Abstract: A financial analysis is an important instrument of planning, coordination, motivation, and control.

Any industry can benefit a lot from the analysis. Financial analysis can promote forward thinking and identification of the problems in the industry. If the problems are identified early enough, it allows mangers time to overcome them. Sometimes managers can avoid making mistakes. Budgets can coordinate the activities of various sections of the industry and allocate the resources to the various departments, which ensure every department operate in the harmonious way in the industry. Another important role of budgets is to motivate the managers and staff at industry to better performance. The reasonably budgeted targets could exploit the potential of managers and staff, and encourage them to do utmost to achieve it. In addition, the budgets provide the basis for the control, which is to monitor and measure the actual performance of the industry. In this assignment I have discussed the different financial resources, strategies and communication strategies of stakeholders of Ajax plc for their new planning project in China.

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Index Page no Introduction [ Task 1] Evaluation of the need for Financial and Human resource for the proposed branch in China: [ Task 2] Critically assess the criteria used by Ajax Plc in the allocation of its financial and human resources in 2010 [ Task 3] I. Evaluation of Payroll budget and Human Resources are allocated in 2011 cost allocation of Ajax plc 6 Suggest how Activity Based Costing (ABC) and Activity Based Budgeting (ABB) can support Ajax Plc in re-engineering its products costing in order to achieve global competition. 5 4 3

II.

[ Task 4] III. Use Activity Base Costing (ABC) technique to reallocate the payroll costs on table1 above. Allocation should be based on number of employees for each department. 8 Explain how Value Chain Analysis and Budgeting approaches can be used to allocate, monitor and control resources effectively and efficiently. 9

IV.

[ Task 5] Appraise the importance of internal communication within the Ajax Plc and evaluate how these can be used to improve the current situation: [ Task 6] Impact on communication strategies of the relative power and importance of individual stakeholder groups of Ajax Plc. 12 Conclusion Bibliography and references 14 15

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Introduction: Potential shareholder faces two options about whether investing in Ajax plc. According to detail information from financial statements, we can use accounting ratios to make a better prediction and analysis about potential advantages and drawbacks in investing in one of this company. Through interpretation of budget analysis, we can look closely at the financial state of two companies-profitability, efficiency, and financial stability, and then decide which company to invest in. The main concepts discussed in this paper relating to Ajax plc scenario are as follows: assess organizational performance, cross-border growth strategies and diversification, and analysing risk associate with investment decisions. Strategic plan: Strategic planning is defined by intestorwords.com as the process of determining a company's long-term goals and then identifying the best approach for achieving those goals. But this definition is too broad and does not identify the true advantages of strategic planning for large to small businesses. Strategic planning provides the foundation for the policies, procedures, and strategies for obtaining and using resources to obtain the goals of the organization. Some believe that in today's rapidly changing environment, strategic planning is becoming more difficult and therefore more obsolete because changes are occurring so fast that plans-even those set for just months into the future-may soon be obsolete. The fact is that with the fast changing environment it is even more important to have strategic planning in every business today. Strategic planning process: 1. Evaluation of current performance result. This is to evaluate the organizations performance in the past years in terms of return on investment, market share, and profitability. Also, it includes the current view of strategic posture which is mission, objectives, strategies, and policies of the organization. 2. Scanning and assess the strategic factors or environmental scanning. The environmental scanning is the monitoring, evaluating, and disseminating of information from the external and internal environments. The purpose is to identify the strategic factors that determine the future of the organization. The environmental scanning includes the following items. 3. Seeking goal of the project
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With the revision of goal, mission, and objectives, the organization then generate the strategic alternatives of what the organization can do to exploit and enhance its core competencies with the underlying opportunities and what it can defend or react to those of threats or how it can improve its weaknesses. Finally, designing evaluation and control process to ensure that the implementations are followed the plans. [Task 1] Evaluation of the resources for the proposed branch of Ajax plc in China: Financial resources: The financial resource is become available for spending. Financial resources include cash and resources include cash and resources ordinarily expected to be converted cash ( eg. Cash, bank loan receivable, loan and medium and short investment). Financial resources may also include inventories and pre-paid (because they prevent the need to expend current available resources). Human resources: The heart of the issue of the human resources is the skill-base of the business. What skills does the business already posses? Are they sufficient to meet the needs of the chosen strategy? Could skill-base be flexed/ stretched to meet the new requirements? An audit of human resources would include the following factor: Tangible resources: Include land, buildings, vehicle and furniture; Intangible resources: Include goodwill, reputation, brands and intellectual property; It is important to use a strategy-centred human resource management at Ajax plc in relation to employees in modern management. Ajax plc may take employee relations very seriously and employ people from all backgrounds so that they can gain a full understanding from all of their customers wants and needs. The amount of financial resources an organization must remain at all the time. It comprises primery and secondary requirements in the Ajax plc company for their new market policy in China. Resource gaps A familiar progressive strategic gap is a shortage of money resources. The budgets can influence resources gap between various departments in an organisation. Since one of the primary functions of the budgets is cost control, departments within the organisation that are more worried of quality of products and service over price of same can fall into a black hole of budgeting. Whereas budgeting and performance are typically over seen by the finance department, planning is coordinated by the strategic development.

