Unit 02: Business Resources
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This document provides information about the recruitment documentation used in a selected organization, the physical and technological resources of Stemcor, and the breakeven point and chart for Scrumptious Cupcakes. It also highlights the importance of budget in Scrumptious Cupcakes.
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Unit 02: Business Resources
Table of Contents
Introduction......................................................................................................................................4
P1. Describe the recruitment documentation used in a selected organization.................................4
P2. Importance of Employability skills and Personal skills..........................................................12
P3. Physical and Technological Resources of Stemcor.................................................................15
P4. Produce a formal report to the Board of Directors describing the internal and external
financial resource management and evaluation.............................................................................19
P5. (a) The current breakeven point and chart for Scrumptious....................................................21
1
Table of Contents
Introduction......................................................................................................................................4
P1. Describe the recruitment documentation used in a selected organization.................................4
P2. Importance of Employability skills and Personal skills..........................................................12
P3. Physical and Technological Resources of Stemcor.................................................................15
P4. Produce a formal report to the Board of Directors describing the internal and external
financial resource management and evaluation.............................................................................19
P5. (a) The current breakeven point and chart for Scrumptious....................................................21
1
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P5 (b) Budget and its importance in Scrumptious Cupcakes........................................................24
P6. Income statement, balance sheet evaluation............................................................................25
P7. Uses of ratio analysis and its interpretation.............................................................................27
Conclusion.....................................................................................................................................29
References......................................................................................................................................30
Introduction
To run a business in a desired manner, the employers of a company have to introduce
various resources. It includes human labour, equipment, machineries, technologies, raw materials
and more. Among these materials, human resource is considered as the most essential asset,
without which a company cannot run its business. The present assignment is going to describe
procedures through which an enterprise brings human capital at workplace. For this purpose, the
Stemcor is chosen which is one of the largest steel trader company of UK, that operates its
business in more than 45 countries. It acts as an intermediary between sellers and buyers of steel
and raw materials, as well as provides a range of services, such as logistics, inventory and price
risk management. Here, the recruitment documentation used in this organisation is described,
including description of employability skills and its importance, by taking various examples.
2
P6. Income statement, balance sheet evaluation............................................................................25
P7. Uses of ratio analysis and its interpretation.............................................................................27
Conclusion.....................................................................................................................................29
References......................................................................................................................................30
Introduction
To run a business in a desired manner, the employers of a company have to introduce
various resources. It includes human labour, equipment, machineries, technologies, raw materials
and more. Among these materials, human resource is considered as the most essential asset,
without which a company cannot run its business. The present assignment is going to describe
procedures through which an enterprise brings human capital at workplace. For this purpose, the
Stemcor is chosen which is one of the largest steel trader company of UK, that operates its
business in more than 45 countries. It acts as an intermediary between sellers and buyers of steel
and raw materials, as well as provides a range of services, such as logistics, inventory and price
risk management. Here, the recruitment documentation used in this organisation is described,
including description of employability skills and its importance, by taking various examples.
2
P1. Describe the recruitment documentation used in a selected organization
Recruitment documentation includes the entire processes used for hiring candidates
within a workplace, either by internal or external sources. When a company fulfil its vacant
position either by giving promotion to own employees or transferring their job then this method
is known as internal source of recruitment. While hiring workers from outside environment
through campus placement, job advertisement and more, is said to be external source of
recruitment. In context with Stemcor which is a steel trading and British distributor of UK, uses
both processes for hiring best eligible workplace, to provide effective services to customers. For
example – to fulfil a vacant position as a manager in Customer Service Department, following
recruitment documentation process is taken by HR managers of Stemcor:
Job advert: It is the initial document of recruitment process where, a company give
advertisement about vacant position at its workplace. It informs potential candidate to apply for a
job within given dates. A sample for job advertisement is given below:-
3
Recruitment documentation includes the entire processes used for hiring candidates
within a workplace, either by internal or external sources. When a company fulfil its vacant
position either by giving promotion to own employees or transferring their job then this method
is known as internal source of recruitment. While hiring workers from outside environment
through campus placement, job advertisement and more, is said to be external source of
recruitment. In context with Stemcor which is a steel trading and British distributor of UK, uses
both processes for hiring best eligible workplace, to provide effective services to customers. For
example – to fulfil a vacant position as a manager in Customer Service Department, following
recruitment documentation process is taken by HR managers of Stemcor:
Job advert: It is the initial document of recruitment process where, a company give
advertisement about vacant position at its workplace. It informs potential candidate to apply for a
job within given dates. A sample for job advertisement is given below:-
3
4
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For example – HR managers of Stemcor have prepared the given report to be advertised
on company’s website and job portal, for bringing best talented one at workplace.
