Thinking Made Easy

Footsie 100 index

OBJECTIVES

As a person with experience knowledge of companies within Footsie 100 index, the author has always brought up to his superiors the viability of strategy formation regarding the analysis of annual reports and at times fails to understand the reasons or logic behind certain strategic implementations imposed on it.

By delving into this project paper, the author intends to have better insights into how the annual reports of Footsie 100 companies are thought up, formulated and then imparted down. The author hopes to have an in-depth understanding as to how the information on the annual reports of these Footsie 100 companies enables them to compete effectively and profitably in this era of internationalization where competition is extremely intense.

In order to reinforce the learning objectives, two key focal issues were focussed upon, i.e. innovation and diversity. Innovation was discussed with regard to the analysis of the annual report where it was renowned for its developmental capabilities to constantly innovate. Diversity came under strategic thinking and formation as the author considered the diverse culture, political climate, economic surroundings, social environment, technological settings, government policies and legal systems in order to better understand the information found in the annual report.

 

 

INTRODUCTION

Annual reports reflect the degree of efficiency and effectiveness of a company or organization’s implementation of the policies and tasks necessary to satisfy their customers, employees, and management. These are usually in the form of figures and other accounting policies. Annual reports normally focus on the information regarding the company’s careful management of the processes involved in the production and distribution of its products and services.

More often than not, small companies don't really have the capabilities to issue annual reports. Instead, these companies engage in activities that various schools of management typically associate with making annual reports of their status. These activities include press release involving the manufacturing rate of their products, product development, production and distribution.

However, a comprehensive annual report must deal with all operations done within companies and organizations. Activities such as the management of purchases, the control of inventories, logistics and evaluations must still be covered by annual reports. A great deal of emphasis lies on the efficiency and effectiveness of processes. Therefore, annual reports must include the analysis and management of internal processes.

Morrison Supermarkets will be the model Footsie 100 business entity that will be used in this research based on their history in making comprehensive annual reports.

ANALYSIS

 

The following information was found in the 2005 Annual Report of Morrissons Supermarkets, specifically on the Accounting Principles section.

 

1. Fixed Assets and Depreciation

 

Depreciation

“The policy of the group is to provide depreciation at rates which are calculated to write off the cost less residual value of tangible fixed assets by equal annual installments. Following the acquisition of Safeway Limited (formerly Safeway plc), the group has harmonized its depreciation rates resulting in the following changes:

 

                                          NEW RATE                   PREVIOUS RATE

	GROUP	MORRISONS	SAFEWAY
Freehold land	0%	0%	0%
Freehold and long lease buildings	2·5% 2%	10% 2·5%	2·5% 2%
Short lease land and buildings	Over lease period	Over lease period	Over lease period
Plant, equipment and vehicles	15%	33% 15%	33% 12·5%

 

 

Had the group’s previous rates been applied the depreciation charge in the current period would have been £35m higher, and the net book value of fixed assets an equivalent amount lower. In addition to the systematic depreciation, fixed assets are reviewed for impairment if events or changes in circumstances indicate that the carrying amount may not be recoverable” ().

 

Fixed assets

            In terms of intangible assets (negative goodwill), it was equivalent to 262·9 £m in 2005, while the tangible assets registered to about 6,824·0 1 £m.

B. Debtors and Provision for Doubtful Debts

“Cash, for the purpose of the cash flow statement, comprises cash in hand and deposits repayable on demand, less overdrafts payable on demand. Overdrafts are stated net of uncleared banking items (mainly cheques in the course of clearing). Liquid resources are current asset investments which are disposable without curtailing or disrupting the business and are either readily convertible into known amounts of cash at or close to their carrying values or traded in an active market. Liquid resources comprise term deposits of less than one year (other than cash) and investments in money market managed funds”().

C. Stock and Cost of Sales

“Stocks are valued at the lower of cost and net realizable value and comprise goods for resale. The cost of financing property developments prior to their opening date is included in the cost of the project “().

 

2) The major issues/changes that Morrissons Supermarkets have faced in the last 12 months were indicated in the Chairman’s Statement section of the 2005 Annual Report. Its highlight was Morrisons Supermarkets’ recent acquisition of rival Safeway Supermarkets.

