Business Finance - Snappy Drinks Plc Assignment
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Added on 2021-01-01
Business Finance - Snappy Drinks Plc Assignment
Added on 2021-01-01
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Business Finance
TABLE OF CONTENTSEXECUTIVE SUMMARY.............................................................................................................1MAIN BODY ..................................................................................................................................1PART 1............................................................................................................................................11. Purpose and process of preparing a budget.............................................................................12. Application of traditional budgeting approaches & incremental budgeting...........................33. Analysing traditional budgetary system is appropriate for the company business. ...............4PART 2............................................................................................................................................54. Explaining different planning tool of budgetary control with their benefits and drawbacks..55. Application of the planning tool of budgetary control............................................................86. Recommendation on the most appropriate budget..................................................................9CONCLUSION................................................................................................................................9REFERENCES..............................................................................................................................10
EXECUTIVE SUMMARYBusiness Finance refers to amount of funds, capital or money which has been employed by thecompany in its business operations. Finance is considered as the basic requirement of everybusiness organisation at the time of beginning & for conducting business operations. The presentreport is based on Snappy Drinks Plc, an international manufacturing company producing energydrinks of different variants. The report will streamline about launching of 15 new productsspecialising in health led drinks having low fruit exotic flavours by the company for whichSnappy will need additional plant and manufacturing capacity. Further the report will define thepurpose along with the process of budget preparation. Application of traditional budgeting &incremental budgeting approaches to plan future cost management will be discussed. At last, thereport will shed light on the concept of alternative budget methods available to Snappy DrinksPlc and which method is the considered more suitable for company will be disclosed. Zero basedbudgeting is considered as the most appropriate method for Snappy Drinks Plc as it facilitatesefficient allocation and optimum use of the resources as per the business requirement.MAIN BODY PART 11. Purpose and process of preparing a budget.Budget is a process of preparing a financial plan for making projections of sales and revenueamount from the set defined business goals and objectives for a specified period of time. It alsohelps in estimating or forecasting of cost expenditure amount to be incurred for conductingbusiness operations. By formulating a good and effective budget, a company can make use of itslimited budgeted resource and amount available effectively and efficiently (Grossi, Reichard andRuggiero, 2016). Budgeting practice can help in making business plans and evaluatesperformance. Company with proper budgets, can make estimates of income to be earned fromfuture sales and expenditure to be minimized for specific business task. Purpose of Preparing budgetForecasting of Income and Expenditure - Budget helps Snappy Drinks Plc in makingforecast of the level of income and expenditure amount associated with business process. As thecompany is about to launch new product range, creating budget will help in making forecast1
about income and expenditure of the launching new product. Also, it will help in makingestimate about how much additional plant and manufacturing units will cost.Acts as a decision making tool – Budget assists Snappy in making decision regarding thefinancial as well as business framework (Morgan and et.al., 2017). It helps company in decisionmaking process related to procurement and effective utilisation of funds and limited resources.Monitors and evaluates the business performance – With the help of budget, Snappycan make assessment of its business performance and profitability associated with its businessoperations. Comparison can be made between the actual business outcome and expected one,which provides company measures for mitigating the variances if any. Process of preparing budgetThe process of preparing budget by Snappy Drinks Plc consist of following steps:1.Defining of business goals and objectives – The first most important process in budgetformulation is planning and specifying the goals and objectives of business to beachieved. Budgeting is a practice of making estimation of expenditure and revenueamount for which company should have a clear and specific goal of its business.2.Assessing the future business requirements – With the help of budget, company is ableto determine what will be the cost expenditure conducting or expanding of businessoperations. It assists in identifying the resources which Snappy will be required forlaunching of new product range along with the increase in manufacturing and productionunit capacity.3.Collection of data and resources – For preparation of budget, Snappy should have all thedata and information of its past, current business operations which will assist in makingprojection of future sales and resources required for its completion. This helps companyin making proper use of limited available budgeted resources effectively (Zhao, 2016).4.Creating budget – After ascertaining the goals and objectives of the Snappy, the nextstep in budget preparation includes formulation of new budget plan. The budget isprepared by keeping into consideration all the business plans, profit margin, businessrequirements and available resources with the company.5.Execution and implementation of budget designed – When the new budget is created orformulated, the next step is to make implementation or execution of budget designed. It2
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