Unilever Organized Its Supply Chain Management

Unilever Organized Its Supply Chain Management Abstract According to the analysis of some cases of how Unilever organized its supply chain management, we found that Unilever organized their factories, regional supply chains, business groups and corporate center with strategic focus and in an operational environment. Plan-source-make-deliver is the way Unilever managed their supply chain. Simultaneously, we found that Unilevers supply chain management focus on the multi-local aspects of the business at a national or regional level and the multinational aspects. Introduction In todays globalised world, every company has to face strong competition. Each company has to consider many factors if they want to be successful in the market. One of important elements in this is the supply chain management, this involves the moment of materials as they flow from their source to the end customer. Unilever is a global firm and they have numerous products, as result the ways they manage the flow of their product from beginning to the consumers is vital. The question was asked: How do Unilever organize their supply chain management. Methodology The study was conducted by a group of four team members in Middlesex University on the pre-sessional program in August 2010, namely: Lam Trinh, Long Ta, Pan Zhen Zhao and Chi Doan. The instrument used in this study was secondary research. In which, individuals of the team used various resources, especially online academic directories to locate the necessary articles related to the topic supply chain management and take a specific British Group, Unilever and its organising system, as an example. After the research team had read the academic textbooks, the relevant information was analyzed and noted in order to assess the main ideas. The process took two weeks. The first week involved choosing a suitable topic and company. The choices were based on individuals possibility and interest in the field of business and management. The second week included researching resources from the schools learning resources and other reliable sources. A total of five sources were found, of which two were theory-based online journal articles and were obtained through academic directories, and three were from media articles and company-official website. There are some limitations with the study. One of them is that it is difficult for second language learners to understand complex articles and sophisticated arguments. Furthermore, it is a difficult task to identify and collect the best helpful and suitable information for the report amongst numerous of sources. Literature review Organizing supply chain management (OSCM) is one of the most important things which companies need to do to not lag behind economically in the fast-moving business world. That is why this report researches in-depth five articles: Unilevers supply chain efficiency, Unilevers supply chain vision, supply chain case study, how Unilever aligned its supply chain management, and Unilevers spotlight. According to Supply Chain Management Review (Monahan, Sean; Nardone, Robert, Nov2007, Vol. 11), it has been claimed that Unilever has to upgrade facets of its supply chain operations to stay ahead in the fast-moving consumer packaged goods industry. Furthermore, Srivni (http://www.zimbio.com/ Jun-19-07) asserted that while Unilever keeping its global branding, its strategy is to have local supply chain for local demand to minimize complexity. It seems a lucid strategy for OSCM in order to make profit and consolidate brand effectively. Findings In this section, author using SWOT analysis to analyze the internal and external environment of Unilever. Figure 1 Strengths Weaknesses Clearly supply chain management vision highly complex supply chain and production line Using information technology Local supply chain for local demand Strong network of sales and distribution Many products have low profit Opportunities Threats Increasing in environment friendly product Globalization There are many competitors Strengths Unilever is a global company so their supply chain management seems to be very well organized. The first strength is Unilever make a clear vision for their supply chain management. IEE (www.iee.org, 2004) states five strategies on Unilever supply chain management: Clearly defined global strategy and an effective and robust strategy into action processes. Focus on cost reduction, to be achieved through regular monitoring of a standard set of globally shared KPIs along with consistent data acquisition. Consistent global approach to, delivery of manufacturing excellence. Convergent organization. Clearly defined skill definitions of all supply chain roles. Established process to enable a rapid and cost effective implementation of innovation. Furthermore, Unilever implement information technology (IT) in their supply chain with the purpose to manage the flow of product better. Because Unilever have many factories in the world, they use different type of supply chain for each country so they can meet the demand of local customers. Strong network of sale and distribution is the one more strength of Unilever. Weaknesses Unilever have a huge number of product brands (over 1600 brands) but 400 brands make up over 90% of Unilevers total sales (http://www.zimbio.com, Jun-19-07)good . As a consequence, the ineffective brands make them money but not very profitable and become one of their weakness point. Opportunities Customers focus more on the products which are friendly with environment, it is an opportunity for Unilever to follow the trend and get more customers from competitors with the strategy in greening their supply chain such as cutting emissions. The second opportunity for Unilever is globalization develop. Their supply chain will find easier to approach customers because the world without barrier. Threats Unilever set up factories, branches in more than 100 countries and they have numerous competitors from other global companies like PG and Nestle and also competitors from local. Global enterprises with strong brands and experience in management while local companies understand the demand of consumers and they have support from local government lead to a threat for Unilever. Discussion and analysis IT solution According to Srivni (http://www.zimbio.com, Jun-19-07), the first solution for Unilever to organize supply chain management is the use of information technology. Firstly, Unilever use enterprise resource planning (ERP) system to manage activities in supply chain. ERP with huge databases can access the status of supply chain such as distribution and sales. As a result they can control the flow of products well and make sure it is not interrupted. By using IT in supply chain management, company also reduce the costs and improve efficiency in the chain and bring the company closer to their consumers. Moreover, IT helps Unilever track their products better from distribution centers to stores, they will have right strategy to reduce the length of product runs and make other refinements to react more quickly to changes in demand (http://www.zimbio.com, Jun-19-07). Finally, Unilever apply integrated supply management information system (ISIS) which help the collected information is analyzed quickly and easily by supply managers in national as well as global companies. With this system, its