Morrisons Supermarkets won the bid to acquire Safeway Supermarkets, and the integration of the two business entities started on March 8, 2004 (). Under the agreement, Morrisons had to let go of more than fifty stores and sell them to other buyers. It was fortunate that there were many buyers interested on those stores, but of course the fact of letting go of those stores was discouraging. The main objective of merging the Safeway supermarkets with Morrisons Supermarkets did not materialize easily, since there became a necessity of certain cultural adjustments all throughout the newly merged company in order to improve the overall business operations. The process of benchmarking of all the products of both companies was the main goal which the company believed would optimize their operations.

Ever since the start of its business, Morrisons Supermarkets has always been a sales-oriented business entity. They give premium value to their clients because they believe that this is the key towards increased sales and maximization of operations. Morrisons plans to convert the former Safeway stores into a rolling store format throughout the next months, believing that this move will guarantee further growth through the recognition of the needs of their clients. Morrisons Supermarkets is governed by an effective management group which helps in maintaining the delivery of quality services for all its customers to enjoy.

3) Pieces of Information

A. Suppliers (Director’s Statement)

Payment to creditors

“Supplier credit is an important factor in the success of the business. Following the acquisition of Safeway Limited the company will, as previously acknowledged, work within the spirit and letter of the supermarkets’ code of practice. The company will continue with its policy to ensure all payments are made within mutually agreed credit terms. Where disputes arise the company attempts to sort these out promptly and amicably to ensure delays in payment are kept to a minimum. Creditor days outstanding for the company at 30 January 2005 were 39 (2004 ) ()”.

 

B. Local Community (Director’s Statement)

Political and charitable donations

“During the period the group made charitable donations amounting to £153,000. In addition the group sponsored various charities and in the year over £4·1m was raised by customers and staff. No political donations were made ().”

Future developments

“The group continues to expand into new areas of merchandise where considered appropriate and plans to continue physical expansion of retail stores as and when opportunities arise. Further details of current and future developments are set out in the chairman’s statement ().”

C. Customers (Director’s Statement)

Health and Safety Policy

“It is the group’s intention as far as is reasonably practical to ensure the health, safety and welfare of all its employees, customers and visitors to its premises. In order to achieve this, the group has drawn up a comprehensive health and safety manual that contains policies and procedures detailing safe working systems and practices for all work-based activities ()”.

D. Shareholders (Director’s Statement)

“The company maintains regular contact with institutional shareholders throughout the year. In addition the annual general meeting provides a forum for communicating with private investors. The non-executive directors have developed an understanding of the views of the major shareholders from briefings provided by the chairman and executive directors at the board meetings ()”.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ANNUAL BUDGETING

Introduction

            The preparation process for the annual budget involves a great deal of energy, time, and expense. Hence, it is important that a company must be able to follow accurately all the methods of preparing an annual budget. Budgeting is defined as a form of financial planning and such budget is utilised to impose the strategy of a company. Consequently, a budget is composed of different functional budgets such as production, personnel, sales, and investment and material budgets. The combination of each functional budget made up the capital budget, master budget and even the cash flow budget which consists of income and balance sheets.  The capital budget is used to show the future capital expenditures of an organisation while the cash flow budget is a plan of how much finances will be needed and used.  On the other hand an income budget is a plan to show the income and costs while the balance sheet budget illustrates the forecasted liabilities, assets and equity of the firm. 

            Aside from determining the financial needs, other purpose of budgeting is to motivate employees and to establish figures and rations for the purpose of comparison.  Other essential reasons for having a budget plan is to effectively allocate resources, coordination, rendering tasks, dimensioning of the activities of the company, efficient communication and a foundation for incentive systems.

            In budgeting, the focus is not only to prepare the budget, but more importantly to have a follow-up operation for budgeting and to act according to known data. In addition, budgets are also known as a financial expression of a company’s plan for a period of time.  It tells where and how the organization will spend money and where the money will come from to pay these expenses. Budgets also set limits.  Imagine how chaotic an industry would be if everyone was allowed to spend as much as they wished on whatever they wanted.  Besides setting limits, budgets also enables the assurance that the most important needs of a company are met first and less important needs are deferred until there are sufficient funds in which to pay for them.

