Manage finances Assignment -
Assessment Requirements: You are to complete a financial analysis for Houzit Homewares using the information provided. All the information that you research must relate back to Houzit in the manner of providing recommendations and continuous improvement for the financial stability of the organsiation.
Assessment Task 1 - Financial analysis and budget notes
This assessment requires you to determine the requirements to undertake budgeting, financial forecasting and reporting requirements for Houzit Pty Ltd.
Q1. Introduction
First provide an introduction to Houzit, in your introduction confirm the financial data that you are presenting complies with the organisational and policies and procedures as per the embedded Houzit Budgeting Policy and Procedure:
Peter Simons CEO of Houzit produced a summary of the current business plan that covered the budget year to highlight some of the key goals, objectives and strategies he would like incorporated into the budget.
Q2. Sales and profit budget for 2016/17
You need to complete the below information questions a) - k) by placing the information either in to the Excel Work Book or the Work Template. If you use the word templates you need to embed the templates back in to your document.
The information you received from your meeting with Sarah Saunders, Houzit accountant, gives you the evidence about the past expenses and the current statutory compliance liabilities of Houzit.
Sales and profit budget information
Accountant Sarah Saunders explained that the only budget she monitors on a day-to-day basis is the cash flow budget and the store manager is primarily responsible for the sales budget.
These are the notes you took at the meeting: The overall sales for 2016/17 target set by the business plan should be shared across the quarters in the same % as was achieved in 2015/16.
This was:
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Qtr 1
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Qtr 2
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Qtr 3
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Qtr 4
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2015/16
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3,142,822
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3,771,386
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4,085,668
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4,714,232
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15,714,108
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You now need to address the below calculations and place them in to the excel work book or word template provided:
a) Provide a total amount for the cost of goods sold.
b) Accounting fees have been negotiated for the year at a fixed amount of $10,000 to be paid in equal amounts each quarter.
c) The interest charges on the bank loan are anticipated at a reduced amount of $84,508 due to an agreed repayment of some of the loan principal. This is to be paid in equal amounts each quarter.
d) Bank charges are expected to be the same as 2016 and paid in equal amounts each quarter.
e) Depreciation is expected to be the same as 2016 and allocated in equal amounts each quarter.
f) Advertising is to be divided by each quarter based on the business plan.
g) The following expenses are expected to increase by the determined inflation rate in the business plan summary:
- Insurance - shared in equal amounts each quarter.
- Store supplies - is calculated for to each quarter using the same % as determined by the sales for each quarter.
- Cleaning - is calculated for each quarter using the same % as determined by the sales for each quarter.
- Store supplies in the 2009/10 results was $3,500 of the cleaning expense and $3,605 of the 2015/16 result and $3,749 of the 2016/17.
- Repairs and maintenance - apportioned in equal amounts each quarter.
- Rent - apportioned in equal amounts each quarter.
- Telephone - is calculated for to each quarter using the same % as determined by the sales for each quarter.
- Electricity - is calculated for to each quarter using the same % as determined by the sales for each quarter.
h) Fringe benefits tax is expected to be the same as 2016 and paid in equal amounts each quarter.
i) Wages and salaries are calculated for each quarter using the same % as determined by the sales for each quarter.
j) The statutory requirements are:
- Superannuation is 9% of wages and salaries for each quarter
- Payroll tax is 4.75% of wages and salaries for each quarter
- Workers compensation is 2% of wages and salaries for each quarter
- Company tax is 30% of net profit before tax for each quarter.
Q3. Sales budget by Department
Produce a sales budget for 2016/17 by department per quarter, complete the blank highlighted fields:
Calculation is Total Sales - % of sales
Q4. GST Analysis
Using the below information complete the GST section of the excel workbook or word template provided, the table below is an example with calculations.
10% GST was paid on the following items
Cost of goods sold:
- Accounting fees
- Insurance
- Store supplies
- Advertising
- Cleaning
- Repairs and maintenance
- Rent
- Telephone
- Electricity expense
The GST amount payable each quarter is the difference between the GST collected from sales and the GST paid - format as per policy and procedures (GST Collected minus Less GST Paid = GST Payable.
Also consider the new car for the Chairman costing $97,466 including GST has been planned for in the coming period to replace the just over five year old vehicle currently used by the chairman. This fuel inefficient car will attract a luxury car tax.
How much is this tax and what are your recommendations with regards to this luxury?
Q5. Aged Debtors budget
Complete the aged debtors' analysis in the excel workbook, or the Word Template using the information below:
Debtors ageing budget
The historical records show that the debtors balance at the end of each quarter (Qtr) is 20% of the quarter's sales.
