Financial Management and Budgeting

This assignment examines the importance of prudent financial decision-making in organizations. It explores various factors to consider when selecting finance sources and highlights the role of budgets in efficient resource allocation. The analysis delves into key financial ratios like Interest Coverage Ratio, Asset Turnover Ratio, Inventory Turnover Ratio, and Debt Equity Ratio, demonstrating their significance in assessing business performance and financial health.

Business Resources

Table of Contents
INTRODUCTION ..........................................................................................................................1
PROJECT 1......................................................................................................................................1
P1- Describe the recruitment documentation used in Debenhems.........................................1
P2- The main employability, personal and communication skills required when applying for a
job role....................................................................................................................................5
M2 Importance of employability and personal skills in the recruitment and retention of staff in
Debenhems.............................................................................................................................6
PROJECT 2......................................................................................................................................7
P3- Describe the main physical and technological resources required in the operation of a
Debenhams.............................................................................................................................7
M1 Managing human, physical and technological resources can improve the performance of
Debenhams.............................................................................................................................7
PROJECT 3......................................................................................................................................8
P4- Describe sources of internal and external finance for Debenhams..................................8
P5- Interpret the contents of a trading and profit and loss account and balance sheet for a
selected company..................................................................................................................10
M4 The reasons why costs need to be controlled to budget.................................................11
PROJECT 4....................................................................................................................................11
P6- Illustrate the use of budgets as a means of exercising financial control of a selected
company...............................................................................................................................11
P7- Illustrate the financial state of given business...............................................................13
M3 Interpretation of ratios....................................................................................................15
CONCLUSION..............................................................................................................................17
REFERENCES..............................................................................................................................18

Illustration Index
Illustration 1: Interest Coverage Ratio...........................................................................................13
Illustration 2: Asset Turnover Ratio..............................................................................................13
Illustration 3: Inventory Turnover Ratio........................................................................................14
Illustration 4: Debt Equity Ratio....................................................................................................14

INTRODUCTION
Human resource is the one of the most important department of any organization because
it directly measures the performance of the employees in an organization (Veit and et.al., 2014).
In the current report varied recruitment documents that are used in the current organization are
discussed in detail. Along with this, major communication and employability skills that are
needed in respect to the specific job role are discussed in detail. Along with this, major physical
and technological resources that are needed for operation of an organization are discussed in
detail. At end of the report, different sources of internal and external sources of finance are
discussed briefly. In this way entire research work is carried out by the researcher.
PROJECT 1
P1- Describe the recruitment documentation used in Debenhems
As part of recruitment documentation there are some documents that are prepared by the
HR manager of the Debenhems. One of them are job description and specification document. An
important element in workforce planning is to have clear job descriptions and person
specifications. A job description sets out:
 the title of the job
 to whom the job holder is responsible
 for whom the job holder is responsible
 a simple description of roles and responsibilities
Job descriptions and person specifications provide the basis for job advertisements. They help
job applicants and post-holders to know what is expected of them (Akter and et.al., 2016). At
Debenhams these documents are combined. As they are sent to anyone applying for jobs, they
should:
 contain enough information to attract suitable people
 act as a checking device to make sure that applicants with the right skills are chosen for
interview
 set the targets and standards for job performance.
 Job descriptions and person specifications show how a job-holder fits into the
Debenhams business. They help Debenhams to recruit the right people. They also provide
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a benchmark for each job in terms of responsibilities and skills. These help managers to
assess if staff are carrying out jobs to the appropriate standards.
CV and Cover letter
Justin Root
MBA- HR
Contact No.- 00000000
email- [e-mail]
Present Address-
Career Objective: To work in an environment of improvement and development and get a job
which gives me opportunities and self development and guide me to achieve personal as well as
organization goals.
Basic Academic Credentials
Qualification Board/University Year Percentage
MBA HR XYZ University 2016 71.00%
B.Com ABC College of
Commerce
2013 75.45%
High School TUV School 2011 84.06%
Secondary School TUV School 2009 86.22%
Activities and Achievements
 Won many debates competitions
 Associated with young talent organisation
 Participated in various HR events and seminars
Hobbies
 Playing Cricket and Football
 Computer and social networking
 Reading Books
Personal Details
2

Date of Birth- 29/02/1993
Nationality- Britain
Language Known- English, French and Spanish.
Present Address- 12352 Irule Rd, Stockport, Greater Manchester, The United Kingdom.
3