There are many approaches of budget preparation that a certain organisation can use.  One of these methods is the activity-based costing (ABC). Activity-based costing approach represents one capital budgeting technique for analysing an investment opportunities. The purpose of activity-based costing (ABC) systems is to focus on the causes behind indirect costs. It is primarily a system of allocation. Activities rather than traditional departments are emphasized in order to isolate the cost drivers, which are the factors most likely to cause or contribute to the incurrence of costs. ABC systems are designed to be complementary with the technological changes in the business world due to enhanced global competition (Lewis, 1993).

This method allows the management to vary the underlying activity drivers in business operations and processes so as to identify the impact of different levels in the process itself. It is noted that managers have the potential to learn much more about the risks of investment when they are able to determine the uncertainties in the business processes, rather than the traditional overview approach. The traditional approach has typically focused upon highly aggregated revenue and cost items that are merely the result of business processes.

Hence, this paper describes and discusses the budgetary process employed in a Bahrain Telecommunications Company (BATELCO). The organisation had recently established a new division to investigate and develop new business opportunities on food industries. Moreover, the paper discusses the organisation’s development of budgetary system in addressing the limitations posed by traditional budgeting. The last part of the paper provides suggestions to future budget planners on how to come up with an effective budget plan.

 

Budgeting Process

It is important to know that budgets do not function well when treated as an isolated business procedure.  In order to be successful in this approach, it is essential that the management associates the budgetary process to the other key business processes such as sales and marketing, public relations and advertising, and accounting.

The budget process is made up of activities that include the development, implementation, and evaluation of a plan for the provision of services and capital assets. An effective budget process includes several essential features, which includes, but are not limited to the following:

·        The budget process incorporates a long-term perspective;

·        The budget process establishes links to broad organizational goals;

·        The budget process focuses the budget decisions on results and outcomes;

·        The budget process involves and promotes effective communication with stakeholders;

·        The budget process is based on a "team approach" for program managers and administrative management; and

·        The budget process provides incentives to management and employees.

 

Since BATELCO is a large industry, the management is aware that it is a good idea to spreadsheet all known revenue producing areas as well as to understand all of the expense categories.  In this way, the management is able to start getting a grasp of its peak business periods as well as it’s off business periods. As a result, the company begins to get an understanding on which this work will be rendered.

In previous years, the organisation took budgeting so lightly that, until the year was nearly over, it suddenly realised that they had to put on a “hiring freeze”, until the financial people could figure out if they could pay the incoming bills. The financial situation got too bad that the organization started to make painful, but very predictable, across-the-board cost cutting measures.

The organisation develops activity-based costing (ABC) systems to provide more accuracy in assigning indirect and support costs to activities, business processes, products, services, and customers. ABC systems have recognized that organizational resources are needed both for direct production of goods and services and for indirect or support activities (Krumwiede 1998). The goal of the organisation is for the ABC to measure and then price out all the resources used for activities that generate the production off and services for customers.

The ABC system in the BATELCO first traces costs to support activities and then to products. Traditional product costing has also involved two stages; however, in the first stage, costs are traced to departments, not activities. In both traditional and ABC cost systems, the second and last stage consists of tracing costs to the products or services.

The principal difference between the two methods is the number and type of cost drivers used. The traditional product costing systems used allocation bases that may or may not have been cost drivers. The company finds that direct labour is not a cost driver and may never be a cost driver, especially in highly automated production environments. Therefore, the company utilises the ABC system because it uses a much larger number and variety of cost drivers than the one or two volume-based cost drivers typical for a traditional cost system. As a result the ABC method has increased accuracy.

The company does not use the traditional cost system because it uses only volume-based cost drivers, ignoring the key role of support activities in producing many modern products and services. These volume-based cost drivers often lead to one group of products subsidizing another group of products. These subsidies often create the appearance that one group of products is highly profitable, adversely impacting the pricing and competitiveness of another group of products. In a highly competitive environment with complex products and services, accurate cost information can be critical to sound planning and decision making.

