Assignment 3: Mother & Child Essay Researchpaper Help

Assignment 3: Mother & Child Essay Researchpaper Help

MA in Culture, Policy and Management Plagiarism declaration By submitting this work, I declare that this work is entirely my own except those parts duly identified and referenced in my submission. It complies with any specified word limits and the requirements and regulations detailed in the coursework instructions and any other relevant programme and module documentation. In submitting this work I acknowledge that I have read and understood the regulations and code regarding academic misconduct, including that relating to plagiarism, as specified in the Programme Handbook. I also acknowledge that this work will be subject to a variety of checks for academic misconduct. Marks are provisional and subject to change in response to moderation, assessment board decisions and any ongoing investigations of suspected academic misconduct. Student s signature 150052091 Date 04/01/2016 Introduction The use of quantitative data sets to determine the financial performance and positioning systems has become the most fundamental basis for determining the financial performances of companies besides aiding in objective decision making. Financial analysis is vital for determining the future of the companies and other profit making organizations. Over the last century, various international exchanges have grown rapidly. Due to these growths, regions are becoming more interconnected and interlinked with one another such that investors take chances to make investments in foreign companies far away from their homes. Such investment affairs need to be well informed to enable the investors to make good choices for their investments. For investors to make their investments in various companies, they need to be aware of the respective companies financial stability based on their performances through time (Clausen, 2009). Scrutiny of the financial disclosures of the target companies, therefore, provides an informative point to inform critical investments decisions. This paper provides a critical evaluation of ICA accounts. Also, a review of the financial position of the company for the year 2010 and 2013 has been provided. This is accompanied by an illustration of how ICA has positioned itself based on its financial performance over time. Due to increasing demands on investments, companies analyses are becoming the most fundamental component of decision making for investment purposes. Investors carry out detailed and elaborate analysis of the companies of interests based on the financial releases. Financial statements, therefore, become an important document for companies and investors. For instance, companies struggle to make their financial reports impressive by registering positive performances to increase their chances of attracting more investors into their companies. On the other hands, investors are in constant search for companies that are consistent in their financial management and performances based on the quantitative reports on their financial statements. Different financial indicators have been used by financial analysts to determine the position of various companies. Such include the ROCE, ROA and other financial ratios (Clausen, 2009). Evaluation of the respective ICA accounts ICA is a charitable company whose financial are governed on the basis of the Memorandum of Association and the related articles. The operational governance of the company, like other charitable organizations, is vested purely on the councils. Charitable companies operate mainly in two basic financial systems: the restricted finances and unrestricted financial (Beranov?, 2008). While restricted financial are contributed by the donors for specific purposes, i.e. to accomplish certain specific tasks within the company (Beranov?, 2008), unrestricted funds have no designated or specific purpose for which they are designed (Beranov?, 2008). Besides the donations that are made by various financial organizations to the company, the company has also established additional sources of funds from which a considerable amount of money is generated to help steer the programs undertaken at the institution. Different accounts have been presented by the company and which have been evaluated in this section. Beginning the year 2010, just emerging from the global economic depression that saw the company deplete a lot of resources, its accounts during this period was unimpressive. The global economic recession (Cairns, 2010) saw many companies and other business organizations eat into their savings; many also liquidated their assets to meet their regular activities as income sources diminished extensively. ICA has most of its income sources dependent on the exhibitions and other showcasing that they conduct in the UK. These activities and events are more profitable when the majority of the people are not economically strained since they are considered non-basic needs. During the global economic downplay (2007-2009), the company liquidated a lot of its assets thus decreasing its asset. This is because the income from activities decreased substantially in 2010 as the world was on the verge of economic recovery. Many people spent only a little money on extra expenses other than the basic needs in fear of uncertainties ahead (Hitz, 2007). The consolidated statement of the company s financial activities for the year ended March 2010 register a staggering decrease in its income generated from such activities. During this time (2010), the company managed to accrue a net income of ?3,629,206 from its activities including funds from both restricted and unrestricted sources. Compared to the amounts generated in the previous year (2009 = ?4,293,530), the company s revenue went down by up to ?664,324 thus presenting a huge drawback to its performance and activities. To the contrary, the company s net expenditure during this year far outpaced the net revenue generated. For instance, the company spent up to ?5,062,514 in 2009 and ?5,087,207 in 2010 thus accumulating deficits during the period. When companies spend more than they accrue from their investments (fixed and liquid assets), they make losses, and the situation is dangerous to the future of the companies involved (Casabona & Shoaf, 2010). This fact is derived from a simple economic equation that Loss = expenditure income A positive result from the calculations above indicates the existence of a loss while a negative result shows that the company is making profits. Besides, during the period 2007 to 2010, the company also recorded great losses on their investments. Further reduction in