Analysis Of Financial Reports And Sources Of Capital: Bellamy’s Organic Ltd.

Explanation of Financial and Manufactured Capital

The main purpose of this assignment is to analyze the financial reports of Bellamy’s Organic ltd and identify the various important sources of capital which is available to the management of the company. The capital which are available to the business are generally of two types which are Financial and Manufactured capital (Chen and Graedel 2015). Financial capital is referred to as pool of funds which is available to the management of the business. Such capital is used in financing the operational activities of the business. The manufactured capital is either manufactured or purchased by business. Manufactured capital refers to assets which are manufactured by the businesses and the factors such as depreciation, impairments of such assets depends on the principles which are followed by the business as per relevant standards (Flower 2015). Another classification of capital shows that there are four types of capital which are used by businesses in the manufacturing process which are Intellectual capital, human capital, Social and relationship capital and natural capital. The following are discussed below in details:

1. Intellectual Capital: It is a key element in the organization’s future potential earning and includes various expenses which are related to research and development, innovations, human resource and external relationship which are the factors that determine the competitive advantage of an organization. Intellectual capital development is very crucial for any organization’s future. Identifying, measuring and reporting on intellectual capital is also important as it reports about research and developments and innovations in a business and the success factors related to the sameDumay, J. and (Garanina 2013). As per the financial statement of Bellamy Organics, the intellectual capital relates to the development of a new product for the market of china which can be achieved through innovation. The company will be pursuing its business growth objectives through premium quality of goods, innovation and continuing application of sustainable practices. The company needs to engage in innovative activities to further improve the business processes and related products as well.
2. Human Capital: Human capital refers to the employees who are working in an organization. Such type of capital also includes the skills, capabilities and knowledge of the employee working in the organization. Moreover, they are the ones who are responsible for efficient running of the organization. In other words, human capital can be referred to as the relationship between an individual working in a firm and the firm itself as well as the relationship between the firm and the individual stakeholders outside the firm(Ployhart et al. 2014). In the case of Bellamy Organics, the business will be requiring skill employee in order to further develop in the long run.
3. Social and Relationship Capital: It is one of the concepts in the filed of sociology. The definition states that it is capital which includes relationships within an organization as well as those which exists between an organization and its external stakeholders. Social and Relationship capital includes effectiveness of supply chain management, community acceptance, government relations and relationship with competitors. In the case of Bellamy’s Organics social and relationship capital includes the relationship of the company with the stakeholders of the business, society at large, supplier and creditors of the business(Lin 2017). The company needs to have a stakeholder’s policy so that a relation can be built with them. For such purpose the management of the company can conduct an annual open meet with the stakeholders so that they can interact with the management which will help in building relationship.
4. Natural Capital: This refers to the resources which are provided by the environment which can be used for the production of goods now and in future as well(Ouyang et al. 2016). For example, in case of an industry which is depended on minerals, then such minerals forms part of natural capital of the business. In the case of Bellamy’s Organic, the natural capital which the business use is the ingredients which are used by the company to make the baby products and formula. Such resources are used by businesses to create long term value for the organization.

Figure 1: (Figure Showing Four types of Capital)

Source: (Created by Author)

1. In case of financial perspective, control over the asset utilization in Bellamy’s Organic can help the business to reduce wastage of resources and thereby reduce the costs of the products.
2. In case of Customer’s Perspective, gifting and coupon programs will be helpful in meeting the needs of the customers and further build the brand image of the company. Such a program is included in Balanced Scorecard as this will help the business to face competition and also develop brand loyalty at the same time.
3. In case of internal Business perspective, setting up innovative research and development departments for improvement of the business and further development of the business.
4. In case of learning and growth perspective, the employee training program is very crucial as employees are lifeforce of an organization. The employee training program ensures that necessary skills are developed which is required for the business are developed. This will only be benefiting the organization in the long run.

Strategic Maps are visual tools which are used by businesses to communicate strategic plans of the business (Lacerda, Ensslin and Ensslin 2014). The advantages of strategic maps in relation to Bellamy’s Organics are given below in details:

• It can be used by the management of Bellamy’s Organic to visually present clean, simple information which if required can be referred back to easily.
• It can be used to unify the goals of the business in a single strategy so that it can be easily be followed by all departments.
• An effective strategic map helps businesses to bifurcate and recognize each element which is associated with the strategic plan of the business.

The major limitation of using strategic maps are given below:

• The presentation which is provided in a strategic maps often consist of management’s estimation which might not be accurate and thus it affect the accuracy of the strategic maps.

The first things which was required for performing well in this assignment was the analytical skills which I had previously developed in an assignment where I had to analyze a financial statement of company on the basis of which answers were to be given. As I had already done an assignment with analysis of financial statement, I knew what sections and sub-headings to look for in Bellamy’s Organic financial statements. In addition to this, in my class lecture I learned about the four types of capitals which are used in a business and I just need to relate the same with financial statement of Bellamy’s Organic.

