Essay
Business Financial Performance level 3 M2 UNIT 2
- Institution
- PEARSON (PEARSON)
Analyse the performance of a selected business, using information provided from its accounting systems, highlighting potential causes for concern
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I will be analysing the performance of ASDA using information provided from its accounting systemsand highlighting potential causes for concern.
In terms of ASDA sales it was 23.2bn in 2014 and it decreased to 22.4bn in 2015 and this is a cause
for concern because sales is what makes the business grow. ASDA’s sales may have decreased
because they did not have a lot of customers or customers did not like their products or it was too
expensive or customers were not aware of their products. Sales going low is a concern for ASDA
because having low sales could be long lasting especially if their customers go to competitors which
means they have to find ways to keep customers such as having a loyalty card which will reward
customers if they buy products and this will increase sales. ASDA having low sales could affect them
in the future because having low sales leads to low profit and ASDA if they do not improve could end
up having to close some of their stores in order for them to having more money. ASDA can improve
this by making more sales, advertising, lowering prices and doing competitions as this will attract
customers.
In terms of costs ASDAS costs were £22m in 2014 and in 2015 it was £21m which is good because
they have improved and lowered their costs so they have no cause for concern however if they want
to lower their costs more they can find cheaper suppliers, lower rent for stores, cheaper advertising
and make some staff redundant and this will lower their costs. However they should do it properly
because if they do not advise as much, fewer customers are aware which means lower profit. Also
the costs may have been lower in 2015 than 2014 because ASDA found ways to lower their costs or
they did not find it necessary to spend as much such as buying many stock because they did not
need to because they didn’t have much customers. Lowering costs benefits ASDA because they will
have more funds to improve their sales such as introducing new products and opening more stores
and this may attract customers.
ASDAs prepaid expenses in 2014 were £1,909m and in 2015 it was £2,224m, this can be a cause for
concern and it can be positive. It can be a cause for concern because if they pay their expenses early
it leaves them with fewer funds, however paying expenses early gives ASDA a good relationship with
their creditors which mean the creditors may give ASDA a longer time before they are due to pay
expenses. In 2014 the expenses were lower than 2015 maybe because ASDA did not need to buy
much stock because customer demand was low and their expenses were low, however in 2015
expenses were higher may be because they had more customers which means more stock and more
customers means more staff needed to satisfy and provide customer service to these customers
which is why the expenses were high. Paying expenses before it is due is good because the business
can focus on other improvements needed for the business however the business can invest the more
before it is due for payment or they can just pay it early if they have enough money to do so and not
in debt.
In terms of cash in 2014 ASDA had cash of £7,281m and in 2015 it increased £9,135 and there is no
cause for concern for this because ASDA have improved by having more cash .The cash may have
improved in 2015 compared to 2014 because ASDA made many sales and lowered their expenses
which is why they had a high amount left over and also they could have done good investments
which allowed them to make good profit from it. It may have been low in 2014 compared to 2015
because ASDA did not have many customers and their expenses were high. Also in 2014 they may
have had less cash because they bought a lot of stock because customer demand was high, however
in 2015 they had more cash because they did not need to buy as much stock. If ASDA wanted to
make more improvements they can make more sales, lower expenses, make investments and
advertise well which will attract customers.
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