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    Rate this Business Report

    Someone who got B6 in Business please rate this Biz report, its the last years paper.


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    Business Report.

    Lee’s catering firm a small sized business maintains an excellent standard of culinary acumen as a result of its high profile chef, and is currently a leader in the catering field. This conclusive and concise business report will accurately address limitations of financial reports, highlighting the importance for integrity in financial monitoring and bookkeeping, recommended efficient and effective working capital management strategies, that address deficiencies in managing the day to day assets of Lee’s catering firm and finally the report will encompass a wide spectrum of pricing strategies the business can utilise to facilitate and encourage growth and sales ultimately leading to profit and increased market share for the business. By utilising this invaluable information Lee’s catering firm can assess the performance of its catering business and further excel away from its competitors.

    Limitation of Financial Reports

    Financial reports are used by shareholders and stakeholder alike to assess the current position of a business. Not only this, accurate financial statements allow business owners to forecast and predict sales growth for the future. This is invaluable information as it allows Lee to alter the business to meet future trends and changes to stimulate growth and increase profits for the business.

    Capitalising Expenses

    A common limitation of financial statements and reports are the capitalising the expenses of an asset. Capitalising expenses are the additional on-costs or expenses incurred with financing non-current assets. A clear example would be if Lee decides to finance a factory. The extra costs such as solicitor, accountants and stamp duty may be added onto the total value of an asset. For example, If a factory is purchased at 1.2 Million dollars an additional 400000$ may be added onto the value due to administration fees such as hiring a solicitor and paying for stamp duty. Capitalising expenses are ultimately misleading to shareholders and stakeholders alike, If a potential investor wishes to invest in Lee’s business the value of an asset may be greatly inflated due to the capitalisation of the expense. Ultimately capitalising expenses are a limitation that may be present in Financial statements in Lee’s business, they can be misleading an promote a false sense of security for potential investors and the business owner, thus qualified accountants must be vigilant and wary to not capitalise the assets of a business.

    Valuing Assets

    Non-current and current assets ultimately highlight the financial capabilities of a business. However in the 21st century valuing assets has been a major dilemma when taking into account depreciation due to new technologies being implemented in the business environment. A severe limitation of financial reports maybe the incorrect valuing of assets, which ultimately encompasses the idea of not taking into account external factors such as, use, depreciation and new technologies rendering the asset obsolete. Assets may be incorrectly valued when the original purchase price is stated even after 2 years of purchase. Placing the historical costs of assets can be misleading as factors such as depreciation have not been taken into account. For example a high quality stove purchased by Lee for $5000, the asset cannot have the same value 5 years after, due to factors such as depreciation. Assets that have been incorrectly valued pose a threat to future shareholders and stakeholders, as it is ultimately misleading and clouding the original value of an asset. Another limitation faced with valuing assets in a financial report, is the dilemma of valuing intangible assets such as brand, good will and patents. These intangible assets cannot be accurately valued as there is no consistent rule or guideline to accurately value goodwill or existing patents. This also poses a risk since, accountants may be able to inflate the financial capabilities of the business by valuing assets such as goodwill, patents and brand names. Ultimately assets in a business need to be carefully valued, and factors such as depreciation and amortisation need to be taken into account, or else financial statements may be inaccurate and misleading.

    Working Capital Management

    Working Capital management is the effective management of current assets that facilitate the day to day functioning of a business. Current assets such as cash need to be carefully managed to ensure the business has a sufficient amount available to compensate for sudden and unexpected changes in the business environment.

    Control of Current Assets.
    Current assets such as cash and receivables need to be monitored and controlled to ensure Lee’s business has a healthy level of Working Capital.

