Essay
Business Financial Performance level 3 D1 UNIT 2
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Justify recommendations on ways in which problems with cash flow, working capital, costs and budgets and break- even may be addressed for a profitable business.
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I will be justifying recommendations on ways in which problems with cash flow, working capital,costs, and budgets and breakeven may be addressed for a profitable business.
Cash inflow can be improved by the business doing promotion and sales as this will increase sales
because people may like the products cheaper. Also they can try improving their business activities
by advertising and introducing new ideas which will bring in more income and they could possibly get
more investors for the business as this will bring in income. ASDA could also make a loan as this will
also increase the cash inflow, also instead of paying the supplier straight away they could delay
payment as this will not decrease their inflow however they must be careful because they do not
want to lose the supplier. They can also compare their previous cash flows to see what they were
doing then and adjust. Cash outflow can be improved by finding inexpensive suppliers and ASDA ma
have many staff who are not needed which shows they can make some staff redundant as this will
decrease they outflow of the business.
Breakeven can be improved by the business attempting to have a lower break even for example
instead of needing to sell 20,000 products to break even they should try and make it 5000 products
as it would be easier for them because they could do more sales and advertising. Also breakeven can
be improved ; instead of ASDA break evening they should think of making a profit then they will not
break even and they will have actually made a profit and they could do this by selling different
brands in their store and expanding in areas where there are less grocery stores. Also the business
could identify why there are not break evening by looking at their previous break even data, the
reason could be the price of their products is too high or their supplier is too expensive which is why
ASDA also makes their products expensive.
The budget can be improved by looking at previous budget data and the business can improve the
budget by spending less as they will have more money in the budget to spend. Budget can also be
improved by doing it as soon as possible because this will avoid a business having unexpected
expenditure. They could have more to spend in the budget by investing the extra funds as this will
allow them to have more money for the next budget. A budget can be improved by making sure the
figures are correct or as accurate as possible as this will stop the business over spending or spending
less as they could have opted for the high priced item if they has the correct information. Having a
budget allows a business not to waste money so a budget can be improved by not spending money
on items which are not needed and spending more on items which will bring in money into the
business. Also keeping budgets from previous years or months is important as this can be used for
comparison and improvement. Costs can be improved by finding cheaper suppliers and building a
good relationship with the supplier so they can give discount and additional items, cost can also be
improved by not wasting because it is available such as leaving the light on, electricity should be used
when needed only, ASDA should only introduce products if they know it will be successful so they do
not waste money and if the cost of rent is too high and the building is good maybe the business can
make staff that are not needed redundant because transferring a business to another store is time
consuming. Also to improve costs they can find more investors and they can invest the money they
have to bring in more money, however they should not invest all the money, they can save some for
emergencies.
Working capital can be improved by a business increasing their current assets and this can be done
by having more stock as they will need to sell it to pay off debts. They can have less current liabilities
by paying their suppliers on time which will gain the trust of the supplier and they may give ASDA
more time to pay them what is owed and paying loans off which will stop them from owing any debt
and they will have less current liabilities. They could also increase the current assets by selling more
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