managers may discuss and make a decision with suppliers clearly and effectively. Therefore, both of them make benefits from this way (Sean Monahan and Robert Nardone, 2007). Path to Growth Based on the weakness point in SWOT analysis, Unilever make a plan name: Path to growth focus on reducing non production items (NPI). Before discussing the results of this plan, this report is going to analyze the reason why they have to cut NPI. In 2000, there were over 1600 brands belong to Unilever. However, the company recognized that the high profit brands were around four hundred and many other brands take a huge amount of money to organize their supply chain. Unilever decided to stop producing over five hundred and sell seven hundred brands and get over 16 billion euro. With this amount of money, they can invest more in supply chain management system. The goal of this plan is simplify the business and reducing complexity (http://www.zimbio.com, Jun-19-07). This plan brings to Unilever many advantages but there are some disadvantages when Unilever apply Path to growth. In 2004, their net profit lost by over 300 million dollars, and the company still focus significantly on local market lead to fragment in global market. Conclusion The purpose of this report is answering the question: How does Unilever organize their supply chain management? The finding is based on the SWOT analysis which shows the internal (strengths and weaknesses) and the external (opportunities and threats) environmental in supply chain of Unilever. Unilever apply IT to manage their supply chain to reduce the cost and improve the effect. They also use plan path to growth to sell and stop production over one thousand ineffective brands. These strategies help Unilever to organize their supply chain better and more effectively. Recommendations Unilever is a strong company in global market. They have many strengths point but they have some weaknesses point. After the process of findings and analysis the information of Unilever, the company should focus more on their supply chain of high profit products to maximize revenue and ensure their supply to customers is on time.

The Bodies Are Talking: Will Society Listen? :: Essays Papers

The Bodies Are Talking: Will Society Listen? On Thanksgiving evening, November 27, 1992, Sergeant Kenneth Mathison and his wife Yvonne drive their 1988 tan Ford van along Route 131 in Hilo, Hawaii. The rain is pouring down and before he knows it, Kenneth Mathison is awaiting police assistance as he cradles his wife’s dead body in the back of their van. Mathison, a sergeant of 25 years with the Hilo Police Department was allegedly informing his wife, a maternity nursing professional at the Hilo Medical Center, that he was being investigated in his second paternity suit. According to Mathison, when Yvonne heard the news, she jumped from the passenger side of the van. While he was looking for her in the blinding rain, Mathison purportedly ran over his wife. He then carried the body into the van and secured it with yellow rope in the back before attempting to find help. Will the forensic evidence support Mathison’s account of that fateful evening? That night, many witnesses reported having seen a man changing the tire of his van and waving any possible help away angrily while others reported seeing a woman wandering around the side of the dangerous highway. More witnesses reported that Kenneth and his wife were having many violent disputes at their home that usually resulted in Kenneth pursuing an angry Yvonne around the block. The most compelling evidence against Mathison, however, is purely scientific. Detective Paul Ferreira first noticed that the extensive blood stains inside the Mathison van. After hearing Mathison’s original account, he summoned the assistance of famed forensic expert Dr. Henry Lee to analyze what he thought was inconsistent evidence. Blood stains on the paneling and the spare tire in the cargo area reveal low-velocity blood stains meaning that the blood probably dripped from Yvonne’s head onto the floor. The stains found on the roof and steering wheel were contact transfer patterns probab ly caused by Mathison’s bloody hands. Blood stains on the driver’s side of the van were contact-dripping patterns which indicate that Mathison touched the inside of the van multiple times before and after moving his wife’s body. The final groups of blood stains on the instrument panel of the van were medium-velocity stains which show investigators that Mathison probably struck his wife at least once in the front seat causing the blood to fly from her open head wound. The enormous amounts of blood inside the van lead prosecutor Kurt Spohn to investigate the Mathison case as a murder instead of a misdemeanor traffic violation. The Bodies Are Talking: Will Society Listen? :: Essays Papers The Bodies Are Talking: Will Society Listen? On Thanksgiving evening, November 27, 1992, Sergeant Kenneth Mathison and his wife Yvonne drive their 1988 tan Ford van along Route 131 in Hilo, Hawaii. The rain is pouring down and before he knows it, Kenneth Mathison is awaiting police assistance as he cradles his wife’s dead body in the back of their van. Mathison, a sergeant of 25 years with the Hilo Police Department was allegedly informing his wife, a maternity nursing professional at the Hilo Medical Center, that he was being investigated in his second paternity suit. According to Mathison, when Yvonne heard the news, she jumped from the passenger side of the van. While he was looking for her in the blinding rain, Mathison purportedly ran over his wife. He then carried the body into the van and secured it with yellow rope in the back before attempting to find help. Will the forensic evidence support Mathison’s account of that fateful evening? That night, many witnesses reported having seen a man changing the tire of his van and waving any possible help away angrily while others reported seeing a woman wandering around the side of the dangerous highway. More witnesses reported that Kenneth and his wife were having many violent disputes at their home that usually resulted in Kenneth pursuing an angry Yvonne around the block. The most compelling evidence against Mathison, however, is purely scientific. Detective Paul Ferreira first noticed that the extensive blood stains inside the Mathison van. After hearing Mathison’s original account, he summoned the assistance of famed forensic expert Dr. Henry Lee to analyze what he thought was inconsistent evidence. Blood stains on the paneling and the spare tire in the cargo area reveal low-velocity blood stains meaning that the blood probably dripped from Yvonne’s head onto the floor. The stains found on the roof and steering wheel were contact transfer patterns probab ly caused by Mathison’s bloody hands. Blood stains on the driver’s side of the van were contact-dripping patterns which indicate that Mathison touched the inside of the van multiple times before and after moving his wife’s body. The final groups of blood stains on the instrument panel of the van were medium-velocity stains which show investigators that Mathison probably struck his wife at least once in the front seat causing the blood to fly from her open head wound. The enormous amounts of blood inside the van lead prosecutor Kurt Spohn to investigate the Mathison case as a murder instead of a misdemeanor traffic violation.

