E-Reflection 9 Overall Reflection

  1. Things that I liked in this course – Nad is a very Knowledgeable teacher, and is very keen to teach and make the students understand the subject. The sense of humour Nad carries with him all the time is a great quality. I would aslo like to say that the E reflections are a great idea, since it gives student to learn progressively and also to score from the learning.
  2. Things that I disliked in this course – Considering the fact that a student would join this course with a little or no knowledge in Accounting, I think the course should be designed a little more easier. 
  3. Suggestions – Cant think of any
  1.          Financial Management – Evaluation of an Investment Proposal  (10 marks)

Yang Corporation is reviewing an investment proposal. The initial cost is $52,500. The cash flows for each year and the net profit for each year are presented in the schedule below. All cash flows are assumed to take place at the end of the year. There will be no salvage value at the end of the investment’s life.

Year Annual net cash flows Annual net profit
1 $20,000 $2,500
2 $17,500 $3,500
3 $15,000 $4,500
4 $12,500 $5,500
5 $10,000 $6,500
$75,000 $22,500

Yang uses a 12 per cent required rate of return for new investment proposals.

Required

  1. Calculate the project’s payback period.

-52,500 + 20,000 + 17500 +15000 = 0. By 3rd year the amount of initial investment is covered. Thus the payback period for initial investment of $52,500 is 3 years.

2.        Calculate the accounting rate of return on the investment proposal. Base your calculation on the initial cost of the investment.

ARR= Average Profit/ Average investment *100%

The Average profit= $22,500/5= 4,500 and the Average investment $52,500

4,500 * 100% = 8.571

52,500

Thus ARR= 8.5%

3.     Calculate the proposal’s net present value.

The required rate of return being 12%

NPV= – Initial Outlay + Present Value of all the cash flows

PV= Cashflow * 1/ (1+r)t

NPV= -52,500 + 20,000 + 17,500 +15000 + 12,500 + 10,000

(1.12)1   (1.12)2   (1.12)3    (1.12)4     (1.12)5

= -52,500 + 17857.14 + 13950.89 + 10676.91+ 7944.073 + 5674.40

= 3603.413

Thus as the NPV is Positive $3603.41, the project should be accepted.

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Individual Blog Reflection 5

Software As A Service

Software as a Service (SaaS) is a new model used in today’s internet based world. Using this model you only pay for what you really need. Previously when you buy a pack of software, you are dumped with lots of components that you don’t even need, and you are forced to pay for it.  You also pay for the media, the transportation of the media and also pay for the overheads and the profits of the retailer. This has even improved and has become so convenient to the consumers by paying for what you use for a particular period of time. There are many areas where SaaS is used today. Not only in purchase or rental of software, but also in areas like, movie downloads web storage spaces, antivirus software’s etc.

MYOB Live Accounts is a Classic Example for a SAAS product used widely in New Zealand. This is perfect for small businesses especially sole traders. It does the following aspects of accounting for a small business,   Online Accounting,  Invoices, Expenses,  Banking,  Reporting,  Security,  Manages Contacts,  and Teamwork by connecting to other members of your business or your accountant. All you pay for this service is $25.00 per month. The information is available for you anywhere any time via internet.

The video below will explain how MYOB has made this practical:

Even though this is an exciting technology, if the service providers are not protected enough, then there is a high risk of all kinds of online threats like, Identity theft, stealing Credit card and bank access information, etc.

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E-Reflection 8 Week 10 Activity

  Budget – Last weeks class in Budget was a totally new experience for me. It was so interesting to discover the various aspects in budgeting. I also leaned how flexible a budget could be and also the importance of proper budgeting … Continue reading

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E-Reflection 7 Week 9 Activity

Learning CVP was a new experience for me. i felt it is easier than any other module in the semester. However, I am required tomemorise all the required formulas.

1.0     Almo company manufactures and sells adjustable canopies that attach to motor homes and trailers. Almo developed its budget for the current year assuming that the canopies would sell at a price of $400 each. The variable expenses for each canopy were forecasted to be $200 and the annual fixed expenses were forecasted to be $100,000. Almo had targeted a profit of $400,000.

