ASSIGNMENT
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Question 1: triple bottom line 1
The actions of BP’s management 1
Question 2: partnership business 1
Question 1: the triple bottom line
- The bottom line refers to an accounting framework that incorporates the financial, social, and environmental performance of a business firm over time. It also consists of elements that include profits, people, and the planet, and thus they help in gauging the level of commitment in a company. This economical tool aims to measure the financial, social, and environmental performance of a company over time. The importance of triple bottom line is that it brings forth the essence of sustainability by measuring the effects of a company’s activities on the world and thus enhancing the success of the company.
b) The actions of BP’s management
The main concern in BP’s management is to build a deeper understanding of the customer’s needs and hence be able to develop and deliver tailored solutions. BP’s management aims to be in a position always to provide products and services that add value to the business. It is important to note that the reflection of the triple bottom line concept is evident in BP’s management concept in the following ways.BP’s management system emphasizes much on social and financial factors as well as environmental factors. The reason is that for a business organization to emerge victorious in its operation, customer satisfaction comes first. However, finance is a crucial factor in the performance of a business to deliver goods and services that fulfill the customers’ needs. It is essential to understand the environment well to offer products and services that favor customers in that place. In my view, I think BP’s management chose the decision to understand customers’ needs so that they deliver products and services that fulfill their requirements. Through this, the firm maximizes the profits rates, and customer loyalty is maintained.
Question 2: partnership business
The better option for the new business venture for Bundoora and his cousin Robyn is a partnership. The factors to be considered the organization include the name and the amount to be contributed by each partner. The importance of naming the business is to distinguish the firm from other firms. It is also crucial for the partners to know the minimum amount required to start the new business. Even, they should agree on the allocation of profits, losses, and draws incurred in the business to avoid conflicts in the future in the business. The advantage of a partnership is that it becomes easy to establish, and start-up costs are low.
Moreover, it is less formal, with fewer legal obligations required. Besides, one disadvantage of partnership is emotional issues that may causes conflicts due to different opinions or unequal efforts put into the business. Another shortcoming of collaboration is that there is a loss of autonomy. The control of the business is shared between the partners.
Question 3 a) Importance of financial statements;
Income statement
It shows the profitability in general terms of the firm. The analysis of the income statement is useful in checking on the efficiency of the business. To prove this, the rate at which the firm’s expenses are translated to revenues is determined.
Statement of changes in equity
It is useful in showing the changes in the equity of the firm. The statement of changes in ownership reveals the difference between the firm’s assets and differences.
Statement of financial position
It is useful in analyzing the financial stability and health of the firm. Analysts use it to check on the firm’s financial position and the underlying factors.
Errors found in the financial statement and their correct treatment.
Some of the errors made by Maria in the preparation of the income statement include the following. At first, she did not follow the right format in providing a fair view of her company. In the determination of the firm’s revenues, Maria included only the revenues without consideration of the sales made. She did include the sales revenue in the income statement. Another error made in the preparation of the income statement is that cash and accounts receivable were included. These are not revenues that should be included in the income statement of Maria’s firm. However, cash and the accounts receivable elements should be contained in the statement of financial position. Accounts payable is not an expense, and therefore, it should not be included in the income statement.
The statement of financial position is prepared wrongly in its format. An example is where the current assets come first before the fixed asset. In the preparation of the financial position statement, the heading of fixed assets should come first before the existing assets. Also, the delivery vehicle is placed as a current asset, and yet it is a fixed asset. Under the non-current asset, supplies do not fall under. However, Maria includes supplies under non-current assets, which should not be the case. Another error is that the long-term bank loan is placed in the current liabilities category. There should be a category of the long-term liabilities in which the long-term bank loan should be placed.
Another error in the preparation of the statement of changes in equity is to do with its components. The total of the closing ownership is incorrect in that it is obtained from adding the owner’s investment to the retained earnings ending balance of the firm. Maria should consider preparing these financial statements correctly. The elements should be placed in the correct categories, and the right format followed.
Question 4: Reasons for investing or not investing in the company
According to the statement of cash flows of Harvey Norman, the following is evident. The net cash flows from operating activities of the firm have declined from 454,170 in 2018 to 372,845 in 2019. This information reveals that the firm‘s profitability from the daily business activities has dropped. Therefore, it is not operating for a profit.
On the other hand, the net cash flows used in investing activities of Harvey Norman are negative figures. These reveal that this firm is investing in capital assets. And therefore, it is much likely to grow in the future. The business is, therefore, viable in that it is focusing more on future growth and expansion.
For the cash flows from the financing activities, the figure is negative, indicating the firm has paid out capital. Some of the components of money that may have been paid out include the payment of long-term debt. And also dividends to shareholders. It has, therefore, retired the debts owed to the firm by creditors. I would consider investing in this firm because it is likely to grow in the future, and also it pays dividends in time.
References
Hussain, N., Rigoni, U. and Orij, R.P., 2018. Corporate governance and sustainability performance: Analysis of triple bottom line performance. Journal of Business Ethics, 149(2), pp.411-432.
Hutadjulu, L.Y. and Blesia, J.U., 2016. Factors That Affect The Perception of Small and Medium-Sized Businesses (SMEs)’Community on The Importance of Financial Statements, The Amount of Credit Received and Implementation Prospects. KnE Social Sciences, pp.125-135.