Decision Based on the Collected Data


Added on  2019-09-25

7 Pages1563 Words160 Views
BUSINESS REPORTExecutive Summary:Fresh It Plc, food manufacturer have been going steady in the business for past 15 years with amodest growth rate of 4%, which speaks volume of its attained stability and market share in thecorporate world.Having independent retailers across the country, the company has good command in itsrespective segment, but acknowledges the growing trend towards more nutrias way of living andis looking forward to bifurcate into this segment of the industry.Venturing into a new segment will pose its’ won difficulties for the company, but the goodwillachieved over the span of 15 years and having precise knowledge of the changing economicconditions, the company should fare well into the new venturing.Aims of the report:The laid down report showcase the projections towards the health food segment that thecompany is interested in venturing.Report shows projections with assumed details with regard to the profitability of the newsegment for the company.The report tries and formulates decision based on the collected data as to whether theproject deemed to be undertaken by the company.The report tries to convene ways and methods by which true and fair financial position ofthe company can be obtained.

Business Analysis:Current Status:The company at present enjoys a steady moderate growth rate of 4%, over the year and its returnon capital employees i.e. 25% is greater than cost of capital at 12% indicating that the companyhas the capacity to earn more profits and is utilizing the capital employed efficiently.The above status is the basis for venturing into the new segment as the company will have backup from the main segment and raising debt will be impacted by the same. The profit increasingindicators will motivate the stakeholders of the company to continue their interest with company,which will have the organization to slide easily into the new segment.Research Methodology:The current report has utilized the tools of Investment appraisal technique, Cost Sheet and CashFlow analysis to showcase and forecast the route and viability of the new project to beundertaken. Cost Sheet and Cash Flow analysis are based on certain assumptions and investmentappraisal technique consists of Net present value, internal rate of return and payback period. Allthe calculations are made in pounds.Cost Sheet:Advantages:Managers appreciate cost accounting because it can be adapted, tinkered with and implementedaccording to the changing needs of the business. Labor costs are easier to monitor and controlthrough cost accounting. Depending on the nature of the business, wage expenses can be takenfrom orders, jobs, contracts, or departments and sub departments. This means management canpick and choose how it determines efficiency and productivity. This is very important whenestimating marginal productivity of individual employees.Disadvantages:The benefits of cost accounting come with a price. Since costing methods differ fromorganization to organization, it's not clear how these costs might manifest themselves until aspecific firm is examined.Generally speaking, complex cost accounting systems require a lot of work on the front end, andconstant adjustments need to be made for improvements. This complexity consumes time andresources and leaves room for misinterpretation.

Even if the rigidity of financial accounting creates some inherent disadvantages, it does removethe uncertainty and misapplication of accounting guidelines of cost accounting. Uncertaintyequals risk, which always comes at a cost. This means additional, and often more vigorousreconciliation to verify accuracy.Cash Flow:Advantages:1.It shows the actual cash position available with the company between the two balancesheet dates which funds flow and profit and loss account are unable to show and thereforeit is important to make a cash flow report if you want to know about the liquidity positionof the company.2.It helps the company in making accurate projections regarding the future liquidityposition of the company and hence arrange for any shortfall in money by makingarrangements in advance and if there is excess than it can help the company in earningextra return out if idle funds.3.It acts like a filter and is used by many analyst and investors to judge whether companyhas prepared the financial statements properly or not because if there is any discrepancyin the cash position as shown by balance sheet with cash flow statement than it meansthat statements are incorrect.Disadvantages:1.Since it shows only cash position, it is not possible to arrive at actual profit and loss ofthe company by just looking at this statement alone.2.In isolation this is of no use and it requires other financial statements like balance sheet,profit and loss etc..., and therefore limiting its use

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