Bsbfim 601 Assessment Task 3 V 2 PDF

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Management Financial task 3 - question and answers...

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Assessment Task 3

Written answers

BSBFIM601 Manage finances

questions

and

Submission details The assessment task is due on the date specified by your assessor. Any variations to this arrangement must be approved in writing by your assessor. Submit this document specifications for details.

with

any

required evidence below

attached.

See

Performance objective The candidate will demonstrate the ability to describe the skills and knowledge required to establish the strategic direction of the organisation, sustain competitive advantage and enhance competitiveness.

Assessment description In this assessment task, you are required to provide answers to the questions asked. You may use additional documents as required.

Procedure 1. Read and understand the questions clearly. 2. Provide answers to the questions asked. 3. Give examples from your own experience as far as possible. 4. Submit all documents required in the specifications below to your assessor. Ensure you keep a copy of all work submitted for your records.

Specifications You must: ● meet with your assessor to clarify any confusion ● provide answers to all the questions ● submit your notes and any additional documents. ● If you utilise material from published authors make certain that you

cite and reference appropriately. If you do not know how to reference discuss this with your assessor. Plagiarism is unacceptable. Your assessor will be looking for your ability to: ● plan for financial management ● read and review profit and loss statements, cash flows and aging

summaries

Choice Business College RTO 41297 | CRICOS 03444C Jan 2018 version: 2.0

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● prepare, implement and revise a budget which aligns with the

business plan, is based on research and analysis of previous financial data and cash flow trends, and meets all compliance requirements ● contribute to financial bids and estimates ● establish a budget and allocate funds in accordance with statutory

and organisational requirements ● communicate with other people including: 

reporting on financial activity and making recommendations

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identifying and prioritising significant issues

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ensuring managers and supervisors are clear about budgets.

● analyse

the effectiveness of existing financial management approaches including reviewing financial management software, managing risks of misappropriation of funds, ensuring systems are in place to record all transactions, maintaining an audit trail and complying with due diligence.

Adjustment for distance-based learners ● No variation of the task is required. ● Documentation can be submitted electronically or posted in the mail.

Choice Business College RTO 41297 | CRICOS 03444C Jan 2018 version: 2.0

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Answer the following questions: You are required to answer the questions given below. You may either use the space being provided for your answers or attach separate answer sheets as required. 1. In your own words, describe responsibility accounting?

Responsibility accounting is a kind of management accounting, responsible for all management, budgeting and internal accounting of the company. The main purpose of this accounting is to support all the company's plans, costs and responsibility centers. Accounting usually includes preparing monthly and annual budgets for the personal responsibility center. Responsibility accounting is mainly concentrated in the responsibility center.

2. Which of the following statements relating to a budget is not true? a) It is a detailed plan b) It is a management tool c) It provides many of the performance targets used in responsibility accounting d) It is prepared on a historical basis e) It identifies certain financial and operating targets Choice Business College RTO 41297 | CRICOS 03444C Jan 2018 version: 2.0

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3. Detail 4 different types of budgets, and their purposes.

Incremental budgeting is the most common budgeting method because it is simple and easy to understand. However, using this method is likely to be inefficient. For example, if the manager knows that he has the opportunity to increase his budget by 10% each year, he will only seize this opportunity to obtain a larger budget, and not spend any effort to find ways to cut costs or save costs. It may also ignore external drivers of activity and performance. For example, certain input costs have high inflation rates. The incremental budget ignores any external factors and only assumes that costs will increase by 10% this year. Activity-based budgets are used to determine the amount of input needed to support the company's goals or outputs. The company will need to first determine the activities required to achieve sales goals, and then find out the cost of performing these activities. The value proposition budget is actually a state of mind, that is, to ensure that everything included in the budget can bring value to the company. The purpose of the value proposition budget is to avoid unnecessary expenditures-although it is not as precise as the zero-based budget in our final budget plan. When there is an urgent need to control costs, such as when the company is undergoing financial restructuring or a major economic or market downturn, where sporadic budget reductions are required, the zero-based approach is a good choice. Zero-based budgeting is best suited to address discretionary costs, rather than basic operating costs. However, this can be a very time-consuming method, so many companies only use this method occasionally.

4. What information would you require to plan and prepare a budget for Choice Business College RTO 41297 | CRICOS 03444C Jan 2018 version: 2.0

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a new business? Detail where this information would come from.

