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Evaluating Net Income of Retailer With the Help of Standard Deviation and Mean

University: Arden university

  • Unit No:
  • Level: Undergraduate/College
  • Pages: 13 / Words 3213
  • Paper Type: Assignment
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  • Downloads: 1499
Organization Selected : Boots Plc

INTRODUCTION

An accounting information system is a procedure which includes the collection, storing as well as processing of financial information. Financial information is used by management for making important business decisions. The market position and growth of the firm are the foremost criteria which reflect the success of the business. The assessment is based on determining the biggest income earners of Boots Plc which is a health and beauty retailer in the United Kingdom. The focus of the firm is on increasing demand and sales for its every product that is hair care, bathroom, oral care, etc. Further, the report will discuss the performance of the company as per different products which are responsible for the company’s growth.

SECTION 1

1. For each of the terms below definitions and examples of what these statements can be used for

  • Cash Flow Statement – It is defined as financial information which provides complete information related to all cash flows. A cash flow statement renders information which includes the total amount of money received by an organisation and investment made during the specific financial year. It can also be referred to as a summary of the anticipated or actual outgoings and incomings of cash in an enterprise during a particular accounting period.

A cash flow statement can be used for analysing the liquidity as well as the long-term solvency of an organisation. This statement is used by management in an enterprise to identify the financial performance of an enterprise (Marshall and Lambert, 2018). In addition to this, a projected cash flow statement can be utilised for knowing or determining the future need for cash. It is mainly used for making financial plans.

A cash flow statement can be used for identifying the variations or reasons for deficiency in cash or financial resources. In case of deficiency, it allows management to take immediate action. It can be used by management to forecast the ability of the company to repay its due debts or meet obligations. Examples of cash or revenue generated from operating activities are cash receipts of revenue generated by selling products or services.

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  • Income statement –It can be defined as a financial statement which assists management in analysing an organisational performance during the specific accounting year. All the revenues as well as profits are included in the income statement. Sales and service revenue are shown at the top of the income statement (Hall, 2018).

An income statement is used by management in an organisation to evaluate whether the firm has net income or loss during a particular financial year. For instance, an annual report includes the total income earned by the company during a particular accounting year. On the other hand, a quarterly report emphasizes revenue earned by an enterprise in three months.

The income statements can be used by management for determining tax liability. It is used by analysts for calculating financial ratios. For instance, return on asset, operating profit, gross profit, earnings before tax etc.

  • Statistical data –It is considered to be an important element in accounting system which helps management in making important business decisions. Statistical data is defined as quantitative information on any subject. In the context of business, statistical data might include earnings from different business activities. Statistical data is defined as a branch of mathematics which includes various activities such as the collection, organisation, analysis and interpretation of numerical data.

Statistical data is generally used by management in an enterprise for reaching to specific conclusion. It can also be utilised by managers for calculating the average income earned by the firm during the specific financial year.

  1. Annual report- It is considered a comprehensive report which includes detail about the various business activities which are carried out throughout the financial year. The annual report is used by management for analysing the performance of the company and making future business plans. It is used by management to identify the areas which require improvement. Annual report also provides detailed information related to market segments, products, management, legal process dings, customers, competitors etc.
  2. Trend analysis- It is defined as a technique which is used by management in an organisation for technical analysis. Trend analysis can be used for predicting the fluctuations in stock prices which are based on present trends. It assists management in determining the growth of the company, industry or market in the future. Trend analysis includes the collection of information from multiple time periods and plotting the information on a horizontal line for further review (Mohammad, 2018). For instance, a trader or manager in an organization should look inside the financial conditions of an enterprise, understand the market and technologies, and anticipate competitive pressures on the firm within its sector.

2. Discussing the use of accounting information systems to provide management with data for better decision-making

ERP accounting system

The word ERP stands for Enterprise resource planning system. This accounting information system assists management in determining the need of resources required for performing various functions. It could also be described as database software which supports all business procedures as well as operations such as manufacturing, human resources, marketing etc.

There are various benefits of using modern ERP systems such as it helps in saving money. This system helps business entities in preventing delays in production. Advanced ERP systems assist management in identifying an appropriate path for achieving goals (Richardson and Yigitbasioglu, 2018). It also supports management in determining the number of workers they will need. This system will help management identify the time when they should order inventory.

The major drawback is that the implementation of ERP involves high cost.