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[Task 2] Critically

assess the criteria used by Ajax Plc in the allocation of its financial and human resources in 2010 Ajax Plcs spending for the year 2011 was budgeted to be 1 Million. Mr. Alex Simpson the management account in charge of the budge suggested that the company has four key departments, Administration, Marketing, Production and Finance therefore each department should be allocated 25% each of their cost allocation. We have critically assesses the following departments: Administrative department: The administrative department is in charge of the overall well-being of employees dealing with pay, training and addressing any issues they have. Equality within a firm has to be maintained my human resources, making sure equal opportunity is given for everyone to develop and gain promotions within the business. They take the responsibility for interviewing someone for a promotion, maintaining health and safety and training, improving overall motivation. Production department: The production department decides factors such as the quality and quantity of products being produced. Unless the type of material is specified for a particular use in a product of the Ajax plc, the production department can find new materials that are cheaper such as cheaper non oven materials. This could cut prices down, leaving the marketing department to decide the price of the new product with the cheaper non-woven, giving them more power to implement and exercise pricing strategies. Finance department: Finance departments can also report back on financial trends when it comes to setting the price of the product/service. If there is a recession going on people would be less likely to pay premium price for a product, the finance department could feedback this information to the marketing department, which would influence choices in the design of the product. I think that the finance department of Ajax plc of the most crucial parts of their business; for the effective running of business there needs to be some more financial allotment of financial department. Without allotting
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the financial finance department the company will be blissfully unaware of their financial situation, which could lead to bad decision making and costly retributions. Marketing department: The marketing department must act as a guide and lead the company's other departments in developing, producing, fulfilling, and servicing products or services for their customers. Communication is vital. The marketing department typically has a better understanding of the market and customer needs, but should not act independently of product development or customer service. Marketing should be involved, and there should be a meeting of the minds, whenever discussions are held regarding new product development or any customer-related function of the company. Reinforce the idea among Ajax plcs employees that marketing is a team effort. Individuals may have their own goals and priorities, but if they don't also consider the goals and greater need of the company, they may hinder efforts and make the decision maker carefully planned marketing efforts fail. [Task 3] I. Critically evaluate and provide necessary suggestions, the basis on

which Payroll budget and Human Resources are allocated in 2011s cost allocation: Ajax Plcs spending for the year 2011 was budgeted to be 1 Million. Mr. Alex Simpson the management account in charge of the budge suggested that since the company has four key departments, Administration, Marketing, Production and Finance therefore each department is allocated 25% each of their cost allocation. From the survey in Ajax plc, we learnt that their incentives payroll plan is not much encouraging. So we advise that, they should provide employee allowances and follow the piece work plan. By using this plan they can increase their production. It is using motivation of labours. Because piece work plan give value of the labours work, and increase their wage. This plan also increases production, which can generate companys revenue. That means increase prof its. So this plan will be effective and profitable for the company. The budgets are expected to be equal expenses. A deficit budget means expenses will exceed revenue. A surplus budget means profits are anticipated, while a
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balanced budget means that revenues are expected to equal expenses. Allocating budget for the human resource in the Ajax plc will have an impact upon corporate financial reporting. In the future, corporations would have to report on their investments in human assets. The purpose of this financial allocation by Miss Anna Konica, human resource manager will be to show managements attention to building human assets. Ajax plc may choose to include this information in a statement of intangibles, and some will include it in preforms their market expansion globally. II. Suggest how Activity Based Costing (ABC) and Activity Based Budgeting (ABB) can support Ajax Plc in re-engineering its products costing in order to achieve global competition.

