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

Organization Selected : Boots Plc

INTRODUCTION

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

SECTION 1

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

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

Cash flow statement can be used for analysing the liquidity as well as long term solvency of an organisation. This statement is used by management in an enterprise for identifying 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 of cash. It is mainly used by for making financial plan.

Cash flow statement can be used for identifying the variations or reason for deficiency in cash or financial resources. In case of deficiency, it allows management to take immediate actions. It can be used by management for forecasting the ability of 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.

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

Income statement is used by management in an organisation for evaluating the whether firm has net income or loss during particular financial year. For instance, annual report include total income earned by company during particular accounting year. On the other hand, quarterly report emphasizes on revenue earned by an enterprise in three months.

Income statement can be used by management for determining the tax liability. It is used by analyst for calculating financial ratios. For instance, return on asset, operating profit, gross profit, earning before tax etc.

  • Statistical data –It is considered to be as 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 context of business, statistical data might include earning by different business activities. Statistical data is defined as branch of mathematics which include various activities such as 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 manager for calculating the average income earned by firm during specific financial year.

  1. Annual report- It is considered as comprehensive report which include detail about the various business activities which are carried out throughout the financial year. Annual report is used by management for analysing the performance of company and making future business plans. It is used by management for identifying the area which require improvement. Annual report also provides detail 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 is based on present trend. It assists management in determining the growth of 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 assist management in determine the need of resources required for performing various function. It could also be described as database software which supports all business procedures as well as operations such as manufacturing, human resource, marketing etc.

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

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

Customer relationship management software

This management software assists an organisation in performing routine business functions. It helps management in identifying the ways to improve relationship with customers. Customer relationship software assist business entity in meeting overall goals. It provides management with actionable customer insight which further support manager in making decision regarding improving quality of products or services (Trinandha and Ghozali, 2018). Customer relationship management software is used by firm for storing the contact information of client.

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

The drawback of this system is that there are one major obstacles that is transition from manual toautomatic processesmight occur in implementing 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 ha marked tremendous growth of company by boosting its sales by 19.3 million pound. 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 products packs have increased in comparison to last year. As per data, it has been denoted that Boots PLC holds 38 percent of share in skin care market which is a leading position and still firm managed its sales by selling 11 million packs worth 13 million pound.

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

2.Performanceproduct areas of company which are denoting different growth rates

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

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

Likewise, market monitor sector share of firm is classified into two that is 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 grocery percent of retailer and 47 % increase in non-grocer packs. The retail week data of 2017 helped the firm in comparing change in share of sector from where it is outlined that there is -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 retailer where bathroom segments holds almost 50% of market share. As per growth in bath segment, it has evaluated that toiletries packs are the biggest sale booster of Boots (May, 2018). Almost 4 to 5 million bath products are sold by PLC in 2017 which represents increasing demand of buyers. Rise in sales of bath products evaluated that bargain stores of organisation are reflecting incline of 8 % specially by uplift in toiletries volume performance. Thus, from market monitoring it can be outlined that performance of bath packs is increasing because of discount channel of Boots Plc.

Apart from bath room packs, the firm has 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 for every aspect in order to target 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 determied that toiletry market of Boots holds highest market share and has sold products worth 11 million pound. This remarked sales of business which were 19.3 million pound highest among all aspects of 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 both market that is grocer and non-grocer. The evaluated implies that non grocer share of Boots emerged as a sales booster while sales of grocer have been declined. Therefore, focusing on both sector can be 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 market. Sense of stability on both sector will allow firm to target different types of consumers to increase market share.

In accordance with analysis, it can be suggested that Boots Plc should make use of different market positioning strategy to balance profits and growth of targeted sector of business. The management can make use of price quality approach where the business can focus on maintaining relation between price and quality of grocery products. Maintaining quality of grocery is essential for PLC because it includes gifts, electrical, and basic household amenities which are offered by retailer in different packaging (Wittock, 2018). Packaging of grocery item 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 consumer towards product price and quality.

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

Moreover, there is product class approach which should be used by Boots Plc to improve its market for both sector (Varley, 2014). The approach is neither narrow nor broad but helps the business in segmenting products according to different needs of buyers. In accordance with health and beauty market it is necessary for the organisation to offer packs on the basis of class like narrow goods class can be leaning products which comprise of shampoos, shower gels, conditioners, soaps, etc. Whereas broad product class for Boots Plc can be department which will include, beauty and skin care, baby and child, electrical, opticians, sun and holiday, etc. (Boots, 2018). Thus, from different strategies and discussion it can be outlined that the firm should focus on improving its both sector 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 net income of 5 years of WBA, it can be interpreted that the firm faced rapid up and down in recent years but still managed to balance growth index with the help of different strategies like offering products on bargain stores, discounted channel, etc. The average net income is 3.37 billion $ which denotes 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 sense of balance in profits and revenues.

As per standard deviation which is 1.093, it has been analysed that growth of firm is remarkable and denotes positive response of buyers towards products of company. Moreover, from the evaluation it can be sated that when standard deviation is marked above 1 is positive signs of increasing sales and revenue of 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 type of buyers.

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

Thus, from the discussion it has been determined that mean and standard deviation of Boots denotes positive response of consumers towards business products and services (Greenwood and Ingram, 2018). It denoted that standard deviation denotes balance growth of WBA which can helps 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 statement such as cash flow, statistical data, income statement can be used for making various business decision. The another conclusion drawn from the study is that ERP and CRM is an appropriate as well as effective advance accounting system.

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

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