MA515 Managerial Accounting: Financial Analysis Report

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MA515 MANAGERIAL ACCOUNTING

Table of Contents
Introduction.................................................................................................................................................2
Body............................................................................................................................................................2
HLW new membership plan and fee structure enhances the planning cash receipt...............................2
Effect of change in plan on sales revenue...............................................................................................3
Key factors of Hawthorn Leisure Works..................................................................................................5
The financial analysis considered by HLW towards continuing the evaluation........................................6
Cash management of HLW differ from the present one..........................................................................7
Conclusions..................................................................................................................................................8
References...................................................................................................................................................9
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Introduction
Hawthorn Leisure Works (HLW) provides several physical fitness services and tennis courts to the
customers. The organization has 2000 members who provide a significant amount of fees. The
membership fees are the main source of the income of the organization. The organization collects the
fees on an annual basis and hourly basis. In an annual basis, an individual, student, and families have to
pay $ 45, $ 30, and $ 10 respectively. The hourly court fees of the organization are relied on between $ 8
to $ 12. The values of the fees are fluctuated as per the season. The organizational senior management
team has faced significant challenges in maintaining cash flow statement due to the difficulty of the
existing membership plan. The top management team of the organization has proposed a new
membership plan. In the new membership plan, there is no option of hourly fees. The customers have to
pay fees on a yearly basis. As per the new membership plan, the individual and families have to pay $
300 and $ 500 annually. The management team of the organization is not been able to increase the
number of profits by the existing membership plan. The new membership plan of the organization can
be increased overall revenue. In this case, the organization can be able to invest a significant amount of
money for the enhancement. By getting whole payment in one time, the organization can be able to
decrease its administration costs.
Body
HLW new membership plan and fee structure enhances the planning cash receipt
The new membership plan of HLW can provide significant services to the people. The organization has
decided to implement its new membership plan in the month of October. The organization has intended
to change the fee structure to increase its cash flow. In a new membership plan, the customers have to
pay a significant amount of money as advance payment. The existing payment plan of the organization is
not providing useful services to the customers. The management of the organization has faced
significant challenges due to the existing membership plan. In the existing membership plan, the
organization has charged hourly fees. The management of the organization is not able to assume
profitability due to the complication of the existing membership plan. The new plan of membership can
be able to make the calculation process of profitability easier than the existing membership plan. The
organization has to implement an effective cash management process for the enhancement.
Administration cost is a very vital factor in the organization. The new membership plan can be able to
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reduce the organizational administration cost. The organization can be able to collect the fees in bulks.
By making the cost management process easy, the organization can be able to take an effective decision
for the betterment of the organization. In the new membership plan, the organization can collect the
number of fees in advance. The advance payment can be able to increase organization profits. As per
the new membership plan, an individual has to pay $ 300 annually. On the other hand, families have to
pay $ 500 annually. In this way, the organization can be able to increase its profitability ratios very
massively. By getting advance payment, the organization can utilize it in the investment process. In the
existing membership plan, the organization has to prepare numerous cash receipts. Due to this reason,
the costs of the organization are increased. But, in the new membership plan, the organizations have to
prepare single cash receipt for one person on an annual basis. The organizational management team can
be able to get significant relief by implementing a new membership plan (Cleartax, 2018).
Effect of change in plan on sales revenue
The organization has 2000 members. Among all the members, the numbers of the family group are
1000. The numbers of students and individual are 500 each. According to the existing membership fees,
an overall calculation of revenue can be formed. In below, cash receipts from the members as fees have
been given:
Groups Calculations Amount In Dollar
Student 500 * 30 15000
Individual 500 * 45 22500
Family 1000 * 100 100000
Total 137500
The calculation of court fees have given below in a structured manner:
Particulars Calculations Amount In Dollar
Prime Season (2000 * 90 %) 120 days * 4 hours
@ $ 12
86400
Non-Prime Season (2000 * 50 %) 120 days * 7 hours
@ $ 8
56000
Off Season (2000 * 30 %) 120 days * 6 hours
@ $ 6
21600
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Total amount 164000
The total amount of receipts is ($ 137500 + $ 164000) = $ 301500.
