Corporate Finance - On The Beach: 2019 Budget Board Report

This report provides an overview of the expected results, product analysis, cash position, market analysis, and recommendations for On The Beach's 2019 budget. The report includes tables and figures to support the analysis. The future of retail business in Australia is booming, which will eventually boost the business of On the Beach Company.

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Table of Contents
1. Overview of the Expected results:.........................................................................................2
2. Product Analysis:...................................................................................................................2
3. Cash position of the company:...............................................................................................3
4. Analysis of the market:..........................................................................................................5
5. Summary of the recommendations:.......................................................................................7
References and Bibliography:....................................................................................................9
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1. Overview of the Expected results:
From the evaluation of 2019 budget, it can be detected that the operations of ‘On the
Beach’ are adequately generating higher income during the fiscal year. The evaluation of
different budget mainly portrays the positive attributes of the products, which is been sold by
the company during the fiscal year of 2019. The further evaluation of the income statement is
mainly depicted a projected profitability of $491,638. This relevantly indicates the positive
returns, which will be generated from operations. Moreover, the evaluation of cash flow
statement mainly helps in depicting the level of income that has been generated from
investment. The overall projection for cash balance has mainly increased for the budget year
of 2019, which indicates the positive attributes of the company in generating high returns
from its operations.
2. Product Analysis:
One Piece Board Shorts Towels Bags
Sales 1,250,000 913,600 78,000 117,000
Variable 816,691.4
4
656,097.69 69,307.4
7
119,124.40
Operating income/ (Loss) 433,308.5
6
257,502.31 8,692.53 (2,124.40)
Contribution Margin 34.66% 28.19% 11.14% -1.82%
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The above table represents the overall contribution margin for the products, which is
being sold by On the Beach company. The calculations relevantly indicate that the expenses
indicated by Bags is relatively high than the current sales value. This is mainly reducing the
cash inflow and forcing the company to incur operating loss for the specific product. The
contribution margin mainly comprises of the variable expenses, which needs to be conducted
on each product for comparing its production. Therefore, it can be understood that the current
pricing of the bag is relatively not accurate, which is leading to a loss of 2,124.40 for the
organization. The selling price of Beach bags needs to be increased, as the overall expenses is
higher than the anticipated selling price. On the other hand, the maximum benefits are mainly
generated from the one-piece product, which can help in improving the level of income that
can be generated during the fiscal year of 2019. The income generated from Board shorts are
relatively adequate and considered adequate, where the company is generating high
contribution margin from the product. Further evaluation on Towels also indicated a positive
contribution margin of 11.14% that supports operations of the company. In this context,
Noreen, Brewer and Garrison (2014) indicated that with the evaluation of contribution
margin organizations are mainly able to detect the level of income, which can be generated
after deducting the variance expenses. Yoo and Lee (2017) further stated that organization
with the help of contribution margin is able to understand the level of breakeven sales, which
needs to be conducted by utilizing the fixed assets.
3. Cash position of the company:
Cash on
hand
Amount
January 192,526.06
February 258,371.90
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March 350,351.24
April 438,219.76
May 452,954.96
June 457,592.38
July 435,882.72
August 374,257.66
September 431,001.91
October 472,094.43
November 493,138.06
December 538,632.75
Total 4,895,023.84
The above table helps in depicting the level of cash position, which the organization
will have over the fiscal year of 2019. In addition, the evaluation also helps in depicting the
level of cash flow, which the organization will have during the fiscal year of 2019. The cash
position of the company on yearly basis has adequately rising during the budget year of 2019.
The calculation of the cash flow statement also indicates the level of cash, which is seen
increasing from the months of January to June. However, decline in the cash position is
mainly seen during the months of July and August, which was conducted due to the
increment in cash outflows. Nevertheless, from September the cash position of the company
will eventually increase and depict the level of cash inflow that can be generated from
operations. Furthermore, the evaluation of 2019 budget also indicated that the total cashflow
of the organization will be positive for the fiscal year of 2019. Uwonda and Okello (2015)
stated that companies after evaluating the budgeted cash flow statement will eventually detect
the level of cash flows that will be generated in future. On the contrary, Tinkelman and Fan
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(2018) argued that budgeted values lose their significance, when adequate measures are not
taken into consideration, while preparing the budget calculation. Therefore, the organization
needs to maintain the current trajectory in cash flow position for generating adequate cash for
supporting their operations in future.
4. Analysis of the market:
The preparation of budget for 2020 will mainly require additional information, which
can authenticate the values that will be generated from the created budget. In addition, the use
of different industrial data can be helpful in detecting the growth and expense, which will be
incurred by the company in future. Furthermore, the increment in revenue growth and
expenses needs to be taken into consideration, which can help in identifying the level of
future cash outflows and inflows that will be conducted by the company. Price (2016)
mentioned that collecting authentic data for competing the budget process will eventually
help in detecting the accurate data, which the organization will generate in future. The
evaluation of statistical data mainly allows organization to determine the future growth,
which can be conducted in retail sector.
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Figure 1: Depicting the growth in annual figures of Retail Trade
(Source: Ibisworld.com.au 2018)
The above figure mainly helps in depicting the level of forecast growth and current
growth, that is been obtained by the retail sector to Australia. The above figure mainly
depicts the overall growth in revenues, which will be conducted for retail sector companies is
at the levels of 1.1%. which can be used for increasing the budgeted sales value for 2020.