Digital Comm Tutorial

The process of quantisation introduces an error or noise component into the quantised signal. Derive an equation for the mean-squared quantisation error in terms of the quantization interval ‘a’. ii) Hence show that the peak signal-to-quantisation noise ratio (SQNR) is SQNR = ( 6n + 4. 8 ) dB Where 2 n is the number of quantisation levels. b)i) Linear quantisation is used prior to binary PCM encoding of an analogue baseband signal which has a uniform probability density function. The signal-to-quantisation noise ratio must be no less than 35 dB.How many binary bits are required to code each quansation level? ii) If the bit rate is 104 bits per second, what should be the maximum bandwidth of the analogue signal prior to sampling? Q2. a)i) Explain how nonlinear quantisation can be used to reduce the number of levels required to quantise a signal. ii) Explain why logarithmic quantisation is preferred. iii) What types of signal is most suitable to be processed by non-linear quantisation? b) Sketch the A-law companding curved. Explain why companding is used in voice transmission systems. c) Show that the dynamic range of the logarithmic portion of the A-law compander is 38. dB and that the improvement in signal to quantisation noise ratio realized for small signals, compared with linear quantisation , is 24 dB.d) For an 8-bit A-law companded PCM system, calculate the SQNR obtainable and the PCM bit rate. Assume the sampling frequency is 8 KHz. Q3. a) Explain (qualitatively) how Differential Pulse Code Modulation (DPCM) can reduce the transmission bandwidth required. b) Explain what is delta modulation. Why it is particularly suited to speech signals? c) For an input sinusoid of frequency 1 kHz, estimate and compare the signal-to-error ratios of a linear PCM coder using a sampling rate of 2. kHz and 7 bits per sample quantisation with a single-integration delta modulator producing the same gross bit rate. BASEBAND REGERATOR / ERROR PROBABILITY / LINE COD E Q4. a) Digital transmission systems provide better received signal quality compare to analogue transmission systems when implementing a long distance communication link. Explain briefly why this is so. b) A PCM transmission link employed 8 bit coding and uses baseband regenerator as repeater. Determine the Signal-to-Noise ratio obtainable at the receiver assuming no bit error occurred. c) An analogue transmission system required amplifiers to be spaced every 2 km apart.Assume the Signal-to-Noise ratio of the amplifier is 65 dB, determine the maximum distance of the link before the quality of the received signal is lower than the PCM link above. d) A RF binary PSK system operates with phase states separated by 180o. The bit rate is 2. 0 Mbit/s and the noise power spectral density at the input to an ideal matched filter detector is 1. 0 pW/Hz. If the transmission loss between transmitter and detector is 40 dB, what power must be transmitted to achieve a probability of bit error of 1 ( 10-6 ? For binary PSK , Pe = ? [1- erf(Eb/No)1/2] Error function tables are provided. Q5. ) Draw a simplified block diagram of a PCM regenerative repeater. b) An ideal 18 – section, copper cable, PCM link employs unipolar , NRZ, rectangular pulses on each section and a center point detection process at each repeater. The probability of error versus SNR for this transmission and detection scheme is given by [pic] If all sections were identical, and operated with a section SNR of precisely 18 dB, what would be the overall probability of error for the entire link? Q6.(a) Sketch the typical, long term, spectrum of a speech waveform. Show on your sketch the bandwidth normally considered sufficient for telephone quality transmission. b) i) If the voice signal in part (a) is to be transmitted using 8-bit PCM and use the bandwidth upper frequency limit shown on your sketch to find the required PCM bit rate. ii) What channel bandwidth, in principle, would be required if the PCM bits were to be transmitted as perfectly rectangular pulses without distortions? iii) What is the minimum theoretical bandwidth which would allow the PCM bits to be transmitted independently (i. e. without inter-symbol interference (ISI) at the receiver sampling instants)? Explain your answer. (c) i) What is the main functions of line codes? i) The bit stream shown in Fig. Q7 is to be line-coded using the high-density substitutiontechnique HDB3. Sketch a version of the resulting coded signal.What are the features of HDB3 which makes it an attractive line code? [pic] Fig. Q6 TDM / PDH / SDH Q7. a)i) Describe, with the aid of a diagram, the way in which analogue telephone channels plus signalling and service information are combined in a plesiochronous time-division multiplexed system to form the primary multiplex group. ii) What sampling rate would be appropriate for each telephone channel and what would be the gross bit rate of the multiplex group? )i) Show how primary multiplex groups may be combined to form higher level multiplexes and to provide access for wideband signals. ii) Explain why it is necessary in a high order Plesiochronous digital hierarchy (PDH ) to de-multiplex down to the lowest order whenever a single channel is to be extracted or inserted.c) Calculate the number of telephone channels which can be accommodated at level 4 of a PDH. d) In the PDH, explain why the bit rate at a given level is not exactly an integer multiple of the bit rate at the level below. Q8. a) Explain why bit justification is required in a PDH network, and describe how it may be performed. ) i) Determine the minimum and maximum input channel rates accommodated by an CEPT2 multiplexer. ii) Determine the rate of CEPT1 misframes caused by erroneous interpretation of a stuffed bit. Assume channel bit error rate Pe is 10-6. CEPT2 parameters: Bit rate8. 