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MANAGE FINANCES

Table of Content

1.0 Introduction 2

Assignment 1 2

1

1.1 Purpose of conservatism 2

1.2 Analysing two key of accounting standard that are directly relevant to gathering

revenue data for statutory recording and reporting

3

1.3 Financial statement comprise according to AASB 3

1.4 Features of off-shelf business management and accounting software products 4

Assignment 2 5

2.0Ratio analysis (Biz ops Enterprise) 5

2.1 Biz Ops Enterprise’s current financial position 7

2.2 Need of a Budget plan 7

2.3 Budget Plan analysis 8

Assignment 3 8

3.1 Forecast of Income statement 8

3.2 Forecast of Cash Flow 10

4.0 Conclusion 12

References list and Bibliography 12

1.0 Introduction

In this assignment a discussion has developed on the accounting principle of Australia and how

it works on the practice field. Furthermore, with the help of ratio analysis a calculation has

developed to identify the strengths and the weakness of the Biz Ops Enterprise. A forecast has

made on the financial performance statements to analyse the company’s growth and chances of

profitability.

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Assignment 1

1.1 Purpose of conservatism

Conservatism is also known as prudence in accounting. In this principle of accounting it says

record all anticipated losses and expenses and ignore all anticipated gains and incomes, this is

known as conservatism or prudence (Erasmus et al. 2016, p. 998). The concept of convention

future losses are losses and future gains perhaps not the gains.

According to the conversation concepts it stated that the closing stock is valued on the basis of

the cost price or market price whichever is lower. Provision for bad debts and doubtful debts are

maintained. The purpose of conservatism is that, this policy understates rather than overstates

net assets and net incomes which help the company to play safe.

1.2 Analysing two key of accounting standard that are directly relevant to gathering

revenue data for statutory recording and reporting

Key accounting standards that are directly relevant to gathering revenue data for statutory

recording and reporting are:

AASB 118 REVENUE - According to the Accounting revenue standard section (118), each

company needs to produce an income statement and company every company needs to follow

the revenue standard.

Revenue is the income that rises if the cost of goods sold got lower of the firm. The accounting

revenue standard is applied in each revenue transaction of a company. Hence, the company

needs to follow each standard to prepare the cash flow, income statement and balance sheet.

The revenue shall be measured at the fair value of the consideration received or receivable.

1.3 Financial statement comprise according to AASB

Financial statements according to AASB comprises of :

1) Statement of financial activities at each of the year (Balance Sheet).

2) Annual Statement of profit and loss for each financial year.

3) Annual income Statement of the cash flows for each financial year.

4) Changes of earning per share for a financial year.

a) The balance sheet helps the company to identify the financial growth of a particular period. It

also helps the shareholders to analyse the financial valuation of the company. The balance sheet

consists of total assets, which include fixed assets and current assets and total liabilities. Fixed

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assets are those assets which effect are long term and can be converted quickly into cash;

examples of it are plants, furniture, heavy machinery etc.

Current assets are those assets which can be converted into cash within one year, example of it

are cash, debtors etc.

b) Profit and loss statement- Company’s profit and loss statement shows the financial

performance of the business. It shows the net profit or net loss of the company. It takes only the

revenue items, revenue incomes and revenue expenses and not capital incomes or expenditures.

c) Cash flow - the cash flow statement allows the company to measures the total cash inflow and

cash out flow of the company for a particular period of time.

d) Changes in equity- Retained earnings and Earnings per share are main two variables of

changes in equity. It shows the details of changes in the owner's equity over a particular period

of time.

1.4 Features of off-shelf business management and accounting software products

Off the shelf software’s are common nowadays. The example of the the off shelf software are

spreadsheets, database applications, desktop related application, web design. Uses of these

applications are:

Word processing application is generally used for the writing reports, memoranda, letters to the

supplier and customers.

Spreadsheet application: This application is helping to keeping company’s various accounts,

Invoice control system etc.

Database application is helping the company to maintain the customer records , sales records .