Job Adverstisement
There is a vacancy of manager post in CRM department of Stemcor so, interested candidates
having experience of more than 8 to 10 years are hereby, informed to give their application
(resumes) before 27th June, 2019.
Interested candidates are hereby, apply for given post by uploading their resumes on
company’s websites – www.stemcor.com before deadline.
Preparing the job description and job specification:
Job description: This part describes the purpose where, roles and responsibilities are described
that fits with a specific position. A sample format under which a company can prepare the given
5
on company’s website and job portal, for bringing best talented one at workplace.
Job Adverstisement
There is a vacancy of manager post in CRM department of Stemcor so, interested candidates
having experience of more than 8 to 10 years are hereby, informed to give their application
(resumes) before 27th June, 2019.
Interested candidates are hereby, apply for given post by uploading their resumes on
company’s websites – www.stemcor.com before deadline.
Preparing the job description and job specification:
Job description: This part describes the purpose where, roles and responsibilities are described
that fits with a specific position. A sample format under which a company can prepare the given
5
document is given as beneath:
6
6
For example:- CRM managers are mainly emphasised to monitor the services provided to
customers. The main work of them is to ensure that each product and service which is offered to
potential customers must satisfy their demands.
JOB DESCRIPTION
Organisation Name: Stemcor
Post: Manager
Department: Customer Relationship Department
Roles and Responsibilities
Sets bold aspiration i.e. a clear vision in order to develop the effective relation with
customers
Sets client relationship strategy which defines areas where improvement is necessary to
fulfil demand of customers on time.
Develop, manage and build an effective team to make effective relationship with
customers.
Required Qualification
Graduation from affiliated university
Management degree
IT certification
Experience required
More than 10 years
Job specification: This part of recruitment process provides a sample of person specification that
may help interested applicants to match their profile with company’s requirement. In context
with Stemcor, for vacant position of manager in CRM Department, job description is given
below-
JOB SPECIFICATION
Name:
E-Mail:
Contact:
Objective: To showcase the abilities at a distribution company and put experiences for
7
customers. The main work of them is to ensure that each product and service which is offered to
potential customers must satisfy their demands.
JOB DESCRIPTION
Organisation Name: Stemcor
Post: Manager
Department: Customer Relationship Department
Roles and Responsibilities
Sets bold aspiration i.e. a clear vision in order to develop the effective relation with
customers
Sets client relationship strategy which defines areas where improvement is necessary to
fulfil demand of customers on time.
Develop, manage and build an effective team to make effective relationship with
customers.
Required Qualification
Graduation from affiliated university
Management degree
IT certification
Experience required
More than 10 years
Job specification: This part of recruitment process provides a sample of person specification that
may help interested applicants to match their profile with company’s requirement. In context
with Stemcor, for vacant position of manager in CRM Department, job description is given
below-
JOB SPECIFICATION
Name:
E-Mail:
Contact:
Objective: To showcase the abilities at a distribution company and put experiences for
7
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improving the customer services of a company and fit criteria in business by which customer
demand can be incorporated more easily.
Qualification:
Class University/ Board Grade Passing Year
12th Class XYZ School 80.00% 2002
Graduation in
science faculty
ABC College 75.00% 2005
MBA DEF University A 2009
Experience:
10 years of working experience in distributor companies as an executive manager in CRM
department
Roles and Responsibilities:
Explore and analyze the available data for providing best customer services
Able to use web-based CRM applications, print letters and navigate, enter corrected
data and pull reports
Excellence in communication skills to develop effective relationship with customers
and fulfil their every demand on time
Integrate experience for enhancing sales and service coordination
Able to work for more than 10 hours and handle customer related problems more easily
Possess knowledge of iron and steel materials
Personal Skills:
Digitalized skill
Managerial abilities
Declaration:
I have hereby, declared that all above mentioned information is true as per my skills and
knowledge.
