Finance and Accounting for Nonfinancial Managers

Question: Discuss about the Finance and Accounting for Nonfinancial Managers. Answer: Introduction: The merit-based pay rise is the increase, which is provided to the staffs of an organization to adhere to their contributions in improving the business productivity and profitability. For instance, if a staff receiving an increase of $300 per annum, the value after five years would stand at $(300 x 12) or $3,600. Hence, merit-based pay could be provided to the staffs through bonuses and incentives, which could increase the personal wealth of the employees. In addition, the merit-based pay rise helps in increasing employee motivation level, which, in turn, could lead to effective achievement of the organisational objectives. The pay rise is the increase in salary, which is provided to the employees of an organisation for fulfilling their daily needs. In addition, the salaries of the employees are adjusted with respect to the rate of inflation. Hence, it is recommended to the organisation to provide pay rise to the employees after completion of year of service. However, it is to be borne in mind that the pay rise needs to vary depending on the contributions of the staffs. For instance, the pay rise of the manager might be greater in contrast to the sales officer. Equity stake (with vendor financing): The business owners might undertake decisions of distributing a portion of the equity shares amongst the staffs of the organisation. This generates a feeling of oneness amongst the employees, as they feel themselves to be a part of the organisation. In addition, the employees hold a minor portion of the equity stakes, which make them the owners of the organisation. Share of profit and business: The staffs of the organisation could be provided with a portion of the business profit. For instance, if the employees contribute effectively to accomplish the organisational objectives, the organisation might provide 4% of the profit made to them. Such sharing of profit would help the organisation to retain its key employees by motivating them effectively. Evaluation of the issues that might breach the bank covenant in the cash flow statement: According to the provided cash flow statement, it is inherent that the a significant portion of the receipts generated from the customers are used to settle the suppliers and the employees. However, the income generated from the customers is not adequate to settle the suppliers and employees, which has lead to negative cash inflows from operating activities. The amount accumulated from the PPE disposal is $50,000 in 2014. On the contrary, the PPE purchase has amounted to $500,000 in the years 2013 and 2014. This has further lead to negative cash inflows from the investment activities. However, the cash flow from financing activities has shown positive trend, since no fund has been made to finance projects, while $10,000 has been received from the owners. The lower cash inflows from operating activities often restrict an organisation to invest funds in capital projects. As a result, the potential future cash inflows of the organisation are minimised. Moreover, inadequate receipts and different payment-related obligations have lead to shortage of cash in the year and the trend is identical for the years 2013-2015. Furthermore, it has been observed from the cash flow statement that the beginning cash balance, which has been positive in nature, has failed to show positive closing cash balance for the organisation. However, the exception is noticed in the year 2013, in which the closing cash balance has been positive. The organisation suffering from negative cash balance might find complexities to maintain its daily business activities and operations, which might affect its future growth. For the years 2013-2015, the organisation has not incurred any amount for repaying the business debt. The non-repayment of debt helps an organisation to save additional cash, which would help in improving the business operations. In addition, the organisation has acquired additional debt of $500,000 in 2013. Hence, there is greater chance that this particular issue might be associated with the breach of bank covenant, which might create complexities for an organisation to maintain its business operations and growth. Evaluation of the four channels of sales including impediments and solutions including excess demand: Sales Channel Obstacles Solutions Cellar Door The sales quantity is low at the time of winter and this process contributes to the reduction in the loyal customers. This process increase the maintenance cost of the shops and the owners need to pay a lot of money to the staffs. The customers can chose online shopping process. To avail this opportunity, Heretaunga needs to assure the customers about receiving the orders in time[7]. The company needs to employ more staffs in order to make smooth delivery of the online products. Local retailers (Including bars and restaurants) The local retailers use to offer extended credit terms to the customers in order to make the wines locally available. However, the customers pay the money in a very slow pace. There should be periodically fixed credit terms like there months or six months. The customers can avail the opportunity of discount in case of early payment. There must be fines as penalty for the late payers[8]. Pemberley Grocers Firstly, suppliers prefer lower prices with delayed payment terms. Secondly, it is required that the suppliers need to bear the marketing as well as advertisement expense. Firstly, it is a gain for Heretaunga to highlight their products in Pemberly Grocer. This is why the company has a little scope for the price negotiation. However, they have the option to discuss issues related to delayed payment. Heretaunga can discuss for fixed payment period. Secondly, Heretaunga can save a lot of money if Pemberly can bear the marketing and advertisement expenses. The initial discount may be offered on the part of the company. Fitz Wine On Line Low margin in gross profit Heretaunga needs to reduce the sale of products through online if the company increases the ability of selling their wines by increasing the marketing and advertisement of their products. Table 1: Evaluation of various sales channels (Source: As created by author) References: Al-Debei, Mutaz M., Mamoun N. Akroush, and Mohamed Ibrahiem Ashouri. 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