Analysis of New LifeTraining Plc's Operational and Regulatory Factors

The assignment analyzes the income statement projections of New LifeTraining Plc for four years, considering alterations in tutor fees, hypothetical variable expenses, and source of capital. It provides clear evidence and descriptive statistics to understand issues and their applications in the business of giving training. The report also discusses various risk factors and the importance of proper consideration by the board of directors.

Managing Finance
and Operation

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
a) Operational and regulatory factors considered by the board..............................................1
b) Income and expenditure projections for the first 4 years ..................................................3
c) Evaluation of financial worth for current proposal............................................................5
d) Conclusion and recommendation.......................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
In order to consider development of business, there are several elements included in it
that make important consideration to take decisions. In this way, proper cash needs to be
maintained to run short objectives in the financial management. Furthermore, it is important for
operations to consider proper attention and focus on day to day elements such as raw material,
electricity bills, rent, etc. In this context, present report is based on the New Life Training which
is growing business and authorised share capital to attain desired results in systematic manner.
They offer different kinds of core academic subjects to attain significant results in the business
environment. For gaining insight information of present report, it includes operational and
regulatory factors which are considered in the board. Furthermore, it focuses on income and
expenditure for 4 years incorporating to develop significant advantages. At last, conclusion and
recommendations have been implemented that help to attain significant advantages in the
business environment.
MAIN BODY
a) Operational and regulatory factors considered by the board
In order to focus on the board consideration, there are regulators that consider financial
focus on the business to analyse distinctive and greater level of insight and awareness. Therefore,
risk will be managed in a successful manner to ascertain and mitigate the significant results. In
addition to this, operational management involves managing process that helps to consider raw
material, labour, energy, etc. to produce goods and services. With this regard, different theories
are considered such as business process redesign, reconfigurable manufacturing system, lean, six
sigma, etc. In this context, Six Sigma is the main approach that helps to focus on the quality
which assists to maintain effectiveness at workplace with defined sequence and financial targets
as well. It assists to increase the profits and reduce costs to develop effective advantages
(Mizgier and et.al., 2015). Lean accounting is also a systematic method that helps to eliminate
waste material in the manufacturing process. It helps to seem resources to create value for
customers. As results, elimination of the negative elements could be considered in a systematic
manner.
Following are certain operational and regulatory factors exist that are considered by
board in New Life Training:
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 Cyber risk and data security: In respect to work for the new operations and functions in
New Life Training, it is essential to look upon the cyber risk and data security. This is
because; number of risks ranked with threat from cyber-attack as the top operational risk
for last year. With the help of the proper management, they can reduce cyber-attack
which is not growing but also insidious forms by the risk practitioners (Chwieroth, 2015).
As the reputation damage, enough actions will be taken. Source of potential cyber threat
pins down and making building of appropriate control which is serious challenges and
attack in the world.
 Regulations: Furthermore, there are several regulations considered as the risk
practitioner which denotes landmark regulations with capital adequacy frameworks,
widespread market structure reform, etc. It represents that changes to accounting
practices determine potential operational risks for New Life Training. In this regard, it is
essential for business to expose themselves in the operational risk and increasing their
return on equity. However, operational risk seems to one of the cause of regulators which
determines more concern in which they struggle. It creates a huge impact on the
operational risk capital and groups as well (Mousa, 2015). Hence, the chosen business
needs to make sure that all employees are fully aware with roles and responsibilities.
Ethical elements are also associated that create challenges that ensure proper business
practices exit around all products and services rendered by enterprise.
 Outsourcing: Outsourcing consider three operational risks in New Life Training. For
instance: spurred by clear message from regulators, third party risk management and face
punitive sanctions. Hence, financial organisation must consider their reviews with
existing outsourcing arrangement. It helps to ensure that failure of third party service
providers will be reduced in a systematic way through focus on the systematic work
performances. GDPR compliance represents a significant burden so that managers need
to know exactly about the customer data that are held all times (Cambini and et.al.,
2016). Hence, it is important to understand complex web of relationship with different
outsource, practitioners, etc.
 Geopolitical risk: In the business outcomes, geopolitical risk also ascertained due to
election of UK. The country withdrew from the European Union so that it combined to
push the geopolitical risk into 10 years. Along with this, direct costs occur against the
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backdrop of significant economic, regulatory and business change. As results, it directly
impacts indirectly as operational risk with outsourcing, organisational and business
change, regulations, etc. in New Life Training (Cruz and et.al, 2016). Financial
legislations also create own risks to maintain new supplier relationship that are
heightened outsourcing the risk.
