...Analysis of different alternatives available to Guillermo Analysis of different alternatives available to Guillermo Guillermo's Furniture Store Scenario provides the expedient case study for studying the concept of financial principle in the competitive economic environment. The current paper discusses the approach of financial management with correct application of ideas to create value and economic efficiency through analysis of financial transactions to establish the position of Guillermo in market. Current Project, High-Tech Project and the Broker Project are three alternatives available to the company to invest in right project. Financial principles, financial markets, and business ethics form a foundation for the financial decisions that managers routinely make. Guillermo’s case study shows that the arrival of new competitor from oversees have put unexpected challenges on the financial condition of the company. Guillermo has three alternatives to approach the business with new insight and action. Incremental costs and benefits are the basis for choices among alternatives where transactions have at least two sides, with each party considering their self-interest. Concept of an opportunity cost can be applied to differentiate between the value of one action and the value of the best alternative. He can invest in new technology and make furniture automatically, accurately and with almost no labor costs. So, developing expertise can create value. Other option is...
Words: 1462 - Pages: 6
...Personal Budget, Balance Sheet, and Cash Flow Statement ACC/547 Memorandum To: Mr. From: Mr. Subject: Personal Budget, Balance Sheet, and Cash Flow Date: Thank you for providing the details required to assist you in developing a comprehensive budget for successfully managing your personal finances and planning in advance for the future. As you have seen, our process of developing this plan for effective day to day management of financial activities required an in depth review of your personal financial records, use them to create your personal financial statements, and to create and implement the plan for spending and saving. In addition to the financial records provided, other factors are considered. These factors are your age of 40 years old, the fact that your education level is a bachelor’s degree, you are single with no dependents, never married, have worked for the same Engineering firm for the past 18 years with a stable and increasing annual salary throughout your career. I further understand that you feel like you are not quite gaining on credit card debt as you had hoped at this point in your life, and your thoughts are beginning to become more serious about your retirement and how you should be preparing, financially. Your goals of being able to retire earlier than your friends and live comfortably can be obtained. Your goal of becoming debt free before you’re 45th birthday is also attainable. This memorandum will provide a brief summary of my main...
Words: 1225 - Pages: 5
...company’s understanding and use of financial tools stronger is essential to the success of that company. A cash budget helps a company determine whether or not they have enough money for a particular period. Cash management helps a company decrease their financial cost and keep a business from going bankrupt. Economic factors play a significant part in the companies, which, can either help or hurt them. The key to a successful business is knowing how and where the money is being spent. Cash Budget Accounting Tools. (2016). Cash Budget. Retrieved from http://www.accountingtools.com/cash-budget This article helps explain the importance of using a cash budget and what information will be needed to do a cash budget. A cash budget is used to determine whether or not a company operations and daily activities will support the amount of money the company will need for that period. When putting together a cash budget a company will need to use the Sources of Cash and Uses of Cash to ensure that the prediction is as close as possible. Cash budgets will change depending on the period in which a company is conducting one. This is an excellent article from Accounting Tools because it explains this easily so that anyone can understand the content. The website also provides an example of a cash budget so the reader can see how it will look. Minimizing Financing Cost Cash Management. (2016). Retrieved from http://www.inc.com/guides/finance/cashmanagement.html In this article...
Words: 837 - Pages: 4
...output, between original budget and actual, by flexing the budget. If there were a volume difference, it is water under the bridge by the time that the variances come to be calculated’. Variance analysis typically involves the isolation of different causes for the variation in income and expenses over a given period from the budgeted standards. So for example, if direct wages had been budgeted to cost $100,000 actually cost $200,000 during a period, variance analysis shall aim to identify how much of the increase in direct wages is attributable to: * Increase in the wage rate (adverse labour rate variance); * Decline in the productivity of workforce (adverse labour efficiency variance); * Unanticipated idle time (labour idle time variance); * More wages incurred due to higher production than the budget (favourable sales volume variance). Variance analysis highlights the causes of the variation in income and expenses during a period compared to the budget. In order to make variances meaningful, the concept of 'flexed budget' is used when calculating variances. Flexed budget acts as a bridge between the original budget (fixed budget) and the actual results. Flexed budget is prepared in retrospect based on the actual output. Sales volume variance accounts for the difference between budgeted profit and the profit under a flexed budget. All remaining variances are calculated as the difference between actual results and the flexed budget. According to QFinance...
