Essays on Loan Proposal for New Socks Case Study

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The paper "Loan Proposal for New Socks" is a great example of a business case study.   The primary role of the owner of a business is to develop a business budget or plans, that formalize the business’ operational goals and express them as financial performance criteria that will be met by the business owner. A business budget will gauge these achievements by tracking the outflow of the business resources that are required to accomplish the goals and the inflow of resources that results from achieving the objectives. Operational Budgets: The business’ operational budget will cover both the revenue and expenses that are generated in the day-to-day running of the core business.

Business revenue will represent sales of products (men’ s socks), while the business expenses will be defined by the cost of products sold as well as administrative and overhead costs that are directly or indirectly used to produce the products Advantages Disadvantages Managing current expenses: it will help the business to track some of its operating expenses and identify areas of considerable savings and help the business ease some of the financial strain. Projecting future expenses: It will help the business evaluate its past expensed and help the business to move forward. Building reserves: It will help the business reduce its debt as the business work toward a goal of building financial reserves. Accountability: The business will able to establish financial accountability instead of spending haphazardly and losing sight of the main objective. Operating budget can perceptions of unfairness. Budgets can create competition for resources and politics Budgets can demotivate employees because of lack of participation. A rigid budget structure reduces initiative and innovation at lower levels, making it impossible to obtain money for new ideas. Apply to New Sock: This tool will be applied to New Sock business because it will provide the way to review the . Cash Budget: This tool is used to manage inflows and outflows during a specific period of time.

Cash budget in business usually consists of 4 sections: disbursements, receipts, deficit and cash surplus and financing section. Advantages Disadvantages The budget will help the business to determine whether cash balances are sufficient to fulfill regular business obligations and whether minimum cash balance and liquidity requirements stipulated by financial institutions such as banks or internal company regulations are maintained. This tool will help the business to identify the amount of cash required to fulfill short-term business obligations without the utilization of lines of credits or overdraft protection. This tool will help the business to make business plans for optimal utilization of cash. whether too much cash is retained that could be otherwise used in productive activities; Cash budgets may cause distortions.

Cash inflows to the business cannot be equated to profit. Cash inflows from security deposits, sale of capital assets etc do not represent reliable ongoing sources of business revenue. Cash budgets are susceptible to manipulation.

It restricts cash flow for one period and inflates cash flow for the other period. At times, non-financial factors have a major impact on decisions. For instance, a product might not generate much cash flow, or generate negative cash flow. Apply to New Sock: This tool will be applied to New Socks business because cash budget needs to be used to ensure the business has sufficient fund to maintain its daily operation. Sales Budget: A  sales budget  is a detailed  schedule  showing  the expected sales for  the budget  period; typically, it is expressed in both dollars and units of production. Advantages Disadvantages This tool will help the business achieve its sales targets. Provides a basis for sales evaluation and will help the business to prevent sales losses. It helps the business to distribute goods and services in a cost-effective way. It will help the business keep its marketing expenditure within affordable limits It cannot forecast the future trends of events. It may not be easily accepted by all employees in the business. This tool usually shies away from the business expenditure. Apply to New Sock: This tool will help the New Sock set realistic targets and this will make the business make a profit. . SECTION THREE Costs involved in employing staff There are many direct and indirect costs that are associated with employing people in the business.

It is important for any business to take up all these costs into account when preparing a business budget. First, the business needs to consider the costs and time that is associated with advertising, selecting, and interviewing the new applicants. This will depend on the size of the business, a number of applicants and type of job, this process is very involving. The business owner also needs to improve the business infrastructures in order to hire new employees.

This includes catering for the physical space- such as working desks etc- new employees will need and the equipment such as desktop computers or personalized email that the new employees will use to complete their assigned duties or work. Part of employing new staff will also involve development and training so that the new employees will be able to work effectively within the existing business environment. There is an additional cost of paying base salaries or wages to the new employees, but other hiding costs that are related to employees’ entitlements exist.

These include annual leave, superannuation payments, public holidays and sick leaves. These costs will add up to a significant cost over the base salary in which the business is offering to its employees.

Reference

Billie Nordmeyer (unknown) ’Budget Types in Management Accounting’ Chronhttp://smallbusiness.chron.com/budget-types-management-accounting-40613.html(Accessed 26/05/2013)

Cross, W and Richey, A.M 2000, The Prentice Hall encyclopedia of model business

plans, Prentice Hall, London.

Covello, J & Hazelgren, B 2000, The complete book of business plans: simple steps to writing a

powerful business plan, Sourcebooks Trade Publisher, London.

Debelak, D 2006, Perfect phrases for business proposals and business plans, McGraw-Hill,

London.

Deloitte & Touche 2002, The business plan: a Deloitte & Touche guide to writing a successful

business plan, Deloitte & Touche Publisher, London.

Pacific Lutheran University. "Cash Budget." http://www.plu.edu/~mgtacctg/cash_budget.htm.

Retrieved June 14, 2011.

Investopedia. “Cash Budget.” http://www.investopedia.com/terms/c/cashbudget.asp. Retrieved

June 14, 2011.

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