Report to the management of surf N sea manufacturers 2022

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Report to the management of surf N sea manufacturers
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Executive summary
This document is a supportive attachment to the various budgets provided to the
management of surf N sea manufacturers limited. It covers several aspects that surround the
activities and operations of the business entity. This report therefore contains information
regarding the company’s financial position, cash and profitability forecasts of the business.
Other external factors surrounding the bossiness environment, the market analysis of the clothing
industry are as well highlighted in this report. Since surf N sea manufactures provides a variety
of products, the contribution margin of the four different products is also analyzed. Form such
assessments, possible recommendations and conclusions are provided the management of the
company to aid proper decision making.
Introduction
The four different products that are produced by surf N sea manufactures are specifically
beach wear products. These products include the one-piece women swim wears, the beach
umbrellas, beach towels and the board shorts. These products are however priced differently and
they therefore yield varying profits or revenues. Therefore, it is of significant value and
importance that the costs, revenues and other factors be are assessed and analyzed to enable a
smooth flow of activities and at the same time provide an informed insight into the various
activities. These aspects are therefore explained to management in the following parts of the
report.
An overview of the company expected performance
Several company budgets were prepared for the company and among such budgets and
financial statements included the cash budget, the income statement, monthly operational

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expenses and sales budget among others. Therefore, this particular section will focus on the
explanation of few financial statements and reports. These will be used to forecast and predict
company’s profitability on the financial year 2020. As a starting point, Surf N sea manufacturers
is anticipated to have a profitable financial year in terms of company sales. However much surf
N sea manufacturers is a profitable company, there is a worrying trend in the company
collections during mid-years periods. For instance the cash collections budget is expected to start
off the year with gross collections of about $1,330,760 with the month of January. This amount
is further increased to an estimated $1,653,788 in February and then starts to drastically decline
up to an estimated 575,720 dollars in the month of august. Such fluctuations in business
activities tend to pose significant threats to profitability a scenario which is highly unfavorable to
management. Therefore, according to such a business which brings in low profits during the mid
year period, there is need for conducting further research and possibly finding out reason for
such declines (Carton and Hofer, 2010). With prior knowledge about the underlying factors that
are likely to cause these declines, management ca ably devise strategies to correct the problem.
According to the business cash budget provisions and forecasts for the financial year
2020, there is a positive indication that Surf N sea manufacturers will have access to sufficient
funds on a monthly basis. The company’s monthly balances brought forward/down are sufficient
enough and therefore, surf N sea manufacturers can decide to undertake several decisions. The
most appropriate decisions to undertake would however be the long term choices of business
growth (Kramer, 2019). For example, management of the company can decide to reinvest these
amounts in other long term ventures. On the other hand however, these sufficient balances such
as the $2,900,489 in the April are a sign that the company is highly liquid. It means that surf N
sea a manufacturer has Capacity to clear debts and meet daily cash requirements. Therefore,

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besides the different underlying constraints that may affect business profitability, the
management of Surf N sea should be firm and certain that the financial year 2020 will be a
success.
Product analysis
Product analysis can simply be defined as the process of assessing and analyzing the
profitability or performance of a given product lone or item on the market. Product analysis can
be conducted using a variety of performance measures depending on the objectives and
prevailing market or business environment (Fatihudin and Mochklas, 2018). For this report, the
margin contribution method or approach will be used to assess the profitability and contribution
of the four different products towards the general performance on the market. The contribution
margin is a technique that is used to determine the entity’s ability to pay off obligations with
revenues from product sales. The formula for determining this is provided as
Source; investopedia staff, 2019
The above formula will be used to assess the contribution of each of the four products
contribution towards the revenue contribution and clearing off obligations.

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one-piece board shorts umbrellas towels total
units 12500 11420 2600 1560 28080
ratio contribution 0.445156695 0.406695157 0.092592593 0.05555556 1
selling price $100 $80 $50 $45
total variable costs ($4,902,107)
total revenue $13,613,800
contribution
margin per product
to sales
$6,060,274.2
2 $5,536,666.52
$1,260,537.0
4
$756,322.2
2
$13,613,800.0
0
percentage
contribution to sales
revenue 44.52% 40.67% 9.26% 5.56% 100.00%
From the above, the percentage contribution of each product towards sales revenue can
clearly be identified. Such information as provided in the table would significantly aid the
process of decision making at any required point in time.
Cash position
Cash position is a point or the amounts of liquidity that is available to a company or an
entity at any one specific period. The cash position may take a variety of assets such stock and
inventory, market securities and any other liquid or cash equivalents (Na and Fadaee, 2016).
Therefore, the more liquidity that is available to an entity, the more such an entity is deemed to
be financially viable and sound. This means that the company has the ability and capacity to
meet most if not all of its short term obligations and liabilities such credit payables (Staron,