8
demand can be incorporated more easily.
Qualification:
Class University/ Board Grade Passing Year
12th Class XYZ School 80.00% 2002
Graduation in
science faculty
ABC College 75.00% 2005
MBA DEF University A 2009
Experience:
10 years of working experience in distributor companies as an executive manager in CRM
department
Roles and Responsibilities:
Explore and analyze the available data for providing best customer services
Able to use web-based CRM applications, print letters and navigate, enter corrected
data and pull reports
Excellence in communication skills to develop effective relationship with customers
and fulfil their every demand on time
Integrate experience for enhancing sales and service coordination
Able to work for more than 10 hours and handle customer related problems more easily
Possess knowledge of iron and steel materials
Personal Skills:
Digitalized skill
Managerial abilities
Declaration:
I have hereby, declared that all above mentioned information is true as per my skills and
knowledge.
8
Short listing the candidate
After getting the list of potential candidates, HR managers of Stemcor used to shortlist the best
one on the basis of their eligibility criteria and experience, by using a rating scale. Here,
qualification, skills, experience and given information of each candidate is rated from 1 to 5 i.e. 1
for inadequate skills and 5 for outstanding.
Letter of invitation for interview
After shortlisting the candidates who have applied for a specific job position, here, a letter of
invitation is sent by all by e-mail and other internet applications. With respect to Stemcor, its
follows the given format for making this document in creative manner –
9
After getting the list of potential candidates, HR managers of Stemcor used to shortlist the best
one on the basis of their eligibility criteria and experience, by using a rating scale. Here,
qualification, skills, experience and given information of each candidate is rated from 1 to 5 i.e. 1
for inadequate skills and 5 for outstanding.
Letter of invitation for interview
After shortlisting the candidates who have applied for a specific job position, here, a letter of
invitation is sent by all by e-mail and other internet applications. With respect to Stemcor, its
follows the given format for making this document in creative manner –
9
For example- After shortlisting the applicants for CRM manager post, HR managers of Stemcor
has mailed the following interview letter to them –
Interview letter
10
has mailed the following interview letter to them –
Interview letter
10
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Subject : Interview for manager post in CRM Department at Stemcor
This is in reference as per your application that indicates the interest in seeking the
employment at our company. We are excited to extend you to meet personally for face-to-face
discussion for given post on 8th July 2019 at sharp 10’O clock in morning.
The company is hope that time and location is suitable for you. Do let us know about any
query or concerns with the same by making a contact with HR team.
Kindly give your confirmation for meeting on prescribed date and time before, 5th July 2019
either by e-mail or contact on +864914048969.
Application Form: This document is given to fulfil the information by applicants who come for
an interview during hiring process. In this regard, HR managers of Stemcor use following
template at the time of interview:-
11
This is in reference as per your application that indicates the interest in seeking the
employment at our company. We are excited to extend you to meet personally for face-to-face
discussion for given post on 8th July 2019 at sharp 10’O clock in morning.
The company is hope that time and location is suitable for you. Do let us know about any
query or concerns with the same by making a contact with HR team.
Kindly give your confirmation for meeting on prescribed date and time before, 5th July 2019
either by e-mail or contact on +864914048969.
Application Form: This document is given to fulfil the information by applicants who come for
an interview during hiring process. In this regard, HR managers of Stemcor use following
template at the time of interview:-
11
Interviewing the candidate
P2. Importance of Employability skills and Personal skills
There are three criteria that must be met to be employed for the position (Kotler, 1979).
Employment skill criteria
Past experience criteria
Personal skill criteria
Employability skills
12
P2. Importance of Employability skills and Personal skills
There are three criteria that must be met to be employed for the position (Kotler, 1979).
Employment skill criteria
Past experience criteria
Personal skill criteria
Employability skills
12
Qualification: The selected candidate must have the right qualification for the particular role
and to carry out the responsibilities and task given for that job role.