In order to understand the assignment to its fullest potential, I would have liked a deeper analysis which as to what are the sources for such capital for the company and how the company utilizes the same. In addition to this, I am aware of the definition of Balanced Scorecard but I am not totally clear about the use of the same and its components. Therefore, when this assignment allowed to develop a balanced scorecard, it gave me an opportunity to have a better understanding of the same which I think I will be able to achieve through this assignment.

Four Types of Capital Used in a Business

The aspects which are covered in this assignment are clear now to me and moreover I get the components of the balance scorecard and its uses but still it needs more reading and research which I feel I will be able to do and grasp the concept. The assignment refined my concepts of the four types of capital which are used in a business and also that of balanced scorecard. I came across a new term which was “Strategic Map of a Company” while completing this assignment.

The part which has been a bit of challenge for me was to develop a balance scorecard of Bellamy’s Organic when I was mot even aware of the concept of balanced scorecard to its full extent. Therefore, I did some reading on balanced scorecard and how the tool works before proceeding in developing one.

It was challenge because I did not understand the components of a balanced scorecard and how it was beneficial to a company. I did not want to copy and paste from net as I wanted to understand the same and then develop the balanced scorecard of Bellamy’s Organic.

In my previous assignment which also required analysis of the financial statement of a company, I learned how to analyze a financial statement. In other word, I understood what I have to look for in case of analysis of financial statement. The analytical skills which I developed in my previous assignment was quite useful in this assignment.

The analytical skills which I developed was useful in this assignment as I had to analyze the financial statement of Bellamy’s Organic and then to identify the different types of capital which is used by Bellamy’s Organic. In case of this assignment, I already knew what subheads I need to read and extract information and also identify what can be considered to be intellectual capital, social and relationship capital, human capital and natural capital.

I learned the importance of presentation and classification of financial data is very crucial in order to promote understanding among the shareholders of the company. In addition to this, I learned that in order to understand any financial information depicted in the statements of accounts whose treatment is not clear can be understood by following the notes to accounts of the company which shows all necessary information and treatments. I learned how to understand the same with the help of the notes to accounts of a business.

Insights on Strategic Maps and Balanced Scorecards

The interpretation of the notes to accounts and financial information is quite useful when it comes to understanding the performance of a company during a particular year. In future, I will also be investing money in shares and stocks and for such a purpose I need the skills for interpretation of the financial statements of the company in order to take decisions. Therefore, it is clear to me that analytical and interpretation skills of a business is quite handy in the long run.

The second assessment was also related to finance and there I learned the various important concepts which are related to finance in a business. This learning can be applied in my future assignment which I believe I will be able to perform better as now I have a clear understanding of the various accounting concepts.

As per my understanding an integrated approach of reporting makes the financial statement more comprehensive and provides detailed insights on the thinking of the management and it is wide used approach in financial accounting.

 In my opinion the best thing any business can do is to move into integrated reporting framework from basic financial reporting. There will be certain changes in reporting structure, however it is to be recognized that the changes are for the betterment of the business process.

This course has taught me analysis of financial statement, interpretation of financial information and analysis of the same. In addition to this, I learned about the four types of capital which are generally used in a business and also how to develop a balanced scorecard for the same. I now understand the components and use of balanced score card in a business which I did not understand earlier.

I further need to improve my analytical skills which can be done with the help of similar assignments. Moreover, I need to understand various accounting standards and their respective treatments for further improvement of my analysis skills.

Reference

Chen, W.Q. and Graedel, T.E., 2015. In-use product stocks link manufactured capital to natural capital. Proceedings of the National Academy of Sciences, 112(20), pp.6265-6270.

Dumay, J. and Garanina, T., 2013. Intellectual capital research: a critical examination of the third stage. Journal of Intellectual Capital, 14(1), pp.10-25.

Flower, J., 2015. The international integrated reporting council: a story of failure. Critical Perspectives on Accounting, 27, pp.1-17.

Lacerda, R.T.D.O., Ensslin, L. and Ensslin, S.R., 2014. Research opportunities in strategic management field: a performance measurement approach. International Journal of Business Performance Management, 15(2), pp.158-174.

Lin, N., 2017. Building a network theory of social capital. In Social capital (pp. 3-28). Routledge.

Ouyang, Z., Zheng, H., Xiao, Y., Polasky, S., Liu, J., Xu, W., Wang, Q., Zhang, L., Xiao, Y., Rao, E. and Jiang, L., 2016. Improvements in ecosystem services from investments in natural capital. Science, 352(6292), pp.1455-1459.

Ployhart, R.E., Nyberg, A.J., Reilly, G. and Maltarich, M.A., 2014. Human capital is dead; long live human capital resources!. Journal of management, 40(2), pp.371-398.

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