Business Finance of Snappy Drinks Plc
Added on 2020-10-22
12 Pages3465 Words425 Views
BUSINESS FINANCE
PART A...........................................................................................................................................31. Explaining the purposes of framing the budget and the process of preparation of the budget......................................................................................................................................................32. Demonstrating an application of the traditional approaches of budgeting for making the planrelated to the future management of the cost...............................................................................53. Analyzing the appropriateness of the traditional budgetary system for all or part of the business activities........................................................................................................................5Conclusion.......................................................................................................................................6PART B...........................................................................................................................................84. Explaining the understanding of the various budgetary tool and their advantages and disadvantages...............................................................................................................................85. Application of each of the planning tools of the budgeting...................................................106. Analyzing one of the above method that best suits to the company......................................10CONCLUSION..............................................................................................................................11REFERENCES..............................................................................................................................12
PART AExecutive summaryBusiness finance means the amount of money and the credit invested in the business. It includes the procurement, allocation and utilization of the funds for smooth functioning of the operations of the organization. The present report is based on the Snappy drinks Plc, an international energydrink manufacturer, located in Nottingham deals in 60 different products. The report will highlight the purpose and process of budgeting. The traditional approaches are also described under the report.1. Explaining the purposes of framing the budget and the process of preparation of the budget.Purposes- Budget is prepared for the purpose of prognosticate the future sales, expenses and the cost of production for the smooth functioning of the Snappy drinks Plc and for earning the desired income by minimizing the consequences of losses (Chengyin and et.al., 2019). Budgeting helps the firm in anticipating the financial condition of the entity in the future and required of the funds to be applied in the business in order to maintain the consistency of the company. Budgeting ensures funds availability at the reasonable cost and enables the enterprise in making the decision regarding the composition of the capitalization. It provides for the coordination between different departments towards the achievement of the common goal. To increase the efficiency of the operations of several departments, cost centers and the divisions is one of the major purposes of preparing the budget for the Snappy drinks Plc. The overall purposeof budgeting is to ensure the effective control on the inventory, sales and cash resources of the firm and to provide for centralized control over budgetary system of the enterprise.Process of budgeting- 1. Developing budget assumptions- Budgets are framed on the basis of certain estimations or assumptions. Such assumptions relates with the cost trends, environmental conditions and sales trend. These anticipations must be reviewed thoroughly as per the current conditions of the environment before preparing budget.2. Evaluatin g the availability of the funding- limited funds greatly resist the firm for investing in the growth projects. Thus, after the assumptions are made adequate attention need to be given the fund available with the corporation as it helps in identifying the start up of the viable projects.3. Stepping down the points on costing- Business environment is inevitable and poses challenges that results in fully change in the cost structure of the Snappy drinks. Therefore, in theprocess of budgeting certain factors must be closely analyzed that impacts the costing for the entity. In order for making the budget more realistic, these factors must be determined carefully.
4. Creating package for the budget- In this step, past standards in relation to the process of budgeting are taken as the base for framing the current period budget (Talib and Ismail, 2017). Updating the previous standards in accordance with the present environmental conditions is doneunder the budget package. It acts as the outline in terms of which the budget will be prepared. 5. Obtaining forecast in terms of revenue- sales budget is very important and plays a crucial role in the formulation of the other budgets. All the other budgets are prepared on the basis of sales budget. Moreover, sales budget helps the business in determining the revenue generation for its long term survival. Thus, adequate focus is needed at the time of preparing the sales budget through effective demand forecasting accurately. 6. Preparing department budgets- This budget enables the firm in reaching the budgeted expenditure for a particular period of budgeting. Every department prepares budget of their own function and lastly all of the budget are combined together for concluding in the master budget.7. Validate compensation- This step is the significant component in the process of budgeting. The approval for increasing the compensation should be taken from management and after that itneed to be included in the compensation plan budgeted in the formulation of the budget. 8. Validating bonus plan-Announcement of bonus has to be considered in the budget because it directly influence the profits of Snappy drinks Plc. It acts as the appraisal method for the employees so that they work with increased morale.9. Obtaining request for capital budget-It relates with the business expansion and assist the enterprise in availing the opportunities that are necessary for the growth of the business (Nguyen, Weigel and Hiebl, 2018). Any plan relating to the capital budget must be consideredbefore and accordingly included in the process of preparing budget.10. Updating the model of budget- any alterations in the anticipations of budget model must be updated and accordingly final budget will be prepared. 11. Reviewing the budget-It is the most important step as it is necessary to review the budget timely for ensuring proper controlling and if any flaws are present then corrective measures can be taken by the Snappy drinks Plc. 12. Obtain approval- After reviewing the budget will be presented to executives of the management so that they can evaluate whether the budget is framed in accordance with the requirements or not. If no modifications are requires then they provide final approval.13. Issuance of budget- Lastly, The budget will be formally issued and all the tasks in terms of the operations will be take place as per the budget prepared.
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