Create a 12-month cash flow forecast. We need to know how much money should be injected into our business in a year and how to generate it. This can help us create a budget based on the expected budget that is expected to occur within 12 months. When we do this, we can determine how much we should spend each month, which can keep our spending under control. This is especially helpful when we run a seasonal business. If we know that a company, we run made most of the money in the first 4-5 months of the year, we know that once the cycle is over, we will need to significantly reduce expenses. Create a 12-month cash flow forecast by doing the following: 

Allow payment terms-this will help us better predict when to make a payment transaction.

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Allowed payment methods-credit agreement incurs fees

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Understand our opening balance and how this affects cash flow

5. Describe what external factors should be taken into consideration when planning and preparing a budget.

Choice Business College RTO 41297 | CRICOS 03444C Jan 2018 version: 2.0

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External factors affecting the budgeting process allow the development of methodological techniques related to the basic methods of budgeting. Competition, scientific and technological progress, international relations, macro and micro economics, political situation and social class are all these factors.

6. Describe the following term in relation to an organisations budgetary requirements. CAPITAL INVESTMENT

Capital investment analysis is a budget tool used by companies and governments to predict long-term investment returns. Capital investment analysis evaluates longterm investments, including fixed assets such as equipment, machinery or real estate. It is used to determine the options that can produce the highest return on invested capital.

7. Describe the following term in relation to an organisations budgetary requirements. CAPITAL EXPENDITURE

Choice Business College RTO 41297 | CRICOS 03444C Jan 2018 version: 2.0

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The capital expenditure budget may be longer than the annual budget. The reason is that some larger fixed asset acquisitions involve a long construction period, which may greatly exceed one year. In addition, the nature of the business may involve a series of major construction projects in progress, which may extend into the next ten years. The number of fixed assets purchased will also vary based on the activity level projected in the rest of the budget, and the activity level will be adjusted to match the organization’s expansion capabilities and the cash flow needed to fund growth.

8. Describe the following term in relation to an organisations budgetary requirements. CASH FLOW

Cash flow refers to the net amount of cash and cash equivalents transferred in and out of the business. At the most basic level, the company's ability to create value for shareholders depends on its ability to generate positive cash flow, or more specifically, its ability to maximize long-term free cash flow (FCF).

9. Describe the following term in relation to an organisations budgetary requirements. BREAK EVEN

Knowing the company's break-even point is important for small business owners. Many owners want to know how many sales they need to achieve to achieve profit. The components of a break-even analysis include sales revenue, fixed and variable costs, and marginal revenue. The break-even point can help managers make important business decisions to achieve the company's expected revenue.

10.Describe the following term in relation to an organisations budgetary Choice Business College RTO 41297 | CRICOS 03444C Jan 2018 version: 2.0

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requirements. GROSS PROFIT

Gross profit assesses how efficiently a company uses its labour and supplies in the production of products or services. This indicator mainly considers variable costs, that is, costs that fluctuate with the level of output, such as:

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Material

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Direct labour, assumed to be hourly or otherwise dependent on the level of output

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Sales staff commission

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Credit card fees for customer purchases

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Equipment, which may include depreciation based on usage

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Utility programs at the production site

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Transport

11.Describe the following term in relation to an organisations budgetary requirements. RISK MANAGEMENT

Every business and organization face the risk of unexpected, harmful events that may cause the company to suffer losses or permanently shut down. Risk management enables organizations to try to prepare for unexpected events by minimizing risks and additional costs.

12.What are the financial reporting cycles relevant to your Industry?

Choice Business College RTO 41297 | CRICOS 03444C Jan 2018 version: 2.0

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The reporting cycle involves the operation, management, update and reporting of company accounts. This cycle usually runs concurrently with the planning and budgeting cycle. It ensures that the company is ready to start the next period. The company’s planning/budget cycle and reporting cycle are usually independent of each other, but can be prepared by the same person.

13.Describe 2 different capital investment evaluation techniques

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The net present value method takes into account the time difference of future cash flows over the years. It is better to withdraw your money earlier than to withdraw it 20 years from now. Inflation makes the value of money in the next few years less than it is today.

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The internal rate of return method is a simpler variation of the net present value method. The internal rate of return method uses a discount rate to make the present value of future cash flows equal to zero. This method provides a way to compare the attractiveness of multiple projects. The project with the highest rate of return will win the competition. However, the yield of the winning project must also be higher than the yield required by investors. If the investor says that he wants a 12% return on funds, and the winning project only gets 9% return, the project will be rejected. When using the internal rate of return method, the investor’s cost of capital is the minimum acceptable return.

14.What are the benefits of participative budgeting?

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BSBFIM601 Manage finances

Employees work harder to achieve the standards they set. Therefore, their productivity is improved.

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It saves the time of senior management. In addition, they can pay more attention to key issues.