Calculation as follows: Sales minus 20% = Total Debtors
The current total of debtors 84%
The following is a breakdown of debtors' balances:
10% is 30 days overdue
5% is 60 days overdue
1% is 90 days and overdue
To calculate the Current Aged Debtors - Calculation is as follows:
Total Debtors:
(Qtr 1) (Total Debtors amount) $678,849 x 0.84 (Current %) = $570,234
30 Days:
(Qtr 1) (Total Debtors amount) $678,849 x 0.10 (10%) = $67,885
Q6. Budget Notes (a-e)
You are now required from the previous tasks to develop budget notes.
a) Profit and Loss
Provide a minimum of three reasons for previous profits and losses, explain your reasons, and consider:
- Discuss the figures - Profits prior year are $851,188 in 2014 and $1,019,499 in 2015, why has this occurred?
- Supply reasons - that there is an increase in customer base and the business is built on superior after sales service.
b) Financial management approaches
Place the following information in to structured paragraphs: Provide comments on what you see as issues with the existing financial management approaches, consider:
- The importance of how budgets will be circulated and ensure managers and supervisors are clear about budgets, reporting requirements and financial delegations
- What are the impacts of inadequate analysis of revenue and financial management approaches?
- What is the impact of lack of computer software to produce timely and detailed reports
- Explain the importance reliance on qualitative input and not enough quantitative data and analysis, for Houzit explain how the importance of quantitative data gives a clear understanding of the financial information of the organisation.
c) Assumptions
What assumptions and bases have been made or used to form the Houzit budgets, consider the following and place the information in to a discussion:
- Sales same sales growth 2016/17 as 2015/16.
- Inflation is how much per annum?
- Reduce the expected gross profit rate by 1%
d) Contingencies
Discuss the need for Houzit to revise budgets, as required, to deal with contingencies, and make at least 3 (three) recommendations of what Houzit should put in place as contingencies.
e) Audit Trails
You need to recommend modified internal controls that could improve risk management and maintenance of audit trails:
Assessment Task 2 - Compliance/Regulatory requirements Software recommendation
This assessments task requires you to:
- Analyse Houzit statutory and compliance regulations
- Make recommendations by addressing the questions the CEO has asked you to identify.
- Make two recommendations for commercial software resources for Houzit to consider.
Q1. Statutory Requirements
What are the current statutory requirements for tax compliance and liabilities for Houzit Pty Ltd?
Q2. Annual Returns
An annual return with information about the company and its activities must be submitted to whom?
Q3. Financial records
Provide and explanation of 5 forms of financial records Houzit should keep and for how long Houzit are legally required to keep these records?
Q4. Director Expectations
What does the Corporate Law Act expect of the Director of Houzit? Provide minimum three examples.
Visit: What does the law expect of you personally?
Q5. Australian Securities & Investments Commission (ASIC)
What must Houzit notify ASIC of? (See Moodle ASIC)
Visit: Do you need to lodge financial reports with ASIC?
Q6. Principles of accounting (a-c)
Using the Houzit scenario discuss how the three following principles of accounting apply to Houzit in developing their budgets:
a. matching principle
b. account groups
c. time periods.
Q7. Probity
Explain and discuss the implications of probity when preparing and revising budgets. Discuss the importance of Houzit maintaining probity within the organisation.
Q8. Resources
Using the financial data that you have been analysing determine where you think resources should be allocated consider the following:
- A new car for the chairman which will also attract luxury car tax.
- Reduce the principal on the loan by $100,000 on 31 December.
- Complete a debtor analysis to reduce cash tied up in outstanding debts.
- Reduce the gross profit rate by 1%.
- Increase the advertising budget by $70,000.
- Increase wages and salaries by $172,500.
Q9. Budget Inclusion
Provide a minimum of three more recommendations for items for inclusion in the budgets for Houzit Pty Ltd.
Q10. Recommendations for Software
Read the current status of Houzit Software system and address the below questions a & b:
Assessment Task 3 - Report on finances and variances
This assessment requires you to analyse the budget variances data, and discuss the questions with regard to what the information is suggesting.
Procedure - You are required to complete a variance analysis using the Excel Work Book or the Word Doc Template provided. You will be required to address the questions in relation to your findings in the variance analysis you have conducted.
Q1. Complete the Variance Analysis
Use the Excel Work Book or the Word Template, complete the highlighted blank fields.
An analysis of the variance between the actual and the budget must include $ and % variance.
Q2. Primary Causes of Variance
After your statistical analysis discuss reasons for those individual and provide recommendations for these items in the variance report that represent the greatest % variance.
Q3. Financial viability
Provide a detailed discussion with recommendations to ensure financial viability of the organisation. In your discussion address the following:
The effectiveness/ineffectiveness of the current financial management processes in Houzit.
Discuss the importance of identifying and prioritising significant issues, including comparative financial performances from the previous years. Discuss how by having this information will assist with better decision making.
Discuss the importance of anyone involved in creating financial reports needs to ensure that the information is clear and conforms to organisational and statutory requirements.
Attachment:- Assignment Files.rar