Historical Performance of a Wine Brewery Business
Discuss about the Asia Pacific Journal of Academic Research in Business.
Present business is a wine brewery that has been operating since two decades. Historically, the brand has well maintained budgeting framework and considering the same it can be seen that the firm has been making good amount of profit during the present date. As per the previous data, it can be seen that the firm’s profit is enhancing by a large amount during the last three years. During 2014, net profit of the firm was 1, 28,258 AUD, whereas the net profit during 2016 has been enhanced almost 64%, showcasing rapid growth of the firm. In addition to this, it has also been seen that, net profit, before taxation, it has also enhanced by a rapid rate depicting good growth of the business. Contrary to this, the firm has been facing large amount of depreciation as well that has proved to be one of the largest reason for loss in the profit margin for the firm.
In order to analyse the financial performance of the firm there are two methods that are utilized by the accountants. These two methods are trend analysis or horizontal and vertical analysis. When it comes to horizontal analysis, then it represents the financial information of the company with its historical information regarding finance of the firm over various periods. On the other hand vertical analysis is performed on the financial statement of the firm for a single period. Though these two are the standard measurement of the financial performance of the firm, there are few drawbacks too. For instance, considering the vertical analysis it can be seen that, it is beneficial for the analysis of the single period and inter-department or inter-firm comparison can be done smoothly utilising this (Sarlin 2015). However, it fails to provide broad picture of the industry wise performance of a firm. On the other hand, when it comes to the horizontal analysis, then it can be seen that information presented in the financial statement of a firm, can be changed that lead to misinterpretation of the trend of the firm. Thus, keeping these drawbacks in mind, in order to analyse the performance of the chosen industry for this report, will be based on the horizontal and vertical analysis of financial information. It will aid the accountants to determine the trend of financial performance of the firm as well as guide them to frame proper plans for the same (Post and Byon 2015).
Horizontal and Vertical Analysis of Financial Information
The above figure represents the timeline of the business plan for the chosen organisation of this report. From the above figure it can be seen that, there would be 5 milestones that will take place between 2017 and 2027. As per the above timeline, it can be seen that the business has been operational since 2017 and till next 10 years it would be growing to gain maturity. The first milestone of the firm was to setup infrastructure and second milestone of the firm is to allocate resources properly in order to gain economies of scale so that the performance of the firm can be enhanced. Third milestone of the firm is to expand the business and fourth milestone of the firm is to increase its earnings. Fifth and sixth milestone of the firm is related with gaining maturity in a phased manner that as per expectation will come within next ten years.
Cash flow of a firm can be explained as the numerical value that appears in the financial statement as the net cash by operating activities (Gitman et al. 2015). It is important because it is the record of cash payment and received during all the period through which idea regarding the revenues and expenses of the firm can be gained. For instance, if the firm is making profit, however, it its receivables become past or uncollected owing to the different reasons, then the firm can go into financial problem (Penman and Yehuda 2015). Thus a strict measurement on the cash flow is required in order to maintain the performance of the firm.
In order to analyse the cash flow of a firm, several ratio are utilised. Some of them are as follows:
It is the ratio expressed as the percentage of a firm’s net operating cash flow to its revenue that entails how much cash has been generated for every unit currency of sales. The relation ratio entails the profit probability of the firm and can ensure the future trend as well (Banker et al. 2016).
It is often described as the net operating cash flow subtracted capital expenditures. It is one of the essential measurements because it depicts how efficient the company is at producing cash. Utilising this ratio investors makes there decision whether it would be beneficial to invest in the firm or not. Thus, the firm will utilise this ratio to measure the cash of itself.
Timeline of Business Plan for a Chosen Organization
It is a form of indirect tax that is being charged by the regulatory authority on the firm. Though it is directly charged on the producer, however, the seller shifts it on the customer by the means of enhancing the price of the products (Storey 2016). Considering the business of this report, there will indirect tax on the firm as the form of sales tax.
The firm of this business possess land, which is expected to have tax by the government. In addition to this, property such as, building and estate the firm need to pay taxes to the government.
For the purpose of certain types of goods and services, business need to provide tax to the government which is known as the excise tax. These type of taxes are paid to the IRS either annual frequency or in quarterly manner via the Form 720 (Schenk et al. 2015).
The selected organisation for this business will export goods and services to different nations, thus it will attract custom duty as well, which will vary depending upon the rules of the importing country.