income levels were realized in charity incomes and other group activities on which the company relied most as integral sources of revenue. The income amounts generated from charities decreased considerably from ?342,864 in 2009 to ?62,295 in 2010 while the group contributions decreased from ?333,967 in 2009 to ?221,632 in the year 2010. As a result, the net current assets also decreased proportionately between 2009 and 2010 as the company liquidated some of its assets to meet its current needs and compensate for the deficits that were being carried forward. As Brunnermeier & Lasse (2009) observes, when the income sources are reduced, the cash inflows are also affected negatively. As a result, the companies have to look for additional funding for their activities or are forced to abandon or postpone some of the activities that they operate to cut down on expenses (Boyson, Christoff & Rene 2010). During the 2009 financial years, the ICA registered decreasing financial inflows and increased outflows as the amounts of expenditure continued to rise consistently due to low high costs of products. However, 2010 recorded an increase in the inflows (Exhibit 1). Exhibit 1: ICA consolidated cash flow statement for the year ended 31st March 2010 Contrary to the previous years, the financial statements provided for 2013 indicates great improvements in the company s performance. ICA attributes these improvements to the London Olympic Games in 2012 and whose impacts fell over to 2013. 2013 saw many events being carried out successfully as the company met its peak productivity since the onset of the global economic recession in 2007. The statements during this year are very impressive as the incomes are increased; donations and charities also improved a great deal thus leading to many activities being conducted by the company. As a result, the cash inflows also increased from various sources. For instance, the unrestricted funds surpluses for the financial year ended 31st March 2013 was registered at ?19,528 up from ?341,148 in 2012. On the other hand, the unrestricted reserve balances further registered a tremendous increase of up to ?491,001 up from ?471,473 in 2012. According to Chen, Itay & Wei (2010), several events can lead to increased incomes for service providing companies such as ICA. On the other hands, adverse events such as the global economic recessions that have impacts across the globe can attract serious negative consequences to the services companies performances (Committee of European Seurities Regulators, 2010). Global events such as the Olympics have a great impact on the economies of the host countries. The spill-overs for these benefits, although short-termed, bear good returns to the companies in the regions. Moreover, 2012/13 saw various economic fronts heal from the recession just a few years back, and many people and companies were coming into the business world once again. A lot of investments came into the business world, and the number of people having extra funds to spend on ICA s experiences increased several folds. These events, as well as the other activities that came into play during the period, led to the improved performance of the company during the 2012/13 financial years. To illustrate these effects, by the end of the 2012 financial year, the ICA accumulated a total reserve amount that was carried forward into the next financial year was registered at ?2,366,012 up from ?1,265,403 of the surpluses accumulated in the previous financial year 2011. This difference in surpluses amounted to up to ?1,826,663 in 2012 and which was carried forward into 2013. The economic healings in Europe saw forth increased activities that were conducted successfully by the ICA thus increased returns. As Covitz et al. (2013) denotes, the economic stimulus in the United Kingdom following recovery from the global financial crises saw the developments in business activities in the region as people began to reinvest to recover the losses that were incurred during the recession. ICA s consolidated statement for the financial year ended 31st March 2013 registered a consistent increase in the amounts of income that was generated by the company. The company registered an income from totaling to ?4,165,689 in 2013 up from ?3,942,525 in 2012. Besides, the total expenditures were considerably lower that the incomes compared to the previous instances thus leading to a lot of money being carried forward as surpluses. The total expenses in 2012 and 2013 were far lower than the incomes as shown in the financial statement for the financial year ended 31st March 2013. The expenditures were recorded as ?3,626,340 in 2013 and ?2,677,122 in the year 2012. These figures, comparable to the incomes registered above, were far below the incomes collected during the two financial years. ICA financial position in 2010 and 2013 As Coval & Erik (2007) notes, the diversity of sources of funding for organizations is a critical point in helping the charitable companies and organizations to meet their desired needs and activities. Based on these facts, Coval & Erik (2007) concludes that charity organizations should yield their funds rather than depending on donations and grants from other sources that are not definite (N?si & Virtanen, 2005). Many companies that rely on donations and free funds sources do not live to experience long lives in service provision. The financial stability of companies is determined by their cash inflows. This is because the inflows of cash are the indication of how much funds the companies have at their immediate disposals for use to accomplish their tasks. Companies that have high outflow rates for their cash than they can receive tend to perform poorly in the market (Coval & Erik, 2007). Another factor that N?si & Virtanen (2005) observes to play a critical role in influencing the financial stability of companies is the return on assets (ROA) of the company. Based on the diversity of cash inflows, ICA has diversified its productivity in a number of ways to make its financial position stronger. For instance, the company is involved in various activities that generate income on a regular basis. Showcasing artistic works form the most significant source of funds for the company as is shown in the statements that will be discussed here shortly. Other sources of funds for the company include talks that are conducted by the company, showcasing of artistic films, fests, cultural shows among others. These events are conducted on a regular basis by the company. The sources contribute a larger share of the unrestricted capital used by the company to accomplish various kinds of tasks. The broad