Cover letter
Justin Root
12352 Irule Rd, Stockport, Greater Manchester, The United Kingdom.
Your City, State, Zip Code
00000000
[e-mail]
21st August 2017
Justin Root
MBA HR
Debenhams PLC
London, England
Dear Mr. Jones:
I would like to apply for the position of HR Executive with Debenhems. I have over 15 years of
human resources experience and eight of those have been in a supervisory role. In my current
position as HR Executive with Carbon Technology I oversee the daily activities of a large
human resources department and take on a number of other duties including hiring developing
employee manuals and handling disciplinary procedures.
I am extremely organized with the ability to prioritize as needed and think on my feet. My
communication and interpersonal skills are exemplary allowing me to interact on a personal
level with employees of all backgrounds and in various scenarios. I possess in-depth knowledge
of employee law and am familiar with every aspect of the HR Executive role. I have been
praised for my professionalism and grace under fire. I know I can bring this same level of
superior service to the HR team at Debenhems.
I am confident you’ll find me to be an outstanding candidate for your HR Executive position.
Please do not hesitate to contact me by email or telephone with any questions or to set up an
interview. I thank you for your time and am eager to hear from you.
Sincerely,
Justin Root
4

Job Application Form
DEBENHEMS
Application For Employment
Personal Information
Name
Justin Root
Address City State Zip
12352 Irule Rd, Stockport Greater Manchester United Kingdom.
Phone Number Mobile Number Email Address
0 0 [e-mail]
Are You A U.K. Citizen? Have You Ever Been Convicted Of A Felony?
Yes No Yes No
If Selected For Employment Are You Willing To Submit to a Pre-Employment Drug Screening Test?
Yes No
Position
Position You Are Applying For Available Start Date Desired Pay
HR Executive
Employment Desired
Full Time Part Time Seasonal/Temporary
Education
School Name Location Years Attended Degree Received Major
[
References
Name Title Company Phone
5

Employment History
Employer Job Title Dates Employed
- - -
Work Phone Starting Pay Rate Ending Pay Rate
- - -
Address City State Zip
- - - -
Signature Disclaimer
I certify that my answers are true and complete to the best of my knowledge.
If this application leads to employment, I understand that false or misleading information in my application or interview may result
in my release.
Name (Please Print) Signature
Justin Root
Justin RootDate
21 Aug 2017
P2- The main employability, personal and communication skills required when applying for a
job role
While applying for any job there are multiple personal and communication skills that are
needed. This is because it is the skills that ensured that an individual can perform a job in better
manner. Employability and personal communication skills that are required for specific job role
are explained below. Writing skills: On the administrative jobs writing skills are needed because in the
administration paper or electronic work is done and under this one need to prepare letters
and many other documents (Bovée and Thill, 2015). It is the writing skills that ensured
that one will be able to communicate anything in better manner to the front person.
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 Verbal communication skills: An individual must have good communication verbal
skills. This is because when one have good communication skills then it means that same
person it using concise and clear sentence in the communication process. It can be said
that these are the communication and personal skills that one must have when applying
for job.
 Critical Thinking: Employers want employees who are able to solve problems on their
own using creative thinking and thoughtful analysis (Wiengarten and et.al., 2013).
Critical thinkers are useful in every industry, from healthcare to engineering to education.
M2 Importance of employability and personal skills in the recruitment and retention of staff in
Debenhems
The benefits and limitations of the employability, personal and communication skills are
provided below:
Skills Benefits Limitations
Writing Skills Great writing skills translate to
effective communication.
Well-written memos and
procedures help companies
run more smoothly
Lack of flexibility Since
writing documents cannot be
changed easily at any time. It is
one of the most important
limitations of written
communication.
Verbal Communication The verbal form of
communication gives the
facility to quickly send
intended message thus saving
you time
Chances of distortion of
meaning. Due to the presence
of various barriers in effective
communication it happens that
the intended meaning of the
message changes for the
intended person which causes a
lot of problems in the future
Critical Thinking Critical Thinking enables to
see beyond, not judge, cultural
norms and learn how to
understand other factors that
Criticak Thinking believing
something not because you had
good evidence for it but simply
because you wished it were
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can influence decision-making true
PROJECT 2
P3- The main physical and technological resources required in the operation of a Debenhams
The physical and technological resources that can be found in a Debenhams store are given
below:
Physical Resources Machinery/Equipment: As a retail store, Debenhams have a lot of machinery all around
the store to help manufacture the products that they create (Christensen, 2017). There
would be machinery to help get the products from storage. Buildings and Facilities: The physical building you work in is a part of the physical
resources of a company. Whether the space is owned or rented, it is used for the purpose
of operating your business.
 Stock: Stock is required by Debenhams so that they can actually make the products that
they will then sell, they keep this stock in selected storage units each for different parts in
different areas of the store.
Technological Resources Software Licenses: At Debenhams they use a variety of different software such as
Microsoft Word, Power point, Excel which they use to aid in managing the products they
sell.
 Information Technology: Debenhams will need to make sure that they have the latest IT
Equipment in order to manufacturer their products to the best of their ability. The use of
IT equipment can save the company a lot of time and also money as they will only have
to pay for the machine with a single starting cost and then possibly costs of repairs.
M1 Managing human, physical and technological resources can improve the performance of
Debenhams
Management of activity- Planning, organising, recruitment, selection, directing and controlling
are the activities conducted by the organisation.
Analysis of resources (advantages & disadvantages)- Enhance employees’ skill-based
competencies. By providing relevant trainings to the employees, their skill-based competencies
can be improved (Crane and Matten, 2016). It is waste of time, if the human resources'
8

