2
Assignment 1 2
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1.1 Purpose of conservatism 2
1.2 Analysing two key of accounting standard that are directly relevant to gathering
revenue data for statutory recording and reporting
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1.3 Financial statement comprise according to AASB 3
1.4 Features of off-shelf business management and accounting software products 4
Assignment 2 5
2.0Ratio analysis (Biz ops Enterprise) 5
2.1 Biz Ops Enterprise’s current financial position 7
2.2 Need of a Budget plan 7
2.3 Budget Plan analysis 8
Assignment 3 8
3.1 Forecast of Income statement 8
3.2 Forecast of Cash Flow 10
4.0 Conclusion 12
References list and Bibliography 12
1.0 Introduction
In this assignment a discussion has developed on the accounting principle of Australia and how
it works on the practice field. Furthermore, with the help of ratio analysis a calculation has
developed to identify the strengths and the weakness of the Biz Ops Enterprise. A forecast has
made on the financial performance statements to analyse the company’s growth and chances of
profitability.
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Assignment 1
1.1 Purpose of conservatism
Conservatism is also known as prudence in accounting. In this principle of accounting it says
record all anticipated losses and expenses and ignore all anticipated gains and incomes, this is
known as conservatism or prudence (Erasmus et al. 2016, p. 998). The concept of convention
future losses are losses and future gains perhaps not the gains.
According to the conversation concepts it stated that the closing stock is valued on the basis of
the cost price or market price whichever is lower. Provision for bad debts and doubtful debts are
maintained. The purpose of conservatism is that, this policy understates rather than overstates
net assets and net incomes which help the company to play safe.
1.2 Analysing two key of accounting standard that are directly relevant to gathering
revenue data for statutory recording and reporting
Key accounting standards that are directly relevant to gathering revenue data for statutory
recording and reporting are:
AASB 118 REVENUE - According to the Accounting revenue standard section (118), each
company needs to produce an income statement and company every company needs to follow
the revenue standard.
Revenue is the income that rises if the cost of goods sold got lower of the firm. The accounting
revenue standard is applied in each revenue transaction of a company. Hence, the company
needs to follow each standard to prepare the cash flow, income statement and balance sheet.
The revenue shall be measured at the fair value of the consideration received or receivable.
1.3 Financial statement comprise according to AASB
Financial statements according to AASB comprises of :
1) Statement of financial activities at each of the year (Balance Sheet).
2) Annual Statement of profit and loss for each financial year.
3) Annual income Statement of the cash flows for each financial year.
4) Changes of earning per share for a financial year.
a) The balance sheet helps the company to identify the financial growth of a particular period. It
also helps the shareholders to analyse the financial valuation of the company. The balance sheet
consists of total assets, which include fixed assets and current assets and total liabilities. Fixed
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assets are those assets which effect are long term and can be converted quickly into cash;
examples of it are plants, furniture, heavy machinery etc.
Current assets are those assets which can be converted into cash within one year, example of it
are cash, debtors etc.
b) Profit and loss statement- Company’s profit and loss statement shows the financial
performance of the business. It shows the net profit or net loss of the company. It takes only the
revenue items, revenue incomes and revenue expenses and not capital incomes or expenditures.
c) Cash flow - the cash flow statement allows the company to measures the total cash inflow and
cash out flow of the company for a particular period of time.
d) Changes in equity- Retained earnings and Earnings per share are main two variables of
changes in equity. It shows the details of changes in the owner's equity over a particular period
of time.
1.4 Features of off-shelf business management and accounting software products
Off the shelf software’s are common nowadays. The example of the the off shelf software are
spreadsheets, database applications, desktop related application, web design. Uses of these
applications are:
Word processing application is generally used for the writing reports, memoranda, letters to the
supplier and customers.
Spreadsheet application: This application is helping to keeping company’s various accounts,
Invoice control system etc.
Database application is helping the company to maintain the customer records , sales records .