Activity-based costing system is effective and appropriate for the company because, as Hammer and Champy (1993) state, it facilitates the use of process-based management that represents an evolving management strategy for highly competitive environments, as opposed to the traditional, departmental management focus. Moreover, process-based management focuses upon the broader control span of cross-functional processes of how work really gets done in organizations, as opposed to the narrow control span of individual departments of organizations. Business processes have been discussed as a series of activities that are cross-functionally linked to achieve specific organisational objectives. According to Ramanathan and Schaffer (1995), almost every business has at least two core processes: the new product/service development process and the customer order fulfilment process.

An integrated process-based management approach has been advocated for success, and even survival, in today's increasingly competitive and rapidly changing business environment (Daly and Freeman, 1997). It requires an integrated performance planning, analysis, and reward system and enhances the effective management of the interrelationships among both processes and functions. It also helps increase the focus on both the internal and external value chains and makes it easier to eliminate non-value added work which enables the organisation to use capacity more efficiently. It also facilitates the creation of intellectual capital through teaming and warehousing information on skills and provides a consistent framework for managing potentially diverse initiatives.

A process-based management approach has also been advocated by the organisation to replace traditional functional budgeting with an activity-based or process budget (Sharman, 1996). Consequently, the organisation applies a process-based management approach to capital budgeting and develops this approach with actual company applications. The organisation needs such an innovative approach to capital budgeting due to the limitations of traditional capital budgeting. In the typical approach to simulation analysis of capital budgeting projects, it is assumed that variables such as market size, market share, and fixed and variable operating costs are uncertain. Another major limitation of traditional capital budgeting is the inappropriate adjustment for risk by using excessively high discount rates, especially for new technology projects, and requiring payback over arbitrarily short time periods (Kaplan and Atkinson, 1998).

The organisation addresses these capital budgeting limitations by using the process-based management approach with staged risk analysis for a potential capital investment in future industries. The organisation’s approach provides a structured analysis of the risks and returns associated with a potential investment so that they may be considered in reaching an investment decision. It provides insight into the relative importance of various risks in the business processes related to the potential investment and thus provides priorities for risk management. By addressing these capital budgeting limitations, the approach has the potential to be generalisable for analyzing risky capital investment opportunities.

 

Conclusion

The budget serves as a financial plan that operates as a statement of revenue and expenses of an organization. Budgets may then be used to look forward as a plan and/or look backward as a monitor. This is due to the limiting feature of the budget to the activities, which the organization may involve in. With budget goals, an organization can also check and verify expenditures that are appropriate. Furthermore, budgets give indications of the revenue flows.

Budgeting process in the organisation is ongoing. Therefore, it is expected for the organisation to redesign its planning and budgeting process from time to time. The future redesign team should conduct a survey to assess what to include in a planning and budgeting process redesign. First, the team should begin by clearly defining what it wants to measure. Since that determines where the business will put its efforts, choose carefully. They should make a list of attributes and ask respondents to assess the level of importance and the current performance level of each attribute; those with a high value of importance and a low level of performance are the ones that should get priority.

Use outside benchmarks wherever possible, because the one thing the team can count on is debate about the meaning of the survey results. Select the distribution list for respondents- survey a cross-section of the organization. Finally, in analyzing the results focus on the most important attributes that also got high performance-level ratings.

Budgeting does not have to be a financial form of fortune-telling. The organisation must use a conservative approach when coming up with its sales and expenses.  It is also important that the budget tells what the organisation intend to do with the business.  Constantly evaluate actual numbers versus budgeted numbers to see how the organisation is actually doing. Lastly, consider the budgeting process as a management tool to help keep the company profitable and keep it running as smoothly as possible.

 

References:

 

Daly, D. and Freeman, T. (1997). The Road to Excellence: Becoming a Process-Based Company. Bedford, TX: Consortium for Advanced Manufacturing-International.

 

Hammer, M. and Champy, J. (1993). Reengineering the Corporation. New York, NY: Harper Business.

 

Kaplan, A. and Atkinson, A. (1998). Advanced Management Accounting. Upper Saddle River, NJ: Prentice Hall.