Experience: The candidates need to have experiences in related field for minimum periods of
time. The experienced staffs provide better performance, give information about competitors,
and bring knowledge and information from diverse environments.
Product knowledge: General knowledge about bakery products are desirable but not essential.
Proper training will be provided to the selected employee.
Personal skills
Hardworking: A hard-working staffs can finish the tasks given on time and manage the tasks
properly. Thus, they can gain an improved performance in workplaces.
Flexibility: This is most important in workplaces including Greggsplc because a staff need to
work for different shifts in different days of the week. It is also important for Greggs to fill in the
staffs shortage and skills gap in workplace.
Team player: the staffs must be good team players because a good team work give a good
performance. Thus, staff must be supportive, helpful and friendly in the workplace.
I think that I have all of the required criteria to be employed for the position. The recruitment
letter specifies the minimum CGPA, years of past working experience in the relevant job, and the
personal skill required for the better accomplishment of the job. All of these required criteria are
met by my resume which is given below.
Resume
13
and to carry out the responsibilities and task given for that job role.
Experience: The candidates need to have experiences in related field for minimum periods of
time. The experienced staffs provide better performance, give information about competitors,
and bring knowledge and information from diverse environments.
Product knowledge: General knowledge about bakery products are desirable but not essential.
Proper training will be provided to the selected employee.
Personal skills
Hardworking: A hard-working staffs can finish the tasks given on time and manage the tasks
properly. Thus, they can gain an improved performance in workplaces.
Flexibility: This is most important in workplaces including Greggsplc because a staff need to
work for different shifts in different days of the week. It is also important for Greggs to fill in the
staffs shortage and skills gap in workplace.
Team player: the staffs must be good team players because a good team work give a good
performance. Thus, staff must be supportive, helpful and friendly in the workplace.
I think that I have all of the required criteria to be employed for the position. The recruitment
letter specifies the minimum CGPA, years of past working experience in the relevant job, and the
personal skill required for the better accomplishment of the job. All of these required criteria are
met by my resume which is given below.
Resume
13
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14
15
P3. Physical and Technological Resources of Stemcor
Main physical resources of Stemcor
Physical resources are the tangible resources of a company which is used to carry out the major
operations of a company. It includes human power, transport, machinery and more. Since the
Stemcor operates it business all around the world so it is difficult to identify all of the physical
resources of the company (Snodgrass, 1992). However, most important physical resources of
Stemcor company is given below.
Building
Currently, this Group has more than 300 employees in over 30 locations globally. Stemcor
offices has combined the personal touch of business at small level and backed with strength of a
large group. It gives commitment to accomplish common objectives, shared values as well as a
unified strategy within set period of time.
Equipment and machinery
Stemcor is mainly involved in providing the trading, logistics and financial services as well as
raw material to steel industry. For this purpose, it has used the latest transport vehicles to deliver
raw materials to end customers for steel production like scrap, iron ore, HBI/DRI, pig iron, coal,
coke and ferroalloys, including some semi-finished steel products. This group also caters its
services to a number of sectors that are automotive, engineering, oil and gas.
Main technological resources of Stemcor
It includes intangible resources like software, insurance, patent rights and more. In this regard,
main technological resources of Stemcor are given as beneath:
CRM Software: To make effective relationship with customers and identify their demands and
preferences, Stemcor has implemented a number of software like Outwork AI – Intelligent sales
management, Apptivo Online CRM, ZOHO CRM tools, CRM4Sure etc.
16
Main physical resources of Stemcor
Physical resources are the tangible resources of a company which is used to carry out the major
operations of a company. It includes human power, transport, machinery and more. Since the
Stemcor operates it business all around the world so it is difficult to identify all of the physical
resources of the company (Snodgrass, 1992). However, most important physical resources of
Stemcor company is given below.
Building
Currently, this Group has more than 300 employees in over 30 locations globally. Stemcor
offices has combined the personal touch of business at small level and backed with strength of a
large group. It gives commitment to accomplish common objectives, shared values as well as a
unified strategy within set period of time.