However, the growth in business will mainly decline by only -0.4% in 2019, as compared to -
2% obtained in 2017. Therefore, the retail sector will eventually increase in value over time,
which can be seen from the above figure. The increment in expense of employee will also be
conducted, where expenses in employee will increase to 1% during 2019, as compared to -
0.5% in 2018. This relevantly indicates that the current valuation of retail sector will
eventually increase over time, as the revenue is anticipated to increase, while the employees
will increase. Therefore, from the evaluation it can be detected that future growth in the retail
sector of Australia is relatively seen, which might allow the organization to operate in retail
sector.
Thus, the values if 1.1% growth will be used for increasing the level of sales, that will
be conducted during 2020. The increment in the overall valuation would eventually allow On
the Beach Company to detect the maximum amount of cash, which will be generated during
the fiscal year of 2020. The level of expenses will increase towards 0.5%, which will
eventually help in drafting the actual performance of the company in future.
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Figure 2: Depicting the trend in Retail sector
(Source: Abs.gov.au 2018)
The above figure mainly depicts the level of retail sector trend, which has relevantly
increased from the level of $25,500 million in 2016 to $27,000 million in 2018. Furthermore,
the evaluation also helps in depicting the level of increment, which the retail sector can
generate during the fiscal year of 2019. Therefore, from the evaluation it can be detected that
the value of current retail sector has mainly increased over time, which will eventually
improve the budget value for 2019. Therefore, from the evaluation of the above figure it can
be detected that the retail sector value will eventually improve in future, where the beach
company will generate higher revenue from 2019, due to the increased demand for the
products. The continuous growth in the overall retail sales can be identified from the above
growth, which helps in generating high level of income for companies. Hence, the rising
trend of the retail sector direct indicates that the sales value of 2020 needs to be improved for
the On the Beach Company.
Therefore, from the evaluation it can be detected the current retail market of Australia
is booming, which will eventually allow the retail organization to increase their income in
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future. In addition, the graphs and trend level are mainly depicted in the above figures mainly
depicts the level of growth, which will allow retail companies in Australia to grow
immensely. The evaluation also indicates that companies located in the retail beach section
and clothing retail section has mainly increased in value during 2018.
5. Summary of the recommendations:
After evaluating the calculation conducted in the budget of 2019, the overall
performance of the company will eventually increase for the fiscal year of 2019. The
budgeted values have mainly helped in depicting the level of income and expenses, which is
generated from income. Furthermore, the evaluation on contribution margin are relevantly
conducted, which helps in depicting the level of profits that is generated from operations. The
calculations have mainly depicted that one-piece, towels, and board shorts has provide a
positive contribution, while only beach bags have negative contribution margin. This mainly
helps in depicting the level of future income, which can be generated by the organization.
The future of retail business in Australia is booming, which will eventually boost the business
of On the Beach Company.
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References and Bibliography:
Abs.gov.au. 2018. 8501.0 - Retail Trade, Australia, Jul 2018. [online] Available at:
http://www.abs.gov.au/ausstats/abs@.nsf/0/3DDA13ECDC094B1CCA257734002042F2?
Opendocument [Accessed 7 Sep. 2018].
Adler, L., Yi, D., Li, M., Mcbroom, B., Hauck, L., Sammer, C., Jones, C., Shaw, T. and
Classen, D., 2018. Impact of inpatient harms on hospital finances and patient clinical
outcomes. Journal of patient safety, 14(2), p.67.
De Jong, J., 2016. Money matters-how to set up a cash flow statement: management. The
Dairy Mail, 23(1), pp.48-51.
Ibisworld.com.au. 2018. Other Store-Based Retailing – Australia Industry Report |
IBISWorld . [online] Available at: https://www.ibisworld.com.au/industry-trends/market-
research-reports/retail-trade/other-store-based-retailing/ [Accessed 7 Sep. 2018].
Khotimah, K., Sari, D. and Kaltum, U., 2016. Event Marketing and Experiential Marketing
towards the Formation of Net Marketing Contribution Margin (NMCM)(Study at PT. Garuda
Indonesia, TBK). Procedia-Social and Behavioral Sciences, 219, pp.431-439.
Miller-Nobles, T.L., Mattison, B. and Matsumura, E.M., 2016. Horngren's Financial &
Managerial Accounting: The Managerial Chapters. Pearson.
Noreen, E.W., Brewer, P.C. and Garrison, R.H., 2014. Managerial accounting for managers.
New York: McGraw-Hill/Irwin.
Price, R., 2016. Controlling routine front line service workers: an Australian retail
supermarket case. Work, employment and society, 30(6), pp.915-931.
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Sutton-Brady, C., Kamvounias, P. and Taylor, T., 2015. A model of supplier–retailer power
asymmetry in the Australian retail industry. Industrial marketing management, 51, pp.122-
130.
Tinkelman, D. and Fan, X., 2018. What Weekly Sparklines Could Add to Financial
Statements. Journal of Corporate Accounting & Finance, 29(1), pp.46-52.
Uwonda, G. and Okello, N., 2015. Cash flow management and sustainability of small
medium enterprises (SMEs) in Northern Uganda. International Journal of Social Science and
Economics Invention, 1(03), pp.153-to.
Yoo, Y.S. and Lee, I.W., Electronics and Telecommunications Research Institute,
2017. Method and apparatus for optimal resource allocation based on contribution margin
ratio. U.S. Patent Application 15/589,574.
On The Beach: 2019 Budget
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