APC 315 Report: Financial Strategies for Inventory, Cash Flow, Pricing

This report examines key financial management topics, including inventory control, cash flow optimization, and transfer pricing. It begins by analyzing alternative measures to offering customer discounts, arguing for strategies like automated accounts receivable and invoicing discounts to minimize working capital impact. The report then evaluates methods for effective inventory control, such as ERP software, inventory management systems, and data analytics, emphasizing their role in managing cash flow. Finally, it discusses market-based and negotiated transfer pricing, outlining their advantages and disadvantages in different business contexts. The report provides a comprehensive overview of financial strategies, supported by academic sources, making it a valuable resource for students studying finance.

APC 315
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Table of contents
INTRODUCTION...........................................................................................................................3
Question 2........................................................................................................................................3
a) discuss the alternative measures to offering discounts to customers.......................................3
b) Evaluate the methods which is adopted to manage effective control of inventory and
improve cash flow........................................................................................................................4
Question 3........................................................................................................................................5
Market based transfer prices........................................................................................................5
5. Negotiated Transfer Prices......................................................................................................7
CONCLUSION................................................................................................................................9
REFERENCES................................................................................................................................9
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INTRODUCTION
this report will be based on several questions in which different different methods and answers
will be given. and the question one by using the details of war products of Gimini plc , This
report will determine the production plan which will maximise the weekly profit of the company
and prepare the profit statement showing the profit of the plan that will be yelled. it will also
provide the marketing director of the company that is concerned with the inability to meet the
quantity demand by the customers. The one consideration to overcome this to increase the
number of hours working using the existing machinery by working overtime. such overtime
would be paid at the premium of 50% of about normal Labour rates and variables overhead cost
would be expected to increase in production to Labour cost. This report will also critically
remove the strategies an findings from the quantity and qualitative data that is expected to
increase the contribution and it will also discuss the issues later to work time working that is
rising and it will also provide a solution to resolve the issues. And the another question as well
criticly discuss the alternative measures to offering discounts to the customers that could prove
more effective in reducing the working capital required by the company and it will also critically
evaluate the methods that are adopted by the manager of the company to achieve the efficient
control on their investment an result benefits for improving their flow of cash within the
company and ultimately profit and revenue within the business. In the end of this report well
cover two of the methods and provide critical discussion on methods give up in the question and
right their advantages and disadvantages.
Question 2
a) discuss the alternative measures to offering discounts to customers
Enabling discount with regard to early repayment is an effective mode by which payment
can be received early and on time. However, it may again have an impact over the profit as well
as working capital in terms of declining and affecting profits along with affecting the working
capital. As working capital refers to the capital that is used for meeting day to day operation with
a deduction of current liabilities and an inculcation of liquidity (Le, 2019). Thus, in order to have
a minimal impact over the working capital or to reduce the working capital it is essential that the
company would not offer discounts because offering discounts will certainly receives cash which
is right at some moment but it will again resist the company to have an investment in terms of
some other investment. As the working capital is double edged sword and maintenance of high
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working capital is also not good likewise the lower working capital. Also enabling discount will
have an adverse impact over the profit too because it will lead to reduction of profit. Thus,
instead of enabling discounts company may choose the method of automate accounts receivable
so that payment will be received on due time and will neither affect the profit nor the working
capital.
Automate receivable practice enable the company to have a reduction in the gap between
the accounts receivable and payable (Kruchak and Muravskyi, 2019). This will lead to smooth
operation of the company. Likewise, instead of offering discount at the payment time, making
and enabling discounts at the time of invoicing and performance of purchase transaction will
enable the company to have better management. This is because by keeping the marginal profit a
side and offering discounts will not affect the accounting of company and in the same way by
getting the product at the desired discounted price customers will also make timely payment.
Thus adopting this technique will never affect the profits of the company and sudden raise the
working capital.
In addition to this enabling a method of getting discounts from vendors is also included in
this because through this method the company can reduce its cost of operation and as a result of
that the offering discounts by company will never give a major impact over the company and its
profits. This is because the discounts given to customer will be stabilize with the discounts taken
from vendors. Likewise, by ensuring the regular and smooth flow of debtor receivable company
instead of raising its liquidity make the investment in some other alternative so that better return
can be grabbed.