Words: 2311 - Pages: 10
...statement of cash flow. Discuss the decisions that are made based upon this information. Statement of cash flow reports sources and uses of cash for an entity and provide an entry for the cash balance shown on your balance sheet. Also statement of cash flow knows where the cash comes from is important in projecting whether cash will be generated from those sources in the future. In addition it also must knowing where the cash goes is important in assessing the organization’s future cash needs. The decisions that are made based upon this information: Is the company generating enough cash from normal operations to continue operating and to make required payments to creditors? Will the company generate sufficient cash for future expansion? Is the company generating sufficient cash to pay future dividends? The purpose of the statement of cash flows is to provide an entry for the cash balance shown on your balance sheet. The statement of cash flows is divided into three specific areas: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities. Let's take a quick look at each, hopefully you will then be able to differentiate which area your will tell you the most about the health of your business, or if just one area can provide that much information. The area of cash flows from operating activities is the meat and potatoes of the statement of cash flows. This area will show you if your sales, your cash receipts...
Words: 1427 - Pages: 6
...on the January through June 2010 cash budget, what is the maximum monthly loss during the six-month planning period? What is the maximum cumulative borrowing balance? (For purposes of this question, disregard any interest payments on short-term bank loans or interest received from investing surplus funds.) Maximum monthly loss is in June: -$60,750. The maximum cumulative borrowing balance is $99,000 in February. What does the monthly cash budget reveal that indicates it should probably be extended beyond the original six months’ horizon? The major cash shortfall in June and the seasonality inherent in the firm’s business indicate that a full year’s cash budget should be developed. The monthly cash budget assumes that cash flows occur simultaneously. This is not realistic, of course. Assume, more realistically, that cash outflows occur early in the month and cash inflows occur later in the month. What do you think would happen to the current cash budget’s predictive powers? (NOTE: This question should be answered without preparing a spreadsheet; it is a ‘thought’ question.) The monthly cash budget would understate the need for funds, since outflows would occur before inflows. If you identified any issues in #3 above, what do you think would resolve them? HINT: There is a specific answer I am expecting, short and sweet, and it is in the case study narrative. Use a daily cash budget to predict cash flows. The need for cash could then be more precisely forecasted...
Words: 972 - Pages: 4
...BSBFIM501 Manage Budget and Financial Plans Assessment 1 |Budget | | |Expected Site Cost | $ 80,000 | |Security of premises | $ 6,000 | |Surveying | $ 4,000 | |Plumbing / electrical | $ 15,000 | |Base stage | $ 20,000 | |Framing | $ 55,000 | |Lock up (roofs, flooring & windows) | $ 30,000 | |Fixing (cabinets doors, baths, basin, sinks, cupboards & cabinets) | $ 45,000 | |Total Cost ...
Words: 646 - Pages: 3
...Cash Management Modeling, Excel Assignment 3 Cash Management Modeling, Excel Assignment 3 Cash flow forecasts are a powerful management tool to help identify future deficits or surpluses in liquidity. The cash flow forecast shows the total expected outflows and inflows during a given period; i.e. a year. It is vitally important that this budget is prepared so the organization is aware of shortages and surpluses during the year. These can help the business spot cash problems and cash opportunities. A known cash shortage can be planned for and resolved proactively verses reactively. It would be wrong to assume that if the organization is in surplus that it does not have a problem. Idle cash means the opportunity to earn interest or profitable investment is lost (Investopedia, 2012). Lakewood Laser Skincare For Lakewood Laser Skincare and all business cash budgets really do matter. The business owner who does not pay attention might have a rude surprise when they run out of cash or applies to the bank for renewal of loans. One of the many advantages of utilizing Excel financials or an accounting software program is that updating is calculated automatically by simply completing a new data input. This helps business owners quickly get a handle on the financial strength and capabilities of their business. Creating and Calculating Cash Balances Sheets The first step in creating a multiproduct, multi-period, spreadsheet-based budget is setting up a clear and understandable Data...
