BSBFIM601 Manage Finance Question and Answer 2022

Assessment Task 3 BSBFIM601 Manage finances
Written questions and
answers
Submission details
The assessment task is due on the date specified by your assessor. Any
variations to this arrangement must be approved in writing by your
assessor.
Submit this document with any required evidence attached. See
specifications below
for details.
Performance objective
The candidate will demonstrate the ability to describe the skills and
knowledge required to establish the strategic direction of the organization,
sustain competitive advantage and enhance competitiveness.
Assessment description
In this assessment task, you are required to provide answers to the
questions asked. You may use additional documents as required.
Procedure
1. Read and understand the questions clearly.
2. Provide answers to the questions asked.
3. Give examples from your own experience as far as possible.
4. Submit all documents required in the specifications below to your
assessor. Ensure you keep a copy of all work submitted for your
records.
Specifications
You must:
● meet with your assessor to clarify any confusion
● provide answers to all the questions
● Submit your notes and any additional documents.
● If you utilise material from published authors make certain that you
cite and reference appropriately. If you do not know how to reference
discuss this with your assessor. Plagiarism is unacceptable.
Your assessor will be looking for your ability to:
● plan for financial management
● read and review profit and loss statements, cash flows and aging
summaries
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Assessment Task 3 BSBFIM601 Manage finances
● prepare, implement and revise a budget which aligns with the
business plan, is based on research and analysis of previous financial
data and cash flow trends, and meets all compliance requirements
● contribute to financial bids and estimates
● establish a budget and allocate funds in accordance with statutory
and organisational requirements
● communicate with other people including:
 reporting on financial activity and making recommendations
 identifying and prioritising significant issues
 Ensuring managers and supervisors are clear about budgets.
● analyse the effectiveness of existing financial management
approaches including reviewing financial management software,
managing risks of misappropriation of funds, ensuring systems are in
place to record all transactions, maintaining an audit trail and
complying with due diligence.
Adjustment for distance-based learners
● No variation of the task is required.
● Documentation can be submitted electronically or posted in the mail.
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Assessment Task 3 BSBFIM601 Manage finances
Answer the following questions:
You are required to answer the questions given below. You may either use
the space being provided for your answers or attach separate answer
sheets as required.
1. In your own words, describe responsibility accounting?
The accounting system that is involved internally for budgeting of the
company. Responsibility accounting helps in organizing and controlling
the responsibility centers of the company. This accounting is related with
the assembling and reporting profits and cost by area of responsibility.
The top managers of the company could use the report and then they
can focus on the strategic or long term planning for the organization.
This also provides a guide for the performance evaluation. The
performance of the manager and his assistants are evaluated based on
the attainment of these goals. The company expects from the
management to find out the causes and solves it. Suppose if the
company in incurring high cost than the expected budget then the
responsibility of the management will be to fix the concern.
2. Which of the following statements relating to a budget is not true?
a) It is a detailed plan
b) It is a management tool
c) It provides many of the performance targets used in
responsibility accounting
d) It is prepared on a historical basis
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Assessment Task 3 BSBFIM601 Manage finances
e) It identifies certain financial and operating targets
As per the different options which are available from the above options,
the fourth option is not true.
3. Detail 4 different types of budgets, and their purposes.
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Assessment Task 3 BSBFIM601 Manage finances
The budget forecast helps the company to predict the future
performance and analyze the with the past performance .The four
different types of budget are Operating Budget, cash flow budget,
financial budget and static budget.
 Operating budget: This budget is prepared to provide a detailed
statement that shows all the operational expenses to be incurred
and the earnings to be produced during a particular period of
time. Companies use different types of operating budget to make
better decisions and can analyze each area of business.
 Cash flow budget: This budget is basically prepared to manage
the cash transactions of the business. This budget decide whether
the accounts payable and the accounts receivable are dealt timely
or not. The primary reason behind making this budget is to
provide the company statement of the company’s recent cash
positions. The managers of the company take necessary action
when there is a shortage of cash.
 Financial budget: The purpose of making the financial budget is
for organizing and controlling the inflows and the outflows of the
cash and the company’s overall financial position. The decision of
mergers and acquisitions depend on the financial budget of the
company.
 Static budget- This budget is prepared to see a constant data as
there is daily rise and drop in sales of a company occurs. The
company uses the static budget as there is no changes in the
amounts even if there is a significant change in the volume.
4. What information would you require to plan and prepare a budget for
a new business? Detail where this information would come from.
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Assessment Task 3 BSBFIM601 Manage finances
The things which require for preparing a budget for new business
venture is that a careful planning, a sufficient amount of capital and the
estimates of both revenues and expenses. Apart from this the company
needs to gather applicable information as possible, including discussions
with the experts while the preparing the operating budget.
The information of these requirements comes from the market and from
the current and previous financial budget of the company. Financial
budget helps the company in making the decision of new business,
mergers or acquisition.
5. Describe what external factors should be taken into consideration
when planning and preparing a budget.
The budget of a company is regularly changing and getting updated and
modified. There are some external factors which are needed to be
considered while changing the budget.
The external factors are the political and the legal influences, social
external influences, technological influences and economic influences.