    Cash

    Cash is the most liquid and valuable asset in a business, available amounts of cash allows a business to meet unexpected situations such as repairing critical equipment that is crucial to the day to day running of a business. Lee’s firm can increase its current level of cash ($1000) by selling its non-current assets and injecting a instanteous flow of cash into Lee’s firm, for example Lee can utilise the sale and leaseback to ensure his business’s procedures are not interrupted, by selling Lee’s factory, a quick and large amount of funds follow into the business, allowing the levels of cash to increase, and increasing the businesses current assets and frees up capital, the sold asset can then be leased back to the business from the new owner. This strategy can successfully be utilised by Lee’s catering firm, however in the long term it may prove detrimental as a monthly lease needs to be paid, thus this may increase Lee’s expense ratio, since he needs to pay a monthly lease to occupy and use the sold asset. Another significant drawback to the sale and leaseback strategy may involve the business ability to not have complete control of its asset, this only applies to NCA such as factories, when leasing, vendors may impose conditions such as the inability to alter factory layout, and this may also hinder Lee’s catering firm’s ability to function.
    Receivables

    Receivables also known as debtors are an invaluable asset to a business. A business needs to effectively manage its accounts receivable to ensure debts are being paid on time by customers. This increases cash flow for Lee’s firm since cash is being injected into the business by customers at a frequent and steady basis. Lee’s receivables adding up to a total of 10000$ can be effectively controlled by employing a factoring firm. By instituting account receivables to a factoring firm, Lee’s catering firm will be able to generate instantaneous cash flow to the business. Factoring firms will pay upfront for the total account receivables although this amount may be lower than the actual value. However this is a minor disadvantage, as funds are instantly available to the business and the dilemma of waiting for payments is eliminated. Furthermore, Lee’s business can increase cash flow if it monitors and controls its debt payment scheme. By incorporating a late payment fee, debtors will be encouraged to pay on time. This will ultimately allow funds to be paid at a quicker date and increase cash flow quickly into the business. Thus by effectively managing and monitoring a the firms account receivables a business can inject a stream of funds into the business.

    Control Of Current Liabilities.


    CL are expenses that must be paid in the short term, the most common include account payable and bank overdrafts.
    Account Payables
    Account payables are the funds a business owes to its supplies. Account payables must be managed carefully and paid within the timeframe. Failure to pay within the set timeframe may damage the business’s reputation and lower its credit rating. A business must prioritise its accounts payable, paying bills too early is a pristine example of inept utilisation of funds. Instead, funds within Lee’s business must be kept as close to the due date as possible, this allows the business to hold onto funds, and address sudden changes in the business environment. A favourable strategy for business’s is to stretch the timeframe of its account payables, this involves paying its account payables as late as possible but at the same time not jeopardising its credit rating and the crucial relationship between the business and its supplier. Thus an effective way to manage account payables and ensure working capital is effectively managed and monitor in the business.

    Overdrafts

    Overdrafts involve a business overdrawing its bank account in order to meet sudden cash shortages or short term ventures. Bank Overdrafts are the last resource a business owner will seek to use due to high interest rates and on costs involved. A business can control its overdrafts by paying as soon as possible. However the most efficient way to avoid overdraft, is to keep funds aside for sudden changes in the business environment. Lee’s firm can also utilise banking systems to manage and incur limits in its business credit card to ensure funds are not over drawn.

    Pricing Strategies

    Pricing strategies involve the way a firm prices its products to cater to its faceted set of products, penetration pricing and demand based pricing.\

    Penetration Pricing.

    Lee’s firm can utilise penetration pricing to generate a high amount of sales and increase market share in a short amount of time. Penetration pricing is ultimately the method of pricing its products lower than competitors, in order to penetrate and generate fast sales and revenue, whilst at the same time increasing market share and market presence. Penetration pricing ultimately aims to undercut competitors and encourage customers to switch over to a business’s products. For example Lee can price its products lower than its competitors to generate a high amount of sales in the short term, but also create long term customers that will contribute to the businesses growth and provide a steady amount of income and profit for the business. Lee can use penetration pricing in the short term to gather loyal customers and then increase its prices to generate more revenue. However a disadvantage to penetration pricing is that in the short term, the business may undergo losses, to the low price of the products; this will lead to less revenue being generated. Furthermore if the products are priced too low, the brand image of the business may be tainted, since the products are deemed to be ineffective, a stigmatism of low price. Thus penetration pricing Is a effective pricing strategy for Lee’s firm.