diversity of the sources of funds that the ICA explores for its continuity makes its financial positioning more accurate and outstanding (Hope, Jin & Kang, 2005). The primary goal for ICA Company in the coming future is to see itself becoming financially stable in future to avoid the low performances that were recorded during the global economic recession as has been discussed in the previous section. In order to accomplish these goals, the company has embarked on a mission to position itself financially by developing goals, aims and objectives that reflect their future development needs. For instance, the company s revised aim by centering its aims on achieving stability, sustainability and enhancing risks management while maximizing financial controls. Profit maximization is focused by Dasgupta, Andrea & Michela (2011) as an integral strategic positioning for companies that seeks to attain financial stability for relatively longer periods. This means that the companies have to maximize on incomes and minimize the expenditure. This is what Dasgupta, Andrea & Michela (2011) refer to as the process of financial control. ICA s positioning system is a critical factor of analysis. The company has laid down policies and measures to help it position itself strategical to achieve better financial standing. For instance, the ICA management has resolved to build their unrestricted bank of general funds that excludes the designated funds so as to provide for their working capital needs. In this respect, therefore, ICA will be in a position to sustain its primary programs as well as activities that are scheduled to accrue money to their business. As Gennaioli, Andrei & Robert (2012) highlight, the ability to be financially sufficient such that they can fund their activities without having to borrow is a good strategic move to attain financial stability. Borrowing funds from other sources to support the companies activities eats into profits as the companies need to pay back the borrowed money with interests that would otherwise form part of their income. The positioning strategy adopted by ICA, therefore, puts it on the right path towards achieving financial stability in the future. About this policy, the ICA is looking forward to developing strategies that would enable them to manage their medium-term risks effectively in events of an unexpected reduction in their cash influx. T His positioning strategy also seeks to cushion ICA s expenditure in an event of occurrence of a major period of an unpredicted anomaly in expenditure, supplement an arising need for an urgent investment opportunity or difficulties that inhibits cash flows. This is because the investment income is increasingly becoming ICA s number one priority as defined in its business models. The strategy is commensurate with Gennaioli, Andrei & Robert (2012) research that led to a conclusion that short-term risks can result into greater loses than some long term risks since such risks are often unplanned for by the respective companies. These findings echo that of Dasgupta, Andrea & Michela (2011) who noted that companies would be in better positions of achieving financial stability only if they manage their short-term risks effectively. The company s focus on this agenda looks into supporting the elements that seem undeliverable to its balance sheet using the existing business model. Having these needs in mind, ICA has devoted to redeveloping both reserves as well as the financial policies to reflect their main agenda. As a result, it has begun to put in more funds into the investment funds kitty. For instance, in 2013 alone, the company has reserved up to ?500,000 into its investment funds kitty as a preliminary investment into the project. More funds are expected to be pumped into the kitty to support various activities in the coming future. Against this backdrop, we can conclude that ICA has positioned itself adequately regarding business needs and achievements. The main reasons why companies incur losses in events of uncertainties is due to improper planning for the unexpected risks Dasgupta, Andrea & Michela (2011) such as those that occurred during the global financial crises. Planning ahead for better risks management prospects require that the companies not only develop strategies to detect these risks upfront but also develop ways to combat them. Financial risks require financial solutions. During these times, if the companies have to carry on with all activities, they must borrow from other companies or banks or even liquidate some of their fixed assets to meet their deficits (Committee of European Securities Regulators, 2010). Having extra finances in place to cushion the extra needs at times of difficulty helps businesses to avoid plunging into these risks thus keeping pace with positive returns even during hard financial times. Based on these evidence, we can ascertain confidently that ICA has positioned itself adequately for future financial needs and risks combating. Conclusion and recommendations The ICA Company, like any other companies, has undergone a series of highs and lows common in the business world. The global financial crisis of 2007-2009 presented the greatest challenge to the company s business activities as many their sources of cash inflow were hampered by the cash crunch that made many of its customers focus much on their basic needs rather than the additional sources of experience such as the ICA services. Besides, the donations and grants also decreased considerably until 2012 when normalcy returned into the business world. Even though the company has laid down measures to ensure that these circumstances are not repeated, I would recommend the following to help provide additional positioning to curb any future uncertainties. The company should consider investing more in tangible assets that have low maintenance costs. For instance, using the extra funds accumulated from its funds, ICA can consider investing its monies in real estates and other related low maintenance costs investments. In this way, the company will uphold good financial influx with very minimal management and maintenance costs. In this way, therefore, its financial positioning will be guaranteed for both short and long-term risks. Besides, I would recommend that the company diversify its income sources more than the artistic exhibitions. For instance, since ICA is a charitable company, it can consider outsourcing some of the services rendered through the charity departments to other people and organizations that are in need of such. The strategy can help cushion its cash needs. 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