Equipment and machinery
Stemcor is mainly involved in providing the trading, logistics and financial services as well as
raw material to steel industry. For this purpose, it has used the latest transport vehicles to deliver
raw materials to end customers for steel production like scrap, iron ore, HBI/DRI, pig iron, coal,
coke and ferroalloys, including some semi-finished steel products. This group also caters its
services to a number of sectors that are automotive, engineering, oil and gas.
Main technological resources of Stemcor
It includes intangible resources like software, insurance, patent rights and more. In this regard,
main technological resources of Stemcor are given as beneath:
CRM Software: To make effective relationship with customers and identify their demands and
preferences, Stemcor has implemented a number of software like Outwork AI – Intelligent sales
management, Apptivo Online CRM, ZOHO CRM tools, CRM4Sure etc.
16
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P4. Produce a formal report to the Board of Directors.
To
Heather and Annabel Dean
Scrumptious Cupcakes Ltd.
Wales.
Subject: Available internal and external sources of fund for scrumptious cupcakes ltd.
Dear sir/madam,
I have been informed that in order to get sufficient funds for running business successfully, there
are various sources available. It includes public appropriations, endowment income, private
investment, loans from commercial bank, income from sales etc.
Sincerely Yours
Finance manager
P5. (a) The current breakeven point and chart for Scrumptious.
For the calculation of the breakeven and the drawing the breakeven chart all of the required
information has been given in the scenario. The following information will be used to calculate
the breakeven of the company.
Fixed cost £4300
Variable cost £.60
17
To
Heather and Annabel Dean
Scrumptious Cupcakes Ltd.
Wales.
Subject: Available internal and external sources of fund for scrumptious cupcakes ltd.
Dear sir/madam,
I have been informed that in order to get sufficient funds for running business successfully, there
are various sources available. It includes public appropriations, endowment income, private
investment, loans from commercial bank, income from sales etc.
Sincerely Yours
Finance manager
P5. (a) The current breakeven point and chart for Scrumptious.
For the calculation of the breakeven and the drawing the breakeven chart all of the required
information has been given in the scenario. The following information will be used to calculate
the breakeven of the company.
Fixed cost £4300
Variable cost £.60
17
Selling price per unit £1.75
So, breakeven point in unit = 4300/ (1.75-.60)
=3739 units
Breakeven point in sales = 3739*1.75
=6543.48 pounds
We can draw the breakeven chart from the above information
500 1000 1500 2000 2500 3000 3500 4000 4500 5000 5500 6000
0
2000
4000
6000
8000
10000
12000
Breakeven analysis
Fixed Cost Total Cost Sales
Comment
From the graph it is clear that the company must sale 3739 units to cover its fixed cost. After
covering the fixed cost the company will be able to make profit. So, the company must sale 3739
units to reach the breakeven.
Recalculation of breakeven point
From the reduction of fixed cost and variable cost we can calculate the new breakeven for the
company.
18
So, breakeven point in unit = 4300/ (1.75-.60)
=3739 units
Breakeven point in sales = 3739*1.75
=6543.48 pounds
We can draw the breakeven chart from the above information
500 1000 1500 2000 2500 3000 3500 4000 4500 5000 5500 6000
0
2000
4000
6000
8000
10000
12000
Breakeven analysis
Fixed Cost Total Cost Sales
Comment
From the graph it is clear that the company must sale 3739 units to cover its fixed cost. After
covering the fixed cost the company will be able to make profit. So, the company must sale 3739
units to reach the breakeven.
Recalculation of breakeven point
From the reduction of fixed cost and variable cost we can calculate the new breakeven for the
company.
18
Fixed cost £4100
Variable cost £.55
Selling price per unit £1.75
Breakeven point in unit = 4100/ (1.75-.55)
=3417 units
Breakeven point in sale = 3417*1.75
=5979.17 pounds
New breakeven graph
0 500 1000 1500 2000 2500 3000 3500 4000 4500 5000 5500 6000
0
2000
4000
6000
8000
10000
12000
Breakeven analysis (new)
Fixed Cost Total Cost Sales
Comment
The new breakeven graph shows that the company must sale 3417 units to reach the breakeven
and after crossing, this boundary the company will make profit.