 

Customer relationship management software

This management software assists an organisation in performing routine business functions. It helps management identify ways to improve relationships with customers. Customer relationship software assists business entities in meeting overall goals. It provides management with actionable customer insight which further supports managers in making decision regarding improving the quality of products or services (Trinandha and Ghozali, 2018). Customer relationship management software is used by firms to store the contact information of clients.

The major advantage of this software is that it enables managers to address the permanent customer and helps them in analysing the number of time purchases made by an individual within a specific time period. It also supports management in formulating various customer policies.

The drawback of this system is that there is one major obstacle which is the transition from manual to automatic processes that occur in implementing an ERP system. There are high chances of hacking of system.

SECTION 2

1. Biggest income earner for Boots and its percentage in overall organisation

In accordance with retail week data, it has been bathroom amenities and toiletries have marked tremendous growth of the company by boosting its sales by 19.3 million pounds. Volume growth of four and five million is seen in Bath and skin care. With reference to growth, it has been determined that the sales of bathroom toiletries and skin care product packs have increased in comparison to last year. As per data, it has been denoted that Boots PLC holds 38 per cent of the share in the skincare market which is a leading position and the still firm managed its sales by selling 11 million packs worth 13 million pounds.

Further, the Skin care market of the company offers a wide range of products like, makeup, cleansers, accessories, scrubs and natural body care. The focuses on providing packs which help its customers to look great from top to toe (Scott and Walker, 2018). Therefore, it can be said that remarkable growth of the organisational market in every aspect is reflected by its trending beauty tips and wide range of products.

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2. Performanceproduct areas of the company which denote different growth rates

Data for retail week denote the decline and incline in business and its market share of particular aspects. The retailer deals in health and beauty where the firm holds a share in grocer and non-grocer markets. The classification offers its own unique products which denote a wide range of organisational products and services (Tungate, 2011). For example, in health, the company offers Nicotine replacement therapy with the motive of stopping smoking aid. The pack contains nicotine but in small amounts and is offered to motivate people to quit smoking as it is dangerous for their health. In accordance with this product example, it can be said that different products of the company are offered with different strategies to increase sales.

Further, market monitoring denotes that the expenditure of Boots Plc has increased by 0.6 % which worth 1.39 billion pounds. As per the increase in expenses, it has been implied raising capital reflects a firm’s ability to upgrade, acquire and maintain physical assets of an organisation such as equipment, machinery and buildings. In accordance with this, it can be stated that an increase in capital expenditure denotes a company’s ability to work consistently with dynamic market trends. On the other hand, there is an increase in a number of units of retailers by 0.4 % which is approximately 681.81 units (May, 2018). However, an increase in units implies an increase in the demand of customers which is a sign of a rise in revenue, profit and market share of Boots Plc. Thus, the rise in demand of buyers and increasing sales reflected that the average price of unit of a firm has increased by 0.2 %. In accordance with this, it can be said that the usual price per unit offered by Boots PLC is 2.04 pounds.

Likewise, the market monitor sector share of the firm is classified into two categories grocers and non-grocers. In accordance with changing trends and increasing sales of business, it has been determined that there is a 53 % decrease in the grocery per cent of the retailer and a 47 % increase in non-grocer packs. The retail week data of 2017 helped the firm in comparing changes in the share of the sector where it is outlined that there is a -1.5 % decrease in grocery sales of enterprise whereas 1.5 % rise in sales of non-grocery products like bathroom, skin and hair care.

Apparently, product share in retail week data reflects 4 aspects of health and beauty retailers where bathroom segments hold almost 50% of the market share. As per growth in the bath segment, it has been evaluated that toiletry packs are the biggest sales booster of Boots (May 2018). Almost 4 to 5 million bath products were sold by PLC in 2017 which represents the increasing demand of buyers. The rise in sales of bath products evaluated that bargain stores of the organisation are reflecting an incline of 8 % especially by uplift in toiletries volume performance. Thus, from market monitoring, it can be outlined that the performance of both packs is increasing because of the discount channel of Boots Plc.

Apart from bathroom packs, the firm has an increasing market share for its hair, oral and other products which is 19%, 16% and 15%. Thus, from the discussion, it can be concluded that Boots Plc is focused on growing its market share in every aspect in order to target the majority of buyers by fulfilling their different needs. Moreover, as per retail week data it has been calculated that bargain stores of Boots Plc have increased by 8 % and its pack moved up to 0.7. Nevertheless, as per retail week data, it has been determined that the toiletry market of Boots holds the highest market share and has sold products worth 11 million pounds. This remarked sales of the business which were 19.3 million pounds highest among all aspects of the organisation.