448 Mbit/s Master frame length848 bits Message length/channel205 bits Framing bits12 bits Stuffing control bits12 bits Stuff bits 4 bits c)i) Explain what is frame slip. ii) In a PDH network, the primary multiplex clock generators have frequency stability of 1 part in 107. Calculate the average number of frames slips per hours in a connection of 5 inter-exchange links.Q9. a) Describe the essential features of the Plesiochronous Digital Hierarchy (PDH). b) Plesiochronous networks have a number of disadvantages by comparisons with the Synchronous Digital Hierarchy. State and explain two of them. c) Draw a block diagram illustrating the SDH. Show on your diagram the nominal STMbit rates associated with each SDH level. d)i) Describe the SDH primary-rate frame structure with particular reference to the location within the frame of the section overheads, the (administrative unit) pointers and the STM-1 payload. ii) What are the main functions of pointer? SIGNALLINGQ10. a)i) Explain the need for signaling in a telecommunication system. ii) List the minimum basic signaling requirements, and show how they may be obtain ed in the subscriber loop of a typical telephone network. b) Draw a simple block diagram illustrating the essential difference between channel-associated signaling (CAS) and common channel signaling (CCS). c) List the advantages of CCS over CAS. d) Modern digital switching systems using Stored Program Control (SPC) employ CCS. Draw a block diagram showing how CCS may be implemented. e) What is the disadvantage of CCS and how are they overcome? Q11. ) Show how the ITU-T (formerly CCITT ) signaling systems No. 7 conform to theInternational Standard Organisation, Open Systems Interconnection (ISO-OSI ) model. b) What are the three types of signal units employ by the ITU-T SS No. 7? What is the function of each? c)i) How is the channel associated signaling handled by the 30+2 PCM primary multiplex frame? ii) Calculate the bit rate of the signaling channel with one voice channel. TELETRAFFIC THEORY Q12. a) In a switching system for which blocked calls are lost, the average number of call s per hour is 200 with an average holding time of 3 minutes.Estimate the number of trunks required to achieve a grade of service of 0. 1 %. b) On the average during the busy hour, traffic generated in exchange A and exchange B is shown in table Q13. Assume no tandem traffic, estimate the number of trunk channels (two way connections) required for a grade service of 1 %: i) if the same lines are used for incoming and outgoing calls, ii) if separate lines are used for incoming and outgoing calls. Evaluate the above options and propose a cost effective solution. What is the minimum number of trunk lines required to serve the two exchanges? |Exchange A |Exchange B | |Exchange A |- |36 Erlang | |Exchange B |43 Erlang |- | Table Q13 c) Calculate the number of channels needed in a seven-cell re-use pattern cellular systems to achieve a blocking probability of 1 % if there are 2800 calls per cell per hour, each of average duration of 1. 8 minutes. (use traffic table). Q13.a) Define traffic intensity and congestion. ) Explain why it is necessary to determine the traffic variations as a function of time for a telephone exchange. c)For a telephone exchange designed based on blocked call lost assumption, the probability of there being k calls in progress with N trunks carrying traffic A Erlang is given by: [pic][pic] i) Explain what is meant by blocked call lost. Give an evaluation the effect of this assumption. ii) Derive an equation for the probability all servers are busy and the subscriber encountered call blocking. State the assumptions made for the above equation to be valid. ) A PBX with 250 internal lines has 10 trunks to the public network. i) What is the probability of call blocking if each internal line is involved in four external calls with an average duration of 2. 5 minutes per call, per eight-hour working day? ii) How many additional trunk connections would be required to improve the grade-of service to better than 0. 5 %? Q14. a) In a queueing system, the average rate of packet transmission is ( frames per second, and the average arrival rate of data is ( packets per second. The probability that therewill be n packets in the queue isPn = (1 – ( )( ( ) nwhere ( = ( / ( b) Derive an equation for the average number of packets in the queue and show how this varies with the parameter ( . c) How would you use this equation to design the node in a packet-switched system? d) If the switching node has a transmission capacity of 800 packets per second and the packet arrival rate is 500 packets per second. i) Calculate the average number of packets in the queue and hence ii) Calculate the average waiting time per packet. iii) What is the mean delay introduced by the switching node on a packet? ) A common –channel signalling system uses a 64 kbits/s data link to serve a group of 1500 speech circuits on a route between two exchanges. The busy-hour traffic is 1000 E and the average call duration is two minutes.On average each call r equires transmission of ten messages (five signals plus five responses) and the average message length is 20 octets. Calculate the percentage of messages which encounter delay and the mean delay for these messages. DATA COMMUNICATION NETWORK Q15. a)i) Describe the principle of data communication by packet switching. ii) Evaluate the advantages of this strategy by comparison with circuit switching. )Show how the format of a packet can allow inclusion of routing, error correction, synchronisation and data. c)A packet switch has a single outgoing link at 2. 048 Mbit/s. The average length of each packet is 960 bytes. If the average packet delay through the switch must be less than 20 ms, assuming an M/M/1 queue, determine the i) maximum total packet arrival rate ii) average length of the queue. Q16a) Outline the ISO-OSI data communication network model. b) i) At which layer of the ISO-OSI model does the routing information provided? ii) Name and describe briefly two common routing proto cols for the Wide Area Network (WAN).ii) Compare the relative performance of the protocols. iv) give an example of the connection standard applicable to each. c) Describe the format of a High-level Data Link Control (HDLC) packet and describe how this could be employed to implement call set-up, data transfer and call clearing in a virtual circuit. ISDN / B-ISDN Q17. a) Most national tele-traffic networks have evolved from systems using analogue telephonyand signaling and electromechanical switching. Show, using diagrams, how it has been possible to develop Integrated Digital Networks (IDN) whilst retaining much of the transmission network. ) An IDN is required to provide communication of information in addition to digital telephony signals. Describe the others signals necessary to operate an IDN and show how these can be integrated within a single network. c) Outline the potential benefits of an ISDN. d) Describe the data handling capabilities of Basic Rate Access and Primary Rate A ccess ISDN services. What are the gross bit rates in each case? Q18. a) Describe the process which takes place in a packet speech transmission system and outline the transmission delay which might be expected. ) In a packet communication network packets arrive at a switch according to a Poisson distribution with a mean arrival rate of 4 packet/s.The service time is exponentially distributed with a mean value of 100 ms. Assuming that each packet contains 70 bytes and the output transmission rate is 5. 