Managing Finance and Operations for New Life Drinks Plc Report

This report provides a comprehensive analysis of the financial and operational aspects of New Life Drinks Plc, a soft drink manufacturing company seeking investment for expansion. It evaluates operational and regulatory factors, including international regulatory frameworks, corporate governance, and compliance initiatives. The report examines operational management theories like 4Vs analysis and Business Process Management (BPM) to optimize processes. It identifies the company's financial needs, differentiating between short-term and long-term financing, and analyzes financial worth using techniques such as break-even analysis, ARR, payback, and NPV. The report concludes with recommendations for the board, offering a strategic overview of financial management and operational strategies to enhance the company's performance and investment potential. The report also includes an analysis of the financial worth, proposal and alternative evaluation.

MANAGING FINANCE AND
OPERATIONS

Table of Contents
INTRODUCTION...........................................................................................................................1
REPORT..........................................................................................................................................1
a) Evaluation of operational and regulatory factors to be considered by the board...............1
b) Identification of financial needs and evaluation of short term and long term sources of
finance....................................................................................................................................5
Financial needs:......................................................................................................................5
c) Critical analysis of financial worth, proposal and alternative evaluation..........................7
d) Conclusion with recommendations for the board............................................................10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Managing finance and operation mainly refers the control and operation of financial
resources in organisation subject to organised manner (Butler, 2016). The operations which
mainly related to operational departments helps in determining the changes in day to day
operations. This project report defines the sustainability of investment plans available to
organisation for better better outcomes and results. New Life Drinks Plc company which is a soft
drink manufacturing organisation is seeking for better investment plan for increasing sales
revenues.
Evaluation of operational and regulatory factors to be considered by the board recognised
in this report. Research in to the relevant environment and application of management theories
also considered with in organisational context. Financial value of the current proposal and an
alternative analysis containing cost and revenues for appropriate analysis also considered in this
report. Break even analysis, ARR, payback and NPV are applied with the case material subject to
challenges also analysed with remodelling financial plans. Recommendations and conclusion
made for determining the layout the structure of board recognised in this report.
REPORT
a) Evaluation of operational and regulatory factors to be considered by the board
Business operations are lead by effective execution and control model, theories and
frameworks. Organisation mainly analyse the framework that helps in assessing the needs and
financial requirements of business with available options. Internal control and management of
financial resources assist the operational and functional divisions of business (Wuttke and et. al.,
2013). At managerial level the leadership skills and managers contributes significance efforts to
utilise the operational management theories, plans and strategies. As the New Life Soft Drink Plc
has an investment plan for expanding the business by utilising the plan with in organisation.
Board of the company is required to evaluate the regulatory framework and operational tactics to
assist the smooth flow of operations and business requirements. Some of the regularity factors
are required by the board which are defined as follows;
International regulatory framework: As per the regulation standards and rules
regarding the ethical organisational structure and framework subject to maintain ethical
evaluation and control with in organisational context. It is one of the essential aspect in terms of
1

managing the sections through the operational and regulatory framework. This factor basically
affect the formation of working and operations of business internally and externally. To maintain
an viable operational form and maintain transparency it is required to adhere this regulatory
framework for better control and management. Board of senior level management and control
helps in determining the risk and discipline the financial institutions.
Business organisation in UK adhere rules and legislations related to different bodies like
Environmental Agency, Financial Conduct Authorities, Scottish Environment Protection Agency
, Care Quality and Commission etc (Arslanian, 2016). Data protection has been an essential
needs of business organisations to follow subject to maintain ethical environmental with in data
procedures for retain and control the rights of employees with in organisation. Data Protection
Act, 1998 and Freedom of information Act, 2000 regarding equality are considered by the board
of Company.
Corporate governance: it is one of the essential factor that helps in maintaining the
ethical flow and operation of organisation in organisation with complying operational and
managing models (Al-Mwalla, 2012). The familiar functions helps in determining the changes
and variation n various sectors the flow of operations and feasibility considered with creating the
extra ordinary charges and fluctuations in competitive and compelling way. The fluctuation rate
and valuation mainly determine the significant changes and developments for creating a legal
structure of corporate governance. The management and flow of information mainly combine the
sections and divisions of business. Compliance initiatives for determining the changes and
fluctuations in operational activities of an manufacturing and production organisation.
Board of the organisation is required to adopt required laws, policies and regulations for
developing the transparent nature and frequency with combined compliance controls and
approaches. There is a significant rules and regulations are made in terms of operating the
framework in more better and essential form. Compliance framework and standards with proper
regulation standards and rules indicates towards implementation process of new legislations and
rules with in organisational context. Functional changes and determination helps in evaluating
the organisational goals and objectives with critical business process and environmental process.
Operations management theory
Management of operations and functions is essential to manage and operate the functions
of business in contingent way (Soumadi and Hayajneh, 2012). It is required to analyse the
2