After implementing the new membership plan, the receipt structure will be as follows:
The numbers of members = (2000 * 70 %) = 1400 members
Calculation of income under the campaign
Particulars Calculation Amount in Dollar
Individual 700 * 250 * 45 % 78500
Family 700 * 450 * 45 % 141750
Total 220500
Receipt in the case of no campaigning
Particulars Calculation Amount in Dollar
Individual (700 -315) * 300 115500
Family (700 -315) * 500 192500
Total amount 308000
Total receipts according to the new membership plan:
Particulars Amount in Dollar
In case of campaigning 220500
Under no campaigning 308000
Total Receipts 528500
According to the new membership plan, some occupancy related assumption has been made. The
assumption has been given below in detail manner:
Particulars Percentages
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Primer season occupancy 90 %
Non-Prime season occupancy 50 %
Off-season occupancy 30 %
Form the above calculation, the benefits of the existing membership plan and new membership plan can
be found. The new membership plan can be able to increase the profitability of the organization. As per
the calculation of the existing membership plan, the organization can be able to earn $ 301500. In the
case of the new membership plan, the organization can be able to earn $ 528500 as revenue. The
implementation of a new membership plan can provide significant assistance to the top management.
Cash receipt is a very vital part of the organization. The organization provides cash receipts to the
members against the annual fees. In this case, the organization has to expend a significant amount of
money for a cash receipt. In the new membership plan, the members have to pay fees on an annual
basis. The organization has to provide only a single cash receipt to the members annually. The new
membership plan can be able to make the management process very easy for the organization. The cash
flow of the organization will definitely be increased by implementing a new membership plan (Inflibnet,
2019). The administration cost of the organization can significantly decrease by the new membership
plan. By saving a huge amount of money, the organization can be able to invest that money for
betterment. The members can also get useful services from the organization. The organization should
implement a new membership plan to increase its efficiency level.
Key factors of Hawthorn Leisure Works
Hawthorn Leisure Works facilitates in the evaluation of fee structure and new membership plan.
Therefore the key factors that are analyzed to be essential for Hawthorn Leisure Works in order to
evaluate the fee structure and new membership plan are also analyzed. The cost reduction is being
identified by the HLW management within the administration. The cost reduction is being identified
after the adoption of a fresh plan of membership. This has been identified after the implementation
because there would not be any need for creating a regular record. These records were directly linked to
the collection of revenue in opposite to the utilization of court through their members of the
organization. in the beginning phase of the implementation regarding the new management plan has to
deal with many issues for acquiring advance payment of fees towards their staff members next to their
membership. on a specific occasion, the advance payments have a direct impact which is negative in
nature. This could be analyzed when there is a fall in the aggregate amount of members. Another key
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factor that needs to be considered in the HLW could be identified as the new membership plan. There
were numbers of benefits which also rendered through the new membership plan. The new
membership plan is the key factor that provides some free services to their members of the institution.
When the new membership plan has been adopted it will be instituted during the new fiscal year. The
new fiscal years would also be the commerce of new season for tennis. This new membership and the
new fee structure could lead towards the enhancement of their planning related to their cash flow. In
this new plan for the membership, the institute would be charging the fee for an annual membership.
The management should not charge the fee for membership along with the fee of court on an hourly
basis. The annual payment will be gathered before handed during the period when the membership
application has been completed (Deloitte, 2019).
The financial analysis considered by HLW towards continuing the evaluation
The financial analysis was made in order to fulfill the evaluation regarding their new plan for
membership. The liquid funds of the management would be evaluated through the calculation of the
liquid ratio. The liquid ratio of the assets could be very beneficial for making most favorable utilization of
the institutions liquid finance. The analysis of the company’s liquid ratio mainly refers to the utilization
of different ratios. These ratios would be very beneficial for the organization. This is because the
management could be very easily able to analyze the ability of their financial health. This analysis would
be helpful in measuring the business ability towards disbursing their debt obligations in a most
appropriate manner. The liquid ratio analysis is very fundamental for both the creditors and lenders.
This would portray a clear picture of the financial health of the organization. Moreover, it also attracts
investors towards the organization in order to invest more amounts. These ratios are mainly focused
upon the organization’s current liabilities (Infor, 2015).
The preparation of organizations’ cash flow statement facilitates in controlling and managing their
existing liquid funds. It is very essential for making sufficient stability among the organizational cash
flows which is both outflow and inflow of funds. The cash flows could be also estimated through the
cash budget preparation. The statement of cash flow is very important for management. This is because
it helps in analyzing the cash position of the business. This analysis is essential to enhance the
productivity of the company. The successful business is the one which maintains its cash flow in a most
suitable manner. The revenue that the business generates from its operations was being analyzed
(TARVER, 2019).
