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Managing Financial Principles and Techniques Essay

   

Added on  2020-07-22

28 Pages9716 Words47 Views
Managing FinancialPrinciples and Techniques

TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................11.1 Determining the costs in the pricing strategy of a company............................................11.2 Designing a costing system for a firm..............................................................................51.3 Evaluating the costing and pricing techniques for business.............................................7TASK 2............................................................................................................................................72.1 Application of forecasting techniques to enhance the costs and revenue decisions for firms................................................................................................................................................72.2 Analysing the availability of funds for the business operations.......................................9TASK 3..........................................................................................................................................103.1.........................................................................................................................................103.2.........................................................................................................................................103.3 Comparison of actual expenditures with the master budget...........................................113.4 Determining the budgetary monitoring process in an entity..........................................12TASK 4..........................................................................................................................................134.1 Presenting the process for cost management in entity....................................................134.2 Determining the use of activity based costing method...................................................15TASK 5..........................................................................................................................................175.1 Application of the financial appraisal techniques..........................................................175.2 Justifying the strategic investment decisions for organisation.......................................195.3 Reporting the appropriateness of strategic investment decision by implicating the postaudit appraisal.......................................................................................................................20TASK 6..........................................................................................................................................206.1 Analysing the data set to determine the financing viability of firm...............................202. Computation of financial ratios........................................................................................216.3 Recommending the strategic portfolio of the organisation............................................22CONCLUSION..............................................................................................................................23REFERENCES..............................................................................................................................24

INTRODUCTIONThe motive behind presenting principles and techniques that will be fruitful for enhancingthe performance of organisation. In there present report there will be determination and analysisof various costing principles and techniques which are need to be implement by a firm.Therefore, such techniques will be helpful in terms of enhancing the performance, efficiency aswell as revenue gathering of the entities. Allocating the costs to any task and operations will helpfirm in estimating the required level of funds for the business operations. Therefore, on the otherside it can be said that with the help of such analysis the business will have adequate amount ofrevenue generation and tat will be helpful for further industrial activities. The report alsocontains various forecasting techniques which will help the managerial professionals in anyorganisation in terms of revenue decisions as well as determine the availability of the funds forthe further organisational activities. There will be presentation of appropriate budgetary targets and the preparation of masterbudgets that will be helpful for the growth of entity as well as fund generation of the business.Therefore, these methods will be helpful for the venture in context with investment decisions andprofitability of the projects. Analysing and interpreting the reports will be fruitful as to enhancethe operations of the firm. To analyse the costs it will be beneficial for the firm in terms ofpricing decision, setting the organisational objectives and analysing the profitability from suchtasks. It will also help the business in proper management, adequate utilisation of the resourcessuch as men, material, machineries and funds.TASK 11.1 Determining the costs in the pricing strategy of a companyIn accordance with allocating the costs to the business activities which will be beneficialin terms of analysing the profits from such operations as well as the ability of firm in terms ofmeeting such expenditures. Therefore, in these regards the firm need to make effective pricingdecision which will be appropriate to meet the demands of firm as well as helpful in revenuegeneration. The rates over products and services must be affordable by the consumers as well asit will be profitable for the entity in terms of attaining the proper revenue on the long term basis.However, there has been various techniques and methods that will help them in allocating theprices to the products and services such as:1

Profit Driver: There has been dramatic changes in the performance as well as in therevenue generation of the organisation which will be on the basis of consumer reactions onpreferences toward a price and rate over any products and services offered by a company. Herethe hotel has various rate to its room in accordance with the variation in the seasons (Barr andMcClellan, 2018). Therefore, it will be beneficial for them in high seasonal time were they canmake profitable earnings as compared with other seasons.Value based pricing: The prices are to be developed over the products and services asper the observations made by professionals. There is need to make research over the differentorganisation and the rate implied by them over the various categories of services (Ward andForker, 2017). Therefore, in these regards it will be helpful as the managers will have properinformations regarding the industrial operations as well as determining the rates over suchservices.Premium pricing: In relation with this technique it can be said that the managers and theprofessionals determine the prices over the products and services with the additional features. Itcan be understand as they offer the prices higher over the similar products and services which isprofitable for them in terms of having the adequate gains (Sun, 2017). This can be said that theprices are base on “Skim the Cream” concept on which buyers found it will be profitable for theand they happily spend more of the same categories of products and services.Price- Quality Basis: Here in this method where the professionals plans the costs of theproducts and services which are going to be offered to the buyers are comparatively more butthey increase the quantity of the services and the products offered. Therefore, in this situation thebusiness will go to have the adequate revenue generation and that will be helpful for them interms of having the favourable brand image (Tsai, 2017). Thus, it will be fruitful for them interms of having the favourable quality of services as well as income generation for the business.Competition: The price will be fixed by the managerial professionals on the basis ofcompetition available in the market. It can be analysed on the basis of prices set by various othercompetitors over the same level of products and services facilitated by them. Therefore, it will behelpful for them in terms of making the adequate plan for setting the prices (Borgonovo andet.al., 2018). It will be beneficial for them as they allocate low rate than the rivalry firms. Thiswill help them in generating the adequate revenue as well as attracting the large numbers ofconsumers.2