process with more sustainable and vibrant manner to explain the business conditions and manage
the possible solutions for effective control and management. The working also define the
structure and policy to define the changes and variations for both external and internal business
structure. Following operations and management theories are defined below that are essential to
optimise and enhance the process of different operations. It is reckoned that better operations
management leads organisation towards sustainable growth and attaining competitive
advantages.
New Life may use 4Vs analysis for improving its operations. In companies like New life,
which is a manufacturing company, the operations start from processing the raw material and
end when it becomes a finished goods and gets delivered to its destination. The four Vs that
stand for Volume, Variety, Variation and Visibility. This analysis can be used by New Life in the
following way:
The Volume Dimension
A volume of production is vital and important
for any manufacturing company. Companies
like New Life produces the products in large
quantity as the demand for the products are
high and they supply in large quantities. The
sales of New life is expected to rise to
1,300,000 bottles in the coming years
therefore, the company should arrange its
standards and procedure in such a way that a
combination will provide optimum output with
low cost.
The Variety Dimension
This dimension is based on the fact that a
manufacturing company that produces large
variety of products has more to offer to their
customers. New Life is already producing 18
soft drinks and is considering to launch 4 new
alcoholic drinks which means that there will an
increase in the per unit cost and overall costs of
the new drinks. The variety of the products
give a flexibility to the company to meet its
customers' requirements. But it should also be
considered that lower the variety, lower the
cost and vice versa.
The Variation Dimension
This is concerned with the change in the
demand within a span of time due to the
external factors. Before launching the 4 new
alcoholic drinks, New Life must consider the
factors that may affect its demand, sales,
The Visibility Dimension
This refers to how much of the company's
process does the customer actually experience.
The service industries have a high level of
visibility as compared to manufacturing
industries. There are some companies that have
3

profits in future. The factors can be, change in
the demand due to change in the taste,
regulatory implications for curbing the health
damages due to alcoholic drinks, etc.
a combination of both. New Life can make its
operations better by providing additional
services of tracking the details of customer
experience.
Business process management theory (BPM)
This theory of operational management theory is associated with analysing the
managerial needs for effective fluctuation and control (Barth, Caprio Jr and Levine, 2012). The
changes and observations helps in managing the process regarding the lookout process and
dividing process that helps in mainly reenergising the departmental structures and theories. The
constant look out process provide potential improvements for collecting the changes with
creating the variations and follow ups in organisational context. This theory is further divided in
following steps such as
Design: Process Design incorporates both the recognizable proof of existing procedures
and the plan of "to-be" forms. Regions of center incorporate portrayal of the procedure stream,
Service Level Agreements, Standard Operating Procedures, and undertaking hand-over
components. Regardless of whether existing procedures are considered, the point of this
progression is to guarantee that a right and proficient hypothetical plan is executed in effective
form.
Modelling: Demonstrating takes the hypothetical plan and presents blends of factors
(e.g., changes in lease or materials costs, which decide how the procedure may work under
various conditions).
Analysis: One of the approaches to analyse forms is to create or buy an application that
executes the required strides of the procedure; in any case, by and by, these applications seldom
execute every one of the means of the procedure precisely or totally. Another methodology is to
utilize a mix of programming and human intercession; anyway this methodology is increasingly
mind boggling, making the documentation procedure hard (Binxiong and Hongping, 2012).
Monitoring: The Monitor Phase is the place procedure execution is estimated. Observing
envelops the following of individual procedures, so data on their state can be effortlessly
observed, and measurements on the execution of at least one procedures can be given. A case of
the following is having the capacity to decide the condition of a client arrange (e.g. requested
4