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The Hawthorn Leisure Works moreover form the flexible budget for the organization. This type of
budget could be modified in a due course. The amount of budget is not fixed throughout the annual
year. This could be modified as per the actual level of sales. The flexible budget could change the
production cost when the business is incurring a loss. This flexible budget would be very much suitable
for achieving the expected outcomes of the organization. This type of budget could be followed which
would lead towards the efficiency in the operational level. The level of the operational budget could be
supported effectively by the management of Hawthorn Leisure Works. The flexibility towards becoming
accustomed to the modification is very essential for both manager and owner. The greatest benefit of
the flexible budget is its adaptability. The flexible budget would be very advantageous for the
organization. This is because the flexible budget could be able to put the company in the most suitable
position. Moreover, this type of budget is more beneficial than the static budget. The main reason for
the difference is that the flexible budget is very favorable for the organization to deal with the
challenges that emerge in the marketplace (Intuit, 2019).
Cash management of HLW differ from the present one
The cash management process of the organization is very critical. Hourly basis receipts are providing
dissatisfaction to the organizational management team. The existing membership plan is not providing a
significant amount of profitability to the organization. Advance fees systems are included in the new
membership plan. The organization can be able to utilize the advance fees to improve organizational
services. In the existing membership plan, the management team of the organization has to give receipt
against the advance payment of the members. Due to this reason, the organization will able to decrease
the administration cost after implementing a new membership plan. Cash management is a very
important matter for the organization. Without effective cash management, the organization cannot be
able to provide its service for long term purposes. Effective implementation of the new membership
plan can solve the issues of the cash management process. The organization can be able to use advance
payments for better service purposes (KENTON, 2019).
From the calculation, it has been found that the organization can be able to increase its revenue by a
very high margin by implementing a new membership plan. The prevailing changes within the practice
of cash management of Hawthorn Leisure Works were been analyzed very effectively within this
particular segment. The new membership plan of the institution has led towards the efficient recovery
period of revenue. The management of the organization is very effectively able to gain revenue from
their members in a specific period of time. The management is able to recover its revenue in an
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expected period of time. According to the new plan the members need to disburse advance fee in
opposite to the services that they acq2uired from the organization during the annual year. The new
policy of membership put more emphasis on the onetime cash budget preparation. This is because they
can be able to obtain the revenue at the end of a specific year. Effective management of funds could be
required for the effective execution of the membership plan. The cash management could be able to
make inclusion regarding the cash flow preparation. Through this way, the organizational management
could be able to manage and control its activities that are concerned with cash (KENTON, 2017).
Conclusions
The organization HLW offers several physical fitness services to the existing members. The total numbers
of members of the organization are 2000. The organization provides its services against charging a
significant amount of money on yearly basis and hourly basis. The existing membership plan is creating
difficulties in the cost management process. The organization has proposed a new membership plan for
the enhancement of the members. This new membership plan helps the organization to reduce the
issues in the cost management process. Revenue is a very crucial factor for the organization. The new
membership plan can be able to generate a huge amount of revenue. Similarly, the organization can be
able to implement a useful cost management process. The organization expands a high amount of
money for cash receipts. But, in the new membership plan, the organization has to use only cash receipt
for one single member. In this way, the organization will able to reduce the extra costs. As per the
calculation, it can be said that the total revenue of the organization will extremely increase by the
implementation of a new membership plan. By maximizing the overall revenue, the organization can be
able to increase the amount of investment. The useful investment strategy of the organization can
enhance its image and popularity in front of the members.
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References
Cleartax. (2018). Management Accounting - Meaning, Advantages & Functions. Retrieved from
https://cleartax.in/s/management-accounting
Deloitte. (2019). Strategies for optimizing your cash management. Retrieved from
https://www2.deloitte.com/content/dam/Deloitte/ca/Documents/finance/ca-en-FA-strategies-
for-optimizing-your-cash-management.pdf
Inflibnet. (2019). CASH MANAGEMENT. Retrieved from
https://shodhganga.inflibnet.ac.in/bitstream/10603/4864/11/11_chapter%206.pdf
Infor. (2015). Infor Infocenter. Retrieved from
https://docs.infor.com/help_lawson_cloudsuite_10.1/index.jsp?topic=
%2Fcom.lawson.help.financials%2Fcom.lawson.help.cbug-uwa_10.0.x
%2FL23131162915656.html
Intuit. (2019). 10 Effective Cash Flow Management Strategies for Small Businesses. Retrieved from
https://www.firmofthefuture.com/content/10-effective-cash-flow-management-strategies-for-
small-businesses/
KENTON, W. (2017). Revenue. Retrieved from https://www.investopedia.com/terms/r/revenue.asp
KENTON, W. (2019). Managerial Accounting. Retrieved from
https://www.investopedia.com/terms/m/managerialaccounting.asp
TARVER, E. (2019). The Common Concepts and Techniques of Managerial Accounting Defined. Retrieved
from https://www.investopedia.com/ask/answers/062915/what-are-common-concepts-and-
techniques-managerial-accounting.asp
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