Independent work charges are those paid by sole proprietors and accomplices for standardized savings and Medicare, in light of the wage of the business. Because entrepreneurs are not representatives, there is no compensation to withhold these assessments from, so independent work impose is the option. LLC proprietors additionally should likewise pay sovereign work assess (Ward 2016). Proprietors of enterprises who function as workers don’t need to pay independent work impose. This article clarifies how independent work assess functions.
Some work charges are gathered, announced, and paid. For this situation, the expenses are paid to the IRS and the Social Security Administration. Employment charges are those paid by the proprietor of a business for a few kinds of duties in light of the gross pay of workers. These duties incorporate FICA charges (for government disability/Medicare), elected/state joblessness, and elected/express specialist’s pay charges. How these expenses function is clarified in this article (Doerrenberg 2015).
For the purpose of the selected business MYOB software is used and it has various benefits as well as the drawbacks too. Some of the advantages of utilising the software is as follows:
General ledger is essential need for every big business; thus, flexible accounting structure is available from the MYOB software that aids the firm to keep its financial management on track.
MYOB provides reports to generate data in Excel with live access to MYOB Greentree data that allows the accountants to avail current data.
Measuring Cash Flow of a Firm
With the aid of the real time information regarding the enhancement in the collection rates and debt control utilising the eCRM module, firm can keep its financial accounting statement on track (Arcega et al. 2015).
Utilising the multi-level and multi-currency consolidation, MYOB aids to carry out consolidation of a business easily.
Disadvantages of the MYOB is as follows:
As per the usage wise, MYOB is one of the great software, however, major issue of the same lies within the data security. It has been seen that 46% of the users argue that the software has inefficient data security that has made it problematic for the firm (Patrut 2015).
MYOB is not an easy software for the novice and it require much amount of expertise in order to complete the task properly. This has posed problematic situation in front of the business.
In order to allocate resources optimally utilising the previous financial report following steps will be utilised:
- Objectives, priorities and aims of the business are agreed for future implementation
- Alternative course of action are determined and evaluated for the business
- Only those options are chose for further evaluation that meets the organizational priorities, objectives and aims
- Utilising the previous year budget definition, resources are allocated in such a way that it enhance the performance of the desired unit or all.
- Utilising the cash flow statement, the business will decide how to allocate the resource in order to enhance the revenue of the firm
- Taking advantage of the revenue statement, the firm will allocate resources in such a way that it can generate much amount of profit through it.
As a new head in the budget, position can be infused in the same. Position will be of different type. Being a wine brewery, there will be owner/general manager, chef, line cook, servers, dishwashers, senior server, and bartenders as well. Cost of the same will be as follow:
When it comes to creating budgets, then there are different policies and organisational requirements that need to be followed. For instance, budget planning hierarchical process does not match with the standard organisational hierarchy, which is utilised for other requirements. Due to this hierarchy utilised to aggregate and distribute data, one might want it to provide different structure (Kibria et al. 2015). At first instance, budget schema is need to be created and then various other department need to be sketched under the same. policies that need to be followed must adhere with the expenditure and the revenue cycle of the budget and update as well as analyse the same for multiple scenarios is essential for the proper growth of the budget.
- Share information with the managers
- Define and evaluate the departmental goals
- Implementation process explanation
- Monitoring process explanation
- Adjustments as per requirement
Falling support – the operations of the firm need to ensure proper collaboration among the workers.
Difficulty in scaling up – firm need to bring in well depicted scale up process for the growth of the same.
Weak cash flow – the firm should ensure cash flow statements are hidden from the employees and revealed only through the budgeting statement.
Falling cash flow – in this regard, the firm need to bring in proper cash flow through exploration of the market.
Different Types of Taxes
Dwindling cash – firm need to keep their incentive structure lucrative in order to enhance the performance of the employees and willingness to work as well.
An accounts receivable aging is an analysis that grades unpaid client invoices and unexploited credit memos by date varieties. The aging report is the primary tool used by collections personnel information in order to regulate which invoices are overdue for payment (Flynn et al. 2015). The reports are organised by customer name, with all invoices for each customer itemized directly below the customer name, usually sorted by either invoice number or invoice date. The aging report is also used as a tool for estimating potential bad debts, which are then used to revise the allowance for doubtful accounts.
Every contingency plan responses a question about a problematic scenario. In this instance, the wine brewery requires each Registered Investment Advisory firm to take on plans that promise that the business move forward and deal justifiably with its customer investors in the occasion that the head of the firm becomes unobtainable through death, serious illness or accident.