Thus, it would be right to evaluate that instead of offering discount in order to have timely
repayment would be replaced with the adequate planning and strategy of company in terms of
enabling discount at the time of invoicing or automate debtor receivable. These strategies will
not only assist the company in terms of better management of working capital and non-affection
of profit but at the same time it will also enable timely payment of dues from customers.
b) Evaluate the methods which is adopted to manage effective control of inventory and improve
cash flow
It is necessary to control inventory in business so that cash flow is maintained. Also, if
inventory is not managed or controlled then it can lead to ineffective cash flow. Thus, this may
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highly impact on organisation profits. This is because inventory is directly related to cash. So,
cash inflow and outflow is highly affected due to ineffective control of inventory. Therefore,
there are different methods which can be adopted to manage and control inventory. So, they are
as follows :
ERP software – This is a method which can be adopted by business. In that they can install ERP
software which will help in managing and control of inventory (Sabila, Mustafid, and Suryono,
2018). Besides that, it also allows in managing cash flow and optimize inventory as well. Here,
bar code scanning system can be used by which all inventory is scanned. This enable in
integrating register on point of sale and delivery.
Radio Frequency Systems guarantee efficiency by automating warehouse control end-to-end,
making them popular with companies with thousands of orders to move every day.
Inventory management system- It is a common method through which inventory can be
controlled. Here, the use of inventory system enables in automating overall process. By that
inventory is easily tracked and then stocked. Apart from it, an inventory management system
tracks goods throughout entire supply chain, from purchasing to production to end sales. It
governs approach of inventory management for organization.
Use of data analytics in inventory- this is also a method which can be used to control inventor.
Here, it gives info on basis of real time and then help in analysing accurate and precise data of
demand and supply. By that it becomes easy to scale up inventory and maintain cash flow. Along
with it, right amount of inventory is predicted to meet demand. Moreover, waste of inventory is
reduced with help of real time data access. This helps in improving cash flow as inflow and
outflow of cash is as per demand and supply of inventory (Azarskov, and Lupoi, 2017).
Forecast inventory- The forecasting can be done to make relevant decisions. This can be used in
managing cash flow as well. For that there are certain planning tools available that are :
Quantitative forecasting involves using past sales data to predict future demand. The more
data, the more accurate the prediction will be.
Qualitative forecasting relies on the knowledge of experienced experts to predict demand based
on less measurable factors like potential demand and market forces.
Hence, in this way by use of these methods inventory can be controlled and cash flow is
managedcash
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Question 3
Market based transfer prices
Market based trash transfer pricing is one of the easiest way to transfer the prices when it comes
to let remind the prizes that will be paid between different different divisions of the
organisations. it uses the normal prices or rates of the market that would be paid every products
and goods were brought on the open market. Simply the market change supplies where the goods
passed through the different different division or the single division two the another, work well
for the companies without a lot of subsideries. But what about the big mnc’s that owner plenty
of smaller ones, each of the individual business which has two do their own accounting. And
then scenarios companies or the organisation have to use their transfer pricing, the process of
working out how the best charges different divisions for the goods and services. many of the
people are experts believe that the market based transfer pricing which is basis on the goods
prices of what they have not found on the open market is the best method of pricing.
The market please transfer prices take place when perfectly the competitive within the market
exist for the intermediate product which creates an optimal for both decision making and
performance evolution to set a transfer prices at competitive market prices. a completely my
competitive market take place when product sold are all on the same prices and no individual
buyer or any type of seller can affect or manipulate the market prices. record of transfer prices at
the market prices therefore divisional performance is likely to press present in the real economic
contribution of the region to total company profits.
There are some advantages and disadvantages of market transfer pricing
Disadvantages
 The price is within the market can be fluctuate frequently or temporary of the product and
services.
 There will be no external prices within the market available to that enable the division to
base their prices on.
