CompanyINTRODUCTION
In an organisation, there are various kinds of resources available like human, physical, financial, technological and more. Among these, human resources play a crucial role in accomplishing targeted goals and objectives in a set period of time while other materials enable them to function in an appropriate manner (Hai-Xia, 2011). This project entails the importance and purpose of managing such kinds of resources in an enterprise. It also describes ways to manage human resources and raise funds from different sources as well as an interpretation of key financial statements is also given. For this context, a large company in the UK named LIDL has been taken which deals in the supermarket business.TASK 1(Covered in leaflet).
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P4 Sources of internal and external finance
In order to run a business properly, a company requires money in a sufficient manner. The term finance entails the management of a desired amount of money and allocation from different sources (LIU and YAN, 2015). For instance- If an organisation sells its products or services to people then they are considered as a source of obtaining finance. It can be distinguished in two broad terms that are:-
Internal Source of finance: Rather than induce loans from banks and investors, a company can get necessary funds from internal sources i.e. use its own money for financing operations. In context with LIDL, this kind of finance helps in saving money on payments of interest or getting free from being accountable to investors. It uses the following sources to generate finance in business-
- Retained Profits: This source is used by such companies that operate business on a large level with shareholders and stock. They used to recycle profit as working capital instead of using the same for paying it as dividends.
- Sale of Assets: In this context, the management of LIDL can sell such assets to other companies like machinery, equipment, transport and more which have no use in business. It will help to cover a cash-flow emergency in quick manner.
- Reducing working capital: It is a type of strategy used to manage available cash in an adequate manner. Under this context, employers used to be more on longer payment terms rather than shorter billing items so that funds could be received faster.
External Source of finance: It states the process of arranging funds from outsiders rather than retained earnings from the internal activity of business (Xie-Kui and Dan, 2015). This source of financing can be segregated on the basis of long-term and short-term purpose that are-
- Long-term source: It includes equity shares, debentures, term loan, preferred stock, venture capital, leasing and hire purchasing. For big enterprises like LIDL, equity shares and debentures are considered as common source but costly as compared to finance on debt. Hire purchase is normally provided by suppliers to buyers with an alternative to buy assets of the company at the end of its term.
- Short-term sources: Bank overdraft, trade credit, factoring in debt etc. are defined as short-term sources of finance. As companies are required money for day-to-day operations in which requirement of cash is generated due to a gap between collection and payments. Therefore, to fulfil this gap, the management of LIDL used to take bank overdrafts. While trade credit is given by suppliers or creditors which allows a firm in delaying its payment for certain period of time (LIU, SU and QI, 2012).
P5 Interpretation on contents of a balance sheet, trading and P&L account
|
Income statement of LIDL |
|
|
|
Currency in GBP. All numbers in thousands |
|
|
|
Revenue |
31/01/18 |
31/01/17 |
|
Total revenue |
8267 |
8212 |
|
Cost of revenue |
2999 |
2612 |
|
Gross profit |
5268 |
5600 |
|
Operating expenses |
||
|
Selling general and administrative |
7380 |
5543 |
|
Total operating expenses |
10488 |
8114 |
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Operating income or loss |
-2221 |
98 |
|
Income from continuing operations |
||
|
Total other income/expenses net |
3 |
4 |
|
Earnings before interest and taxes |
-2221 |
98 |
|
Interest expense |
- |
-2 |
|
Income before tax |
-2218 |
102 |
|
Income tax expense |
-125 |
-85 |
|
Net income from continuing ops |
-2093 |
187 |
|
Non-recurring events |
||
|
Net income |
||
|
Net income |
-2093 |
187 |
|
Net income applicable to common shares |
-2093 |
187 |
|
Income statement |
|
|
Revenue(ttm) |
8.27M |
|
Revenue per share(ttm) |
0.03 |
|
Quarterly revenue growth(yoy) |
-2.50% |
|
Gross profit(ttm) |
5.27M |
|
EBITDA |
-1.84M |
|
Net income avi to common(ttm) |
-2.09M |
|
Diluted EPS(ttm) |
-0.9 |
|
Balance sheet |
|
|
Total cash(mrq) |
3.23M |
|
Total cash per share(mrq) |
0.01 |
|
Current ratio(mrq) |
3.2 |
|
Book value per share(mrq) |
0.03 |
|
Cash flow statement |
|
|
Operating cash flow(ttm) |
-720k |
|
Levered free cash flow (ttm) |
-969.12k |
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Trading information |
|
|
Stock price history |
|
|
Beta |
0.14 |
|
52-week change 3 |
-28.75% |
|
S&P500 52-week change 3 |
14.79% |
|
52-week high 3 |
10.45 |
|
52-week low 3 |
5.999 |
|
50-day moving average 3 |
7.535 |
|
200-day moving average 3 |
6.95 |
|
Share statistics |
|
|
Avg vol (3-month) 3 |
50.81k |
|
Avg vol (10-day) 3 |
32.5k |
|
Shares outstanding 5 |
244.18M |
|
Float |
146.08M |
Interpretation: From this financial statement, it has been interpreted that LIDL Company as compared to last year, has not achieved much success in terms of sales performance and revenue.
TASK 4
P6 Use of budget for financial control
A budget in a firm provides a road map which describes the entire detail of estimated outcomes through which the manager of a firm can make decisions as per set goals (Junyi, 2014). It helps in three main aspects of business that are:
Planning: When a budget reflects expected sales in a certain period then the manager can analyse the costs of the same and determine resources or raw materials needed for that. For instance- if sales of a business are increasing 4% over budget for a specific time then management can add this in further calculation.
Forecasting: The budget of the previous financial year helps managers prepare a budget for the following year by applying strategies that were helpful in the last year for gaining profitability.
Continuous improvement: With the weekly performance of the business in terms of sales, managers can evaluate ways through which improvement may be done (Chen, Nasongkhla and Donaldson, 2015). Budget helps them in providing clues as to where they need to concentrate more to improve financial performance.
P7 Financial State of LIDL
This statistic reveals the profit gained by LIDL from 2014 to 2017. It shows that the operating profit of this company dropped continuously i.e. amounting to 68 million euros in 2017 which was nearly about 2 million euros less as compared to 2016.
CONCLUSION
It has been concluded from this report that behind the success of every organisation, management plays an important role who helps in allocating different resources as well as managing them in a proper way. It includes human, physical, technological and other non-financial resources which have played different role in the operating functions of business. Along with this, financial resources are considered as the most essential initiatives without which the entire functions of a company cannot operate. So, various kinds of financial sources are also described in this assignment.
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