 Conduct risk: In the UK, security and exchange commission take successful
enforcement that are entitled to provide reward up to 30%. Therefore, managers stated
that it seeks to codify culture of personality development. Individuals also input their
efforts to make systematic results in New Life Training. It assists the business to take
successful enforcement (Leyman and Vanhoucke, 2016). In this regard, Securities and
Exchange Commission imposed to the organisation with legislation which came into the
force and it is levied with related fines.
 Organisational change: Organisational change comes in different forms. However, it
consider by the regulation, technological changes and corporate restructuring as well.
Results also consider upheaval which require changes to the top risk frameworks. It helps
to cope up with new and idiosyncratic source of risk (Ng and Beruvides, 2015). Changes
to desk structure and internal risk transfer processes helps to encounter under the
committee.
b) Income and expenditure projections for the first 4 years
Each and every transactions which are related to concerns which are not for profit such as
clubs, library etc. are usually tracked in the books of account according to the double entry
system and in the end of year all the interpretation is justified with the help of final accounts and
it comprises two steps, one is income and expenditure account and another one is a balance
sheet. Here the income statement is undertaken for observing the financial position or to justify
the net income and projections are done for consecutive four years (Caballero, Farhi and
Gourinchas, 2017). The main feature of income statement is all the revenue and income which
are properly concerned with current year whether the cash is received or not and even the
expenses which are paid or not are considered in this statement. But no expense or income of
next year is not included in it.
Projected Income statement for the years 2018, 2019, 2020 and 2021
2017-2018 2018-2019 2019-2020 2020-2021
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Income
Franchise
Training 86400 172800 345600 345600
Student
session 30400 39600 44000 132000
18000 18000 18000 18000
Chargeable
sessions 134800 230400 407600 495600
Expenses
Full-time
equivalent
tutors 120000 120000 120000 120000
Full-time
equivalent
administrators 36000 36000 36000 36000
Private Hire
Overheads 10950 10950 10950 10950
Variable
expenses 2700 1800 2520 3600
Interest 66000 66000 66000 66000
Total
expenses 23560 234750 235470 236550
Net income -100850 -4350 172130 259050
Interpretation: The present income statement proposal is of New Life Training Plc
whose income is reflecting in very positive manner and leaning towards more profit margin. The
missing portion is all about variable expenses, as every organisation incurs some amount of
variable so hypothetical has been allotted. The adjustments regarding private hire sessions is
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been altered that for six years then want to be stable from previous year. In the first two year it
generated loss but that is also decreasing after that it started raising its net income in four years.
The combination of debt and equity is been presenting the whole company as in the
present company it has equity of 10% and debt of 6% and gearing ratio was 50% before taking
debt of additional capital for the building. According to the given information company has
given more focus on equity but it should give priority to debt base to improve the performance of
organizations. But the building will be debt financed so company must be able to balance debt
and equity both but with properly payment of instalment.
c) Evaluation of financial worth for current proposal
Net present value: It is the difference between the present value of cash outflow and the
cash inflow during the period. It is used to calculate the profit of the project during the whole
period (Wang and et.al. 2015). A positive pet present value shows the project is positive and it
can be accepted or the negative net present value shows the project is rejected, it is net loss of the
company.
Year Cash flow
Present value at
10% Discounted amount
1 -100850 0.91 -91681.82
2 -4350 0.83 -3595.04
3 172130 0.75 129323.82
4 259050 0.68 176934.64
Total discounted
cash flow 210981.59
Initial investment 1100000
Net present value -889018.41
Interpretation: The present value which has been considered in this scenario is cost of
equity that is 10%. Time value has been considered in this method with the total discounting
cash flow of 210981.59 but the initial investment in this project is of 1100000 with snagging
amount but without considering snagging amount net present value is -889018.41. Hence, it is
negative so logically this project is rejected.
Accounting rate of return: It is also indicated as average rate of return and a beneficial
ratio of capital budgeting but time value of money is ignored in this concept (Tanaka, Fukuda
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and Yoshida, 2016). Usually it is used to estimate the calculations of return which are generated
from the net income of the time period of capital investment.
