For every company, bookkeeping is mandatory. Every transaction has to be entered in the financial record books. At the end of any financial year, the books have to be studied before planning for the way forward of the business. These books help in preparing budgets and strategizing. All the records have to be entered perfectly and the books have to balance. In the case of Able and A_Kwil Company, their books have been entered properly over a period of 8 years, and this makes it easy for managers to plan.
Part 1
The Progress of the Company
Able and A_Kwil Company has kept three financial records, the cash flow statement, the balance sheet, and an income statement. All the books have seen changes to values in their components, both negative and positive. From the cash flow statement values, the net income has seen major slumps and high rises. As can be seen from the first four rounds, the value decreases gradually before rising in the final half. There is a high percentage increase in the value of net income in the final round as compared to that in 2019. Balances in the cash flow and income statements show a steady rise in depreciation on assets. This shows that assets are becoming worn out or obsolete at a high rate.
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Despite the low value of accounts payable, the company should try and avoid debts and also reduce the amount of credit issued. Accounts receivable balances are way higher than the accounts payable. Too much money in creditors’ hands poses a risk to the business as some of them could have to be written off. Despite the fact that these amounts could be surplus, they could be used to boost other weak sections of the business.
The company’s methods of holding inventory changes periodically. This can be recognized from the fact that the value of inventory isn’t stable. Observation of inventory value from the cash flow statement shows that the company prefers the just-in-time method of holding stock. This method could lead to losses as delivery of required goods to the company could delay. However, the company holds important inventory, judging from the value in the income statement. Despite the positive value when it comes to the amount of sales made over the eight-year period, the company has had a challenge having cash in hand. The fourth and the third rounds have however faced the highest challenges as cash in these periods was at zero. A company needs to have cash both at hand and in the bank to ensure a smooth running of the business. The net profit over these two years was affected since it was at the lowest.
Able and A_Kwil Company should focus more on budgeting for improvement of their plant. Negative values in the plant development show that these accounts have yet to be settled. However, the company shows an improvement when it comes to the value of their plant and machinery. The company has witnessed an increase in net profit through to the eighth period. Factors which might have led to this are an increment in the amount pumped into sales promotion and sales budgeting. Miscellaneous and variable costs have seen an increase. These costs could be cut or moved to other areas in which they are required the most. The values, as observed in direct labor and direct materials have been irregular. For the direct labor, the irregularity was due to seasonal labor and retirement whereas, for direct material, it was due to the changes in stock holding policies.
Current Situation
SWOT analysis is a company performance measurement matrix. It covers strength, weaknesses, opportunities, and threats. Able and A_Kwil Company faces all these four parts of the matrix. The financial books of the company can help in the observation of the current financial condition of the business. Able and A_Kwil has strength in making sales. Income statement values show that sales increased from 45 million in the first round to 77 million in the eighth. The high rise in the amount of sales is due to the amount of money that has been put into sales promotion like advertising. More money was also pumped by the business into sales budgeting. A proper sales management strategy will always yield good results. These high returns on sales prove that the business must have had a good sales strategy.
Despite the strength that the business has, it still has some weaknesses that have to be dealt with. There is an increase in the variable cost. This will mean an increase in the contribution margin leading to a higher selling price. Contribution margin is the difference between selling price and variable cost of each unit (Horngren, 1967). The company hasn’t been able to reduce the cost of production. An increase in the selling price of products could be bad for business as it could chase away customers. Customers would buy substitute products or get their products from competitors. The cost of production has to be stabilized and/or reduced. Unnecessary costs in the production process have to be eliminated. Improvements in plant and machinery have to be managed properly. From the values in the cash flow statement, it is evident that there is little attention being paid to plant development. This activity has to be budgeted for and executed strategically. This will ensure that no unplanned expenses are made on important parts of the organization.
A business is bound by its need and will to grow. To ensure growth, whether spontaneous or gradual, a business has to exploit any opportunities that they get. Able and A_Kwil has various opportunities for which they can use to their advantage. The company could restart the issue of stocks. They had done this in the first financial year. Selling of securities could help raise more funds for the developments of weak areas in the business. Plant and machinery are the assets with the highest value in the organization. These items have been well upgraded as can be seen that their value has increased over the eight years. The company could forego increasing the number of machinery for a short while and use the extra funds for settlement of debts and provision for unpaid debts. Retained company earnings could be put to use in most needy departments. Opportunities have to be looked at carefully as a misstep could mean losses. Based on the amount of returns on investment for the company, it is able to solve its internal problems and set up more branches in other available markets.
Developed, developing and underdeveloped businesses usually face threats which match or bigger than the company can handle. These threats could come from inside or outside the business. In Able and A_Kwil Company, the amount owed to the company has kept rising over the eight-year period. It could be possible that some debts have boiled over the length of the bookkeeping period. Some debts might have had to be written off. These debts are to the tune of millions and writing them off means losses to the company.
From the income statement, the values for direct labor are seen to fluctuate constantly over time. This could either mean that there are a large number of temporary employees or frequent changes in wages and salaries. The company should ensure that there are more employees who have been employed on a permanent basis. It is not always a guarantee that temporary employees will be available. If the case is about change in salaries and wages, employees would grow uncomfortable. An individual with a stable salary is always more productive than one whose salary changes periodically.
Future of the Company
No company can move forward well without studying trends in its past and their subsequent outcomes. A detailed analysis of available financial data has to be developed. Using this information, a proper plan has to be drafted. There are eight available rounds of financial data for Able and A_Kwil Company. This data is more than enough for a financial manager to develop a detailed way-forward plan. The company has to use its strengths to support the weak areas and the available opportunities to subdue the threats. Able and A_Kwil generates high sales, and this means much revenue and profits are made. The company also has a lot of retained earnings. These funds can be pumped into the production process to help in subsidizing production costs. More of it can be used in the development of plant and machinery. An organization has to use its available resources to manage their own needs.