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It can improve the creativity of stakeholders, thereby preparing future managers.

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This budget is more realistic. The reason is that it is prepared by personnel with technical knowledge of relevant departments.

15.What steps would you take to effectively implement the budget into a team environment?

Step 1: Determine the goal The first step in formulating a budget is to determine your business goals. Step 2: Check what we have Review current business documents, including income statements, balance sheets and outstanding debts, past tax returns, assets, liabilities, and real-time cash flow forecasts. Step 3: Define costs Use our company’s past data to fill in all expenses and do some research to generate approximate values for each item for which we don’t know the expenses. Step 4: Establish a budget To do this, we need to start backwards from the bottom line, and then look at the final result. We may need to make some adjustments when setting the budget.

16.What are INCOTERMS? Choice Business College RTO 41297 | CRICOS 03444C Jan 2018 version: 2.0

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The "General Rules for the Interpretation of International Trade Terms" is a set of commercial/trade rules formulated by the International Chamber of Commerce ("ICC") for international sales contracts. The "General Rules for the Interpretation of International Trade Terms" are not mandatory rules. In order to make them legally effective, all parties must explicitly include them in the contract.

17.Describe the following INCOTERMS codes? (a) Departure (Group E) FCA – Free Carrier (b) Main Carriage Paid By Seller (Group C) CIF - Cost, Insurance And Freight (c) Arrival (Group D) DAF – Delivered At Frontier

(a)

FCA – Free Carrier

Free carrier is a trade term that stipulates that the seller of goods is responsible for delivering these goods to the destination designated by the buyer. The destination is usually an airport, cargo terminal, warehouse or other location operated by the carrier. It may even be the seller’s place of business. The seller includes the transportation cost in its price and bears the risk of loss until the carrier receives the goods. At this time, the buyer assumes all responsibilities. (b)

CIF - Cost, Insurance And Freight

Cost, insurance and freight (CIF) are the fees paid by the seller to cover the cost, insurance and freight of the buyer's order during the transportation process. The goods are exported to the port specified in the sales contract. Before the goods are completely loaded on the carrier, the seller shall bear the cost of product loss or damage. (c)

DAF – Delivered At Frontier

Delivered At Frontier is a transportation contract clause that can be used when transporting goods across borders. A border is a mark on a border that is usually Choice Business College RTO 41297 | CRICOS 03444C Jan 2018 version: 2.0

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crowded on transportation routes, including customs cargo inspections. The seller is usually responsible for all costs of transporting the goods to the buyer’s drop-off location. 18.What is the trades practice Act?

If all businessmen act in an honest and ethical manner, then the goals of the Trade Practices Act of 1974 can be achieved. Since many companies take shortcuts in order to gain a competitive advantage in a fierce market, and occasional unethical behavior harms the interests of other companies in a disgraceful way, it is necessary to enact Trade Practices Act to ensure fair competition.

19. What is the Warsaw Convention?

Choice Business College RTO 41297 | CRICOS 03444C Jan 2018 version: 2.0

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The Warsaw Convention, is an international convention which regulates liability for international carriage of persons, luggage, or goods performed by aircraft for reward

20.What is the World Trade Organisation?

The World Trade Organisation handles the trade of goods, services and intellectual property rights between participating countries by providing a framework for negotiating trade agreements and a dispute settlement procedure aimed at strengthening the compliance of the participating countries with WTO agreements. Representatives of member governments sign and approve the WTO ban on trade Discrimination between partners, but provides exceptions for environmental protection, national security and other important goals. Trade-related disputes are resolved by independent WTO judges through dispute settlement procedures.

21.What are Bilateral and Regional Free Trade Agreements?

Choice Business College RTO 41297 | CRICOS 03444C Jan 2018 version: 2.0

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Bilateral trade agreements are concluded between two contracting parties, while regional trade agreements are concluded between two or more contracting parties that share some common name (conceptually called "region"). The purpose of such agreements is to strengthen trade relations between members

22.What is meant by financial probity?

The requirements for financial probity as an employee or organization must maintain the confidentiality of participants' confidential information (including commercially sensitive information and intellectual property). Ensure that the bidding process, negotiation, evaluation process and contract management process are auditable, transparent and accountable. In accordance with applicable laws and policy requirements, including the applicable Victorian Public Sector Code of Conduct, proactively identify and manage conflicts of interest, whether real, potential or appropriate.

23.What records need to be kept for the ATO for a small business with an annual turnover of less than $2million (cash basis)

Choice Business College RTO 41297 | CRICOS 03444C Jan 2018 version: 2.0