 

Krumwiede, K. (1998). ABC: Why It's Tried and How It Succeeds. Management Accounting, April: 32-38.

 

Lewis, R.J. (1993). Activity-Based Costing for Marketing and Manufacturing. Westport, CT: Quorum Books.

 

Ramanathan, K. and Schaffer, D. (1995). How Am I Doing? Journal of Accountancy, May: 79-82.

 

Sharman, P. (1996). Activity/Process Budgets: A Tool for Change Management. CMA Magazine, March: 21-24.

Annual Budget

Introduction

                        Budget is a monetary value allocated for different purposes. The budget is an inevitable portion of business operations because of several reasons. One reason is limited financial resources. This means that the company has to spend within its means so that it has to identify the areas requiring monetary resources and apportion the available resources according to priority and necessity. Another reason is accountability. Accountability pertains to the responsibility that the owners, managers and employees have in ensuring that the money apportioned is spent for the determined purpose. The foundation of accountability is the budget. (Weygandt, Kieso & Kimmel 2005, p. 971)

 

Benefits of Budget to a Business

 

A budget is a plan, a record and a forecast. It is a plan because it maps out the expected areas of spending together with the apportioned monetary resource. This serves as a guide to the limit of spending of the different operations of the company. It is a record or a printed document that businesses show to the government and to investors as proof of their monetary activities. The budget serves as a standard of performance. It is a forecast because it shows the pattern of future spending of the company. (Warren, Fess & Reeve 2005, p. 870)

 

The relevance of budget to the company enhances the importance of budgeting and budget management. Budgeting refers to the activity of matching the various planned actions and objectives with their respective estimated financial resource requirements. Budget management refers to the continuous process of drafting for approval a list of areas of spending and their corresponding monetary allocations based on a limited budget. This is followed by the activity of predicting price and cost as part of the spending plan. Then the next step is submitting the proposal and plan for approval. After approval, the implementation state involves supervision over performance through the identification and control of any occurring budget variances. (Weygandt, Kieso & Kimmel 2005, p. 972)

 

Parties Involved in the Determination of the Budget

 

            The two elements of budget are income or money to spend and expenses or items subject of spending. The proper parties to determine the budget are the people with information about the income and spending of the company. (Weygandt, Kieso & Kimmel 2005, p. 1005) In small businesses, the owner or manager usually handles the budget but in larger businesses, there is a team of employees, in charge of finance management.

 

            In the case of a family-owned cuisine restaurant, the finances and the budget of the business is handled by the owners themselves with tasks delegated to each family member. The spouses have two children and the delegation of tasks is cooking is done by the father with the assistance of the younger son, the cash register is manned by the wife, and waiting or food delivery is done by the older son together with two hired help. Thus, in the determination of the monthly budget, the father provides information on expenses on food ingredients, the mother knows the amount of money the business takes in everyday and the children provide information on other expenses in the maintenance of the restaurant’s physical structure. As the business grew and the restaurant is nearing its full capacity, the family hired two more people to help in the kitchen and in delivery and hired three more as the children moved out of state to earn a college degree. The business was a success that the owners searched for another location to establish a branch. The branch had a manager and six employees. In doing the budget, the parties involved included the spouses and the manager. Although the budget was done separately for the two restaurants, the spouses had to know the financial performance of both to determine their ability to pay for the amount loaned to start the restaurant branch. The goal is to make the restaurants independent with the revenue received by each restaurant covering its respective expenses.

 

 

 

 Methods/Steps in Arriving at a Budget

 

            There are two basic types of budget. One is cash budget that provides an estimate of the cash position of the business in a given period. Cash budget involves the consideration of the liabilities of the business and schedules the payment of these liabilities according to the schedule of the receipt of revenue from by the business. Cash budget starts with a list of the starting cash balance followed by expected revenue for the period covered by the budget added to the starting cash and then followed by the expenses such as liabilities deducted from the total cash balance. The positive remaining amount determines the cash earned by the business. (Weygandt, Kieso & Kimmel 2005, p. 978; Minbiole 2000, p. 225)

 