6 kbit/s. How long, on average, does a packet have to wait in the queue? If the switch in part (c) is limited in length to 10 packets, what is the probability of losing packets? c) What extensions to these access processes will be required to handle multi-media terminals and what data transfer method will be most appropriate? ) What are the numerical values of the following: i) ATM cell size. ii) ATM information field size. iii) SDH STM-1 bit rate. iv) PCM voice channel bit rate. e) Use your answer in part (d) to find the expected total network delay (including packetisation delay) experienced by a voice signal transmitted over an ATM network connection operating at the SDH STM-1 bit rate. The connection traverse 8 switching centers, each of which introduces a mean delay equal to 98 ATM cells. The transmission path length is 350 km in total, and the specific delay of the transmission medium is 5 (s/km.

Importance Of Finance And Financial Management To Companys - Free Essay Example

Sample details Pages: 14 Words: 4200 Downloads: 2 Date added: 2017/06/26 Category Finance Essay Type Narrative essay Did you like this example? If you plan to go big with your business, you can never neglect the importance of Financial Management. It is an essential tool that is required to move ahead with your expansion plans. Generally, this critical aspect is disregarded because the entrepreneurs are unaware of its advantages and uses. Don’t waste time! Our writers will create an original "Importance Of Finance And Financial Management To Companys" essay for you Create order Financial reports can help aid in making important future decisions. If you have a solo or micro business, then it is not imperative to make use of Financial Management. But as I mentioned earlier, if you plan to make it big in the world of business and commerce, you should make Financial Management your forte! Accounting and Financial Reports It is very important to keep track of your companys origin and its past history, particularly an account of the money that has been spent. When you analyze the financial reports, you will be aware of all the spending and expenses accurately. The earnings from specific services, product lines and sales staff all will come into clear focus once you have gone through the financial reports. This will help you to manage your expenses and marketing accordingly. Financial Ratios These ratios gives you all the information that you need to know about your business. Moreover, it is very easy to calculate. This way you can compare your companys standard with others. Financial ratios are not essential but it can point out your faults. Research A little bit of research on the expenses managed by other companies will help you manage yours better and your bottom line could increase. You might need to tweak the procedures, alter operations, streamline competencies or shake up the staff for a better performance. Analyzing the financial ratios will guide you towards the area you are most weak in so that you can develop a strategy to enhance the efficiency of your business. Financial Statements All the patterns in your expenses are exposed with the help of Financial Statements. Sales Trends comes into attention whether impacted by the season, changing consumer taste or other factors. This helps you to manage your inventories better, staff levels and sales promotions. Variable expenses and unusual or unauthorized expenses can be monitored with the help of Financial Statements. This will aid you in occasions of theft, embezzlement or other questionable activity before the stakes become too high. Economic highs and lows affect all companies and these periods of change is a test for all. Some stumble, some even fail and there are some who stand unscathed. But the economic growth of all companies is affected collectively. Sometimes the growth is totally unplanned and the expansion occurs due to some external factor which can range from landing a large account to just finding a great deal on a second location space. Always remember that without proper and concrete planning, no business can survive. Financial planning and management is not only for reviewing the financial statements but also to be aware of your expenses and then manage them in such a way that they dont go waste. You can use it to fund your future realistic projects and help your business go big. To explain why companies need to raise finance for different purposes. Finance is the money available to spend on business needs. Right from the moment someone thinks of a business idea, there needs to be cash. As the business grows there are inevitably greater calls for more money to finance expansion. The day to day running of the business also needs money. The main reasons a business needs finance are to: Start a business Depending on the type of business, it will need to finance the purchase of assets, materials and employing people. There will also need to be money to cover the running costs. It may be some time before the business generates enough cash from sales to pay for these costs. Link to cash flow forecasting. Finance expansions to production capacity As a business grows, it needs higher capacity and new technology to cut unit costs and keep up with competitors. New technology can be relatively expensive to the business and is seen as a long term investment, because the costs will outweigh the money saved or generated for a considerable period of time. And remember new technology is not just dealing with computer systems, but also new machinery and tools to perform processes quicker, more efficiently and with greater quality. To develop and market new products In fast moving markets, where competitors are constantly updating their products, a business needs to spend money on developing and marketing new products e.g. to do marketing research and test new products in pilot markets. These costs are not normally covered by sales of the products for some time (if at all), so money needs to be raised to pay for the research. To enter new markets When a business seeks to expand it may look to sell their products into new markets. These can be new geographical areas to sell to (e.g. export markets) or new types of customers. This costs money in terms of research and marketing e.g. advertising campaigns and setting up retail outlets. Take-over or acquisition When a business buys another business, it will need to find money to pay for the acquisition (acquisitions involve significant investment). This money will be used to pay