P5 (b) Budget and its importance in Scrumptious Cupcakes
Budget
19
Variable cost £.55
Selling price per unit £1.75
Breakeven point in unit = 4100/ (1.75-.55)
=3417 units
Breakeven point in sale = 3417*1.75
=5979.17 pounds
New breakeven graph
0 500 1000 1500 2000 2500 3000 3500 4000 4500 5000 5500 6000
0
2000
4000
6000
8000
10000
12000
Breakeven analysis (new)
Fixed Cost Total Cost Sales
Comment
The new breakeven graph shows that the company must sale 3417 units to reach the breakeven
and after crossing, this boundary the company will make profit.
P5 (b) Budget and its importance in Scrumptious Cupcakes
Budget
19
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Budget is the future planning of the company. Budget is the estimation of the cost revenue and
expense of the company that will occur in the future. To survive in the competitive world every
company makes budget (Long, 1991). There are two parts of the budget-revenue planning and
expense planning.
Essentials of monitoring the budget
Budget is important for every small or large company. Through the budget, the company is able
to meet its objective. If the company’s actual performance is coincident with the budget then the
company will reinforce the current performance. On the other hand, if the actual performance of
the company does not coincident with the budget then the company will take the corrective
action. Therefore, budget is important for the scrumptious cupcakes.
Problem with scrumptious cupcakes’ budget and recommendation for it
There are some problems with the scrumptious cupcake’s budget which are given below.
Negative variance of the sales
Negative variance of the FC
Negative variance of materials and other elements
20
expense of the company that will occur in the future. To survive in the competitive world every
company makes budget (Long, 1991). There are two parts of the budget-revenue planning and
expense planning.
Essentials of monitoring the budget
Budget is important for every small or large company. Through the budget, the company is able
to meet its objective. If the company’s actual performance is coincident with the budget then the
company will reinforce the current performance. On the other hand, if the actual performance of
the company does not coincident with the budget then the company will take the corrective
action. Therefore, budget is important for the scrumptious cupcakes.
Problem with scrumptious cupcakes’ budget and recommendation for it
There are some problems with the scrumptious cupcake’s budget which are given below.
Negative variance of the sales
Negative variance of the FC
Negative variance of materials and other elements
20
Low profit than budget
Negative utility and other cost variance
Recommendations for the problems are given below.
Effective control of the variable cost and timely delivery of the products
Identifying and selecting various suppliers to reduce supply cost
Increasing the efficiency of the labor
Minimizing the wastage of the materials
Maximizing the control over the cost
Using aggressive marketing to increase the sale
Need for Controlling Budget Properly
P6. Income statement, balance sheet evaluation
Financial statements are the lens on the business. Financial statement provides the overall picture
of the company. There are different types of financial statements like-income statement, balance
sheet and so on.
Purpose of income statement
Parts of the income statement
Users
The users of the income statement are the stakeholders of the company like-shareholders,
investors, employee, suppliers, customers, government, and management of the company.
Balance sheet, its parts and the user
Purpose of balance sheet
Balance sheet is also known as the statement of financial position. It measures the financial
position of the company.
Parts of the balance sheet
21
Negative utility and other cost variance
Recommendations for the problems are given below.
Effective control of the variable cost and timely delivery of the products
Identifying and selecting various suppliers to reduce supply cost
Increasing the efficiency of the labor
Minimizing the wastage of the materials
Maximizing the control over the cost
Using aggressive marketing to increase the sale
Need for Controlling Budget Properly
P6. Income statement, balance sheet evaluation
Financial statements are the lens on the business. Financial statement provides the overall picture
of the company. There are different types of financial statements like-income statement, balance
sheet and so on.
Purpose of income statement
Parts of the income statement
Users
The users of the income statement are the stakeholders of the company like-shareholders,
investors, employee, suppliers, customers, government, and management of the company.
Balance sheet, its parts and the user
Purpose of balance sheet
Balance sheet is also known as the statement of financial position. It measures the financial
position of the company.
Parts of the balance sheet
21
There are three parts in the balance sheet like-asset part, liability part, and the owner equity part.
Asset part shows the total assets of the company (Angbazo, 1997). Liability part shows the total
liability of the company. And the equity part shows the owner equity of the company. The
purpose of balance sheet is to show the asset, liability, and equity figure of the company.