Business needs vary from one organisation to another because different organisations have
different requirements. Therefore, the continuous improvement of process and techniques
effectively run the business is must to survive in the competitive environment. Owners of the
businesses always step out of their normal day to evaluate whether or not they are being
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effective and efficient , how they can improve their inefficiencies and plan for the future to
cope the challenges ahead in the future, because the competition is so strong and huge everyone
or rather everybody wants perfection. There are many companies which offer this kind of
software’s like QuickBooks, Microsoft Dynamics, MAS90 etc. These software’s helps in getting
instant insights into your finances, get complete visibility of the business, monitor key trends in
the businesses, easy invoice and estimates, track sales and expenses.
Advantages of the off the shelf software’s are:
a) Economical it is not too much costly
b) Contains many features more than you need.
c) Upgrades may be provided for free or at reduced price.
Disadvantages of the off the shelf softwares are:
a) Higher customisation fees
b) Slow to adapt or change to industry needs.
I will purchase Quickbooks software because quickbook is very simple and easy to use software
for business management purpose. It helps in sees who owes money and send them reminders,
gets instant insights into the finances, gives complete visibility of the business (balance sheet,
profit and loss account and tax details), easy invoicing and estimates, online banking integration,
tracks sales and expenses.
Assignment 2
2.0Ratio analysis (Biz ops Enterprise)
Ratio 2014 2015
Net profit
margin 0.05794187999 0.04453064594
Net profit ratio 4.406172899 3.386013512
Cash Flow
return on assets 0.02797317985 0.03429950787
return on 2.51047409 1.913288288
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owner's equity
Table 1 : ratio analysis
(Source: Investors.hpe.com, 2016)
Analysis of Ratio
Net profit margin
The net profit ratio percentage is generally measured after the tax profit (Sharpley et al. 2015,
p.885). Therefore,all the tax related expenses are not concern for a net profit margin ratio. In
2014, the net profit ratio of Biz Ops Enterprise is 4.40. It is indicates a positive movement of net
profit. The company was able to decrease the long term liabilities in order to maintain the 4.40
net profit ratio. On the other hand, in 2015, the company’s net profit decreased from 4.40 to
3.38. That indicate the company has not able to minimise the operating expenses during 2014 to
2015 financial years. It is important for Biz Ops Enterprise to minimise the current liabilities
and short term liabilities in order to increase the net profit ratio. Decreased net profit ratio will
not make a positive feedback to the shareholders of the company. Hence, the share price may
fall down.
Net profit ratio
The net profit ratio percentage is generally measured after the tax profit (Sharpley et al. 2015,
p.885). Therefore,all the tax related expenses are not concern for a net profit margin ratio. In
2014, the net profit ratio of Biz Ops Enterprise is 4.40. Its indicates a positive movement of net
profit. The company was able to decrease the long term liabilities in order to maintain the 4.40
net profit ratio. On the other hand, in 2015, the company’s net profit decreased from 4.40 to
3.38. That indicate the company has not able to minimise the operating expenses during 2014 to
2015 financial year. It is important for Biz Ops Enterprise to minimise the current liabilities and
short term liabilities in order to increase the net profit ratio. Decreased net profit ratio will not
make a positive feedback to the shareholders of the company. Hence, the share price may fall
down.
Cash flow return on assets
Cash flow return on assets is measured company’s efficiency of a particular period (Brand et al.
2014, p.465). The Biz Ops Enterprise using cash flow return on assets to measure the future cash
flow of the company. In 2014, the cash flow on assets was 0.02. On the other hand in 2015 the
company was able to increase the the cash flow return on assets. That signifies the company
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maintains a certain cost control and paid all the outstanding expenses in order to increase the
future cash flow over the period. Furthermore, a positive cash flow return on assets ratio also
helps the company to Measure Company’s earning quality.
Returns on owner’s equity
Return on equity is basically how much profit company generated with the capital of the
shareholders (Erasmus et al. 2016, p. 998). Therefore, a higher return on owner’s equity is
always a favourable condition for a company. In 2014, Biz Ops Enterprise return on owner’s
equity ratio was 2.51. The Return on owner’s equity was decreased from 2.51 to 1.91 in 2015.
