Assessment Activity Short Answer Responses

Describe at least one (1) business that is profitable and explains why you think it is enjoying financial success.

Domino’s Pizza Enterprises Limited is one of the most successful businesses in Australia’s food delivery industry. It has achieved record store growth around the country with a net profit of $ 64 million. The major underpinnings of such success are Domino’s digital innovation and strong operations system. Currently, the business is largely operating through digital channels like Android and iPhone apps, Kindle Fire, and the company’s website. This has brought huge returns to the company.

While the evidence suggests otherwise, there is a common view that many new businesses fail within the first year of operation. Why do you think a new business might not succeed?

The most commonly failing businesses are those of small and medium enterprises. A report issued by the Australian Securities and Investment Commission looking into company bankruptcies depicted that business collapse mainly because of poor strategic planning, as 44% of failures were caused by this factor. Meanwhile, forty per cent suffered from insufficient cash flow or bad cash flows, and thirty-three per cent retired because of losses in trade.

3. Explain the following fundamental accounting concepts:

▪ Business Entity Concept

Business entity concepts imply that a business is a separate body from its owners for all the associated transactions, referring to the use of separate accounting records exclusively.

▪ Dual Aspect Concept

The concept derived from the principle accounting equation refers to recording each business transaction in two accounting heads underpinning the double entry system.

▪ Money Measurement Concept

The money measurement concept in business refers to the fact that only monetary transactions shall be recorded.

4. Explain the following fundamental accounting concepts:

▪ Objectivity Concept

Objectivity concept in accounting means that the financial statements should be evidence-based.

▪ Going Concern Concept

The going concern concept is based on the assumption that the business entity will be working in the foreseen future and will not be ceasing its operations or selling its assets shortly.

▪ Periodicity Concept

The periodicity concept means that the financial transactions of a business entity are summarised, divided and reported periodically, such as annually, semi-annually, quarterly and monthly.

5. Explain the following fundamental accounting concepts:

▪ Cost Concept

The cost concept means that transactions against assets and liabilities shall be recorded at their initial cost in history.

▪ Conservatism Concept

The conservatism concept refers to the recording of assets when there is an assurance to be received, whereas liabilities and expenses are to be recorded without waiting for the associated outcomes.

▪ Materiality Concept

The materiality principle means that if ignoring an accounting standard has too little of an impact to mislead the reader of a financial statement, it is acceptable.

6. Explain the following fundamental accounting concepts:

▪ Realization Concept

The realisation concept refers to recording the revenue entries only when the services are rendered, and products are sold or delivered.

▪ Matching Concept

The matching principle refers to the recording of expenses and associated revenues simultaneously in the same accounting period. Causal-effective entries are to be recorded at the same time; however, if there is no relation, record the cost under the head of expense immediately.

▪ Full Disclosure Concept

Financial statements of a company should be all-inclusive, and no relevant financial information should be missed.

7. Provide four (4) examples of investment decisions
8. Provide five (5) examples of financing decisions
9. Provide three (3) examples of financial management decisions.
10. Explain the difference between financial accounting and management accounting.
11. Provide five (5) examples of ratios that can be used for analysis and what they mean.
12. Provide the formulas for the following ratios:

▪ Gross Profit

Sales – cost of goods sold = Gross profit

▪ Net Profit

Total Revenue – Total expense = Net profit

▪ Inventory Turnover Ratio

Cost of goods sold ÷ average inventory = Inventory Turnover Ratio

▪ Debt to Assets Ratio

Total Debt ÷ Total assets = Debt to equity ratio

▪ Return on Investment

Gain from Investment – Cost of Investment ÷ Cost of Investment

Week 3

Assessment Activity: Research

1. Research the following website http://ato.gov.au/ and summarise the services, facilities, and products the Australian Tax Office provides for individuals and businesses.

Australian Taxation Office facilitates individuals and business entities in managing their taxation accounts officially, which allows them to maintain their details and past taxation records and track their progress on returns. There are proper audiovisual guidelines for creating, using, and maintaining a taxable account. All the information regarding taxation policies and registration processes is available on the website. The website provides services in different languages and separate channels for individuals, businesses and non-profit organisations.