Users
The users of balance sheet are the investors, employee, suppliers, customers, government,
shareholders and the management of the company.
P7. Uses of ratio analysis and its interpretation
Ratio analysis is used to evaluate the financial performance and position of the company. There
are different types of ratios that can be used to evaluate the company (Altman, 1968).
Profitability ratio
Gross profit margin = (Gross Profit / Sales Revenue) * 100
= (1, 00,000/2, 20,000) * 100
= 45.45%
Gross Profit margin shows how much the company earns after paying the Cost of Goods Sold.
Net profit margin = (Net profit/Sales Revenue) * 100
= (42900/220000) * 100
= 19.5%
Net profit margin shows how much the company earns after paying all of the expenses.
Return on Capital Employed
ROCE = (Operating Profit / Long Term Capital Employed) * 100
= 42900 / (31000+20000)*100 = 84.12%
The outcome of ROCE proves that the company is performing well in its current position.
22
Asset part shows the total assets of the company (Angbazo, 1997). Liability part shows the total
liability of the company. And the equity part shows the owner equity of the company. The
purpose of balance sheet is to show the asset, liability, and equity figure of the company.
Users
The users of balance sheet are the investors, employee, suppliers, customers, government,
shareholders and the management of the company.
P7. Uses of ratio analysis and its interpretation
Ratio analysis is used to evaluate the financial performance and position of the company. There
are different types of ratios that can be used to evaluate the company (Altman, 1968).
Profitability ratio
Gross profit margin = (Gross Profit / Sales Revenue) * 100
= (1, 00,000/2, 20,000) * 100
= 45.45%
Gross Profit margin shows how much the company earns after paying the Cost of Goods Sold.
Net profit margin = (Net profit/Sales Revenue) * 100
= (42900/220000) * 100
= 19.5%
Net profit margin shows how much the company earns after paying all of the expenses.
Return on Capital Employed
ROCE = (Operating Profit / Long Term Capital Employed) * 100
= 42900 / (31000+20000)*100 = 84.12%
The outcome of ROCE proves that the company is performing well in its current position.
22
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Liquidity ratio
Current Ratio = (Current assets / Current liabilities)
= 14000/18000
= 0.78%
Current ratio measures the ability of the company to meet its current obligation out of the current
asset.
Acid Test Ratio
Acid Test Ratio = Current Assets (excluding Inventories) / Current Liabilities
= 11000 / 18000 = 0.61
This outcome indicates the company is performing well at its current position.
Quick ratio = (current asset-inventory)/current liability
(14000-3000)/18000 = .61%
Quick ratio is same as the current ratio except it excludes the inventory from the current asset.
Gearing ratio = total interest bearing liability/shareholders’ equity
= 20000/31000 = .65%
The capital structure of the company determines the gearing ratio.
Efficiency Ratios
Stock Turnover = (COGS / Average Inventory) * 365
= (3000/120,000) * 365 = 9 days
Stock turnover measures how quickly the company converts its inventory into sales. Here, the
turnover is high.
Debtor’s Collection Period = (Trade Receivables / Average Accounts Receivables) * 365
23
Current Ratio = (Current assets / Current liabilities)
= 14000/18000
= 0.78%
Current ratio measures the ability of the company to meet its current obligation out of the current
asset.
Acid Test Ratio
Acid Test Ratio = Current Assets (excluding Inventories) / Current Liabilities
= 11000 / 18000 = 0.61
This outcome indicates the company is performing well at its current position.
Quick ratio = (current asset-inventory)/current liability
(14000-3000)/18000 = .61%
Quick ratio is same as the current ratio except it excludes the inventory from the current asset.
Gearing ratio = total interest bearing liability/shareholders’ equity
= 20000/31000 = .65%
The capital structure of the company determines the gearing ratio.
Efficiency Ratios
Stock Turnover = (COGS / Average Inventory) * 365
= (3000/120,000) * 365 = 9 days
Stock turnover measures how quickly the company converts its inventory into sales. Here, the
turnover is high.
Debtor’s Collection Period = (Trade Receivables / Average Accounts Receivables) * 365
23
= (4000 / 220000) * 365 = 7 days
The debtor’s collection period shows how quickly the company collects its receivable from the
customer.