That decrease indicating the company was not able to increase the earning per share. In addition
to this the company has faced some difficulty in order to maintain a good amount of retained
earnings. It is important for the company to increase the profitability to increase the market
share price. A higher market share price will help the company to provide higher dividend price
to the company. In addition to this the company also can generate higher retain arning by
increasing the shareholders capital.
2.1 Biz Ops Enterprise’s current financial position
Biz Ops Enterprise is not performing well in 2015 financial year. The reason behind the under
performance are discussing billow
Working capital of the company is keep decreasing from 2014 financial year. Working capital
helps the company to pay all the expenses day in day out business. It is important for the
company to pay the creditors amount of time in order to minimise the current liabilities. On the
other hand it has seen company was unable to increase the net profit margin. This is also
affecting the company’s annual gross profit.
2.2 Need of a Budget plan
A proposed budget plan is very much useful for a company’s financial manager. In 2015, Biz
Ops Enterprise was unable to increase the gross profit and sales. Therefore, to get a bank loan
and stay in challenging business it is very much necessary to minimise the certain cost and
operating cost. On the other hand, a budget plan helps the company to allocate the money
properly. In some sector
AUD (2016) AUD (2016)
Income 150000
Expenses
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Light 1050
maintenance 512
Salary and wages 20000
Advertisement
expenses 2500
MArketing expense 25000
Other operating
expenses 1500 50562
Profit 99438
Table 2 : Budget plan
(Source: Investors.hpe.com, 2016)
2.3 Budget Plan analysis
A proposed budget plan has been developed for the company. It will helps the company to make
a forecast. A proposed budget helps the company to identify the income and the expenditure.
The estimated net income for the next financial year will be AUD 150000. The proposed budget
is emphasis on the employee's salary and wages. It is important for a company to give higher
salary in order to achieve the sales target. On the other hand, proposed budget help will help the
company to minimise various expenses like maintenance and light. A estimated of AUD 99438
gross profit has been identified during the next financial year. It is important for the company to
minimise the operating expenses and cost control in order to achieve the net profit target.
A business plan needs a proposed budget plan. It is important to know the fund allocation
procedure. Moreover, certain accounting rules and regulation needs to maintain in order to
produce a quality budget plan. With the help of various accounting tool, a company can get a
look of employee’s salary structure, cost of production, operating expenses. An accounting tool
will help the companies’ entrepreneur to cost reduction (Investors.hpe.com, 2016).
Assignment 3
3.1 Forecast of Income statement
Particulars 2016 2017
Sales 113255 120354
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Cost of good sold 79576 76408
Gross profit 33679 43946
Operating expenses
Development 3502 3486
General and administrative cost 12353 11942
Restructuring 1017 1116
Other operating cost 2416 2378
Total operating expenses 19288 18922
Operating income 5471 5125
Other income or expense -739 -639
Profit before taxes 4732 4486
Provision for income taxes 178 125
Net income from continued business
operations 6554 1616
Other -963
Net income 2333 1616
Net income available to common
shareholders 4554 3398
Earnings per share
Basic 2.51 1.91
Diluted 2.48 1.88
Weighted average shares outstanding
Diluted 1839 1791
EBITDA 10032 11319
Table 3 : Forecast of income statement
Source : (Source: Investors.hpe.com, 2016)
Analysis
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On the basis of the previous year income statement, a proposed income statement has been
developed. It will give Biz Ops Enterprise to known a brief idea about the expenses and the
EBITDA. This forecast will help the company’s accountant in order to minimise the operating
expenses. Furthermore, a proposed budget and a forecast income statement will help the
company to get a bank loan. It is necessary to provide a proposed budget and income statement
for getting a loan.