Political and legal external influences-The company business can be
affected by the different ways of political and legal policies. The
companies have to pay the taxes that is set by the government. In
certain point of time the companies have to invest money for the
betterment of the society for example in times of war.
Social external influences: There are many social factors that affect the
business of the company. Changes in the pattern of lifestyle, population
change as these changes is directly related with the expenses and
disbursement of money.
Technological external influences: As these days the technology is
developing very fast, Every company is trying to develop the technology
by purchasing and implementing new plants which rise up the cost and
expense amount of the company. This then influence to make changes
in the budget of the company.
Economic external influences: The changes in the stock market and the
change in price of the related commodities affect the budget of the
company. The economy of the country where the business is operating is
also related as because when the GDP of a country is rising this then
helps in the growth of that particular also.
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Assessment Task 3 BSBFIM601 Manage finances
6. Describe the following term in relation to an organizations budgetary
requirements.
CAPITAL INVESTMENT
Capital investment are the sum of money provided to a company for
further business activities and objectives. These is also refer to the
purchase of long term assets for the company such as real estate,
manufacturing plants and machinery. This is required in making a
budget as because to run a business capital is the most essential thing
which every company need for investing.
7. Describe the following term in relation to an organizations budgetary
requirements.
CAPITAL EXPENDITURE
Capital Expenditure are the expenses which an organization make to
produce financial benefits over a period of time. These are the
operational expenditure that involve in the purchase of building,
equipment, and company vehicles. The also includes the transaction
that are related to the expenditure of other companies for research
and development. Capital expenditure is one of the requirement
needed to make a budget. The company have to notice on the
expenditure while making the budget.
8. Describe the following term in relation to an organizations budgetary
requirements.
CASH FLOW
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Assessment Task 3 BSBFIM601 Manage finances
Cash flow is the net amount of cash and other cash-equivalents that is
transferred in and out of the business. Cash flow is very essential and it
is very much related with the organizational budget, as it is one of the
most critical element of business. Cash flow shows the cash flow
projection and the table of the cash transaction and the most critical
elements of the business.
9. Describe the following term in relation to an organizations budgetary
requirements.
BREAK EVEN
The break even means where the company’s total expenses is equal to
total revenue. This is situation where the company is in a position of no
profit or no loss. The relationship between the expenses and the revenue
is the break even analysis. The expenses of the company change as the
sales increase or decrease these are the variable expenses and the
expenses which remain unchanged these are the fixed expenses. Sales,
materials, labor and many others all these expenses are variable
expenses and are related with organizational budget.
10.Describe the following term in relation to an organizations budgetary
requirements.
GROSS PROFIT
The gross profit is calculated after deducting the cost of goods sold with
the revenue of the product. The gross profit of a company is generally
found on the income statement of a company. The type of budget which
the farms required to take financial decision is gross margin budget, this
budget provide the producers for planning and evaluation of the
organization. The gross profit does not include any fixed or overhead
costs.
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Assessment Task 3 BSBFIM601 Manage finances
11.Describe the following term in relation to an organizations budgetary
requirements.
RISK MANAGEMENT
Risk management is the process of planning, analysis and acceptance of
uncertainty in the investment decision. When the fund manager
analyses or aims to measure the potential for losses and then takes the
necessary steps. Risk is the main cause of uncertainty in a business.
Thus the company’s focus mainly on the managing and recognizing of
the risk before they affect the business. This also affects the budget of
the company. The capacity to control risk will help the company to act
more confidently in the future.
12.What are the financial reporting cycles relevant to your Industry?
The financial reporting cycle is the comprehensive process of recording
and processing all the financial transaction of a company from the date
of the transaction taking place till it gets recorded in the financial
statements. The cycle consist of the journal entries, debits and credits,
and the adjusting entries over a full cycle. The Bid ed’s whitegoods
limited is a retail industry. The purchase and the cash sale cycle consist
of the “cash to inventory through purchase of materials then goes back
to cash through cash sales” this is the full cycle. Purchase and sale on
accounts cycle consists of “cash to inventory through purchase then
through sale of accounts to accounts receivable, then to goes back to
cash through collection of cash”.
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Assessment Task 3 BSBFIM601 Manage finances
13.Describe 2 different capital investment evaluation techniques
Capital Investment Evaluation Techniques are the Techniques to determine how
fast the return on investment will get generated. These are in 2 different group
dynamic methods and statistical evaluation methods.
Statistical Evaluation Methods – It is a method to keep monitor on cash benefit and
to measure the cost which take place at initial stage. They are less time consuming
and ignores risk factors.
 Average Annual Return is the ratio of number of year left for the investment and
all the cash flow related to investment.
 Average Payback period is the method to calculate actual time of repayment of
initial investment.
 Average Percentage Return is the method which show the invested capital in
terms of percentage.
 Payback Period is the period which took to recover the initial cost of investment. It
is most commonly used method in term of finding the cumulative cash from the
year 1.
Dynamics Evaluation Method – This method take consider of risk and time factor to find
the return on investment.
 Net Present Value is the method to calculate the return taking life of project and
also consider the opportunity available. It is best and widely use method.