Asset turnover Ratio= Sales Revenue / Long Term Capital Employed
= 220,000/ (31000+20000)
= 4.31 times
Assets turnover ratio shows the ability of the management to use the asset. Here, the high asset
turnover efficiently and productively shows the better efficiency of the company.
Gearing Ratio = [Long Term (Non–Current Liabilities) / Capital Employed] * 100
= 20000/51000*100
= 39.22%
Conclusion
From this mention assignment, it has been concluded that for running a business successfully, a
company focuses more on hiring talented workers. For this purpose, HR managers prepare a
number of documents to recruit employees either from internal or external environment.
Furthermore, companies also concern on optimisation of both physical and technical resources to
operate business activities, appropriately.
24
The debtor’s collection period shows how quickly the company collects its receivable from the
customer.
Asset turnover Ratio= Sales Revenue / Long Term Capital Employed
= 220,000/ (31000+20000)
= 4.31 times
Assets turnover ratio shows the ability of the management to use the asset. Here, the high asset
turnover efficiently and productively shows the better efficiency of the company.
Gearing Ratio = [Long Term (Non–Current Liabilities) / Capital Employed] * 100
= 20000/51000*100
= 39.22%
Conclusion
From this mention assignment, it has been concluded that for running a business successfully, a
company focuses more on hiring talented workers. For this purpose, HR managers prepare a
number of documents to recruit employees either from internal or external environment.
Furthermore, companies also concern on optimisation of both physical and technical resources to
operate business activities, appropriately.
24
References
A. Shipp, V. H. (1999), Factors influencing the career choices of African American collegians:
Implications for minority teacher recruitment. Journal of Negro Education, 343-351.
B. Cozza, P., Mastroianni, C., Talia, D., & Taylor, I. (2006), A super-peer model for multiple job
submission on a grid. In Euro-Par 2006: Parallel Processing (pp. 116-125). Springer Berlin
Heidelberg.
Marchington. & et. al. (2016). Human resource management at work. Kogan Page Publishers.
Messersmith, J. G. & et. al. (2011). Unlocking the black box: exploring the link between high-
performance work systems and performance. Journal of Applied Psychology. 96(6).
pp.1105.
Renwick, D. W., Redman, T. & Maguire, S. (2013). Green human resource management: A
review and research agenda. International Journal of Management Reviews. 15(1).pp.1-
14.
Rubery, J. & Urwin, P. (2011). Bringing the employer back in: why social care needs a standard
employment relationship. Human Resource Management Journal. 21(2). pp.122-137.
Schermerhorn & et. al. (2014). Management: Foundations and Applications (2nd Asia-Pacific
Edition). John Wiley & Sons.
Sheehan, M. (2014). Human resource management and performance: Evidence from small and
medium-sized firms. International Small Business Journal. 32(5). pp.545-570.
25
A. Shipp, V. H. (1999), Factors influencing the career choices of African American collegians:
Implications for minority teacher recruitment. Journal of Negro Education, 343-351.
B. Cozza, P., Mastroianni, C., Talia, D., & Taylor, I. (2006), A super-peer model for multiple job
submission on a grid. In Euro-Par 2006: Parallel Processing (pp. 116-125). Springer Berlin
Heidelberg.
Marchington. & et. al. (2016). Human resource management at work. Kogan Page Publishers.
Messersmith, J. G. & et. al. (2011). Unlocking the black box: exploring the link between high-
performance work systems and performance. Journal of Applied Psychology. 96(6).
pp.1105.
Renwick, D. W., Redman, T. & Maguire, S. (2013). Green human resource management: A
review and research agenda. International Journal of Management Reviews. 15(1).pp.1-
14.
Rubery, J. & Urwin, P. (2011). Bringing the employer back in: why social care needs a standard
employment relationship. Human Resource Management Journal. 21(2). pp.122-137.
Schermerhorn & et. al. (2014). Management: Foundations and Applications (2nd Asia-Pacific
Edition). John Wiley & Sons.
Sheehan, M. (2014). Human resource management and performance: Evidence from small and
medium-sized firms. International Small Business Journal. 32(5). pp.545-570.
25
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