Words: 795 - Pages: 4
...perform a monthly cash flow analysis for the fiscal year ending December 31st, 1990. Robert & Alex would like to open up their own restaurant/brew pub with $200,000 of their own money and with the use of external financing to finance the rest of the company until excess cash flows remain stable and positive. The second issue is to identify the key variables in this analysis. With every company, there are certain variables which affect cash flow significantly more than others. How would changes in these key variables which are identified for this particular business affect the cash flow for Kellers' Freehouse? Is there anything that can be done to fix these variables or to control them better to secure a more positive cash flow? RECOMMENDATIONS Creating a cash flow budget for the fiscal year ending 1990 will help to project cash disbursements and receipts and will inform Robert & Alex of the size of the loan that they must request in order to make it through the first fiscal year of operation with a positive cash flow. Creating five separate cash budgets projecting for sales of $550,000, $600,000, $650,000, $700,000 and $750,000 will help to view the bigger picture. Due to the fact that projected sales are perceived to be anywhere from $550,000-$750,000, projecting the cash budget for several different sales levels is a quick and easy way to perform a type of sensitivity analysis. We are checking to see how changes in sales will affect the cash flow (receipts, disbursements...
Words: 2296 - Pages: 10
...Unit 6 Assignment – HS440-5 Explain the methodologies and processes used in preparing budgets for health care organizations. Before making any major capital investment decisions, such as the purchase of a new Magnetic Resonance Imaging (MRI), Electronic Health Record (EHR), or any major machine/system, the organization must create a business strategic plan that should contain their mission, values, and vision statements, and most importantly, their goals and objectives. Part of this strategic plan, would include the planning and budget process. The general planning process can and will assist an organization and or health system set themselves up for future success. It will be the budget procedure, or financial forecasts that will link...
Words: 641 - Pages: 3
...have chosen. P1.2 Asses the implications of the different sources of finance to your chosen business P1.3 Evaluate appropriate sources of finance for your chosen business project. LO2 Understand the implications of finance as a resource within a business P2.1 Analyse the costs of different sources of finance for your chosen business. P2.2 Explain the importance of financial planning to the business organisation you have chosen. P2.3 Asses the information needs of different decision makers in your chosen business P2.4 Explain the impact of finance on the financial statements of your chosen business LO3 Be able to make financial decisions based on financial information P3.1 Analyse budgets and make appropriate decisions from the case study P3.2 Explain the calculation of unit costs and make pricing decisions using relevant information P3.3 Asses the viability of a project using at least two investment appraisal techniques LO4 Be able to evaluate the financial performance of a business P4.1 Discuss the main financial statements P4.2 Compare appropriate formats of financial statements for different types of business P4.3 Interpret financial statement using appropriate ratios and comparisons, both internal and external P 1.1 To start a new business you need money, to invest , acquisition equipment and make profit. After a period of evaluation the business I choose to...