owners of the business which is being bought. Moving to new premises Finance is needed to pay for simple expenses such as the cost of renting of removal vans, through to relocation packages for employees and the installation of machinery. To pay for the day to day running of business A business has many calls on its cash on a day to day basis, from paying a supplier for raw materials, paying the wages through to buying a new printer cartridge. Choosing the Right Source of Finance A business needs to assess the different types of finance based on the following criteria: Amount of money required a large amount of money is not available through some sources and the other sources of finance may not offer enough flexibility for a smaller amount. How quickly the money is needed the longer a business can spend trying to raise the money, normally the cheaper it is. However it may need the money very quickly (say if had to pay a big wage bill which if not paid would mean the factory would close down). The business would then have to accept a higher cost. The cheapest option available the cost of finance is normally measured in terms of the extra money that needs to be paid to secure the initial amount the typical cost is the interest that has to be paid on the borrowed amount. The cheapest form of money to a business comes from its trading profits. The amount of risk involved in the reason for the cash a project which has less chance of leading to a profit is deemed more risky than one that does. Potential sources of finance (especially external sources) take this into account and may not lend money to higher risk business projects, unless there is some sort of guarantee that their money will be returned. The length of time of the requirement for finance a good entrepreneur will judge whether the finance needed is for a long-term project or short term and therefore decide what type of finance they wish to use. To conduct an appraisal on different options available to a company wishing to invest specific amount of money. Introduction Investment is a key part of building your business. New assets such as machinery can boost productivity, cut costs and give you a competitive edge. Investments in product development, research and development, expertise and new markets can open up exciting growth opportunities. At the same time, you need to avoid overstretching limited financial resources or restricting your ability to pursue other options. Deciding where to focus your investment is an essential part of making the most of your potential. Even a project that is not designed to generate a profit should be subjected to investment appraisal to identify the best way to achieve its aims. This guide highlights the key financial and non-financial factors you should take into account when considering an investment. It also introduces the main financial appraisal techniques you can use. Net present value and internal rate of return Discounting cashflow allows you to put cashflows received at different times on a comparable basis. See the page in this guide on discounting future cashflow. You can use discounting cashflow to evaluate potential investments. There are two types of discounting methods of appraisal the net present value (NPV) and internal rate of return (IRR). The NPV calculates the present value of all cashflow associated with an investment: the initial investment outflow and the future cashflow returns. The higher the NPV the better. Alternatively, you can work out the discount rate that would give an investment an NPV of zero. This is called the IRR. The higher the IRR the better. You can compare the IRR to your own cost of capital, or the IRR on alternative projects. The key advantage of NPV and IRR is that they take into account the time value of money the fact that money you expect sooner is worth more to you than money you expect further in the future. Disadvantages NPV and IRR are sophisticated and relatively complicated ways of evaluating a potential investment. Most spreadsheet packages include functions that can calculate these or you could ask your accountant for help. Choosing the right discount rate to use to calculate NPV is difficult. The discount rate needs to take into account the riskiness of an investment project and should at least match your cost of capital. Financial aspects of investment appraisal Different appraisal techniques let you assess the effects an investment will have on your cashflow. You can compare the expected return to your cost of funding and to the returns offered by other potential investments. Your assessment should consider all the financial consequences of an investment. For example, buying more expensive machinery might be worthwhile if it is more efficient and uses cheaper supplies. As well as the financial impact, your calculations shouldalso considerÂÂ  any indirect effects. Identifying these soft benefits is often as important as the financial evaluation and may make the difference. Soft benefits could be: greater flexibility and quality of production faster time-to-market resulting in a bigger market share improved company image, better morale and job satisfaction, leading to greater productivity quicker decisions due to better availability of information Evaluating these benefits is not easy, particularly when it comes to raising the funds. Generally speaking, benefits that contribute to higher prices or increased sales are rated better than those cutting costs. For example, a manufacturer of machine parts could take a general benefit such as quality and break it down with estimated savings: ReducedÂÂ  reworking means less disruption to the production process, less manufacturing down-time and fewer design changes, resulting in an overall saving of 25 per cent. The current warranty and service costs of 10,000 per annum are likely to be halved. Quality assurance staff will be reduced by one as needs for inspections are lower. Better quality products will increase sales by 6 per cent and will also improve the companys current position of fourth among its competitors. It is important to estimate what the investments benefits are in financial terms wherever possible. You should ignore any sunk costs (ie costs that have already been incurred and cannot be recovered or would be spent regardless of whether the investment goes ahead), as these are not part of the specific investment. Before committing to any investment, it is essential to ensure any financing you need is available.