While Almo’s sales usually rise during the second quarter, the May financial statements reported that sales were not meeting expectations. For the first five months of the year, only 350 units had been sold at the established price, with variable expense as planned, and it was clear that the target profit for the year would not be reached unless some actions were taken. Almo’s president assigned a management committee to analyze the situation and develop several alternative courses of action. The following three alternatives were presented to the president, only one of which can be selected.

1)      Reduce the selling price by $40. The marketing department forecasts that with the lower price, 2,700 units could be sold during the remainder of the year.

 

2)      Lower variable expenses per unit by $25 through the use of less expensive materials. Because of the difference in materials, the selling price would have to be lowered by $30 and sales of 2,200 units for the remainder of the year are forecast.

 

3)      Cut fixed expenses by $10,000 and lower the selling price by 5 percent. Sales of 2,000 units would be expected for the remainder of the year.

 

Required:

  1. If no changes are made to the selling price or cost structure, estimate the number of units that must be sold during the year to break even.

                                                                                                (5 marks)

  1. If no changes are made to the selling price or cost structure, estimate the number of units that must be sold during the year to attain the target profit of $400,000.

                                                                                                (5 marks)

  1. Determine which of the alternatives Almo’s president should select to maximize profit.

            (10 marks)

 

Solution:

 

a. Break even quantity = f.c / contribution margin per unit

countribution margin = 400 – 200

= 200

Break even units = 100000/200 = 500 units

 

 

b.  Let the number of units sold be x

 

sales = f.c + vc  +target profit

400x = 100000 +200x+400000

400x – 200x = 500000

x = 500000/200

number of unit = 2500 unit

 

c. 350 units were sold in 5 months with same selling price and same variable cost

 

option 1. We will take target profit as a measure to consider which one is the best option

sales = f.c + v.c*units + t.p

option 1

Selling price reduced by $40 for 2700 units

sales = 400 * 350 + 2700*360

= 1112000

1112000 = 100000+ 200*(2700+350) + t.p

1112000-710000 = t.p

Target.profit = 402,000

 

option 2.

Variable cost reduces by $25 by which selling price lower by $30 and 2200 unit sold

Sales = 350*400 + 370*2200

= 954000

954000 = 100000+ (350*200+175*2200)+ t.p

954000 = 555000 + tp

Target profit = $399000

 

option 3

Fixed cost expense lower by 10,000 selling price reduces by 5% which is $20 and 2000 units were sold remaining period

 

sales = 350*400+2000*380

= 900000

900000 = 90,000 + 200*(350+2000) + tp

tp = $340000

Option 1 is best as it helped to attain the target profit of 400,000

 

 

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E-Reflection 6 Week 8 Activity

1.0

I was not feeling well last Monday, and could not attend the class. I am sure i have missed quite a lot, but tried to study from the slides in the Moodle.

2.0.

Profitability ratios show how successful a business is by measuring the profit of the firm and are generally expressed in percentage and it includes the following ratios:

Return on ordinary Shareholder’s fund (ROSF): It is a restricted assessment of profitability (when compared with ROCE) and it shows the investor an in depth image about the profitability which is of their concern. It shows whether the firm is able to earn adequate profit  with the investments made by the shareholders.

Return on total Assets: ROA tells as to how effectively the assets are put into use and managed in order to earn income. It is calculated by dividing a company’s annual earnings by its total assets. It is also termed as “return on investment”. Generally the previous ROA of the company is compared.

Return on capital employed (ROCE): It is the comparison between the average of long term investment in capital and the net profit gained by the business.

Net profit margin:   illustrates how much a dollar of sales will show as net income after payment of all the expenditure. For example, if the net profit margin is 5%, it means that 5 cents of every dollar is profit. It determines profitability, after taking into account all the expenditure including taxes, interest, and depreciation.