Year Cash flow Cumulative cash flow
0 -1100000 -1100000
1 -100850 -1200850
2 -4350 -105200
3 172130 167780
4 259050 431180
Accounting rate of return 9.80%
Interpretation: The above cash flow of negative aspect i.e. cash is out flowing not
generating profit in initial years but after that it is giving return to the organisation but from the
initial investment is giving very less accounting rate of return i.e. of 9.80%. As it is positive but
compared to many alternatives it is giving very less rate of return.
Payback period: The time which requires to an investment to recover all the funds
which are spent during the year and to reach the goals (Zhao and Yuan, 2016 ). It is a capital
budgeting and it does not affected by the net present value and internal rate of return. It is simply
to calculate and apply and to understand by the individuals.
Year Cash flow
Present value at
10%
Discounting
factor Cumulative
1 -100850 0.91 -91681.82
2 -4350 0.83 -3595.04 -95276.86
3 172130 0.75 129323.82 125728.78
4 259050 0.68 176934.64 306258.45
Pay back period 0.28
Interpretation: As it has been clearly viewed that time's length is been judged in this
method that how much it is required to reach at break even or to recover the cost of investment.
The above period is less that is 0.28 so according to payback period it can be accepted from the
above cash flows and here the initial investment is of 1100000 of building.
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Contribution analysis: This analysis is purely based on approach which has been taken
by managers for identifying contribution of program which has set some measurable, specific
and particular goal or objectives (Mizgier and et.al., 2015).
Sales 134800 230400 407600 495600
Variable cost 2700 1800 2520 3600
Contribution 132100 228600 405080 492000
Interpretation: The internal and all external factors are contributed in this scenario. Year
1 is contributing 132100, year 2 is contributing 228600, year 3 is contributing 405080 and year 4
is contributing 492000. All the variable costs which are incurred directly are estimated and
selling price of product's range.
Break even analysis: This is the method used to check the minimum amount of
production and selling of the product so that the company may not lose the money. When the net
present value of thee project is zero, it means that the cash flow is just equal to the initial
investment (Chwieroth, 2015). And to know the break even situation of the product firm must
know the level of sales done during the period. The simplest way to understand break even
analysis is that at that point where the calculation of the revenues is almost equal to the
expenditure is known as break even analysis.
Sales 134800 230400 407600 495600
Variable cost 2700 1800 2520 3600
Contribution 132100 228600 405080 492000
Fixed cost 232950 232950 232950 232950
Break even 0.57 0.98 1.74 2.11
Interpretation: Break even is used by each and every organisation who wants to measure
there financial position and stability of their own. The above company is achieving there break
even in year 1 is 0.57, year 2 is 0.98, year 3 it is 1.74 and in year 4 it is 2.11. so the trend is
decreasing from year to year so it should be not acceptable by keeping track of there break even
from past year.
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Internal rate of return: It is the rate by which the net present value becomes zero it is
basically used to maximize the net present value and earn the profit of the investment (Cruz and
et.al, 2016). If the IRR of the project is exceeded a company's required rate of return then the
project is accepted and on the other hand if it is in below rate the project is rejected.
Year Cash flow
0 -1100000
1 -100850
2 -4350
3 172130
4 259050
Internal rate of return -25.26%
Interpretation: In this method time value of money is also considered and the above cash
flows are not giving adequate return. They are becoming even worse because of negative return
that is also from internal operations and there rate of return should exceed on the basis of ideal
position.
d) Conclusion and recommendation
From the above report and every calculation on the perspective of investment appraisal
techniques which are implemented in the above case are net present value, payback period,
internal rate of return, accounting rate of return, contribution analysis and break even analysis.
The majority techniques are rejecting project because of bad management (Leyman and
Vanhoucke, 2016). The income statement is also elaborated whose conclusion are on the basis of
its trend that in 2017-2018 it is giving negative income of 100850 i.e. losses and while projecting
it is recovering there losses by negative i.e. 4350 but in next two year they are generating very
good profits that is of 172130 and in next year it is about 259050. This performance is giving
good financial position and stability of the organisation. According to payback period the initial
cost can be recovered in 0.28 or 2.8 months which is acceptable but on the contrary side the
break even analysis is giving variations in the trend of past year like in 2017- 2018 it was less i.e.
