Investigating Financial Control Essay

Task iThe three different types of follows atomic number 18 fixed exist, protean exist and total cost. For on the whole of the diverse types of costs there are also dissimilar calculations to work out each type of r level(p)ue. Fixed cost does not change no matter how much they produce, even if the business produces 1 or 1,000,000,000 it pass on ever stay the selfsame(prenominal). Examples of fixed costs are rent, salaries, rates and loan payments. Variable cost change with the level of production. In value to work out the total inconstant cost you take for to multiplication together the quantity and the inconstant cost. Also, to determine the total cost you pass on to add the fixed cost and the variable cost. The meaning of Start up cost is the money you need to start up the business. Running cost almodal values varies because of the level of stock changes and you have to pay for workers.In the case of Kiren and Zaiba, salaries are employ as a fixed cost because they dont change with the level of output. Heating and lighting are utilise as a variable cost because the variable cost change with the level of production. The sum Fixed cost + variable cost = total cost which is 6,000 in the scenario.The definitions for the following linguistic communication areProfitWhat is left when all costs incurred in making and marketing a product are deducted from the revenue gained from that sale. It acts as the reward to the entrepreneur, commonly the owner of the business, who has provided the capital. It is usually the net hit after tax which represents the surplus for the owners of the business and is paid as a dividend to shareholders. Profit maximization is seen as one of the major objectives of a business, although it is more likely to be an objective for the investors in a business, than for its managers or employees. It might be for those groups that profit acts as a constraint, season higher sales orhigher wages and salaries are more important objectivesNet profitThis is the amount of sales revenue that a business earns less all the costs involved in achieving that revenue, including both direct costs and expenses. The net profit figure represents the figure for profit before taxation or a dividend are further deducted, and shows how successful a business has been in generating profits from its trading activities.Gross profitThe figure obtained on the profit and loss report card when the cost of goods sold is deducted from the sales revenue of a business, but it does not take into account any of the expenses of running a business such as wages, distribution costs or administration costs.Fixed costVariable costTotal costRent 800Heating and lighting 200Salaries 1400 announce 50Insurance 210Administration 50Rates 150400 CDs 2800Loan repayments 290Telephone 50285031506000Task 2Kiran & Zaiba analytic thinkingIn task two I used excel to work out the break even point, at diverse costs. The fixed costs were the same because I only have done break even for one month. The quantity is going away up in one hundreds. I calculated the variable cost by multiplying the quantity by 6 which came out to be going up in six hundreds. I calculated the total cost by adding the fixed cost by the variable cost in this case it was increasing by six hundred. To calculate the sales revenue, I had to five-fold the quantities by 12, which was increasing by 1200. To calculate profit or loss, I subtract sales revenue from total cost. According to the information on my slacken Kiran & zaiba have to swap 1000 CDs to break even. Break even is when the cost is 6000 and the quantity is 6.In the following table I have changed the fixed cost to 6950 because the following values change magnitude the rate increased to 300 also, the telephone increased to 100, advertising to 125 and the lighting and heating increased to 425.Using the contributing method I leave calculate the following data to achieve how much CDs will be essential to break even. In order to do this I will have to use the following equation 6950 divided by 6. The sum equals 1158. So they will have to sell 1158 to break even. This means that they will have to increase sales.Advantages of break even analysisDisadvantages of break even analysisBreak even can be used to predict profitIt price suddenly changed it wouldnt take it inBreak even can be used to determine financial needsFor example, If petrol prices go up the break even will not show the increase.Keep track of profits and losses.It is a forecast which means that the data is predicted.Gives you ideas for selling prices (if you made a lot of money at that period of time).It helps to calculate profitsHelps to make decisions on pricesI think that break even is very useful becauseIt assists you to figure out your profitHelps you by giving you assumptions of pricesIt is extremely significant in that if you are pickings into consideration to applying for a loan.Gives you a clear impression of pricesTASK 3Analysis for cash hightail it forecastI will now hold the cash flow forecastI have now prepared an annual cash flow forecast using monthly dataI have also included the loan in January. The table looks like this for a regular cash flow forecastimage00.pngThe sales become guerrilla due to an immense amplify in downloading and sharing music. The irregular cash flow forecast should look like thisimage01.pngCash flow forecast is extremely significant and has many uses. For example, it helps the bank manager to keep up to date it helps managers to plan ahead and it also determines if there is a problem with the cash flow by resolving the difficulty.Regular cash flow showsThat there is not a problem with the cash flow because the opening bank equaliser is always increasing, so the profit is rising.The main objective for a cash flow forecast is to see whether there is a profit or loss. Currently, I have identified that with the regular cash flow there is not a problem becaus e all the numbers are increasing, meaning