 A top leaders within the industries cannot use market based transfer pricing as estimating
a market price become more difficult one of the best example is that Coca Cola which is
one of the top most companies all over the world chips their Cola concentrates around the
globe that means there is no particular market exist for the company.
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 When do DIV A Is already selling their products within the market and has our used to
capacity then holding out for the market price for the DIV B Would be sub optimal
becausr as long as it achieved they are variable cost it makes sense becausr it has unused
capacity.
Advantages
 One of the advantages of the market based transfer prices is that add create benefit when
it's difficult to determine the actual amount of profit created by the company before
selling their product and services.
 This method is limited as would can give the rise to the poor cost estimates for long run
marginal costs for the both divisions.
 Thus, this may highly impact on organisation profits. This is because inventory is directly
related to cash. So, cash inflow and outflow is highly affected due to ineffective control
of inventory. Therefore, there are different methods which can be adopted to manage and
control inventory.
 This is because by keeping the marginal profit a side and offering discounts will not
affect the accounting of company and in the same way by getting the product at the
desired discounted price customers will also make timely payment. Thus adopting this
technique will never affect the profits of the company and sudden raise the working
capital.
 Decreasing the corporate access an income in the height access countries by overpricing
goods that are transferred to the countries with the lower tax rates help organisation to
obtain the higher profit margin and they can take competitive advantages within the
market where they’re operating their business and they can show their presence.
5. Negotiated Transfer Prices
Negotiated transfer prices are the prices which are agreed between purchasing and selling
divisions or segments (Clempner and et.al., 2017). Negotiated transfer prices helps in making the
business of Gemini Plc Manufacturers even more workable on the scale of being effective
enough so that the company is able to progress with the transfer price methods. There are various
advantages and disadvantages which are as described below –
Advantages of negotiated transfer prices - The advantages of negotiated transfer price can be
done when market prices are not easily available and when the costs are difficult to calculate for
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the market being provided on the very large basis. This includes that the Green Plc
Manufacturers can take the advantage of the market and through this the analysis of the cost
structure in the market is verified and defined (Geiger, 2017). The major advantage of the
negotiated transfer prices is that the company is able to analyze what they actually want and what
are the conditions through which they are operating. Therefore, the decisions are then taken on
that basis which Gemini Plc Manufacturers then consider. This helps in making the company
more reliable on the data and helps in identifying the cost structure of the market which is being
depicted (Kale, 2017). Also, negotiated transfer price helps in making the process of the
company more effective and efficient which enables proper and significant decision making
which is to be done and which engages in performing along with the market rules and
regulations. Along with this, the main advantage which is incurred is that the manager of the
company gets boosted up for taking the risk in the interest of the division of the market pricing
patterns. This generates awareness about the cost structure of the company which is then
compared to the market structure (Qin and et.al., 2017). Hence, the Gemini Plc Manufacturer has
this advantage of making the process of the company work more on the grounds of what and
how the cost structure of the company can be improved and changed with the transfer of prices
which helps in the negotiation process.
Disadvantages of Negotiated Transfer Price – As there are advantages, there are disadvantages
which denote the other side of what are the ill effects which the process of negotiated transfer
price concerns. There are three major disadvantages which are – Performance measurement can
be distorted which may negotiate the skills of the manager and this makes the biggest
disadvantage of the Negotiated transfer price (Markhayeva and et.al., 2018). The manager skills
can be hampered in the process of actually working for the negotiated transfer price. This creates
and adds on to the negative aspect and creates the weak point in the market structure of the
company which is Gemini Plc Manufacturer. Negotiation transferring of prices consumes more
resources and time which degrades the value of the work and the negotiation process. The
divisional manager of Gemini Plc Manufacturer who has the private information may take
advantage of the other divisional manager of the company and this is the biggest advantage
which the company can have. While these are the most negative points and disadvantages which
are considered to be important so that the loopholes can be covered and this can make the
changes and can overcome what are the improvement processes of overcoming these
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disadvantages (Laubert and et.al., 2018). Also, rather than the economic factors to be concerned
for the negotiated transfer price the performance of the manager can be hampered and can affect
the managers ability which can devalue the process which has been framed.