Business needs vary from one organisation to another because different organisations have

different requirements. Therefore, the continuous improvement of process and techniques

effectively run the business is must to survive in the competitive environment. Owners of the

businesses always step out of their normal day to evaluate whether or not they are being

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effective and efficient , how they can improve their inefficiencies and plan for the future to

cope the challenges ahead in the future, because the competition is so strong and huge everyone

or rather everybody wants perfection. There are many companies which offer this kind of

software’s like QuickBooks, Microsoft Dynamics, MAS90 etc. These software’s helps in getting

instant insights into your finances, get complete visibility of the business, monitor key trends in

the businesses, easy invoice and estimates, track sales and expenses.

Advantages of the off the shelf software’s are:

a) Economical it is not too much costly

b) Contains many features more than you need.

c) Upgrades may be provided for free or at reduced price.

Disadvantages of the off the shelf softwares are:

a) Higher customisation fees

b) Slow to adapt or change to industry needs.

I will purchase Quickbooks software because quickbook is very simple and easy to use software

for business management purpose. It helps in sees who owes money and send them reminders,

gets instant insights into the finances, gives complete visibility of the business (balance sheet,

profit and loss account and tax details), easy invoicing and estimates, online banking integration,

tracks sales and expenses.

Assignment 2

2.0Ratio analysis (Biz ops Enterprise)

Ratio 2014 2015

Net profit

margin 0.05794187999 0.04453064594

Net profit ratio 4.406172899 3.386013512

Cash Flow

return on assets 0.02797317985 0.03429950787

return on 2.51047409 1.913288288

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owner's equity

Table 1 : ratio analysis

(Source: Investors.hpe.com, 2016)

Analysis of Ratio

Net profit margin

The net profit ratio percentage is generally measured after the tax profit (Sharpley et al. 2015,

p.885). Therefore,all the tax related expenses are not concern for a net profit margin ratio. In

2014, the net profit ratio of Biz Ops Enterprise is 4.40. It is indicates a positive movement of net

profit. The company was able to decrease the long term liabilities in order to maintain the 4.40

net profit ratio. On the other hand, in 2015, the company’s net profit decreased from 4.40 to

3.38. That indicate the company has not able to minimise the operating expenses during 2014 to

2015 financial years. It is important for Biz Ops Enterprise to minimise the current liabilities

and short term liabilities in order to increase the net profit ratio. Decreased net profit ratio will

not make a positive feedback to the shareholders of the company. Hence, the share price may

fall down.

Net profit ratio

The net profit ratio percentage is generally measured after the tax profit (Sharpley et al. 2015,

p.885). Therefore,all the tax related expenses are not concern for a net profit margin ratio. In

2014, the net profit ratio of Biz Ops Enterprise is 4.40. Its indicates a positive movement of net

profit. The company was able to decrease the long term liabilities in order to maintain the 4.40

net profit ratio. On the other hand, in 2015, the company’s net profit decreased from 4.40 to

3.38. That indicate the company has not able to minimise the operating expenses during 2014 to

2015 financial year. It is important for Biz Ops Enterprise to minimise the current liabilities and

short term liabilities in order to increase the net profit ratio. Decreased net profit ratio will not

make a positive feedback to the shareholders of the company. Hence, the share price may fall

down.

Cash flow return on assets

Cash flow return on assets is measured company’s efficiency of a particular period (Brand et al.

2014, p.465). The Biz Ops Enterprise using cash flow return on assets to measure the future cash

flow of the company. In 2014, the cash flow on assets was 0.02. On the other hand in 2015 the

company was able to increase the the cash flow return on assets. That signifies the company

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maintains a certain cost control and paid all the outstanding expenses in order to increase the

future cash flow over the period. Furthermore, a positive cash flow return on assets ratio also

helps the company to Measure Company’s earning quality.

Returns on owner’s equity

Return on equity is basically how much profit company generated with the capital of the

shareholders (Erasmus et al. 2016, p. 998). Therefore, a higher return on owner’s equity is

always a favourable condition for a company. In 2014, Biz Ops Enterprise return on owner’s

equity ratio was 2.51. The Return on owner’s equity was decreased from 2.51 to 1.91 in 2015.