ÂÂ   You should also consider the potential risks of any investment. Other factors Although profitability and cashflow are important, you should take into account how an investment fits w Strategic issues for investment appraisal Effective investment appraisal does not consider an investment in isolation. Instead, you should consider how the investment could contribute to your overall strategic objectives. Some investments can offer strategic benefits for your business. For example, you might invest in extending your product range so that you can supply more of the products that your key customers want. An investment like this could help strengthen your brand and your relationship with your customers. Often, one of the key benefits of making an investment can be the skills your business learns and the future opportunities that may arise. For example, you might invest in developing and trialling a new product even if you dont expect to make any profits at that stage. If the trial is successful, you can use what you have learned to make a larger, more profitable investment in bringing the product into full-scale production. On the other hand, making an investment can limit your flexibility to respond to future changes. For example, you would not want to invest heavily in new manufacturing equipment unless you were confident of the demand for your product. See the page in this guide on investment risk and sensitivity analysis. Timescales can also be an important strategic issue. For example, investors in your business may prefer investments that are expected to produce a quick return. See the page in this guide on the payback period. A useful test for a possible investment is to think about your alternatives. For example, instead of buying new machinery you could: do nothing do the minimum necessary to maintain your existing machinery achieve a similar outcome a different way, eg by outsourcing production to a supplier invest in an alternative project instead ith your existing business. There may also be other, non-financial reasons for making an investment. For example, you may need to update your equipment to improve health and safety or to meet modern standards. Accounting rate of return The accounting rate of return (ARR) is a way of comparing the profits you expect to make from an investment to the amount you need to invest. The ARR is normally calculated as the average annual profit you expect over the life of an investment project, compared with the average amount of capital invested. For example, if a project requires an average investment of 100,000 and is expected to produce an average annual profit of 15,000, the ARR would be 15 per cent. The higher the ARR, the more attractive the investment is. You can compare the ARR to your own target rate of return, and to the ARR on other potential investments. The ARR is widely used to provide a rough guide to how attractive an investment is. The main advantage is that it is easy to understand. Disadvantages Unlike other methods of investment appraisal, the ARR is based on profits rather than cashflow. So it is affected by subjective, non-cash items such as the rate of depreciation you use to calculate profits. The ARR also fails to take into account the timing of profits. In calculating ARR, a 100,000 profit five years away is given just as much weight as a 100,000 profit next year. In reality, you would prefer to get the profit sooner rather than later. See the page in this guide on discounting future cashflow. There are also several different formulas that can be used to calculate an ARR. If you use the ARR to compare different investments, you must be sure that you are calculating the ARR on a consistent basis. Payback period Payback period is a simple technique for assessing an investment by the length of time it would take to repay it. It is usually the default technique for smaller businesses and focuses on cashflow, not profit. For example, if a project requiring an investment of 100,000 is expected to provide annual cashflow of 25,000, the payback period would be four years. Similar calculations can be used to work out the payback period for a project with uneven annual cash flows. Payback period is a widely used method of assessing an investment. It is easy to calculate and easy to understand. By focusing on projects which offer a quick payback, it helps you avoid giving too much weight to risky, long-term projections. Disadvantages Payback period ignores the value of any cashflows once the initial investment has been repaid. For example, two projects could both have a payback period of four years, but one might be expected to produce no further return after five years, while the other might continue generating cash indefinitely. Although payback period focuses on relatively short-term cashflows, it fails to take into account the time value of money. For example, a 100,000 investment that produced no cashflow until the fourth year and then a payback of 100,000 would have the same four year payback period as an investment that produced an annual cashflow of 25,000. In reality, the first is likely to be a riskier and less attractive investment. A more complex version of payback period can be calculated using discounted cashflows. This gives more weight to cashflows you expect to receive sooner. See the page in this guide on discounting future cashflow. Discounting future cashflow As a rule, money now is better than money in the future. There are two key reasons: Money has a time value. If you have money now, you can use it for example, by putting it on deposit. Conversely, if you want money now but will only get it in the future, you would have to pay to borrow it. The further you look ahead, the greater the risks are. If you expect an investment to return 1,000 in a years time, you may well be right. If you are looking ten years into the future, things might well have changed. Discounting cashflow takes these concerns into account. It applies a discount rate to work out the present-day equivalent of a future cashflow. For example, suppose that you expect to receive 100 in one years time, and use a discount rate of 10 per cent. If you put 90.91 on deposit at 10 per cent for one year, at the end of the year you would have 100. In other words, the present value of that 100 can be calculated as 90.91. Similar calculations can be used to work out the present value of cashflows you expect to receive further into the future. For example, suppose you expect to receive 100 in two years time and use a discount rate of 10 per cent. If you put 82.64 on deposit for two years at 10 per cent, at the end of two years you would have 100. In other words, the present value of that 100 is 82.64. You can use discounted cashflows to assess a potential investment. See the