2. Explain and find one (1) example of a Bilateral or Regional Trade Agreement

As the name suggests, bilateral is between two nations agreeing on trade terms and conditions that favour both of them. Such agreements provide both nations with expanded access to the market. At an advantage, bilateral trade agreements are easier to negotiate than multilateral agreements as there are only two parties involved.

Example:

A bilateral trade agreement was held between Australia and the States of America on the 1st of January 2005 that generated a total of 26.7 billion dollars by 2009, with a 23 per cent increase since incepted.

Explain the Trade Practices Act. What is it? Who does it apply to?

Trade Practices Act 1974 is a federally regulated law encompassing regulations to cater to all the contributors of a business market, such as codes of practice for industries, monitoring price product safety and market practices. The Act has provided Australia’s economy with a sustainable competitive environment by balancing the encouragement of competition with anti-competitive conduct. It applies to

4. Explain the following key Australian Taxation requirements:

▪ PAYG Withholding

PAYG stands for Pay as You Go, and under PAYG withholding, the tax amount is withheld on certain payments made by the business to others, such as employees, directors, labour, voluntary and other payments that are not quoted with an Australian Business Number.

▪ Company Tax

A company entitled to ABN should register for a Tax File Number and pay sales tax if its annual turnover is $75000 and above. A company needs to pay tax at national tax rates and is subject to concessions in the case of being a small business firm. Usually, in Australia, companies pay through the PAYG taxation system.

▪ Goods and Services Tax (GS.)

A broad-based and most common form of business taxation in Australia is goods and services tax, generally 10 per cent on goods sold and services rendered anywhere in Australia.

▪ Financial Probity

Financial probity is referred to as strict adherence to a code of ethics based on undeviating honesty, especially in commercial monetary matters and beyond legal requirements.

▪ Australian Business Number (A.B.N)

An eleven-digit number unique and identifiable allocated to a business entity in Australia is called Australian Business Number. It is for taxation and other legal matters of the business with authorities of government.

▪ Business Activity Statement (B.A.S)

Every business registered in Australia and subject to GST is required to submit a form called Business Activity Statement, containing information on their tax liabilities and obligations.

▪ Superannuation

Superannuation is a taxation system for the subjects entitled to any super contribution.

▪ Fringe Benefits Tax (F.B.T)

Fringe benefits 1111 tax is a tax paid on the benefits that an employer pays to his employees. It is separate taxation from income tax.

▪ Income Tax

Any resident Australian is reliable to pay tax at the rate of 19c for each Dollar over $18200, 32.5c for each dollar over 3700037c for each dollar above 87000 and 45 for each dollar over 180000. The rates are different for non-resident Australians.

What do International Commercial Terms (INCOTERMS) mean?

International Chamber of Commerce came up with these terms that define the obligations and rights of the parties having delivery contracts for the goods sold. These were thirteen terms in number, defining the conditions with which transactions will occur between the seller party and buyer party and the division of responsibilities and costs between the parties. The terms were revised in 2011 and took effect on 1 January of the same year, and the terms decreased to eleven in number from thirteen. Delivered at Terminal, Delivered Duty Paid and Delivered at Place have been added, eliminating some of the previous terms.

Explain the role of the following: World Trade Organization (WTO)

World Trade Organization is an international organisation that deals with the rules and regulations of trade going on all around the world. There are certain agreements working at the core that are signed by the majority of countries from around the world, helping imports and exports for the benefit of all.

What is GST (Goods and Services Tax, and how is it calculated)?

The most common form of business taxation system is GST, which is applicable to the sale of goods and services rendered. Every country has different taxation rates, such as GST. Goods and services tax is also called general sales tax. In Australia, the taxation rate for GST is 10%, limping businesses selling worth more than $75000 anywhere in the country.

Week 4

1. Prepare a Profit & Loss Statement and Balance Sheet using the information given below.
2. Explain how the business is affected by the completed Profit and Loss Report.