The three standouts from the books of Able and A_Kwil Company include retained earnings, sales, and equity. These areas mark some of the business strengths. Their values are highly significant in the possibility of coping with threats and weaknesses of the company. Money which could have hence been used in some of these three areas could be used in other parts. Some could be shared out for the provision of long-term debts which have the possibility of being written off. Finances that the company owes to the outside could also be settled. Any business that has the big desire to row has to make a workable budget. Money from available net profit could be used to finance some of the items contained in the budget. Settlement and balancing of end values before moving on to another financial period will ensure uproar.
Ethical, Legal and Social Challenges
Every company is faced with challenges that are not related to the core business. These challenges could either be ethical in nature, legal or social. Ethical issues in an organization mostly affect the employees. The values from direct labor in the income statement could show problems to do with ethics. Individuals being employed temporarily or receiving an unstable wage could decide not to take their job seriously. They could be doing non-work related activities on the job. Some would have had to be relieved of their duties. The company could monitor the employees closely. They could introduce CCTV cameras in the offices. The company could also offer rewards to productive employees.
Legal issues usually deal with the law. Legislations usually determine how some activities are conducted in an organization. Procurement processes are usually highly governed by the law. Securities in the company were issued to the public only once, and that was in the first round. Stocks are usually a high source of income, yet the company stopped issuing them. The company might not have followed the right channels as required by the law hence being stripped of the privilege. Taxes are usually determined by the government and the constitution grants the power. There is an observable sharp rise in the amount of taxes paid out in the last four recorded rounds. The high increase could cripple the running of a business since they have to be paid or one could face legal implications. Before undertaking any activity, the managers have to ensure that it does not have any legal implication.
Every organization has a corporate social responsibility. This is where a company is liable to provide services to promote the community in which it is set up. As such, Able and A_Kwil Company also has such responsibility. It has to set aside some funds to help develop the community. The company could be forced to use money that it could have used in improving the business. In other cases, the company should include the public in its budgets.
Global Considerations
A company managed strategically will always realize continuous growth. When a business has already reached its maturity, it sees the need to venture into other markets. Globalization offers a big opportunity for any business to expand further. Judging from the books of Able and A_Kwil, they have to solve their internal challenges first. A stabilization and deep rooting in the local market is highly necessary. This will further act as an anchor for an activity. Globalization means that assets from one place have to be reduced in order for a branch in another country to establish itself. Stabilization in the local market will help in case the new venture does not work out.
Globalization has a lot of advantages, but this too will bring with it negative consequences. A strategic global execution will mean that the business will have increased its customer base. The business will earn more revenue from its investments. The workforce of the company will be diverse as the branches in different countries could be exchanging employees. The business will have access to new information which could help better their products and services. The goods produced will be widely known and used. On the other hand, a business branch could be set up in a place where cultural beliefs do not allow one to use the product. The company could face huge losses in case the execution plan does not work. This will take the business backward. However, any business that wants to succeed must take necessary risks. Part 2
How will you utilize this business communication skill in your career?
Over the course of the CAPSIM (capture and simulation), despite giving the presentation on the performance of the business, I have been able to learn. I will be sure to apply the lessons in my professional career to make my communication better. When giving an address about the performance, be sure to bring everyone to speed. From the audience, there is a mixture of people, and not everyone has had a chance to look at the business records.
Reflect on establishing and maintain a professional business etiquette in business
In business, there should be healthy relationships between the top managers and their subjects. Building a good business relationship always starts with the presence of effective communication. Managers should give information to the juniors in cases where changes have been made in the running of the business. Juniors should also give complete information to the managers about how the day to day activities are progressing. Managers should give employees space and freedom to do their job effectively. Top management in the organization has to see to it that the working conditions of employees are healthy. Healthy working conditions range from a clean working environment to reasonable pay and confidence about their job position.
How will you apply what you have learned to your professional life?
Based on my course, I am bound to have an opportunity as an accounting officer. I have to ensure that all transactions made in the business are entered correctly. The values in the business financial books have to balance at the end of each day. At the close of every financial period, I have to come up with a summary for the whole year. This will help look into the progress of the company and in plotting the way forward. Financial records help in budgeting as the manager in charge of budgets will know how much money to assign to various areas of the organization.
What connections do you see between this and real life situations?
Much can be observed from the analysis of the books of Able and A_Kwil Company. Every company has periods of positive and negative development. Able and A_Kwil have had areas which give positive feedback on the running of the business. These items in the books form part of the strengths of the business. Strengths in the business have to be exploited exclusively to ensure an increase in revenue and profits. A company could use strong areas to help in supporting the weaknesses. Every organization has to deal with their weak areas in order to cope with competition.
How did you demonstrate effective business communication throughout business core?
When giving the presentation, I was able to explain the company progress to new members using historical data. I made an analysis of company data, observed the trends and came up with a proper summary of the financial records. In effective communication, one has to make their point simple in a way that any individual would understand (Kirkman, Turk, 2002). From simplification of the data given, I was able to bring to par new members and give them an understanding of the running of the business.
References
Horngren, C. T. (1967). A contribution margin approach to the analysis of capacity utilization. The Accounting Review , 42 (2), 254-264.
Kirkman, J., & Turk, C. (2002). Effective writing: improving scientific, technical and business communication. Taylor & Francis.