Words: 4278 - Pages: 18
...Master budgets. This is the projection of how management in the organization expects to business over the budget period; it’s usually a fiscal year.it summarizes the projected activity, this is through cash budget, income statement budget and the budgeted balance sheet. Master budgets will always include interrelated budgets from various departments in the organization. Its main purpose is to keep managers in larger organizations to be on the same page. Operational budgets. This type of budget covers the revenues and expenses mainly of the day-day business of the company. Revenues sales of products and services are represented by revenues while costs of goods sold, administrative costs; production costs are represented by expenses. Operating budgets are broken down into smaller reporting periods such as monthly. This will enable managers to compare ongoing operations results to the budget of the year hence enabling planning and adjustment in revenue. Cash flow budgets. These budgets are used to examine the inflows and outflows of cash in a business daily activities.it normally predicts ability for a company to take more money than it pays out.in order to pinpoint shortfalls between expenses and sales managers have to monitor cash flows budget. Production levels and production cycles are suggested by cash flow budgets; this is to enable company’s resources to be available for activity and not sitting idle in the company’s warehouses. Financial budgets. The outlines of how...
Words: 622 - Pages: 3
...of operating budget in Exhibit 15-3 on page 184 from the textbook. 2. Compare and criticize capital budgeting methods? Which method do you recommend for use? Explain why? An operating budget consists of the known expenses, expected future costs, and forecasted income over the next year (Bradford, 2015). The eight items listed on the check list are important for managers to consider when reviewing an operating budget in order to properly evaluate the financial performance of the organization. There is not a single correct way to prepare an operating budget, and its development depends on several individual factors of the organization. For example, a static budget is based on a single level of operations and the budgeted expense amounts never change. Static budgets can be used to plan and set goals. A flexible budget projects expenses at various levels of activity, and is adjusted to the actually level of output reached during the period. Flexible budgets can be used to review previous performance of difference volumes. It is important that a manager is able to understand whether the budget is either static or flexible. If a cost is fixed, it does not change even if the volume changes. Variable costs increase or decrease proportionally to the volume change. A manager needs to know whether a budget’s costs are considered fixed or variable (Baker & Baker, 2014). Cash flow reporting is an important tool used when constructing a capital expenditure budget. However, there...
Words: 652 - Pages: 3
...simply get in the habit of projecting a budget and to put it down in writing. I have made income statements and cash flow statements throughout my employment, but I have never found myself perpetually keeping track of a budget. More specifically, a conservative cash budget seems to have the greatest benefits. Rather than living optimistically, it is an additional safety net- when speaking in the realm of finance- to live in the negative. By that I mean, to project less and in the end have more, is better than to plan for optimal income and by possible variances have less. I realize that was a wordy sentence, so yet another way to say that is: it is better to under-promise and over-deliver. The cash budget is a great tool because it tracks your budget within the parameters of variation. It is a more fluid tool for personal finance. There are “good times” and “bad times” and the cash budget keeps numerical record of both so that we can use times of less income or more expense in concert with our greater financial goals....
Words: 464 - Pages: 2
...Scenario: Joseph’s Hamburger Stall Joseph is a full time student studying for a Bachelor of Commerce at Griffith University. He is looking forward to a career in business and is prepared to invest three years in gaining the knowledge, skills and qualifications he will need to fast track his career. But Joseph needs to find a way to make some extra money on weekends to support his way through university. Joseph is considering whether he might establish a small mobile hamburger stall which he take to various places, markets and events, wherever crowds of hungry people are likely to be gathering and sell hamburgers. To set up his hamburger business, Joseph will have to borrow $10,000 to have a custom-made mobile hamburger stall with a built in refrigerator, gas bar-b-que plate, storage space for utensils and ingredients and sufficient work space. The National Australia Bank is prepared to lend the money to Joseph for the project over a three year period. Joseph will have to make repayments to the Bank of $480 per month. A local celebrity and once-upon-a-time television cook, Ms Jan Power runs a farmer’s market at the Brisbane Power House every Sunday. Joseph learns that he could rent a space at the Sunday farmer’s market for $200 per day. Joseph has also been estimating the cost of ingredients for his hamburgers. On a per, hamburger basis he thinks he can buy ingredients as follows: Ingredients | Cost per hamburger | Hamburger buns | $0.50 | Hamburger patties (meat)...
Words: 5473 - Pages: 22