From the following financial Information, Prepare a Profit & Loss Statement and Balance Sheet;

Balance Sheet

Week 5

Q1. Professional ethics is the application of ethical principles by professionals who have an obligation to those who rely on their services. Give examples of professional care:

• Professional ethics are the set of moral standards that companies follow. For instance, a law service company’s lawyer is obligated to represent his client competently, which will require his legal knowledge, skills and necessary preparations.
• A doctor is supposed to keep the confidentiality of patients’ reports and conditions from others unless treatment requires consultation from other professionals.
• The delivery of incentives to employees on a fair basis, the evaluation of performance without favour to any employee, etc., are general examples of professional care in the workplace.

Q2. Codes of ethics are the most concrete form of communication by which professionals acknowledge their obligations to society. The role of a financial manager involves discharging one’s responsibilities while ensuring compliance with all the obligations espoused in the code of ethics. Give an example of how a financial manager can apply a code of ethics when making decisions.

Professional ethics, or a code of ethics that is morally obligatory for a financial manager are far greater than just being honest and straight. The finance manager is required to establish boundaries to prevent potential conflict arising in the employer’s interests. Perfect, accurate and timely financial information provision is a basic code of ethics a financial manager needs to follow. Besides, the finance manager needs to keep the confidentiality of the company’s financial activities from the ones who might use such information to buy and sell the company’s stock. The finance manager needs to take care that the company is not breaking the law in any way as per finances.

Q3. What are Business Ethics and professional ethics?

Business ethics refers to managers’ primary duty to maximise the shareholders’ returns, whereas professional ethics requires managers to act in a way that balances the shareholders’ interests and other stakeholders’ interests.

Q4. What is Integrity?

Integrity in business refers to the solidarity and probity of the business entity, and for a professional, it refers to uprightness aa, and despite being pressurised, the professional will follow the standardised moral rules and ethics of doing business.

Q5. How often does an organisation need to perform an audit trail to make sure all transactions are recorded with due diligence? How does integrity play a big role in this section?

It depends upon the nature and size of the business and how often they need to get their accounts on an audit. Audits are of two types: internal audit and external audit. Some companies with a complex nature of business and larger accounting heads go for audits twice a year. Integrity in audit results in an accurate, honest and complete reporting of accounts.

Q6. Case Study:

You have been the finance director of a clothing retailer for ten years. The company’s yearend is 30^Th June, and you are finalising the year-end accounts. You have recently been advised by the warehouse manager that there is a significant level of slow-moving stock. The stock in question is now more than nine months old and would normally have been written down some months previously. The shareholders are trying to sell the company, and the managing director (the majority shareholder) has told you that it is not necessary to write down the stock in the year-end accounts. You are sure that the managing director wants the financial statements to carry an inflated stock valuation because he has found a prospective buyer. The managing director has indicated to you that if the proposed deal is successful, all employees will keep their jobs, and you will receive a pay increase.

What would you do?

Answer:

Following the professional ethics. I will get the old stock written down as soon as possible. Even following the business ethics would require me to do so as the goodwill of the company will be greatly at stake if any legal action takes place, and in that case, shareholders will have to face a great loss of goodwill and associated profit.

Week 6

Task 1: Cash budget: service industry

Required:

1. Prepare a cash budget for the three months, July to September, to examine the cash flow projections (Use the spreadsheet template to prepare the cash budget).

2. You are aware that some suppliers’ payments are due in July and August. What relevant personnel are you required to discuss/negotiate the possible cash shortfall?

The relevant personnel will be the cashier, financial manager and Dr Healer to discuss the issue.

3. What possible contingency plan you can implement to avoid the forecasted cash flow shortfall

A contingency plan refers to an alternate prepared plan for a business to face an anticipated plan for a future significant event that is probable to occur. In the above situation, the contingency plan may be to reduce the expenses and consult the short-term creditors for a reasonable credit for the month of July to handle the emergency situation that might happen in the case of bad cash flow expected in the respective month and pay them in coming better projected months of August and September.

Task 2: Alternative debt collection policies

As the manager of Corby and Danes Ltd, you are concerned about the current collection policy from credit customers. The current policy is that all sales are to be made on credit, with the expectation that 70% of all accounts receivable are collected in the month immediately following the sale: 20% in the second month, 8% in the third month, and the balance written off as bad.