3. Strategy of Boots for consolidating market position

As per differing growth rates and performance of Boots PLC in retail week data of 2017, it can be suggested that the firm should focus on improving its markets that is grocers and non-grocers. The evaluation implies that the grocer's share of Boots emerged as a sales booster while sales of grocers have declined. Therefore, focusing on both sectors can be an effective strategy because it will help the firm in managing successful business operations. As per performance monitoring, it is important for the organisation to balance sales of both markets. A sense of stability in both sectors will allow firms to target different types of consumers to increase market share.

In accordance with the analysis, it can be suggested that Boots Plc should make use of different market positioning strategies to balance profits and growth of the targeted sector of business. The management can make use of a price-quality approach where the business can focus on maintaining the relation between the price and quality of grocery products. Maintaining the quality of groceries is essential for PLC because it includes gifts, electrical, and basic household amenities which are offered by retailers in different packaging (Wittock, 2018). Packaging of grocery items plays a vital role in gaining consumer attention where the firm focuses on packaging edibles in types of boxes and bottles. However, proper labelling will help Boots Plc in gaining consumers towards product price and quality.

Apart from the price and quality approach, it can be suggested that organisations can make use of competitive pricing where the firm will be liable to set the price of packs according to rival firms. In this, the management and production team sets the price of certain products a little less with regard to competitor pricing of similar goods. Minor difference in price will help the company to attract buyers which will assist in boosting sales of all products offered by the organisation is grocery and non-grocery.

Moreover, there is a product class approach which should be used by Boots Plc to improve its market for both sectors (Varley, 2014). The approach is neither narrow nor broad but helps the business in segmenting products according to the different needs of buyers. In accordance with the health and beauty market it is necessary for the organisation to offer packs on the basis of class narrow goods class can be leaning products which comprise shampoos, shower gels, conditioners, soaps, etc. Whereas broad product class for Boots Plc can be departments which will include, beauty and skin care, baby and child, electrical, opticians, sun and holiday, etc. (Boots, 2018). Thus, from different strategies and discussions, it can be outlined that the firm should focus on improving its both sectors in order to balance profits and revenues.

4. Net income of Boots over 5 years with the help of mean and standard deviation

Year

Net income (USD BILLIONS)

2013

2.45

2014

1.93

2015

4.22

2016

4.17

2017

4.08

Mean

3.37

Standard deviation

1.093915

 

In accordance with the net income of 5 years of WBA, it can be interpreted that the firm faced rapid ups and downs in recent years but still managed to balance the growth index with the help of different strategies like offering products in bargain stores, discounted channels, etc. The average net income is 3.37 billion $ which denotes the growth graph of WBA (Walgreens Boots Alliance Inc., 2018). With the positive fluctuation, it can be outlined that it is important for the firm to focus on its products shared which will help the business in getting a sense of balance in profits and revenues.

As per the standard deviation which is 1.093, it has been analysed that the growth of the firm is remarkable and denotes a positive response of buyers towards the products of the company. Moreover, from the evaluation, it can be stated that when the standard deviation is marked above 1 is a positive sign of increasing sales and revenue of the business (Avison and Cowton, 2012). WBA managed its growth by segmenting products and increasing market share for each sector which assisted the enterprise in targeting different types of buyers.

The graph reflects the decline and incline in the net income of the firm over 5 years, from which it has been evaluated that in 2015 the net income of WBA was at its maximum which is 4.27 billion $ where the firm made use of different strategies to boost its sales. In accordance with the analysis, it can be said that the focus of the company was on offering products with unique packaging, appropriate labelling, quality and competitive pricing.

Thus, from the discussion it has been determined that the mean and standard deviation of Boots denote the positive response of consumers towards business products and services (Greenwood and Ingram, 2018). It denoted that standard deviation denotes balanced growth of WBA which can help the firm in managing innovation in services and long-term success.

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CONCLUSION

It has been concluded from the report that the various reports or statements such as cash flow, statistical data, and income statements can be used for making various business decisions. Another conclusion drawn from the study is that ERP and CRM an appropriate as well as effective advanced accounting systems.

The report summarized differing growth rates of Boots Plc on the basis of retail week data of 2017. It evaluated the performance of product areas of the company from where this has been determined that the bath segment holds the majority of product share which is 50 %. Further, the assessment outlined a strategy which can be used by Boots to consolidate its market position where the firm should focus on enlightening its sectors that is non-grocer and grocers. Hence, the report concluded by evaluating the net income of retailers with the help of standard deviation and mean.

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