Analyzing Financial Performance: The Cake Collection Shop Report

This report provides a comprehensive analysis of the financial performance of The Cake Collection Shop. It begins with an introduction to financial performance and its importance. The report then delves into various methods for monitoring financial health, including the preparation of financial statements (balance sheet, profit and loss statements, and cash flow statements), aged debtors trail balance, inventory records, and financial ratio analysis (current and quick ratios). Further, it discusses the importance of preparing cash flow statements, examining overheads, assessing marketing expenses, analyzing HR practices, developing dashboards, and conducting competitive analysis. The report highlights how these methods contribute to informed decision-making, risk reduction, and overall profitability. The conclusion summarizes the key takeaways, emphasizing the importance of evaluating company operations and strategies in monetary terms. The report references books and journals to support the analysis.

The cake collection shop

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK ..............................................................................................................................................1
Different useful ways to monitor financial performance............................................................1
CONCLUSION................................................................................................................................3
REFERENCES................................................................................................................................4

INTRODUCTION
In financial term, the process of evaluating the outcome of the companies operations and
polices in the monetary term is known as financial performance (Epstein, Buhovac and Yuthas,
2015). This is a broader term which is used to assess the company complete financial strength
within a specific period of time that is further support to make comparison between other
companies dealing in same industry.
In this report different ways to monitor financial performance of the cake collection shop
is discussed.
TASK
Different useful ways to monitor financial performance
In modern business era, business owner focuses on monitoring financial performance
which support in making valuable decision, reduce risky and uncertainty factors that can lead to
reduce productivity and profitability (Monitoring financial performance, 2019). There are some
ways which help in managing and monitoring financial performance of the cake collection.
These are discussed below:
Preparing of financial statement: Every company required to prepare financial
statements comprising balance sheet, trading P&l accounts and statement of cash flow that
exactly define the financial position and status during an accounting year. These statements tell
the business owner each and everything that are required to be known about company which
enables to make better plans and policies for further improvement. From the balance sheet of the
cake collection shop it has been determined that value of total assets in financial year are 34250
GBP and total liabilities are 16850 GBP which states that company is able to company can easily
pay its current obligations. The profit and loss statements shows that net profit before tax is 4250
GBP and after deducting tax expenses the net profit for year is 3400 GBP.
Preparing of debtors trail balance: The Aged debtors trail balance is mainly prepared to
maintain the record of customer whose money is outstanding. In respective company the
manager use to this trail balance create record of irregular accounts those are not able to pay
outstanding amount (Grewatsch and Kleindienst, 2017). Debtor trail balance also helpful in
estimating the revenue that can be generated from defaulters.
1

Preparing of inventory records: To get better results company invest large amount in
machinery, raw material and useful equipments so they prepare inventory account. This account
define the detail information about total stock purchased, goods in transit and final product ready
for sell. In The cake collection shop, this account is helpful in evaluating the value of machinery
such as computer, oven and mobile phone during financial year. This further support in
monitoring financial performance as it enables to calculate stock turnover ratio.
Analysis of financial ratio and working capital: It is essential to keep a regular record of
working capital so that actual difference between current assets and liabilities can be determined.
Regular calculation of financial ratio like current and quick ratio helps to figure out that either
current or quick assets are able to pay current liabilities. In respective firm, the analysis of
financial ratio is beneficial in determining the total assets that can be easily converted into cash
to meet the business requirement (Oh and Park, 2015).
Preparing of cash flow statements: The cash flow statements describe the total quantity
of cash coming from different activities and total liquid cash going out of business. In The cake
collection shop this statements is supportive to describe the total receivables which are consider
as revenue arising from different activities such as operating, financing and investing.
Examining of overheads: For monitoring financial performance preparing of financial
statements is not enough as manager of company are required to look each and every areas. The
manager of The cake collection shop is required to check weaker region of business and look
overhead expenses such as organic ingredients, interest, telephone, repair expenses deprecation
etc. With the proper analysis manager develop different ways of controlling these expenses in
order to increase overall profitability of shop.
Assessing of Marketing expenses: It is important for company to determine that cost
incurred on advertising and evaluate the total revenue generated from these marketing activities.
In order to monitor financial performance of respective shop manager use to check total money
spend on marketing advertising and promotion and total sales increased from this activity. They
also check the total leads generated and converted into proper sales by analysing the marketing
expenses and revenue generated in that particular period (Wang, Dou and Jia, 2016).
Analysis of HR: In companies when employee turnover rate is higher then, more and
more amount is incurred on hiring best employee, providing training to new ones which can help
them to take company its desired results. In The cake collection shop all HR relevant practices
2

are monitored in proper manner which results in making valuable plans for improving the
functioning of shop. They can hire better sales person, marketing man which can promote shop
in respectful manner that can directly increase the sales for the year.
Development of Dashboards: In business, keeping record of every stakeholder is
beneficial for financial progress in particular time frame. In respective shop manager use to
prepare daily, weekly and monthly dashboards for every employee so that they can evaluate
weather they are loyal towards work and helping in increasing the total profitability (Wang, Do
and Jia, 2016).
Competitive analysis: In present business environment, every company compare
themselves with the competitor so that it easy to determine if they are lacking or not. In the cake
collection company manager are able to compare with other shop that they are capable enough to
control unnecessary expenses and increase revenues. They also add special benefit and additional
discounts to attain the competitive advantage.
CONCLUSION
From the above report, it has been concluded that financial performance is defined as the
process of evaluating the outcome of company operation and strategies in monetary term which
are demonstrated in return on investment, return on assets and value added to company.
3

REFERENCES
Books and Journals:
Epstein, M. J., Buhovac, A. R. and Yuthas, K., 2015. Managing social, environmental and
financial performance simultaneously. Long range planning. 48(1). pp.35-45.
Grewatsch, S. and Kleindienst, I., 2017. When does it pay to be good? Moderators and mediators
in the corporate sustainability–corporate financial performance relationship: A critical
review. Journal of Business Ethics. 145(2). pp.383-416.
Oh, W. and Park, S., 2015. The relationship between corporate social responsibility and
corporate financial performance in Korea. Emerging Markets Finance and Trade.
51(sup3). pp.85-94.
Wang, Q., Dou, J. and Jia, S., 2016. A meta-analytic review of corporate social responsibility and
corporate financial performance: The moderating effect of contextual factors. Business
& Society. 55(8). pp.1083-1121.
Online
Monitoring financial performance. 2019. [Online] Available Through:
<https://dolfinblue.com/the-importance-of-monitoring-financial-performance/>
4