3.2 Forecast of Cash Flow
2016 2017
Cash Flows From Operating Activities
Net income 5554 3398
Depreciation & amortization 4061 2194
Investment/asset impairment charges
Deferred income taxes -700 -100
Stock based compensation 709 494
Account receivable 572 -28
Inventory -330 339
Accounts payable 31 -140
Income taxes payable -137 -727
Other working capital -4549 -1284
Other non-cash items 2279 1603
Net cash provided by operating activities 5749
Cash Flows From Investing Activities
Investments in property, plant, and equipment -3603 -2083
Property, plant, and equipment reductions 424 213
Acquisitions, net -2398 -2198
Purchases of investments -259 -273
Sales/Maturities of investments 302 291
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Net cash used for investing activities -5534 -4150
Cash Flows From Financing Activities
Debt issued 21758 19275
Debt repayment -15867 -17130
Common stock issued 371 157
Common stock repurchased -2883 -1755
Excess tax benefit from stock based
compensation 145 29
Dividend paid -1250 -1089
Other financing activities 70 -12118
Net cash provided by (used for) financing
activities 1344 -11731
Net change in cash 2300 -10132
Cash at beginning of period 16133 18768
Cash at end of period 17433 4636
Free Cash Flow
Operating cash flow 6590 5249
Capital expenditure -3603 -2083
Free cash flow 2887 3666
Table 4 : Forecast of cash flow
Source : (Source: Investors.hpe.com, 2016)
Analysis:
With the help of the previous year cash flow a forecast analysis has been developed. A positive
impact has been developing. The company needs to minimise the liquidity in order to maximise
the company’s net cash flow. Furthermore, in this proposed cash flow help the company to
identify the investment activity over the next financial year. Furthermore, a forecast of cash flow
helps the company’s accountant to maximise the operating profit. It is important for the
company to reduce the per unit, hence it is important to follow the proposed cash flow.
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4.0 Conclusion
I this assignment a discussion have developed on the accounting principle and practice. A
templet has been provided in order to give a proper idea of the accountancy principal.
Furthermore, a proposed budget has been provided to a company to identify the strengths and
the weakness. Certain solution had been provided to the company in order to maximise the the
profit and cash inflow.
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References list and Bibliography
Brand, W.A., Coplen, T.B., Vogl, J., Rosner, M. and Prohaska, T., (2014). Assessment of
international reference materials for isotope-ratio analysis (IUPAC Technical Report). Pure and
Applied Chemistry, 86(3), pp.425-467.
Brand, W.A., Coplen, T.B., Vogl, J., Rosner, M. and Prohaska, T., (2014). Assessment of
international reference materials for isotope-ratio analysis (IUPAC Technical Report). Pure and
Applied Chemistry, 86(3), pp.425-467.
Drivelos, S.A. and Georgiou, C.A., (2012). Multi-element and multi-isotope-ratio analysis to
determine the geographical origin of foods in the European Union. TrAC Trends in Analytical
Chemistry, 40, pp.38-51.
Erasmus, S.W., Muller, M., van der Rijst, M. and Hoffman, L.C., 2016. Stable isotope ratio
analysis: A potential analytical tool for the authentication of South African lamb meat. Food
chemistry, 192, pp.997-1005.
Marin, R.C., Sarkis, J.E. and Nascimento, M.R., (2013). The use of LA-SF-ICP-MS for nuclear
forensics purposes: uranium isotope ratio analysis.Journal of Radioanalytical and Nuclear
Chemistry, 295(1), pp.99-104.
Roe, Y.L., Zeitz, C.J., Mittinty, M.N., McDermott, R.A. and Chew, D.P., (2013). Impact of age,
gender and indigenous status on access to diagnostic coronary angiography for patients
presenting with non‐ST segment elevation acute coronary syndromes in Australia. Internal
medicine journal, 43(3), pp.317-322.
Sang, X.F., Gensch, I., Laumer, W., Kammer, B., Chan, C.Y., Engling, G., Wahner, A., Wissel,
H. and Kiendler-Scharr, A., (2012). Stable carbon isotope ratio analysis of anhydrosugars in
biomass burning aerosol particles from source samples. Environmental science & technology,
46(6), pp.3312-3318.
Sharpley, C., Wark, S., Hussain, R., McEvoy, M. and Attia, J.,( 2015). The Influence of Social
Support on Psychological Distress in Older Persons: An Examination of Interaction Processes in
Australia. Psychological reports,117(3), pp.883-896.
Website
Investors.hpe.com,(2016), investors.hpe.com avalible from :/financial/annual-reports [ accessed
on 8 Augest, 2016]
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