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2018). From the various budgets prepared for the company it is evident that Surf N Sea has a
strong cash position and which is further facilitated cash inflows that are forecast dot result from
sell of products on the market. This therefore puts the company in a position that significantly
promotes future growth.
Market condition analysis
The Australian clothing industry is a vast and wide market which is comprised of
manufacturers of a variety of clothing accessories ( Buzzell, Gale, and Sultan2019). These range
right from those manufacturers that produce for the children, women, men, the elderly and so
many other categories of people. Within the same market certain manufacturers such as the surf
N sea company have chosen to specialize in specific market segments such beach wear makets
(Farmanesh and Hasiri, 2017). Therefore, the possibility of controlling the market has also been
made very difficult due to the presence of numerous producers. The changing population needs
and demographic factors are some of the external influences that have a significant impact on the
profitability of companies. For such reasons, surf N sea manufacturers have the duty to ensure
that they can continuously and consistently monitor and control market share. Failure to address
and satisfy customer needs in this extremely competitive market would lead to significant losses
for the company.
Additionally, the Australian market has recently been subjected to global pressure from
other international brands. As a result of the high pressure that the market is exposed to, the
industry is found to be going into a down fall. For example, Roger David one of Australia’s
iconic brands that has existed for over 76 years has been undergoing significant closures. This is

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supported by the closure of about 57 stores by December 2018. The major factor that was
claimed to be the cause for such a closure was the overwhelming pressure and competition from
the international market ( Sumoto, 2019).
Recommendations
Therefore, one of the most important recommendations to the management of Surf N Sea
would be to ensure the use of strategic measures such as the growth strategy and the stable
growth as well. These strategies would help the management to take control of the already
existing market share and at the same time push further to gain more market (Akers, 2019). The
combination of a declining market together with increasing competition from other global
producers and manufacturers would require the company to devise alternative measures. Among
such measures includes reducing the costs of production, operation, and increase profitability on
the other hand (Gallo, 2017). For instance a reduction in the cost of production would imply that
even the unit price of the commodities on the market would much less. This would act as one of
the competitive strategies that can be used to gain market share.
The other recommendation to the company is that there is need to assess the four
products based on profitability and cost of production. With a clear understanding of such
aspects, the unprofitable products could be out phased or modified so as to increase on
profitability and maintain an effective operation.
Conclusions
Overall, surf N sea manufacturers are relatively still performing soundly on the market.
The cash position of the company as portrayed from the monthly cash book and other revenue

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and cost budgets reflect positive results. The costs of operation are under efficient control and
management whereas the profits are and future forecasts are generally promising.

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References
Akers, H. 2019. The Importance of a Contribution Margin. Retrieved from
https://yourbusiness.azcentral.com/importance-contribution-margin-1875.html
Buzzell, R., D., Gale, B., T., Sultan, R., G., M. 2019. Market Share – A Key To Profitability.
Retrieved from https://hbr.org/1975/01/market-share-a-key-to-profitability
Carton, R., B., Hofer. C., W. 2010. Organizational Financial Performance: Identifying And
Testing Multiple Dimensions. Retrieved from
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Kramer, L. 2019. What Strategies Do Companies Employ To Increase Market Share? retrieved
from https://www.investopedia.com/ask/answers/031815/what-strategies-do-companies-employ-
increase-market-share.asp
Farmanesh, P., Hasiri, A. 2017. The Influence of Marketing Strategy on Market Share. retrieved
from
https://www.researchgate.net/publication/319108652_The_Influence_of_Marketing_Strategy_on
_Market_Share
Fatihudin, D., Mochklas, M. 2018. How Measuring Financial Performance: International
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Retrieved from https://hbr.org/2017/10/contribution-margin-what-it-is-how-to-calculate-it-and-
why-you-need-it

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from https://asia.nikkei.com/Business/Business-trends/Australia-s-fashion-industry-shrinks-as-
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