Therefore, the advantage sand disadvantage of negotiated transfer price of the Gemini Plc
Manufacturers is the way through which the strengths and weaknesses of the pricing pattern is
identified in the company which makes realise what are the processes which are to be followed
and through this what are the changes which can be done to improve the older patterns and move
or generate the new pricing strategies which help in making new decisions which are effective
for the company in a progressive way (Tien and et.al., 2019). Thus, the advantages and
disadvantages of negotiated transfer price also helps in enabling the processes of the company
which aids the purpose of how the process and procedures of the company can be followed
efficiently and in significant manner. The main role is of manager in the company which is
affected by the advantages and disadvantages which creates the problem for the whole company
and this contributes to no less than the process of how the things are to managed in the company
to run smoothly overall.
CONCLUSION
Thus, it is analyzed from the above report that alternative measures were taken in offering
discounts to customers for the Gemini Plc Manufacturers. Along with this, the methods were
adopted to manage the effective control of inventory and how to improve the cash flow. This was
explained in detail which helped in providing the quantitative and qualitative forecasting.
Furthermore, market based transfer prices and negotiated transfer prices were explained with
their respective advantages and disadvantages. Therefore, Gemini Plc Manufacturer helped in
explaining what is the data through the company is able to work in the market and what are the
processes which helped in analyzing various processes and procedures of concern for the
company. It was observed that the mangers of the company were affected most by the process
and the procedures which followed or not followed the rules and regulations transfer prices
methods. This created more difficulties with them as their ability was affected; this was seen in
the description of negotiated transfer price. Along with the, the process of the company as to
what data and the information it provides to the customers and the company working itself for its
progress was measured. This also made sure that the process of the company largely depends
upon the innovative changes and techniques which it grabs from the market place and follows it
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throughout the process of incurring what is to be done along with the success factors of the
pricing and costing methods by analyzing them effectively and efficiently.
REFERENCES
Books and journals
Kruchak, L. and Muravskyi, V., 2019. Automation of receivables accounting based on an
integrated database of counterparties. Herald of Ternopil National Economic University,
(1 (83)), pp.109-118.
Le, B., 2019. Working capital management and firm’s valuation, profitability and
risk. International Journal of Managerial Finance.
Sabila, A.D., Mustafid, M. and Suryono, S., 2018. Inventory Control System by Using Vendor
Managed Inventory (VMI). In E3S Web of Conferences (Vol. 31, p. 11015). EDP
Sciences.
Azarskov, V.N., and Lupoi, R.O., 2017. Inventory control for a manufacturing system under
uncertainty: Adaptive Approach. IFAC-PapersOnLine, 50(1), pp.10154-10159.
Clempner, J.B. and et.al., 2017. Negotiating transfer pricing using the Nash bargaining
solution. International Journal of Applied Mathematics and Computer Science.27(4).
Geiger, I., 2017. A model of negotiation issue–based tactics in business-to-business sales
negotiations. Industrial Marketing Management.64.pp.91-106.
Kale, V., 2017. Agile network businesses: collaboration, coordination, and competitive
advantage. CRC Press.
Qin, Q. and et.al., 2017. Selection of energy performance contracting business models: A
behavioral decision-making approach. Renewable and Sustainable Energy
Reviews.72.pp.422-433.
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Markhayeva, B.A. and et.al., 2018. A responsibility center and transfer pricing. ҚОҒАМДЫҚ
ЖƏНЕ ГУМАНИТАРЛЫҚ ҒЫЛЫМДАР СЕРИЯСЫ.p.79.
Laubert, C. and et.al., 2018. Disentangling complexity: how negotiators identify and handle
issue-based complexity in business-to-business negotiation. Journal of Business
Economics.88(9).pp.1061-1103.
Tien, N.H. and et.al., 2019. Comparative Analysis of Advantages and Disadvantages of the
Modes of Entrying the International Market.“. International Journal of Advanced
Research in Engineering and Management.5(7).pp.29-36.
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