arrived, anticipating conveyance, receipt paid) with the goal that issues in its activity can be
distinguished and amended. The level of observing relies upon what data the business needs to
assess and examine and how business needs it to be checked, progressively, close continuous or
specially appointed (Broadbent and Cullen, 2012).
The point of process mining is to break down occasion logs extricated through process
observing and to contrast them and a from the earlier procedure show. Process mining is an
accumulation of techniques and instruments identified with process checking. Process mining
permits process examiners to distinguish errors between the genuine procedure execution and the
from the earlier model and in addition to investigate bottlenecks.
Improving or automating: Generally, this makes more noteworthy business esteem.
Process advancement incorporates recovering procedure execution data from demonstrating or
observing stage; recognizing the potential or genuine bottlenecks and the potential open doors
for cost reserve funds or different upgrades; and after that, applying those improvements in the
structure of the procedure. Contrasted with both of the past methodologies, specifically executing
a procedure definition can be progressively direct and in this way simpler to make strides
(Doherty, Horne and Wootton, 2014). The framework will either utilize benefits in associated
applications to perform business activities (e.g. computing a reimbursement plan for a credit) or,
when a stage is too mind boggling to even think about automating, will request human
information. Business rules have been utilized by frameworks to give definitions to
administering conduct, and a business rule motor can be utilized to drive process execution and
goals.
b) Identification of financial needs and evaluation of short term and long term sources of finance
Financial needs:
All business required capital at the initial stage. This is also necessary while operating
businesses. As company is growing rapidly in size and want to expand, they required finance to
set up. There are two types of financing needs that is short term needs and long term needs.
Short-term needs:
Short term needs is considered to the financing needs for a smaller periods which is
generally not more than one year (Gamper and et. al., 2017). In company it is also known as
working capital financing. Corporate service and development manager of New life soft drink
Plc. this kind of financing is usually required as of uneven cash flow in firms, business seasonal
5

patterns and so on. In some case this is utilized to finance each kinds of inventory, accounts
receivables. Also it includes financing the current assets and meet regular expenditures. In this
financing cost is more. Some essential short-term finance sources are used by Corporate service
and development manager of New life soft drink Plc :
 Banks: Bank is considered as financial institution which are to be licensed to make loans
and receive deposits. They also facilitates financial services like currency exchange, safe
deposits boxes and wealth management. Corporate service and development manager of
New life soft drink Plc. Can consider finance from banks as they provide various types of
finance for small project and also to fulfil the short-term financing needs of business.
 Trade credit: This is an crucial tool for financing growth, it means an arrangement to
purchase products and services on accounts not doing urgent cheque and cash payments
(Gitman, Juchau and Flanagan, 2015). This short term source of finance can be used by
Corporate service and development manager of New life soft drink Plc for their business
projects as it helpful for the growth of business, at time when favourable conditions are in
a agreement with suppliers. This does not put more pressure on cash flow.
 Instalment credit: This is a loan where the amount is fixed. In this usually borrower
accept to decide numbers of monthly payments at a particular amounts. In company ,
credit is permitted on the situations of their repayments at continuous intervals. Corporate
service and development manager of new life soft drink plc can used this source of
finance as they do not have to pay large amount at a time they can pay credit amount by
setting the months and also instalments amount accordingly.
Long-term needs:
Long term needs to be known as financing needs for longer periods which is considered
to be for five years and more. It is needed by Corporate service and development manager of
New life soft drink Plc for big projects, PPE and so on. Here, permanent working capital and
fixed capital is financed. In this cost of finance is less and some of important sources of long
term finance that are used by Corporate service and development manager of New life soft drink
Plc are mentioned below:
 Issues of shares: Shares are units that is utilised by limited partners, real estates and
mutual funds. Issued shares are the approved shares that is to be sold and held by the
companies shareholders. Either they are institutional investors, general public and
6

insiders those are shown in annual reports of company. New life soft drink Plc issue
shares by using some steps that is prospectus issue, utilises of application money,
allotment of Pro rata, calls in advance and arrears and Balance sheet. There are generally
two types of share that are issued by company equity and preference shares. Issues of
share are considered to be long term financing needs of New life soft drink Plc as
generally shares can be issued for more periods.
 Issues of debentures: Debentures are kind of debt instruments which cannot be secured
by collateral and physical assets (Hauser, Sathrugnan and Roedler, 2015). These are
backed by reputation and creditworthiness of issuer. Government and firm freely issue
this forms of bonds so that they secure capital. New life soft drink Plc issue prospectus
that invites application including money. And then after investigation, boards of directors
form debentures allotment.
 Loans from financial institutions: Loans is a lending amount by people and company
from another individuals, financial institutions etc. in conditions that money is paid back
including interest at specific time. Small company usually lend money from financial
institutions to meet initial and start up business operation costs. New life soft drink Plc
can also lend money from various financial institutions for big project in which finance
cost is more.
Corporate service and development manager of New life soft drink Plc can use various
types of sources of finance as explained above to fulfil the short-term and long term financing
needs of company.
c) Critical analysis of financial worth, proposal and alternative evaluation
Financial Factors: There are several financial factors that can support the decision-
making regarding choosing a plan which would be profitable for the company. The factors that
can support and clear the doubts of the BOD are Internal Rate of Return (IRR), Net Present
Value (NPV), Break-even point (BEP) and margin of contribution.
Internal rate of return (IRR): This technique is used to evaluate the investment
proposals by the companies, banks, financial institution and other organization.
Non-financial factors: The viability of the project does not only depend on financial
factors but also on non-financial factors (Said, 2017). It is very necessary for the organization to
7