development program is not properly implemented, a lot of time can be wasted. For example,
when the training classes conducted cannot improve the employees’ competencies and
capabilities.
Improvements to Debenhams- Debenhams said the figures came on the back of strong sales in its
beauty and gift departments, with double-digit growth in beauty sales driven by specialist make-
up brands, including its exclusive Kat Von D range.
PROJECT 3
P4- The sources of internal and external finance for Debenhams
There are various internal and external sources of finance are provided below:
Internal Source Savings: In general, cost savings are always easier to quantify as compared to a potential
revenue increase. Because they’re easier to quantify (i.e., more objective and tangible),
the organisation is more inclined to believe what the salesperson (or Business
Development) is proposing.
 Capital from profit: A capital gain refers to profit that results from a sale of a capital
asset, such as stock, bond or real estate, where the sale price exceeds the purchase price
(Dudin and et.al., 2015). The gain is the difference between a higher selling price and a
lower purchase price. Debenhams optimise the gains from capital in an effective and
efficient ways so that its business growth will increase.
External Sources Bank Loan: Private Banks can be another good source of funding. For larger operations,
one may have to leverage assets -- real estate, large equipment or inventory -- by using
them as collateral to secure the loan. The advantage to borrowing the money is that it
enables you to keep your cash on hand to use as operating capital or for personal survival
during a down period in your business. Overdraft: An overdraft occurs when money is withdrawn from a bank account and the
available balance goes below zero. In this situation the account is said to be "overdrawn". Venture Capital: Venture capital is financing that investors provide businesses that are
believed to have long-term growth potential (Gaur, Kumar and Singh, 2014). For
Debenhams without access to capital markets, venture capital is an essential source of
money.
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 Hire Purchase: The term "hire purchase" originated in the United Kingdom. Under a hire
purchase contract, the buyer is leasing the goods and does not obtain ownership until the
full amount of the contract is paid.
P5- Interpret the contents of a trading and profit and loss account and balance sheet for a selected
company
Interpretation
In the Debenhams income statement it can be observed that there are multiple items like
sales revenue and cost. It can be observed that sales revenue is reducing consistently in the
business from the last few years. Expenses are also not in control and same are increasing
regularly whether same are direct or indirect expenses. Assets are divided into current assets and
long terms assets (Harmon, 2014). Fixed sterling borrowings comprise the hedged portion of the
debt facility of £120.0 million (2015: £125.0 million), senior notes of £200.0 million (2015:
£200.0 million) and finance lease liabilities of £3.6 million (2015: £3.2 million) at 3 September
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2016. The weighted average interest rate on the fixed rate borrowings as at 3 September 2016
was 4.2% (2015: 4.5%), with the weighted average time for which rates are fixed being 3.1 years
(2015: 4.0 years).
M4 The reasons why costs need to be controlled to budget
Actively monitors management’s execution of approved strategic plans against
established budgets, and their alignment to strategic objectives. The advantages and
disadvantages of controlling cost and budget are given below:
Advantages Definite planning: Budgets are based on the well-defined plans. Budgets enable the
different heads to know what is expected of them. They know the amount that they are
entitled to spend and the income they are expected to earn. Thus, budgeting introduces an
element of definiteness in planning. Enhanced efficiency: Budgeting is an effective way of controlling costs and eliminating
wastage. It promotes economy and efficiency.
Disadvantages Administration expenses: The budgets may be revised from time to time because of
changed conditions. If so, it leads to more administration expenses.
 Budgetary is rigid: A budgetary programme is a rigid one. The deviations are find out by
comparing actual performance with budgeted figures (Slack, 2015). The deviations are
accruing due to changed conditions. If so, the management cannot fix responsibility on
any employees.
If the budgets left unmonitored in the organisation, it will lead to a loss. The penalty for loss is
debt with suppliers, shops, etc. Potentially organisation would lose your goods and chattels
which would be seized by bailiffs to repay the debts. Eventually business would be declared
bankrupt and then the courts would appoint someone to administer your affairs.
PROJECT 4
P6- Illustrate the use of budgets as a means of exercising financial control of a selected company
a) Three problems & three solutions of the budget are provided below:
Problems Solutions
1. Traditional budgeting does not Performance-based framework allocates
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adequately link financial investments to
results or outcomes, limiting the ability
for in-depth analysis and understanding
of the real ROI for any given line of
business or initiative.
resources to specific objectives or activities
based on appropriate metrics; ultimately, this
framework provides increased visibility into
how financial decisions translate into results.
2. Traditional budgets are created based
on requests from competing
stakeholders, each justifying their
projected expenditures based on their
departmental needs rather than the
overall goals of the organization.
Priority-based evaluation framework helps
establish concrete targets and priorities based
on this year’s strategic goals. The targets are
then communicated to all stakeholders
involved in the budget process, leading to
faster decisions and minimizing budget
negotiation issues that may arise from
competing interests and priorities.
3. Traditional budgeting approach has
consistently shown high rates of
inaccurate assumptions, a massive time
commitment and tedious manual input,
Driver-based planning bases budgets and
financial forecasts on operational drivers such
as FTEs, customers, units of output, etc. It uses
mathematical and linked relationships to create
detailed budgeting, forecasting and planning
models with fewer inputs than traditional
models, while simultaneously reducing errors
and saving time by using preset calculations
based on operational activities.
b) Calculation of profits and new profits
Table 1: Calculations of profits and new profits
Particulars 2016 2017 (Projections)
Revenues 2342 2459.1
Cost of revenue 2048 2150.4
Gross profits 294 308.7
Operating expenses
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Sales, General and admin expenses 181 190.05
Operating income 113 118.65
Interest expenses 13 13.65
EBT 100 105
Provision for income tax 19 19.95
Net income 81 85.05
Particulars Profit New Profit
Net income 81 85.05
It can be seen through the graph that there is an increase in the sales revenue of 5% which
is expected from the company. It will help to raise the profits from 81 million to 85.05 million in
the next year that is 2017.
P7- Illustrate the financial state of given business
a) Calculation for ratios of Debenhams
13
Profit New Profit
78
79
80
81
82
83
84
85
86
Net income