Another is operating budget that serves to forecast the revenues and expenditures for a year or less. This involves the listing of income and expenses into two columns, with every source of income and areas of spending itemized to compare the difference in total income and total expenditures. This method is helpful in mapping the revenue generation and spending of every area and stage of the business. Using this method enables the owners/managers to determine and evaluate the financial soundness of the business. (Young 2003, p. 191; Minbiole 2000, p. 212)

 

In the case of the cuisine restaurant, the initial budget method used was a simple cash budget where the family totals the sales revenue and expenses for food ingredients, salaries and other restaurant expenses and determines the difference in amount between the two items. The remaining positive amount becomes the earnings of the family. The starting capital was family earnings so they also considered earning back the amount they spent in starting the business. However, as the business grew and another branch was set-up, the items considered in the budget increased because of the loan, monthly rent, added salaries of workers, and other expenses. The family shifted to the more elaborate operating budget that covers an entire year of business operations. Change was needed so that the owners can foresee incoming and outgoing cash flow in the next twelve months and assess the ability of the company to meet its scheduled debt payments and obligations to employees.      

 

Evaluating the Budget Method

 

            There are four elements to be considered in evaluating the budget. First is the purpose of the budget (Warren, Fess & Reeve 2005, p. 870; Oliver 2000, p. 13). The budget may be for the purpose of planning or scheduling the payment of debt or forecast the future financial performance of the business. Depending upon the purpose, the focus of the budget would also differ. If the purpose were to map-out debt payment, the focus would be on the itemization and spread of the amount to be paid every month based on the expected revenue of the business. If the purpose of the budget is to forecast financial performance, then the focus is on the remaining amount after expenses are deducted from the income.

 

            Second is the complete listing of all sources of income and areas of expenditure (Warren, Fess & Reeve 2005, p. 870). This is important because the reliability of the budget depends upon the inclusion of all expected income and expenses. In the operating budget, the items to be included may be the sales revenue, production revenue, total labour cost, operating expenses, and capital expenses. If even a single item regardless of how small is omitted from the budget, the mapping of liability payments and forecasting will be affected.

 

            Third is accurate estimation of amounts based on previous financial performance by using income statements, balance sheets and other relevant finance documents (Jiambalvo 2000, p. 355; Minbiole 2000; p. 239). Accuracy is important because this adds reliability to the budget especially if the budget serves as a guide to the limit of spending of the company. Ideally, a business should not spend beyond its means and the means of a company is stated in the budget. An inaccurate budget would cause negative effects to the business.

 

            Fourth is flexibility to variances (Jiambalvo 1994, p. 357; Minbiole 2000; p. 239). Although, the budget is a mere estimate, it should be accurate enough to be reliable but flexible enough to cover any changes in the financial performance of the company due to both internal and external forces. The budget should consider every possible expense that the company may incur in the period covered by the budget because it is better to incur expenses less than the amount stated in the budget than to overspend.  

 

            In the case of the budget of the cuisine restaurant, the cash budget method initially used by the owners was not completely effective because there were always one or two expense items incurred during the budget period not included in the original budget. There was a tendency to spend beyond the budget due to the failure to anticipate all expected business expenses. At the start of the business, there were no previous financial records from which to base the budget so the owners had problems with the income and expense itemization. Since the business is family owned there is also the tendency to mix business and personal expenses so that the budget was not as accurate as it should be. The purpose of the cash budget was to see whether the business is earning so the owners are content as long as there is a consistent positive amount remaining after expenses are deducted.

 

            However, after the owners gained experience on the operations of a restaurant business, they were able to lessen incurring unplanned expenses. The expansion of the business through a branch meant that the owners had to develop a more itemized and accurate budget. The increasing income and expense items required the more elaborate operating budget method especially since the purpose of the owners now is to determine the schedule of liability payments and other expenses relative to the in flow of cash. Since the owners have gained experience in the restaurant business, the number of unplanned expenses was minimized resulting to a more accurate budget. Estimations in the budget were also based on the previous financial records of the business.