That decrease indicating the company was not able to increase the earning per share. In addition

to this the company has faced some difficulty in order to maintain a good amount of retained

earnings. It is important for the company to increase the profitability to increase the market

share price. A higher market share price will help the company to provide higher dividend price

to the company. In addition to this the company also can generate higher retain arning by

increasing the shareholders capital.

2.1 Biz Ops Enterprise’s current financial position

Biz Ops Enterprise is not performing well in 2015 financial year. The reason behind the under

performance are discussing billow

Working capital of the company is keep decreasing from 2014 financial year. Working capital

helps the company to pay all the expenses day in day out business. It is important for the

company to pay the creditors amount of time in order to minimise the current liabilities. On the

other hand it has seen company was unable to increase the net profit margin. This is also

affecting the company’s annual gross profit.

2.2 Need of a Budget plan

A proposed budget plan is very much useful for a company’s financial manager. In 2015, Biz

Ops Enterprise was unable to increase the gross profit and sales. Therefore, to get a bank loan

and stay in challenging business it is very much necessary to minimise the certain cost and

operating cost. On the other hand, a budget plan helps the company to allocate the money

properly. In some sector

AUD (2016) AUD (2016)

Income 150000

Expenses

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Light 1050

maintenance 512

Salary and wages 20000

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expenses 2500

MArketing expense 25000

Other operating

expenses 1500 50562

Profit 99438

Table 2 : Budget plan

(Source: Investors.hpe.com, 2016)

2.3 Budget Plan analysis

A proposed budget plan has been developed for the company. It will helps the company to make

a forecast. A proposed budget helps the company to identify the income and the expenditure.

The estimated net income for the next financial year will be AUD 150000. The proposed budget

is emphasis on the employee's salary and wages. It is important for a company to give higher

salary in order to achieve the sales target. On the other hand, proposed budget help will help the

company to minimise various expenses like maintenance and light. A estimated of AUD 99438

gross profit has been identified during the next financial year. It is important for the company to

minimise the operating expenses and cost control in order to achieve the net profit target.

A business plan needs a proposed budget plan. It is important to know the fund allocation

procedure. Moreover, certain accounting rules and regulation needs to maintain in order to

produce a quality budget plan. With the help of various accounting tool, a company can get a

look of employee’s salary structure, cost of production, operating expenses. An accounting tool

will help the companies’ entrepreneur to cost reduction (Investors.hpe.com, 2016).

Assignment 3

3.1 Forecast of Income statement

Particulars 2016 2017

Sales 113255 120354

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Cost of good sold 79576 76408

Gross profit 33679 43946

Operating expenses

Development 3502 3486

General and administrative cost 12353 11942

Restructuring 1017 1116

Other operating cost 2416 2378

Total operating expenses 19288 18922

Operating income 5471 5125

Other income or expense -739 -639

Profit before taxes 4732 4486

Provision for income taxes 178 125

Net income from continued business

operations 6554 1616

Other -963

Net income 2333 1616

Net income available to common

shareholders 4554 3398

Earnings per share

Basic 2.51 1.91

Diluted 2.48 1.88

Weighted average shares outstanding

Diluted 1839 1791

EBITDA 10032 11319

Table 3 : Forecast of income statement

Source : (Source: Investors.hpe.com, 2016)

Analysis

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On the basis of the previous year income statement, a proposed income statement has been

developed. It will give Biz Ops Enterprise to known a brief idea about the expenses and the

EBITDA. This forecast will help the company’s accountant in order to minimise the operating

expenses. Furthermore, a proposed budget and a forecast income statement will help the

company to get a bank loan. It is necessary to provide a proposed budget and income statement

for getting a loan.