The audit trail gives a basic segment in extortion identification. Strict adherence to the production of an audit trail gives data demonstrating the authenticity of exchanges. All business instalments must have a supporting report, for example, buy arranges and affirmed solicitations. Finance and human asset records give a fundamental audit trail. Government controls require keeping records in regards to procuring and end, pay and qualification of the worker to work in this nation. Getting a bank or U.S. Private venture Administration advance requires giving marketable strategies and budgetary articulations. Moneylenders may require some confirmation of income and costs to report the substance of the monetary proclamations (Scoggins and McMasters 2018). An audit trail comprising of cautious record keeping will give the fundamental documentation. A few moneylenders or speculators may require an inspected budgetary articulation. Keeping up clear records of all exchanges speeds the procedure and may lessen the cost of the audit.
It is one of the essential compliance that need to be followed by the selected firm in order to enhance its performance and make it suitable for the growth of the business. The firm is expected to work as per the guidelines of the National Occupational Health and Safety Commission Act 1985, where it will abide by the law passed by the courts regarding the negligence, defamation, trespass and various other rules are applicable (Al-Azam et al. 2015). In order to enhance the acceptability of the workers from different cast and culture, the selected firm will operate under the State and Territory Laws.
Benefits and Drawbacks of Using MYOB Software
Selected firm is a wine brewery that makes it essential for the firm to ensure food safety. With better food safety, firm can provide better quality food o the customers and gain popularity as well. The firm is expected to operate as per the guidelines of the Food Standards Australia New Zealand and Food Safety Legislation, which would enhance the performance of the firm and make it widely acceptable.
Human rights is one of the essential compliance that need to be followed by every organisation for smooth growth of the business and enhance the same with more amount of hiring. The selected business operates in Australia, where the human right is maintained with strong observation from the regulatory authority. The firm operates as per the rules of the Australian human rights commission act 1986 that clearly defines the rules and regulation for the human rights compliance (Durocher and Kay 2018).
Being a wine brewery, the selected organisation utilises statue 311.190 along with 11CSR 70-2.110 report for the proper production and sales of the wine. In addition to this, there is section 311.192 and 311.010.11 report, which is being used by the firm for the secondary licencing of the firm (Burton et al. 2017).
In order to highlight significant issues for priority attention there will be well defined norms for the firm. As per the regulation, if there is issue, then it can be determined through the organization matrix. Due to the matrix, anyone can inform the higher authority regarding the issue and bring in the focus of the management on priority basis.
Cash flow: it is one of the essential ratio that determine the operating cash inflows to cover the operating cash outflows. Utilising the cash flow, capacity of growth of a firm can be determined and the ability of the firm to grow can be measured (Robinson and Sensoy 2016).
Change in business activity: change in the business activity will enable the firm to explore more option or segments to do business and utilising this the firm can become bigger and make super normal profit during long run.
Consolidation: it is essential for the firm to utilise the consolidation so that in case of any enquiry, the firm can provide consolidated financial statement for the assessment.
Expenses and overheads: change in the different expense and overhead will lead to change in the growth prospect of the firm. If the expenses rise, then it would reduce the profit margin and in case of a fall in the expense, there will be rise in the profit margin for the firm.
Labour cost: if the labour cost increases, then it would impact negatively on the profit of the firm. With rise in the labour cost, there will be rise in the operation cost, which will reduce the profit. Thus, in case of the enhanced labour cost, the firm need to increase its cost of products so that the profit does not fall; however, on the other hand, excessive rise in the product cost will eventually reduce the demand for the same (Collins et al. 2014).
Loss: if the firm is making loss, then it would be essential for the firm to operate until its loss does not reach to the shutdown point. Post this point, it would be essential for the firm to stop operating its operation.
Profit: if the firm is making profit, then, it would be ideal for the firm to expand its business and not only keep itself limited to the domestic boundary, rather need to expand the business to over the geographical boundary (Goyal and Florysiak 2016).
Write offs: in case of write offs, firm can enjoy more profit because the firm will be able to shelf their worthless asset at some price that can be introduced to the operation of the firm.
In order to assess the financial management process, the firm can utilise the below mentioned steps:
For all the financial data of the previous year, the firm can utilise the balance sheet and examining the financial statement firm can evaluate its financial position.