Gross profit margin: shows the gross profit of the firm against the sales created throughout the particular period. Gross profit is determined by deducting cost of goods sold from Sales for the period. It is generally expressed in terms of percentage.

3.0

Liquidity ratios: It measures the company’s financial health. In order to survive the business   should have the ability to meet short term obligations like paying the short term debts. Liquidity ratio has two measures: – Quick ratio which does not deal with inventories but is sum of cash, securities and receivables divided by current liabilities and Current ratio deals with current assets and liabilities.

Gearing ratio does not show financial health like that of liquidity ratio instead gearing ratio also known as leverage is important when the business is concerned with the bankruptcy issues it reflects the measure of risk. Firms constitute of debt and equity, the gearing ratio includes two measures Debt to assets ratio and Debt to equity ratio.

Debt- to-assets ratio deals with total assets and liabilities while in liquidity the current ratio deals only with current assets and current liability.

Debt-to-equity ratio deals with long term debt against shareholder’s equity.

Thus Liquidity ratio is calculated as current assets less stock divided by current liabilities while Gearing ratio is sum of (long term borrowings, short term loans, overdrafts) less cash  multiplied by 100 overall divided against shareholder’s funds.

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Individual Bog Reflection 3 CRM

What is a CRM

CRM or Customer Relationship Management is a software to manage the relationship with customers. This software supports the management of customer relationships, sales, marketing and support. It uses information about customers to gain insights to their needs, wants, and behaviours in order to serve then better. This helps the companies to give  their customers a more personalised approach when dealing with issues or when trying to sell Value added products and services.

The video below is and testimony from Radio 100, on good is to implement a CRM system.

My experience with a CRM enabled organisation.

I had a problem wit one of the telecom and internet providers, and I am sure this was sorted efficiently because they had a good CRM system in place. My issue was that, my orcon Land line was not able to accept any calls made from the Vodafone land phones. Vodafone suscribers who call me, were directed to a strange voice mail. I called Orcon and complained about this issue. Since they had a proper CRM in place, all I had to tell them each time was my user Id and password, which helped them to pull out all the details they wanted about me and the issue up-to-date.  This gives me confidence as a customer and also the customer service person on the other end had all the previous discussion I had with them, and the action taken by Orcon on her finger tips.

So I strongly believe that CRM will definitely make life easier. CRMs will definitely help any organisation to work efficiently and profitably, since they have all the details they need to know about a client. This will help the sales  person to suggest new products services etc and a support person to efficiently solve an existing issue.

 

 

 

 

 

 

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E- Reflection Activity Week 7

1.0  Last week we learned quite a lot of Ratio analysis. It was really interesting to know that a bigger ratio was not very healthy and how important is ration in decision making. I am getting a hang of it now, and really like the subject.

2.0.      I do agree with the above quote. Ratio analysis provides an understanding to all the users internal and external as per their interests about the performance of the business and how fit is it. It provides Manager’s and creditors and other users with information about the profitability, liquidity, stock turnover etc. Where the users can take business decisions like. eg: for liquidity purposes manager’s can take decisions like taking credit, overdrafts.

3.0   Ratio analysis is very important and widely used in Business practices. Ratio analysis is a tactic, it’s a systematic approach used for evaluating the fiscal position and the performance. Produces useful information for creditors and bankers. Along with its importance it also has some limitations like:

  • Ratio analysis mainly focuses on the past performance and not future. whereas investors are actually interested in future performance which ratio analysis doesn’t provide pretty well.
  • Ratio analysis tactic can be used to analyze financial performance over lengthy period of time or in comparison to the business in the same industry. It is a major drawback as it could be probable but not definite to always have such information. For eg: some businesses may use LIFO method to calculate closing stock and some may use FIFO which cannot be compared.
  • Ratio analysis as can determine performance based on past data over a long period of time the results can be misleading as over time there might changes in price, sales etc..the price level should adjusted accurately. Not having absolute data, false data would result in wrong ratios.
  • Ratio analysis is and expensive to be practiced and so small scale firms cannot manage affording  it and can be used only by big firms.
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E- Reflection Activity Week 6

 

Class exercises are really getting interesting, even though I am not able to pick up everthing. I am doing my best to get more understanding of the subject. I am sure I will succeed.