that a profit has been achieved. occasional cash flow forecast shows thatThe opening bank balance starts with zero it then rises immensely in February to 11300. Then it starts to go down steeply all the way to December, leaving the opening bank balance drawn to a close with -37470. This is bad for the business because now they are not making a profitThe total cash inflows, starts of with 18000 in January. Then it starts to reduce in each and every month, until it comes to December where it increases to 2700 from November. This is consequently leading them to a loss.The total cash outflows seam from low to high in that, in January it is 6700 and then increases enormously to 9500 in December.The Implication of the problem is that there is an increase in people who tend to download and share music. This will inevitably affect their sales. This will also consequently make Kiran and Zaiba fall to lose a profit. Because of this problem Kiran and Zaiba are making a loss of 43,920.The implication to the problem is that, In order to reject the lost, I recommend thatThe other way around this is to increase the number of quantities, in order to sell more and increase profit. Or, lower maintenance costs and launching a download website so you can attract costumers worldwide.Task 4The documents which Kiran and Zaiba will need to sequence sales and purchasing from order to receipt of goods areIssues by the purchaserIssued by the sellerDelivery note- accompanies the goods. Is signed by purchaser as proof of delivery.Sales invoice- gives full details of goods, prices, discounts, VATCredit note- issued if goods are returned or to adjust any over- darts on the invoice.Statement of account- summarises all transactions and states balance owning.Remittance advice summarises the account for return with cheque paymentCash receipt- issued to confirm cash payment has been receivedPurchase order- lists items required and price for each.Good s received note- lists items received.buyer tells seller if any shortages or damageCheque or electronic transfer- to pay balance on statementI am now going to describe the manual and electronic ways of recording financial transaction that Kiran and Zaiba could usePredominantly, most Kiran and Zaibas transactions are mostly recorded electronically because they are developed either by an electronic cash register or by computer. The advantage of recording transaction for Kiran and Zaiba indicate that any think documents are printed mechanically. Kiran and Zaiba may regard to take the alternative route by considering keeping manual records which are then kept by businesses that would not go through it valuable to buy a cash register or use a computer system.Even people who receive payments in a clients home- such as service engineers- are now more likely to record the transaction on a laptop than carry a receipt book with them.Kiran and Zaiba want and need to prevent fraud because th ey are a minute business. To terminate these frauds they will have to haveA serious-minded staff selection which are trustworthy to procedure which includes character references.A whistle- blowing scheme where workers are compensated for reporting fraud. The system should guarantee that information is treat confidentially.An unambiguous policy on dealing with fraud. Scam is usually considered to be gross misconduct (which means disgusting bad behaviour) for which workers can be open fire instantaneously as part of the disciplinary procedure.Task 5The strengths of a cash flow forecast are thatIt helps the bank manger to keep up to dateIt records how much money you haveIt gives you ideas to plan aheadDemonstrates how much money you have at the present timeThe forecasts of sales and cash flow, and therefrom life-and-death abundance of profit, will be vital on which the prospective bankers will assess the upcoming feasibility of the business. It follows that these forecasts will co me under crucial inspection and significant judgement. The importance of cash inflows is so you distinguish how much value of money is going towards the inside of a businesses bank account at a particular time. An example for this could be the income Kiran and Zaiba make for selling CDs.The strengths of break even areIt helps you see where you have an increase or decrease in your profit.Keeps you informedBreak even engrosses discovering what would occur if there were changes to cost of revenues. The types of questions the boss would ask areIs it possible for Kiran and Zaiba to increase sales by 5% and still make a profit even if sales fall?If by reducing sales by 10% will this effect Kiran and Zaiba? dictate if Kiran and Zaiba shift of to an inexpensive property, how would this affect our profits?There is many different ways in which, to record this information. For instance, Manual recording principally used by businesses that, tend not sense that it is advisable to buy a cash regi ster or computer. (For example, If Kiran and Zaiba dont sell as much CDs then, they may find it simpler to record these manually). Also, there is an alternative route which is, to record by electronically, which means that associated documents are printed mechanically. This could be beneficial if Kiran and Zaiba are selling lots of CDs. Cash flow indicates the amount of money received and spent over time. This is significant in that, you will then be apprised of how much income is in the bank.If Kiran and Zaiba have an enormous demand they can amplify there sales because there are not adequate CDs. They could charge more which is better for the business because they are making more profit. But if there is too much CDs then they could reduce prices to sell more, thus allowing them to make profits.Just to add, the main objective for any business is to make a profit. So, Kiran and Zaiba will want to do so. To do this, Kiran and Zaiba may want to take this into consideration that they may want to reduce their sales in order to sell more and to attract more costumers.