Factors that have less than 12 months or less life expectancy are accounted as the liabilities and current asset. Depending upon the operation of the firm, company will try to reduce the value of its inventory and for instance, if its inventory is falling 20% and the sales is rising 23%; then, it can be said that operating cash flow of the firm is managed good (Karim et al. 2017).
Utilising the ratio analysis, company’s current ratio takes place in relation to the past and it aids to determine the financial performance of the firm during the recent years.
Considering the book value, market to book value and other different accounting tools aid the firm to determine its performance.
Reference:
Al-Azzam, S.I., Awawdeh, B.T., Alzoubi, K.H., Khader, Y.S. and Alkafajei, A.M., 2015. Compliance with safe handling guidelines of antineoplastic drugs in Jordanian hospitals. Journal of Oncology Pharmacy Practice, 21(1), pp.3-9.
Arcega, C.K., Datinguinoo, E., Guerra, J., Guno, C., Mayuga, H.J., Villamena, E. and Manongsong, J.L., 2015. Computerized vs. Non-computerized Accounting System of Small and Medium Enterprises in Lipa City, Philippines: A Comparative Analysis. Asia Pacific Journal of Academic Research in Business Administration, 1(1).
Banker, R.D., Basu, S. and Byzalov, D., 2016. Implications of Impairment Decisions and Assets’ Cash-Flow Horizons for Conservatism Research. The Accounting Review, 92(2), pp.41-67.
Burton, W.N., Chen, C.Y., Li, X. and Schultz, A.B., 2017. Association Between Employee Dental Claims, Health Risks, Workplace Productivity, and Preventive Services Compliance. Journal of occupational and environmental medicine, 59(8), pp.721-726.
Collins, D.W., Hribar, P. and Tian, X.S., 2014. Cash flow asymmetry: Causes and implications for conditional conservatism research. Journal of Accounting and Economics, 58(2-3), pp.173-200.
Doerrenberg, P., 2015. Does the use of tax revenue matter for tax compliance behavior?. Economics Letters, 128, pp.30-34.
Durocher, D.B. and Kay, L.A., 2018. Arc Flash Safety Compliance: A Journey Toward Electrical Workplace Safety and Production Reliability. IEEE Industry Applications Magazine, 24(3), pp.48-57.
Flynn, J., Koitzsch, K.E. and Jraige, W.G., Lavante Inc, 2015. OCR enabled management of accounts payable and/or accounts receivable auditing data. U.S. Patent 8,996,416.
Gitman, L.J., Juchau, R. and Flanagan, J., 2015. Principles of managerial finance. Pearson Higher Education AU.
Goyal, V.K. and Florysiak, D.J., 2016. Capital Market Access and Cash Flow Allocation During the Financial Crisis.
Karim, R., Al-Mamun, M.A. and Miah, M.T., 2017. Relationship Between Working Capital Management Efficiency and Profitability: A Comparative Study on Square Pharmaceuticals Limited and Beximco Pharmaceuticals Limited, in Bangladesh. International Journal of Economics, Finance and Management Sciences, 5(2), pp.121-128.
KIBRIA, A., ALTUNBAS, K. and YAGCI, A., 2015. Research and Applications of Stem Cells in Veterinary Medicine. Journal of the Faculty of Veterinary Medicine/Veteriner Fakultesi Dergisi, 34.
P?tru?, B., 2015. Designing a Multi-Agent System for Improving the Accounting E-Learning. In Artificial Intelligence Applications in Distance Education (pp. 47-71). IGI Global.
Penman, S.H. and Yehuda, N., 2015. A matter of principle: Accounting reports convey both cash-flow news and discount-rate news.
Post, C. and Byron, K., 2015. Women on boards and firm financial performance: A meta-analysis. Academy of Management Journal, 58(5), pp.1546-1571.
Robinson, D.T. and Sensoy, B.A., 2016. Cyclicality, performance measurement, and cash flow liquidity in private equity. Journal of Financial Economics, 122(3), pp.521-543.
Sarlin, P., 2015. Data and dimension reduction for visual financial performance analysis. Information Visualization, 14(2), pp.148-167.
Scoggins, C.R. and McMasters, K.M., 2018. The Business of Surgery: How to Lead as Financial Manager. In Surgical Mentorship and Leadership (pp. 237-245). Springer, Cham.
Storey, D.J., 2016. Understanding the small business sector. Routledge.
Ward, J., 2016. Keeping the family business healthy: How to plan for continuing growth, profitability, and family leadership. Springer.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