Brand awareness: The prices are to be decided by them with consideration of the brandimage thus, the rates are not to be too cheap or luxurious. Therefore, it can be said that valueservices which are to be considered as well as manage by the firm. It must be affordable andmust be reliable over the products and services offered by them (Barr and McClellan, 2018). Therates must be appropriate as it should help the organisation to have better reputation in themarket.Uniqueness: The services and products facilitated by the firm should have uniquenessand bunch of services offered by them. However, with the implication of the innovativetechniques the business will become able to gather the large numbers of consumers (Ward andForker, 2017). Hence, this will be beneficial in future as they will go to have proper incomegeneration as well as have growth in the operational activities of the venture.ParticularsHigh SeasonMiddle seasonLow seasonPrice806040Direct cost/ Room1588Average Occupancy Rate80.00%70.00%30.00%No. of Rooms24219Revenue generated by such rooms19201260360Day* months30*430*455*2Total Days120120112Revenue (€)23040015120040320additional rooms20price of additional rooms25Duration5Income from additional rooms2500Total income (€)23040015120042820Less: Direct variable costs43200201608064Less: Direct variable costs additional rooms800Less: Fixed charges200002000020000Profit (€)16720011104013956Interpretation: In accordance with the above mentioned table it can be said that themanagers has planned to allocate prices over the numbers of rooms on the basis of differentseasons. However, it will be fruitful for them in terms of attaining the adequate amount of3

revenue as well as gaining the fruitful gains. As per the profits generated in the high seasonwhich is competitively higher than the other seasons. Here the professionals has fixed the costsover services such as 80 per rooms on the with 80% of occupancy that means 24 rooms are beingreserved out of 30. There will be direct variance costs of 15 per room and the revenue will bedetermine on the basis of days. This was fixed by them as per month they will estimate the costsover the rooms on the basis of 30 days. Therefore, in the high season the period was of 4 monthsand during that period the income was being gathered by them for 230400. The variable cost of43200 and the fixed cost of 20000 will be reduced and the net profit has been generated by themas 167200.On the other side, The middle season also has the period for 4 months and at the rate of60 per room. There has been occupancy of 21 rooms during that season which has facilitated therevenue of 151200. The direct variance cost of 20160 as 8 per room has been deducted from therevenue with fixed charges of 200000. Therefore, the total profit earned by the firm is amountedto 111040. The profit gathered during this period is comparatively lower than higher season.However, In accordance with the low season the prices are too cheap as compared withthe other seasons such as 40 and with the same direct cost as in middle season for 8 per room.There is 30% of occupancy which means 9 rooms were booked during this season. As per theadditional information there has requirements of 20 rooms for 5 days. Therefore, the 9 rooms hasbeen occupied for the period of 55 days at the rate of 40 per room as well as the direct variancecosts for 8 per room on the same period. In the 5 days of November the 20 rooms were bookedon comparatively low rate such as 25 per room and which amounted to 2500. However, afteranalysing all the direct variances and fixed charges over it the net profit will be analysed as13956 for the low season.Therefore, after analysing the profits earned by hotel in all the period which is helpful forthem in terms of earning the adequate revenue and having the fruitful operations. Inconsideration with the low season transactions it can be said that firm is earning adequately inthe high season while in the low season the revenue generation is comparatively below theexpectation. However, it can be said that there is need to have proper pricing techniques whichwill help the hotel in terms of retain the favourable gains. In context with facilitating the 204

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