Business Finance Assignment - Snappy Drinks Plc
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Added on 2020-10-04
Business Finance Assignment - Snappy Drinks Plc
Added on 2020-10-04
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BUSINESS FINANCE
Table of Contents..........................................................................................................................................................3EXECUTIVE SUMMARY.............................................................................................................4PART 1 ...........................................................................................................................................4. Purpose of preparing budget, its process and how it helps in the development of businessmodel...........................................................................................................................................4. Application of traditional budgeting approaches for planning future cost management..........7. Analysing whether traditional budgetary system is appropriate to all or any part oforganisation's future plan ...........................................................................................................8PART 2............................................................................................................................................9.V Different types of budget methods.........................................................................................9.V Application of these methods to the company through specific examples..........................10.VI Analysing the methods which is best suited to the organisation........................................14CONCLUSION..............................................................................................................................14REFERENCES\.............................................................................................................................15
EXECUTIVE SUMMARYBusiness finance can be defined as the money and credit which is employed in thebusiness. It basically involves acquisition of funds and utilising those funds in the mostproductive way. The various activities are related with the business finance such as allocating theresources, preparing forecasts and continuously reviewing the opportunities for debt and equityfinancing. The present report is going to discuss about Snappy Drinks Plc, an energy drinkmanufacturing company situated at Nottingham. It is listed on LSE. The report will highlight theconcept of budget, why it is prepared and its process. Further, different types of budgetingmethods will be analysed in the project report. PART 1 Purpose of preparing budget, its process and how it helps in the development of business modelBudget in the simpler terms, means a short term plan that states out the expenditure thatwill be incurred by the organisation. Preparing budgets is necessary for the Snappy Drinksbecause of the following reasons:It forecasts the income and expenditure of organisation: Budgeting is said to be one ofthe crucial part of business planning process. Managers continuously put their efforts inpredicting whether the expenses that are incurred could be recovered by the income generated byincurring them. This is done by the way of preparing budgets.It helps in decision making: Another purpose of preparing budget is to render a financialframework that leads to better decision making. For example, when budgets are prepared bySnappy Drinks, it knows where its money is used and how productively it is used. Also,preparing budget leads to tight control on the expenses of the company that again leads toattainment of company's objective of being cost effective organisation. Monitors and review business performance: The basic objective of budget is to find thedeviation between the actual performance and standard performance of Snappy Drinks bycomparing them against each other. This results in taking corrective actions that eventually leadsto better business performance of the company (Miller, 2018.).
Process of budgeting: The process of budgeting which Snappy Drinks could follow isdescribed below:Strategic planning process: The very step in the preparation of budget is writing downthe things Snappy Drinks wants. Every company comes into existence for a specificpurpose that it desires to fulfil. Thus, this is done by witting down the mission and visionof the company that continuously guides them it has to achieve its objectives and goalsfor which it has been formed. The budgeting process involves strategic planning to ensure that organisation uses itsresources in the most optimum way for supporting the strategic goals of the company and pavesthe way for its development. This means that budgeting moves towards vision. Goals of business: There are certain business goals which the Snappy Drinks wishes toachieve for implementing its strategic plan. It is these goals which are funded by budgetor it can be said that the expenses are forecasted in the form of budget that helps infulfilling those goals. It is mainly the responsibility of management team of entity.Projections of revenue: The next step in budgeting process is to project or estimate theincome that will be generated by incurring the expenses for meeting the business goals,For instance, for meeting the goal of increasing the sales of Snappy Drinks by 2%,income that would be generated is projected for the year concerned (Dudin and et.al.,2015). Projection of fixed cost: Preparing budget involves estimating the expenses that will notchange due to any reason. Examples are employees' salary, interest expenses, rent, utilityexpenses etc.Projection of variable cost: Budget also include variable cost that fluctuates with time orother factor. These expenses should be controlled by management of Snappy Drinks bythe way of budgets.Annual goal expenses: Budgets should be prepared I such a way that helps inaccomplishing goals. Each initiative must have estimation of cost that is related to aannual specific goal. Thus, it is place where annual goals or targets are integrated indepartmental budgets.
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