 

            Apart from the contents of the business, budget evaluation may also be made by considering how effective the budget is based on the appropriate budget approach. Top down, bottom up and zero-based budgeting constitute the three budget approaches. A top down budget approach means that the budget is prepared by the owners or top managers of the business and imposed downwards to the rest of the organization. Top down budget reflects the goals of the owner/managers. This works for small businesses but subject to limitations in large firms. Bottom up budget are prepared by supervisors or middle managers and then submit them upwards to the owners or top managers for approval. This is ideal for large businesses because middle managers are most qualified to provide information on the income and expenses of the different areas of operation. (Oliver 2000, p. 49) Zero-based budgeting works through every manager providing an estimate of the proposed expenses in her area of responsibility as if doing so for the first time. Since managers are required to start from scratch, they should be able to justify their proposed budget. (Jiambalvo 2004, p. 343)

 

            In the cuisine business, the budget approach is top down. The approach is relevant to the business because its operation is small and the owners and the manager of the branch has a clear view of all aspects of operations covering income generation and expenditures so they are able to make an accurate and reliable budget.

 

Reflection on Budget

 

            The budget is inevitable to any business because it reflects the operations and financial performance of the business in the past, at present and in the future. The budget is important to assess the continuity of the business and to ensure that the business is able to meet its liabilities to creditors and obligations to the people who work to earn income bigger than the expenses of the company.

           

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

References

 

Jiambalvo, J 2004, Managerial Accounting, John Wiley & Sons, New Jersey.

 

Minbiole, EA 2000, Accounting Principles II (Cliffs Quick Review), IDG Books Worldwide, Inc. California.

 

Oliver, L 2000, The Cost Management Toolbox: A Manager's Guide to Controlling Costs and Boosting Profits, AMA Publications, New York.

 

Warren, CS, Fess, PE & Reeve, JM 2005, Accounting, Thompson Corporation, Ohio.

 

Weygandt, JJ, Kieso, DE & Kimmel, PD 2005, Accounting Principles, 7th edn,  John Wiley & Sons, New Jersey.

 

Young, D 2003, Techniques of Management Accounting, McGraw-Hill, New York.

 

Annual Report Assignment

Students are required to select an organisation (you wish to research, preferably one that produces an Annual Report. Also an organisation, which is large enough to facilitate analyse its internal structure and design choices. Please note â€" there are some organisations that are not allowed. Please discuss with the lecturer before starting your research.
Students are then required to research secondary sources for example, from any of the following journals (The Economist, Far Eastern Economic Review, Business Review Weekly, Asia Pacific Journal of Human Resources, HR Monthly, or journals of similar nature) to critically analyse their selected organization. These sources generally provide externally debated issues facing the organisation, from there you can proceed to conduct a wider literature review on the company. Students are also required to gather an annual report or similar document on the company and read the major business sections of newspapers such as the Financial Review. However, we do not want a financial or market analysis of the organization.
Please note: due to the scope of the report, we definitely do not permit students undertaking any primary research investigation, such as interviews, questionnaires and so on. All materials sourced are to be of a secondary nature, such as annual reports, journal articles, press releases and so on.
Any articles sourced should be recent and preferably not more than five years old. The articles should be on an organisation rather than on an individual of the organisation. Please note that the articles will not directly reflect the principles of organisation design, therefore, you need to look into the implicit theories, models and themes that are in the articles for you to analyse. You can make realistic assumptions to some extent about the organisation.
Students are to chose one key determinant ONLY and analyse its impact on the organisation. For example chose one of the following: Culture, Change, Environment, Strategy, Technology, Size.
Students are also required to apply one of the Organisation Effectiveness models as part of their critical analysis, this allows recommendations and solutions to be posed for the organisation.
Ask the question: What current issues are facing the organisation from an internal and external perspective, how can the organisation re-align any identified gaps?
The presentation of the findings of the study in the research paper will include a description of the process and research method used to gather the information, and its limitations; identification and explanation of the activities undertaken by the organisation and some comment on the activities as they relate to the theories and practices presented in the course- that is, drawing links or identifying differences between theory and practice.
The author’s viewpoints in this paper should be related to the appropriate literature. The paper should be up to 3000 words in length and include a reference list.