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Strategic Accounting for Decision Making

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Introduction

Strategic Accounting for Decision Making Assignment- AF4H17 07235569 Table of Contents Topic Page No Table of Contents 1 Introduction 2 Profit and Loss Account and Balance Sheet for Taffview for year ended 31st March 2008 3 Values of Financial Ratios 4 Comparative Analysis of the Ratios 4 Comparison of Relative Profitability of Canteen and Pool in Taffview 7 Sources of Finance for Converting the Central and Taffview Pools into Fitness clubs 9 Equity Finance: 9 Leasing 10 Hire Purchasing 10 Benefits of Introducing the System of Budgetary Planning and Control 11 Conclusion 14 Reference 15 Appendix 16 Introduction The accounting data gives us the ability to understand the working of the organisation. Fairvalue Leisure Ltd has acquired new pools which are Taffview and Central. With the accounting information there has been the analysis done to improve the profitability of the pools. There are also information on sources of finance and budgeting. Profit and Loss Account and Balance Sheet for Taffview for year ended 31st March 2008 Profit and Loss Account for Year Ended 31st March 2008 Taffview Pool Income 1570000 Expenses Employee Cost 840000 Equipment and materials 295000 Heat and light 93000 Catering Provisions 162000 Depreciation for Land and building 92950 Depreciation for Machinery 33000 Unpaid Overtime wage 3000 Total Expenses 1518950 Profit Before Interest and Tax 51050 Balance Sheet as at 31st March 2008 Taffview Pool Fixed Assets Land and Building 836550 Machinery 297000 1133550 Current Assets Stock 17000 Debtors 3000 Cash 19000 39000 Current Liabilities Creditors 53000 Unpaid Wages 3000 56000 Working Capital (17000) Total assets less Current liabilities 1116550 Long term Liability 120000 Net Assets(Less Long term Liabilities) 996550 Financed By: Capital Amount 895000 Reserves 20500 Profit and Loss c/f 30000 Profit and Loss 51050 996550 Values of Financial Ratios Key ratios Field park (competitor) Central Pool Taff View Pool Operating Profit/Operating Assets 21.28% 1.55% 4.35% Operating Profit/Sales 7.60% 1.40% 3.25% Sales/Operating Assets 2.8 1.1 1.34 �357.14 �909.09 �746.26 Expenses/Sales 92.40% 98.60% 96.75% Sales/Fixed Assets 3.05 1,14 1.38 �327.86 �877.193 ...read more.

Middle

It should highlight the points like cleanliness in the pool and the canteen, availability of life guards and also the variety of offers and services available. 4. Price Bundling: The Pool and the canteen should try and use this strategy to increase the sales. In the canteen they can start to serve combo meals like kids meal, family meals at a reduced price. This way they would sell more items to the customer. The Pool membership's schemes can be redesigned to meet the customers need. They can be given at discounted price if the customer wants it for a longer duration. They can also give out coupons which can be used in the canteen for buying food for loyal customers. Customers can also be provided a free drink whenever they visit the pool, on choosing the life time membership. They can be a lot of offer like the previous one which would get the customers to come back to the pool and canteen. The offers in pool and canteen can be clubbed together to improve the income in both pool and the canteen. 5. New Services: The customers would like to enjoy their weekend with friends and family. The Taffview pool can work to get new business in. They can organise parties in the pool. The canteen can arrange the food for the parties. This way they can get customers to come to their pool regularly and also to have their parties for family and friends. The canteen can look at catering food to house parties to expand the business. This way they can expand the pool and canteen to a complete family and friends outing point. Sources of Finance for Converting the Central and Taffview Pools into Fitness clubs Equity Finance: The finance here is raised from external investors in return of handing over a share of business. Equity finance is a form of share capital which exchanges share of ownership and sometimes an element of control over the business. ...read more.

Conclusion

Pauline Management Accounting An Introduction 2nd Edition Financial Times/Prentice Hall http://www.businesslink.gov.uk http://www.fao.org/docrep/W4343E/w4343e08.htm#sources%20of%20funds http://www.bized.co.uk/learn/accounting/financial/sources/index.htm Appendix Central Pool Operating profit/Operating assets = 19000/(1180000 + 43000) * 100 =1.55% Operating profit/Sales= 19000/ (1350000*100)= 1.40% Sales/ Operating assets= 135000/(11800+43000) = 1.10 , 1000/1.10= �909.09 Expenses/Sales= 1331000/(135000)*100=98.6% Sales/Fixed assets=1350000/118000=1.14, 1000/1.14=�877.193 Sales/Current assets=1350000/43000=31.39, 1000/31.39=�31.85 Sales/Stock=135000/29000=46.555. 1000/46.55=�21.48 Sales/Debtors=1350000/2000=675, 1000/675=�1.48 Current Ratio=43000/47000=0.91 Gearing ratio=150000/(988000+19000+19000+1500000)*100=12.75% Taffview Pool Operating profit/Operating assets = 51050/(1133550+39000)*100=4.35% Operating profit/Sales=51050/1570000*100=3.25% Sales/ Operating assets =1570000/117550=1.34, 1000/1.34=�746.26 Expenses/Sales=1518950/1570000*100=96.75 Sales/Fixed assets=1570000/1133550=1.38,1000/1.38=�722 Sales/Current assets=1570000/39000=40.25,1000/40.25=�24.89 Sales/Stock=1570000/17000=92.35, 1000/92.35=�10.82 Sales/Debtors=1570000/3000=523.33. 1000/523.33=�1.91 Current Ratio=39000/56000=069 Gearing ratio=120000/(8950000+120000+20500+30000+51050)*100=11.04% Equity Finance: 1. Business Angels are people who have entrepreneurial skills and wealthy and want to invest in new and growing businesses. They also invest the knowledge they have from running businesses in the past into the new one. They invest in all the stages of business development, predominantly in the start up and early stages of business. They invest in small businesses so that they have a share in the success of the organisations. They make their investment decisions quickly and don't have a complex process in place to work. The investments from them are not regular and it is difficult to find them. They place a lot of emphasis on relationship and working together directly. Tracking down the right investor may take longer than expected. 2. Venture capital is also known as private equity finance. Unlike business angels, venture capitalists (VCs) look to invest large sums of money in return for some of your business' shares. The biggest advantage of getting a venture capital into a business is that they not only get huge amount of money but also bring wealth of expertise along with them. If you find on venture capitalist successfully, you can use them for future funding as well. Venture capitalist take longer times to decide and the process is complex. For securing a deal with them you need to have a detailed business plan with financial projections (For which you may need professional assistance). ?? ?? ?? ?? Student ID: 07235569 Page 12 of 17 ...read more.

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