The actual sales for the four months of January to April were as follows:

January $40 000; February $50 000; March $60 000; April $60 000

The forecast sales for the next four months are:

May $70 000; June $80 000; July $80 000; August $80 000

You need a report that will show how much cash you can expect to collect each month from accounts receivable for the period February to August. You also like to know what the cash flow patterns would be if either of the two policies below were to be adopted from now (i.e. from May) on.

Answer:

Alternative policy:

80% of the accounts receivable are to be collected in the month following the sale, 10% in the second month, 8% in the third month, and the balance is written off as bad.

Required:

• Show what the existing report on cash collection from accounts receivable looks like.

The current policy and as well as the alternate policy for the collection of accounts receivables are both in loss of the company and badly devised.

• Show how the additional reports revealing the cash flow situation under the proposed alternative policy would look.

The bad cash flow policy may impact other financial reports in a negative way, as the investors, creditors, and lenders may analyse the fact that the company will not be able to pursue its operations effectively shortly. Such a cash flow statement can negatively affect the credibility of the company.

• After Analyzing the data, which policy would you recommend improving the collection process for May, June, and July?

The current policy for collecting cash receivables is advisable to be improved by revising the collection methods and instalment rates.

• Recommendation:

The collection methods need to be revised and improved, such as collection letters, calls and time limits.

The instalment rates as per percentages are not profitable rather they are counting to the loss for the company, these need to be improved to meet the actual cost of operations and goods.

Week 7

Task 1: You are required to research, identify and evaluate available financial management software applications for implementation in a small business or enterprise.

As a foundation to support your research and evaluation, you are to prepare and deliver a written response addressing the following key criteria:

▪ Price

Sage Intacct; suitable for small and medium-size companies which cannot afford costly financial management applications. QuickBooks and PeachTree are also cost-effective software.

▪ Usability

AccuFund Accounting Suite is a financial reporting solution with enhanced features; it helps non-profit organisations, too, in maintaining the smooth running of their financial operations.

▪ Features and Functions

NetSuite is business software that allows firms to plan financial management with resource management.

▪ Suitability

Multiview is the best software for firms looking for an application suiting their existing operations.

▪ Compatibility with other Software Applications

SAP Anywhere has many features that financial managers and employees may already be familiar with in other software.

▪ Technical Support

Adaptive Insight provides web-based budgeting software, including reporting and forecasting tools.

▪ Training Opportunities

PlanGuru is a business planning and budgeting solution for small businesses and non-profit organisations. It helps accountants in constructing reports and preparing the analysis.

▪ Pros and Cons

ReliaBills is also a web-based accounting system providing online billing and invoicing tools. Being web-based, it has technical pros and cons.

▪ Your Recommendations

My recommendation is SAP Anywhere, which is highly featured with accounting tools for the modern, fast-paced, and web-based financial transactions culture.

Task 2: Create And Write A Formal Business Plan

Brief

Develop a formal business plan for a small business or enterprise nominated by your Trainer and Assessor. To demonstrate competency, you will need to consider in your analysis the capabilities and resources of the new enterprise, vision, mission, trends and developments in the marketplace, comparative market information, and legal and ethical restraints on the proposed business activity.

Answer:

Business Plan

Blue Chip Business

Introduction

Complicated phenomena of information and communication are characteristic of today’s mass society. Because of complex sources of information and differences in socio-psychological and cultural backgrounds, the members of the mass society depend heavily on the mass media as the ultimate source of information. The information age is full of channels of information, causing information overload. At the same time, advanced technology has brought new competition for traditional publications in the news and information field; social media has replaced many traditional ways of information dissemination. Despite the challenges to conventional publications, they are making their way into the information superhighway by adopting newer methods of production, marketing, and content specialisation. Different segments of society look for information sources that can address their needs and wants. Magazines are one of the most appropriate channels of information for segmented markets with niche-oriented content and information. Magazines are a constantly growing line of mass communication with stronger editorial stances and greater niche marketing. Various types of magazines serve the purpose of providing information and entertainment to the readers. Consumer magazines are one of the most popular forms of the magazine, in fact, the largest number of publications are consumer oriented. However, not a lot of magazines provide business-related content to business people specifically and the general public in general. My proposed business plan is to launch a specialised business magazine “ Blue Chip Business” for business people.