0.57 and while projecting the next year break even analysis if of 0.98 and in next year 2019 –
2020 it is 1.74 and projections of 2021 – 2022 is about 2.11. The major rule of break even
analysis is that lower the better and higher the worse it says that initial cost should be recovered
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as soon as possible. The past performance is more good as compared to the projections. The
accounting rate of return of the project is giving 9.80% return from the project which is giving
not very good significance from the organisation perspective, it should give more return, there
goal should be big and it should be achieved. As it is giving return but it always ignores time
value of money, there is the presence of constraint and there analysis and it is always giving
impact on company's output and there operations. This measure is not adequate for doing
comparisons between another projects and many other factors rate of return is purely considered
but are not able to express them quantitatively. The project's internal rate of return is about
25.26% but that is negative so it is rejected without observing the factors because in this overall
rate of returns instead of net present value and by rule highest is better and logically through the
operations of the factory is transformed and how much return they are able to make internally. It
can be best suited for doing brief analysis of venture capital and investments of private equity
which does the entailing various cash investments over the life span of business (Ng and
Beruvides, 2015). By summing up the analysis company should reject the proposal because by
observing investment appraisal technique the majority of them are giving negative prospective so
it should properly focus on balance of equity and debt, its internal operations and should try to
reduce the expenses because this will directly reflecting the financial performance and stability
of the organization.
CONCLUSION
From the above report it should be concluded that operational and regulatory factors are
very essential for the organisation and it should give proper consideration by the board of
directors. The major risk should be undertaken very carefully along with the process of training
that are geopolitical risk, cyber risk and data security, outsourcing and regulations should be
conducted very properly and risk should be conducted in appropriate manner. The present report
has mentioned various projections of the income statement of New LifeTraining Plc has been
done for the four years and in that alterations like stable fees of tutor, hypothetical variable
expenses and source of capital has been also identified above with its important. Further it is
concluded not with only descriptive statistics but clear evidence has been provided for
understanding issues and how they are applied for the business of giving training.
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REFERENCES
Books and Journals
Caballero, R. J., Farhi, E. and Gourinchas, P. O., 2017. Rents, technical change, and risk premia
accounting for secular trends in interest rates, returns on capital, earning yields, and factor
shares. American Economic Review. 107(5). pp.614-20.
Cambini, C. and et.al., 2016. Market and regulatory factors influencing smart-grid investment in
Europe: Evidence from pilot projects and implications for reform. Utilities Policy. 40.
pp.36-47.
Chwieroth, J. M., 2015. Managing and transforming policy stigmas in international finance:
Emerging markets and controlling capital inflows after the crisis. Review of International
Political Economy. 22(1). pp.44-76.
Cruz, T. and et.al, 2016. A cybersecurity detection framework for supervisory control and data
acquisition systems. IEEE Transactions on Industrial Informatics. 12(6). pp.2236-2246.
Leyman, P. and Vanhoucke, M., 2016. Payment models and net present value optimization for
resource-constrained project scheduling. Computers & Industrial Engineering. 91. pp.139-
153.
Mizgier, K.J. And et.al., 2015. Managing operational disruptions through capital adequacy and
process improvement. European Journal of Operational Research. 245(1). pp.320-332.
Mousa, G. A., 2015. Financial Ratios versus Data Envelopment Analysis: The Efficiency
Assessment of Banking Sector in Bahrain Bourse. International Journal of Business and
Statistical Analysis. 2(2). pp.75-84.
Ng, E. H. and Beruvides, M. G., 2015. Multiple internal rate of return revisited: Frequency of
occurrences. The Engineering Economist. 60(1). pp.75-87.
Tanaka, K., Fukuda, J. Y. D. S. and Yoshida, J., 2016. Vibration mode contribution analysis for
construction machines utilizing operational TPA. Proc 23rd ICSV, pp.10-14.
Wang, X. Q. And et.al. 2015. Payback period estimation and parameter optimization of
subcritical organic Rankine cycle system for waste heat recovery. Energy. 88. pp.734-745.
Zhao, D. and Yuan, S., 2016. Critical result on the break-even concentration in a single-species
stochastic chemostat model. Journal of Mathematical Analysis and Applications. 434(2).
pp.1336-1345.
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ONLINE
Income and Expenditure account, 2013. [Online]. Available through
:<http://www.accountingexplanation.com/income_and_expenditure_account.html>.
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