analyse the non-financial factors to judge the feasibility of the project. The non-financial factors
are political, legal, social, environmental, cultural, organizational strategy, human resource etc.
Contribution Analysis: Contribution analysis is used in estimating how direct and
variable costs of a product affect the net income of a company (Ibadoghlu, 2014). It is used to
measure the profitability of a product on the basis of total revenues and totals variable costs
associated with the product line. Contribution analysis aids a company in evaluating how
individual business lines or products are performing, by comparing their contribution margin
dollars and percentage. Direct and variable costs incurred during the manufacturing process are
subtracted from revenue to arrive at contribution margin. This is, therefore, a very crucial
procedure in the growth of a business. Formula for calculating this is as follows:
= (Total revenue – variable costs) / number of units sold
Break even Point: It is the point where total revenue is equal to the total costs. The other
use BEP is to ascertain the relevancy of fixed costs and variable costs with production volume
and revenue. If the turnover is less than the total costs, then it will be loss. Whatever the
company will earn above the BEP point will be its profits. It is refers to the point in which total
cost and total revenue are equal. A break even analysis is used to determine the number of units
or revenue needed to cover total costs (Fixed and variable costs).formula for calculating is as
under:
Fixed cost
B.E.P = ___________________
Contribution per unit
Calculation of Break Even Point
£
Selling Price 3.5
Production cost 1.05
ingredient cost 1
Contribution per unit 1.45
Fixed Cost (£m)
Depreciation on factory extension cost 0.67
Depreciation on new equipment 0.33
8

Interest (8.84*8/100) 0.71
Total Fixed Cost 1.71
Break Even Points (Per Bottle) = Fixed Cost / Contribution per
bottle
1.71 / 1.45
1.18m bottle
Break Even Points (In values) = Fixed Cost / Profit Volume
Ratio
Profit Volume Ratio(%) =
Contribution per unit / Selling
price per unit
1.45/3.5*100
41.43
Break Even Points (In values) = 1.71/41.26
£ 0.041m
Analysis
In case of 18 range of different soft drinks:
From the above corporate data, it has been found that the cash flow is reducing since the
last year performance. In order to recover the amount of 6m the company need to produce the
new 18 types of soft drinks. The primary reason for this is related with the turnover is around
£70m in 2018 and £80m in 2017. It will help to overcome the losses that the company is facing
from the year 2018
Introducing new alcoholic drinks in the market
As Sobia is willing to expand its business in the alcoholic drinks market than it is very
important for the organisation to arrange more lorries so that if new drinks are manufactured by
the company all of them can be delivered on time to the suppliers. The company is facing huge
losses hence it is very important to offer new drinks to the customers so that all the losses can be
covered. If New Life Soft Drinks Plc launches 4 new alcoholic than it will help to overcome all
9

the losses as it will help to attract large number of customers by offering them new and attractive
drinks.
It is suggested to the organisation to make new 4 alcoholic drinks and arrange new lorries
so that all the drinks can be delivered to the suppliers and customers on time.
Payback Period: In capital budgeting, it refers to period of time required to recoup the
funds expended in an investment, or to reach the break-even point. In this, accumulation of net
cash flow is required and the year, in which, it becomes positive, then this year will become
payback period (Karamanis, 2012). Formula for calculating this is as follows:
Accounting Rate of Return(ARR): It is a financial ratio used in capital budgeting. ARR
calculates the return, generated from net income of the proposed capital investment and concept
of time value of money is not taken in this. Formula for calculating this is as follows:
Average return during period
ARR = ___________________________
Average investment
Calculation of Average Rate of Return
Average Rate of Return=
Average Operating Profit After
Tax / Average Investment*100
Average Operating Profit
(£m)= 9.715/2
1.62
Average Investment (£m) = (5+1)/2+2/2+1.84
5.84
Average Rate of Return= 1.62/5.84*100 27.74%
Net Present Value(NPV): It is refers to the difference between sum of psesent value of
net cash flow of expected year and initial investment (Maskell, Baggaley and Grasso, 2016).
NPV analysis is a form of intrinsic valuation and is used extensively across finance and
10