Vision

The magazine intends to provide its audience with specialised content to the audiences that are in need and demand of today’s contemporary society, where people are dependent on mass media for information.

Objectives:

• To entrepreneurs, a business project.
• To add up to the range of magazines serving the business sector.
• To obtain experience in implementing business management.
• To accomplish the partial fulfilment of my academic course.

Target Market:

CEOs, top managers, middle managers, executives, and general business concerns.

Competition:

Competition is an inevitable market element you have to face while entering the new market. (Munns & Bjeirmi, 1996)The competitive business magazines do exist in the market, but our magazine will make it place by niche oriented information for the target market. “Blue Chip Business” aims to reach the benchmark by adopting newer techniques and methods to make its way into the industry and especially by providing quality content to its readers.

Execution Plan:

Marketing:

Different tools will be used to send the word about our magazine to our target market, including introductory e-mails and letters to the CEOs and managers (Robin et al., 2004) of the corporations and LLCs. Space on Newsstands will be acquired. Subscriptions, direct marketing and sampling techniques will also be used for marketing.

Newspaper kiosk was situated: The movement area of the newsagent’s newspaper kiosk would be the most suitable for the positioning of our magazine. From our exploration, we revealed there were not as many travel magazines as we expected, so we feel we would get great scope there. In any case, with our intended interest group, a position adjacent to the various young magazines could end up being more useful as it would draw in a greater number of looks than those of the general population who do travel and who look particularly in the movement area. Retail outlets: Due to the idea of our intended interest group, we foresee that our principal offering outlets will be in aeroplane terminal flight parlours and auxiliary schools. In any case, we would likewise envision deals in newsagents, for example, WHSmith, who, through Magazine Business Plan: Nomad Magazine Page 5 of 7 our examination into rivalry, doesn’t stock a substantial choice of movement magazines, particularly those for the more youthful voyager (see statistical surveying area). Membership system: Readers will be urged to buy into our magazine through the setting of in-house promoting, shown in great positions. The membership offer will tempt perusers by offering them significant savings on the cover cost and will keep running for a year or year and a half. Endorsers will likewise be offered the opportunity to buy into the online version of the magazine, which will be altogether less expensive because it will cost almost no to execute. Supporters of this won’t get a printed version of the magazine, yet will be conceded get to, using the magazine’s site, to peruse a computerised, online duplicate of the magazine, which they will have the capacity to download in an all-around discernable organisation. Non-supporters will have the capacity to purchase singular duplicates of the magazine online for a little coincidental instalment. However, this sum will be more prominent than the inevitable single cost through membership and will cost close to the printed copy cover cost. It is trusted that this will urge online perusers to buy into both of the recommended plans.

Operations:

Establishment of an office and interiorize it with appropriate equipment and department spaces.

The phase of development of a strong team includes staff writers, editors, sub-editors, photographers, marketing personnel, graphic designers, content writers, proofreaders, and photographers.

Time Frame:

The estimated time frame for the first publication, including the execution of the marketing and operations plan, is three to four months.

Estimated Cost Breakdown:

Estimation of the cost involved in a business startup is a necessary part of a business project plan. (Robin, Haynes, Paschino, Kroes, Oikawa, Getchell, Kazmi, Dyas, 2004) The estimated cost of the first publication is $25,000 based on the estimated size, colours, type of paper used and the number of copies and compensations. The breakdown for startup expenses is as follows;

Monitoring and controlling:

The editorial department will be headed and controlled by the Chief- Editor. Similarly, every department will have a reporting authority to whom relevant personnel will be reporting on a daily basis. Additionally, the following procedures will be adopted.

• Track records of attained circulation levels.
• Controlling costs while spending the maximum on subscription marketing in year one.
• Carefully monitoring response rates of all media executions.
• Achieving target advertising sales revenues.
• Strong editorial content in each issue.
• Make all production and circulation dates promptly.

Communication and Key Metrics:

For internal communication, employees will use the assigned portals, which will be software containing all the relevant features, including memo generation. Internet, facsimile, telephone, and traditional methods would be channels for external communication.(William A. Sahlman, n.d.)

The subscription will evaluate the progression of the magazine, space enhancement on the newsstands and the scale of advertisers attracted.