Table 2: Key Ratios of Debenhams
Key ratios 2015 2016
Interest coverage ratio 7.72 8.56
Asset Turnover ratio 1.08 1.08
Inventory turnover ratio 5.98 6.23
Debt equity ratio 0.23 0.23
The interest coverage ratio measures how many times over a company could pay its
current interest payment with its available earning. It is company's ability to meet its interest
obligations. There is an increase in interest coverage ratio. It was 7.72 in 2015 which increased
to 8.56 in 2016. It is s good indicator for the company.
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Interest coverage ratio
7.2
7.4
7.6
7.8
8
8.2
8.4
8.6
8.8
2015
2016
Illustration 1: Interest Coverage Ratio

The asset turnover ratio is an efficiency ratio that measures a company's ability to
generate sales from its assets by comparing net sales with average total assets. It is same for both
the years. It shows constant asset turnover ratio over a period.
The inventory turnover ratio is an efficiency ratio that shows how effectively inventory is
managed by comparing cost of goods sold with average inventory for a period. In other words, it
measures how many times a company sold its total average inventory dollar amount during the
year. There is an increase in inventory turnover ratio which is good indicator for the company.
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Asset Turnover ratio
0
0.2
0.4
0.6
0.8
1
1.2
2015
2016
Illustration 2: Asset Turnover Ratio
Inventory turnover ratio
5.85
5.9
5.95
6
6.05
6.1
6.15
6.2
6.25
2015
2016
Illustration 3: Inventory Turnover Ratio

Debt/Equity Ratio is a debt ratio used to measure a company's financial leverage,
calculated by dividing a company's total liabilities by its stockholders' equity. The D/E ratio
indicates how much debt a company is using to finance its assets relative to the amount of value
represented in shareholders' equity. There is a stagnant ratio over the years.
M3 Interpretation of ratios
(a) Calculation of key ratios
Table 3: Calculations of Ratios
Key ratios 2015 2016
Net Profit ratio 0.04 0.04
Acid test ratio 0.18 0.25
Current asset ratio 0.66 0.73
Mark up ratio 0.15 0.14
These ratios play an important role in assessing the financial position of the company.
The net profit percentage is the ratio of after-tax profits to net sales. It reveals the remaining
profit after all costs of production, administration, and financing have been deducted from sales,
and income taxes recognized.
Acid test ratio measures the ability of a company to use its near cash or quick assets to
extinguish or retire its current liabilities immediately. The current ratio that measures a
company's ability to pay short-term and long-term obligations. Mark-up is profit expressed as a
fraction or as a percentage of the cost of good.
16
Debt equity ratio
0
0.05
0.1
0.15
0.2
0.25
2015
2016
Illustration 4: Debt Equity Ratio