 Internal Rate of Return shows the return that will be generated during the life
cycle of project.
 Profitability Index is the index which shows the ratio of benefit from the
investment.
 Accounting Base Profitability Return is ratio of generated profit and the net book
value of investment. It is use the companies CFO’s though it have some other
benefits too.
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Assessment Task 3 BSBFIM601 Manage finances
14.What are the benefits of participative budgeting?
Participative budgeting generally have lots of advantage which include keeping the better
communication between the subordinate to superior which raise the job satisfaction in
subordinate, responsibility of preparing budget and making sure of achieving companies
goals and objectives. Smooth flow of communication from subordinate to high executive
lead to better budgeting making because of allowing subordinate to participate in
budgetary. As a smooth communication lead to subordinate to directly contact to high
executive to discuss issue so the better and smooth flow of information can be exchange
and can find the solution for the betterment of company future. The flow of information
comes much needed when issue is difficult and as more the task is difficult the more need
to subordinate involvement requires. Participating of subordinate in planning budget
create an opportunity to subordinate to show case his skill and provide solution which will
benefit both the company and subordinate in long run. Subordinate feels highly motivated
when there point of view is given importance in implementing the budget, in such the
subordinate is taken as a member of the team. It ensures more accurate budget estimate
as lower level of staff have better knowledge of their particular field. It help manager to
understand subordinate better and helping them achieve their and company goals. In such
process the company can accomplish its goals and objectives in a smoother way.
15.What steps would you take to effectively implement the budget into a
team environment?
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Assessment Task 3 BSBFIM601 Manage finances
There are basically four steps in implementing the plan in team environment are:
 Identifying the goals of the business by creating the effective budget.
 Review of the document which are available like balance sheet, outstanding debt,
assets, liabilities, etc.
 Specifying the cost applicable in process of achieving the goals in such past
performs are consider to make better plans.
 By generating the available information, budget is prepared.
16.What are INCOTERMS?
Incoterms are the rules which states the responsibilities of buyer and seller for the goods
delivering as per the sales contract. International Chamber of Commerce are the publisher
and this is used in commercial transaction. It simply reduce the miscommunication
between seller and buyer. Its main purpose is to set rule relating to the foreign trade.
17.Describe the following INCOTERMS codes?
(a) Departure (Group E)
FCA – Free Carrier
(b) Main Carriage Paid By Seller (Group C)
CIF - Cost, Insurance And Freight
(c) Arrival (Group D)
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Assessment Task 3 BSBFIM601 Manage finances
DAF – Delivered At Frontier
a) Free Carrier is term used in trade process in which the seller is obligated to
handover the goods to the buyer destination. This destination are like
airports, terminal and others were the carrier can operate to deliver.
b) Cost, Insurance and Freight are the expenses for the seller to cover its cost,
and other expenses. When the goods are in transit till the goods reach to
buyer if anything happen to goods the cost will be bear by seller.
c) Delivered at Frontier it is basically a process in which goods are transferred
to the other countries across the border of one’s location. This kind of
delivery process is complex as compare to the standard delivery.
18.What is the trades practice Act?
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Assessment Task 3 BSBFIM601 Manage finances
Trades practice Act is an act for preventing anti-competitive conduct, and so this
improve in competition and business efficiency. It main motive is to protect the
welfare consumer in process of dealing. It direct benefit the consumer in term of
better price, good quality, safeguarding the consumer.
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Assessment Task 3 BSBFIM601 Manage finances
19. What is the Warsaw Convention?
Warsaw Convention is the convention regarding the specific rules related to specific
international carrier by air. It specifies a treaty which safeguard the carrier by
limiting the liability. In this carrier transport languages for profit and so the
protection of such carrier is much required.
20.What is the World Trade Organization?
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Assessment Task 3 BSBFIM601 Manage finances
World Trade Organization is an organization which control the trade between
nations. It also play role in case of dispute between nation to bring true and fair
solution. It raise the transparency level for better decision making. It was
established on 1st January, 1995 for smooth trade between countries by bringing
regulation, import quota and tariffs. It plays an important role as economy of it
members countries is depend on it. World Trade Organization is not a part of Untied
States.
21.What are Bilateral and Regional Free Trade Agreements?
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Assessment Task 3 BSBFIM601 Manage finances
Bilateral Trade Agreements is an agreement in which two nation can freely trade in
there each market. It simply a two way process in which each country looks for their
point of interest. It improve economic growth for the both countries.
Regional Free Trade Agreements is an agreement between two or more countries
that sign treaty to make free movement of trade across the border of its member.
22.What is meant by financial probity?
It is the evidence of proper acceptable behavior and can be said as confirmed
integrity. It simply reduces the risk factor for an organization. As this risk can result
in big matter like liquidity shortage, bad publicity which could result in big loss but
it manages the risk by controlling the financial strengths and viability of contract.
23.What records need to be kept for the ATO for a small business with
an annual turnover of less than $2million (cash basis)
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Assessment Task 3 BSBFIM601 Manage finances
Business records need to be kept minimum for 5years or more than that for the
ATO for a small business with an annual turnover of less than $2million.
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