3.2 Forecast of Cash Flow

2016 2017

Cash Flows From Operating Activities

Net income 5554 3398

Depreciation & amortization 4061 2194

Investment/asset impairment charges

Deferred income taxes -700 -100

Stock based compensation 709 494

Account receivable 572 -28

Inventory -330 339

Accounts payable 31 -140

Income taxes payable -137 -727

Other working capital -4549 -1284

Other non-cash items 2279 1603

Net cash provided by operating activities 5749

Cash Flows From Investing Activities

Investments in property, plant, and equipment -3603 -2083

Property, plant, and equipment reductions 424 213

Acquisitions, net -2398 -2198

Purchases of investments -259 -273

Sales/Maturities of investments 302 291

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Net cash used for investing activities -5534 -4150

Cash Flows From Financing Activities

Debt issued 21758 19275

Debt repayment -15867 -17130

Common stock issued 371 157

Common stock repurchased -2883 -1755

Excess tax benefit from stock based

compensation 145 29

Dividend paid -1250 -1089

Other financing activities 70 -12118

Net cash provided by (used for) financing

activities 1344 -11731

Net change in cash 2300 -10132

Cash at beginning of period 16133 18768

Cash at end of period 17433 4636

Free Cash Flow

Operating cash flow 6590 5249

Capital expenditure -3603 -2083

Free cash flow 2887 3666

Table 4 : Forecast of cash flow

Source : (Source: Investors.hpe.com, 2016)

Analysis:

With the help of the previous year cash flow a forecast analysis has been developed. A positive

impact has been developing. The company needs to minimise the liquidity in order to maximise

the company’s net cash flow. Furthermore, in this proposed cash flow help the company to

identify the investment activity over the next financial year. Furthermore, a forecast of cash flow

helps the company’s accountant to maximise the operating profit. It is important for the

company to reduce the per unit, hence it is important to follow the proposed cash flow.

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4.0 Conclusion

I this assignment a discussion have developed on the accounting principle and practice. A

templet has been provided in order to give a proper idea of the accountancy principal.

Furthermore, a proposed budget has been provided to a company to identify the strengths and

the weakness. Certain solution had been provided to the company in order to maximise the the

profit and cash inflow.

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References list and Bibliography

Brand, W.A., Coplen, T.B., Vogl, J., Rosner, M. and Prohaska, T., (2014). Assessment of

international reference materials for isotope-ratio analysis (IUPAC Technical Report). Pure and

Applied Chemistry, 86(3), pp.425-467.

Brand, W.A., Coplen, T.B., Vogl, J., Rosner, M. and Prohaska, T., (2014). Assessment of

international reference materials for isotope-ratio analysis (IUPAC Technical Report). Pure and

Applied Chemistry, 86(3), pp.425-467.

Drivelos, S.A. and Georgiou, C.A., (2012). Multi-element and multi-isotope-ratio analysis to

determine the geographical origin of foods in the European Union. TrAC Trends in Analytical

Chemistry, 40, pp.38-51.

Erasmus, S.W., Muller, M., van der Rijst, M. and Hoffman, L.C., 2016. Stable isotope ratio

analysis: A potential analytical tool for the authentication of South African lamb meat. Food

chemistry, 192, pp.997-1005.

Marin, R.C., Sarkis, J.E. and Nascimento, M.R., (2013). The use of LA-SF-ICP-MS for nuclear

forensics purposes: uranium isotope ratio analysis.Journal of Radioanalytical and Nuclear

Chemistry, 295(1), pp.99-104.

Roe, Y.L., Zeitz, C.J., Mittinty, M.N., McDermott, R.A. and Chew, D.P., (2013). Impact of age,

gender and indigenous status on access to diagnostic coronary angiography for patients

presenting with non‐ST segment elevation acute coronary syndromes in Australia. Internal

medicine journal, 43(3), pp.317-322.

Sang, X.F., Gensch, I., Laumer, W., Kammer, B., Chan, C.Y., Engling, G., Wahner, A., Wissel,

H. and Kiendler-Scharr, A., (2012). Stable carbon isotope ratio analysis of anhydrosugars in

biomass burning aerosol particles from source samples. Environmental science & technology,

46(6), pp.3312-3318.

Sharpley, C., Wark, S., Hussain, R., McEvoy, M. and Attia, J.,( 2015). The Influence of Social

Support on Psychological Distress in Older Persons: An Examination of Interaction Processes in

Australia. Psychological reports,117(3), pp.883-896.

Website

Investors.hpe.com,(2016), investors.hpe.com avalible from :/financial/annual-reports [ accessed

on 8 Augest, 2016]

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