page in this guide on net present value and internal rate of return. To demonstrate the importance of reports on the sale of an organizations finances. At regular period public companies must prepare documents called financial statements. Financial statements show the financial performance of an company. They are used for both internal-, and external purposes. When they are used internally, the management and sometimes the employees use it for their own information. Managers use it to plan ahead and set goals for upcoming periods. When they use the financial statements that were published, the management can compare them with their internally used financial statements. They can also use their own and other enterprises financial statements for comparison with macroeconomical datas and forecasts, as well as to the market and industry in which they operate in. The four main types are balance sheets, profit and loss accounts, cash flow statements, and income statements. Balance Sheets Balance sheets provide the observant with a clear picture of the financial condition of the company as a whole. It lists in detail the tangible and the intangible goods that the company owns or owes. These good can be broken further down into three main categories; the assets, the liabilities and the shareholders equity. Assets Assets include anything that the company actually owns and has disposal over. Examples of the assets of a company are its cash, lands, buildings, and real estates, equipment, machinery, furniture, patents and trademarks, and money owed by certain individuals or/and other businesses to the particular company. Assets that are owed to the company are referred to as accounts-, or notes receivables. Current Assets include anything that company can quickly monetise. Such current assets include cash, government securities, marketable securities, accounts receivable, notes receivable (other than from officers or employees), inventories, prepaid expenses, and any other item that could be converted into cash within one year in the normal course of business. Fixed Assets are long-term investments of the company, such as land, plant, equipment, machinery, leasehold improvements, furniture, fixtures, and any other items with an expected useful business life usually measured in a number of years or decades (as opposed to assets that wear out or are used up in less than one year. Fixed assets are usually accounted as expenses upon their purchase. They are normally not for resale and are recorded in the Balance Sheet at their net cost less (less is accounting term for minus) accumulated depreciation. Other Assets include any intangible assets, such as patents, copyrights, other intelectual property, royalties, exclusive contracts, and notes receivable from officers and employees. Liabilities Liabilities are money or goods acquired from individuals, and/or other corporate entities. Some examples of liabilities would be loans, sale of property, or services to the company on credit. Creditors (those that loan to the company) do not receive ownership in the business, only a (usually written) promise that their loans will be paid back according to te term agreed upon. Current Liabilities are accounts-, and notes-, taxes payable to financial institutions, accrued expenses (eg.: wages, salaries), current payment (due within one year) of long-term debts, and other obligations to creditors due within one year. Long-Term Liabilities are mortgages, intermediate and long-term loans, equipment loans, and other payment obligation due to a creditor of the company. Long-term liabilities are due to be payed in more than one year. Shareholders equity The shareholders equity (also called as net worth, or capital) is money or other forms of assets invested into the business by the owner, or owners, to acquire assets and to start the business. Any net profits that are not paid out in form of dividends to the owner, or owners, are also added to the shareholders equity. Losses during the operation of the business are subtracted from the shareholders equity. Assets are calculated the following way: Assets=Liabilities+Net worth Balance sheets show how the assets, liabilities, and the net worth of a business are distributed. They usually are prepared at set periods of time, for example at the end of each quarter. It is always prepared at the end of fiscal years. The periodic preparation of the balance sheets, the owner and/or the manager of the company can see historic-, and current trends andalsothe general performance of the corporation. It allows decision makers to make adjustments when needed, like the proportion of liabilities to assets. All balance sheets contain the same categories of assets, liabilities and net worth figures. Assets are arranged in decreasing order of their liquidity . Liabilities are listed in order of how soon they must be repaid, followed by retained earnings (net worth of owners equity). The categories and formats of Balance Sheets are established by a system known as Generally Accepted Accounting Principles (GAAP). The system is applied to all companies, large or small, so anyone reading the Balance Sheets can readily understand what it is saying. Profit and Loss Account Profit and loss accounts (abbreviated as PL account) summarize the incomes and expenses of a company in a given period of time. It also includes accruals too, which are incomes that will be realized only after the particular Profit and Loss Account statement was prepared. Cash-Flow Statements These statements show how money is predicted to move around (hence the phrase cash flow) at a given period of time. It is useful for planning future expenses. It shows whether or not there will be enough money to carry out the planned activities and whether or not the cash coming in are enough to cover the expenses. The cash flow statement is useful in the determination of the companys liquidity in a given period of time. Income Statements Income statements measure the companys sales and expenses over a specific period of time. They are prepared each month and fiscal year end. Income statements show the results of operating during those accounting periods. They are also prepared using the Generally Accepted Accounting Principles (GAAP) and contain specific revenue and expense categories regardless of the nature of the company. Conclusion Financial statements are useful, because they show the financial condition of a company at a given period. There are many types of financial statements uses and purposes, measuring different financial aspects of the company. They can be used for both internal-, and external uses.