    Demand Based Pricing

    Demand based pricing is a effective pricing strategy that involves the process of increasing prices on products that generate a high amount of revenue. Lee can utilise this strategy to increase the prices of popular dishes. This will allow him to get more revenue and increase profits since the prices of the dishes have been increased. On the other hand, for products that generate little revenue, they can be priced lower to encourage customers to make purchases. Ultimately demand base pricing is effective as it is able to exploit the demand of a particular product, allowing the business owner to increase the price and gain higher levels of revenue.

    Recommendations.

    By utilising the information above, Lee catering will be able to assess the limitation of financial reports, implement effective WCM strategies and use a appropriate pricing strategies. Ultimately contributing to the success of the business.

  2. #2
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    Re: Rate this Business Report

    Oh btw, this can be used/plagiarised by anyone I dont really care.

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    Re: Rate this Business Report

    Probably band 5 at the highest at the moment.

    I'd probably talk about what I've bolded as I think the report is directing you to this section of the syllabus heading as well.
    working capital management
    – control of current assets – cash, receivables, inventories
    – control of current liabilities – payables, loans, overdrafts
    – strategies – leasing, sale and lease back
    Last edited by BLIT2014; 8 Oct 2017 at 7:51 PM.
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    Re: Rate this Business Report

    Thats also been incorporated into the response.

    I cant talk about all of them, since that would just be too long.

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    Re: Rate this Business Report

    Its a I cant talk about all of them, It would be too long.

    So i just pick 2 from each.

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    Re: Rate this Business Report

    Quote Originally Posted by BLIT2014 View Post
    Probably band 5 at the highest at the moment.

    I'd probably talk about what I've bolded as I think the report is directing you to this section of the syllabus heading as well.
    working capital management
    – control of current assets – cash, receivables, inventories
    – control of current liabilities – payables, loans, overdrafts
    – strategies – leasing, sale and lease back
    My mistake, yeah I think next time Ill include the strategies as well. explicity

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    The pessimistic optimist. BLIT2014's Avatar
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    Re: Rate this Business Report

    The executive summary at the moment could probably do with some work.

    I'd recommend that you have the heading "Executive Summary"

    For example, something like this:

    Executive Summary
    This report sets out to alleviate the new partners concerns about the accuracy of financial reports, and the effectiveness of current management.It will do this through explaining the possible liminitations of financial reports, recommend appropriate working management strategies and evaluating a pricing strategy that the business could use.
    * Then go on to set out what each section of the report will cover



    The recommendations section also seems a bit weak.
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    Re: Rate this Business Report

    Quote Originally Posted by FrequentBF4 View Post
    My mistake, yeah I think next time Ill include the strategies as well. explicity
    I'd recommend something like

    Recommendations for Working Capital Management Strategy - Heading 1
    Definition of working capital
    Leasing subheading 1
    Sales and Lease back subheading 2
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    Re: Rate this Business Report

    Quote Originally Posted by BLIT2014 View Post
    The executive summary at the moment could probably do with some work.

    I'd recommend that you have the heading "Executive Summary"

    For example, something like this:

    Executive Summary
    This report sets out to alleviate the new partners concerns about the accuracy of financial reports, and the effectiveness of current management.It will do this through explaining the possible liminitations of financial reports, recommend appropriate working management strategies and evaluating a pricing strategy that the business could use.
    * Then go on to set out what each section of the report will cover



    The recommendations section also seems a bit weak.

    My teacher (And feedack from trials) says you need to specifically point out the individual strategies/details in the executive summary. Eg, instead of stating just limitations you need to have something like "This report will outline numerouse financial limitations predominalty captilistaing assets, normalised earnings and timing issues..". Also talk about the subsections when talking about the working captial management strategies such as the control of assets/liabilities and the leasing.

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