Cash and Accrual based Accounting.

Cash based accounting is the system where cash is recorded when it is actually realized or spent. Accrual based accounting is more of a planning. It is recorded as soon as an invoiced is issued.

When a job is done, and invoice  is issued. The Accrual based system records it immediately. However in cash based system, it is recorded only after the cash is received.

The cash flow statement shows the cash receipts which are income to business and cash

payments as expense. The cash flow is of use to the users like Bankers, creditors for their

particular interest which shows where the cash used in business is generated from during that

financial year and how is it put into use in the business. As the motive of any business is to

generate profits, the flow of cash is important as it directly affects the business on whole.

 

 

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E-Reflection 3 Week 5 Activity

The classes are getting slightly harder, and me back to school after after about 9 years is not an easy task i realise. Thank you Nad for the one to one meeting we had at your office, which was really motivating. It was interesting to learn about the different statements in Accounting.

3. I completely agree with this  statement.
Financial statements are the formal record of all the financial activities of an individual, business or and entity.
It analyses the performance of the entity and makes it easier for the internal and external parties to make financial decisions based on it.
 The owners and the managers discuss and analyze from it for decision making purposes, The employees, the investors, the creditors, banks, government in regards to taxes on the company, public and media are also interested for different reasons. Thus financial statements are necessary for the firm.
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Social networking Facebook or Google+


Vs

Social Networking has become a part of life of many computer users.  People are so used this, that most of us are not even worried about the security part of it. “I will Facebook you” is a very commonly used term, and an addition to the colloquial vocabulary.  Even after many reports and news about the security and privacy issues of these networks, common public choose to be in oblivion of the dangers of these networks. Here I would be biased if I crucify just Facebook, since there are lots of other sites like, Orkut, Myspace, Twitter etc..

Recently there has been news about a lady teacher’s uncensored picture on Facebook, posted by her ex-boyfriend. Imagine the trauma, and shame she would have gone through. If it can happen to one, this could happen to all. This has to do with the privacy settings of the networking site. I believe that Facebook has a very low security, when it comes to securing your private data, including your pictures, profile etc. It is not a very good user friendly site.

Talking about copyright etc.; Facebook’s hold the copyright of any data posted on the website. It has faced many questions against collecting user’s private data to transferring it to many advertising companies etc. Most of the time these are the free apps who is the culprit (source http://online.wsj.com/article/SB10001424052748704477904575586690450505642.html). This leaves us in a very dangerous world out there where we are totally exposed and have no idea who is keeping an eye on us.

There were instances where people lost jobs since they have posted unwarranted comments on their walls about their employees. This is because Facebook does not give an option to segregate different level of friends in your network. The answer for this is Google +. The most awaited networking site by the world now. Google+ boast of lots of features that Facebook lacks, and have been a concern for all the social network users. Some of the key feature that would attract us to Google+ in terms of our security is as below:

  1. Better friend management using CIRCLES: This feature helps you drag and drop each contact to a certain circle where you decide what level of interaction this group can have with your Google+ account.  This is almost like real life friends. You interact to each person you know in a different way. You decide whom to call home and who not to. Here you are in control.
  2. Your data is yours and you get it back: Unlike Facebook, where it is very difficult to permanently delete an account, Google + allows you to delete your account and pack your bag and leave, without leaving any of your data in the site. Also any part of the data can be made private in Google+
  3. Safer content sharing: Unlike Facebook, Google+ lets you assign privacy levels to each and every piece of content you share

This is a video from You tube which will give as insight of the security settings of Google Plus

However, it all depends on the user, on how he/she protects his data. It is always good not to publish any private information in any of these sites. You never know, when some on would hack into these details.

We also have to keep in mind that Facebook is a young and very fast moving organisation, which does not have enough respect for user private data and is accident prone. Whereas Google is a much more mature organisation and would be more trustworthy than Facebook.

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