Business Finance - Snappy Drinks Plc Assignment
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Added on 2021-01-02
Business Finance - Snappy Drinks Plc Assignment
Added on 2021-01-02
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BUSINESS FINANCE
Table of ContentsINTRODUCTION.............................................................................................................................3MAIN BODY....................................................................................................................................3PART 1..............................................................................................................................................31. Purpose and process of preparing a budget...............................................................................32. Application of traditional budgeting approach for future cost management............................53. Analyse the appropriateness of traditional budget system........................................................5PART 2..............................................................................................................................................64. Evaluation of different budget methods....................................................................................65. Application of budget methods in company.............................................................................86. Analyse the suitable method for the company..........................................................................9CONCLUSION.................................................................................................................................9REFERENCES................................................................................................................................10
INTRODUCTIONEvery business organization requires funds and money for conducting commercial as well astrading activities. Financial requirements of company should be fulfilled by making soundbusiness and financial policies and plans. Proper allocation and effective utilization of financialand business resources helps in growth of business, improves profitability, market position andperformance level as well. The present report is about Snappy Drinks Plc which is leadinginternational manufacturer of soft drinks. The company wants to expand it business operations bylaunching 15 new products related to health led drinks of variety of low fruit exotic fruit flavors.For which Snappy is required to additionally increase its plant and manufacturing capacity. Thisreport will define the process & purpose of preparing budget. How traditional budget is leading tofuture cost management will be discussed in report. Also, report will focus on applications ofalternative budget methods to the company. Furthermore, the report will shed light on suggestingthe best suitable budgeting method for Snappy Drinks Plc.MAIN BODYPART 11. Purpose and process of preparing a budgetBudget is the financial statement that is prepared by the company which contains incomeand expenses based on plans and objectives that are needed to be achieved by the company. It isconsidered to be the tool for decision making. The company needs to make budget for differentpurposes which are -Forecasting income and expenditure – The most critical and important part of thebusiness is to prepare a budget as it plays an important role in business planning process.Company when is launching a new product line need or driving change in existing product need toprepare a budget. As Snappy drinks Plc is launching new product line, therefore it is important forthe company to create a budget which will help it in forecasting income and expenditure of theproduct and will also provide a rough idea of how business will perform after launching the newproduct and how much additional plant will cost and other costings as well.Decision making tool – The other purposes of Snappy drinks Plc to prepare the budget isthat it will help the company in providing financial framework and decisions related to it (Van derStede, 2015). As the company is launching new product and it needs additional plant for
manufacturing the product in 12 months so the company can afford it or not is assessed by makingwith the help of budget.Monitoring business performance – Budget helps the company in measuring actualperformance with estimated performance which will help the company in knowing that thebusiness is living up to the expectations or not. As the company is launching health led drinksalong with 15 new products will need new marketing campaign as well as new plant formanufacturing along with new employees and therefore costing of all these need to less thanrevenue generated by the company after launching the product.Control finances of the business – The budget helps the company in controlling financesof the business. Snappy drinks Plc launching the product which will need employees,advertisements, other promotional tactics etc. but the amount of finance which each activity willneed can be decided by budget which will make sure that resources of the company do not getover utilized. Process of budgeting The processes which Snappy Drinks needs to follow are mentioned below:Setting up of objective – Before preparing budget, the company should have clear andspecific goals and objectives which it wants to achieve. The goal of the company need to bespecific and measurable within the specific time frame so that the resources of the company canbe fully utilized and company can maximize its sales and profit. As Snappy drinks Plc launchingnew product therefore it is necessary for the company to set up an objective. The objective of thecompany can be to increase the sales of the company with 40 % and to increase its market share to30 %Determining available resources – The company must analyze its available resources anddetermine their availability in reaching the targets. Unless the company does not have properresources, the budget cannot be prepared. Snappy drinks Plc to check its availability of resourceschecks its cash resources along with additional outside investment (Bogsnes, 2016). Projecting future needs – Budget is forward looking and needs some estimation. It cannotbe accurate but with the help of past data of company, data of competitors can help the companyin estimating budget. Snappy drinks use its past data on its sales, employee turnover etc. toestimate cost and profit.Match objectives and resources available - The available resources of the company notalways fit with the objectives set by the company. At this stage, the finance department of Snappy
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