Activity-based costing: It is a type of costing that identifies activities within the business and estimates the resources required to fulfil each activity. An activity cost driver is a factor that affects the cost associated activity. Activity based costing allows the managers to determine the costs to perform an activity as well as the cost associates with not performing the activity. For example, when a production line has to wait for a certain part to arrive from the external distributor or other manufacturing line, the manager can quickly determine the true cost of waiting for the part. Activity cost drives attempt to provide a more comprehensive view of the actual costs of an activity, such as manufacturing process. Monitoring, controlling and distributing products and services require many activities to be performed for the Ajax plc. Performing these activities requires resources to be purchased and used. Purchasing and using resources causes costs to be incurred. Then, costs are assigned, or traced from each of these activity cost pools to the Ajax plcs products in proportion to the demands that each product places on each activity. Activity based budgeting: Activity based budgeting is a method of budgeting in which the activities that incur costs in every functional area of an organization are recorded and their relationships are defined and analysed. Activities are then tied to strategic goals, after which the costs of the activities needed are used to create the budget. By looking at the cost
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structure of an organization via the process that are actually being performed, managers can more efficiently analyses the profit potential of a company products and services. Cost effectiveness can be found by comparing activities performed in the different areas of the organization and consolidating or rerouting certain functions. At its essence, activity-based budgeting begins by looking at results and the activities that created them, as opposes to cost-based budgeting, which often begins the raw input and the material and works outward. Activity based budgeting emphasizes on Ajax plc budgeting activities rather than budgeting cost elements and it provides a link between budgeting and corporate strategy. Activity based budgeting justifies budget allocation on the basis of activities required to make and sell the products and it also emphasizes on control of cost drivers of the Ajax plc. [ task4] (i) Use Activity Base Costing (ABC) technique to reallocate the payroll costs on table1 above. Your allocation should be based on number of employees for each department.

Cost allocation is a process of attributing cost to particular in Activity based costing technique. For example the wage of the driver of the purchasing department can be allocated to the purchasing department cost centre. It is not necessary to share the wage cost over several different cost centres. Cost and services are not identical to each other. Cost allocation is the assigning of a common cost to several cost objects. For example, a company might allocate or assign the cost of an expensive computer system to the three main areas of the company that use the system. A company with only one electric meter might allocate the electricity bill to several departments in the company.
Percentage of cost allocation 20 Payroll cost 200,000

Departments Administration

Number of Employees 200

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Marketing Production Finance TOTAL

30 30 20 100

350 350 200 1,100

300,000 300,000 200,000 1,000,000

Allocation implies that the assigning of the cost in Ajax plc is required to more stresses to the marketing and production department rather than administration and finance department. Here we have described the allocation as the spreading of cost, because of the nature of the allocation. Efforts have been made over the years to improve the bases for allocation in Ajax plc. In manufacturing, the overhead allocations have moved from employee wise overhead rates and to departmental rates, from direct labour hours to machine hours to activity based costing. III. Explain how Value Chain Analysis and Budgeting approaches can be used to allocate, monitor and control resources effectively and efficiently.

Value Chain Analysis: The value chain, also known as value chain analysis, is a concept from business management that was first described and popularized by the Michel Porter. His method to identify all the elements in the linkage of activities a firm relies on to secure the necessary materials and services, starting from their point of origin, to manufacture, and to distribute their products and services to an end user. A budget is a comprehensive, formal plan, expressed in quantitative terms, describing the expected operations of an organization over some future time period
(Les Heitger,2001)

The approach to budgeting is the key point is that the budget is a management tool to assess whether the business is on track, or adjustments are required. Budgets should take account of market conditions such as margin pressure, macroeconomic factors such as changing tax legislation, as well as internal factors such as resource allocation.

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Controlling resources: This is a way of monitoring the use of an organizations resources in and efficient and effective way in order to examine their method of controlling resources. The methods include: budgeting, Performance measure, benchmarking investment appraisal, network analysis liner programming contribution for limiting factors critical path analysis opportunity cost production planning etc.

Budgetary control: The control or management of a government or enterprise in accordance with an approved budget is to keep expenditures within the limitation of available appropriations and available revenues. Performance measurement: A quantifiable measure to assess how wills the organization carries our specific functions or processes. Ways to objectively measure the degree of success program has had in achieving its stated objectives, goals, and planned program activities, measuring expect performance with actual. Benchmarking: Benchmarking is an important because it brings objectivity into the process of identifying competences. It also brings vain imaginations down to the ground. To create a benchmark, one must identify areas of potential improvement; identify world-leading company in each area; contact the companies ( visit, talk to managers, discuss with worker); and define goals based on the leaning done at those companies. Limitation of traditional budgeting: The traditional budgeting process is it is unable to adapt to the fast changing environment. In a dynamic market, budgeting must integrate with and support business strategy. The conventional process is out-dated in that it may assume a
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stable business environment and does not take into account the changing conditions quickly enough due to the centralised process, which is mainly fixed. Managers often have to wait until the results of their decisions are reported in the financial statements. By then, of course, it's too late to correct a financially undesirable decision. Approaches of better budgeting: Better Budgeting, also known as advanced budgeting, intends to increase the efficiency of the traditional budgeting approach, mainly by streamlining budgetary processes through market orientation and optimization. Therewith better budgeting aims for a more flexible and less resource consuming design of budgeting. The designing elements of a better budgeting approach are:

coordination through budgets: adapt the coordination of traditional budgeting for increasing complexity and dynamics

decentralization: increase flexibility of budgetary process by decentralized authority

focus and criticality: reduce the level of detailed budgets and therewith increase speed of forecasting

analytical planning from baseline: no longer based on previous year's effective figures

strategy orientation: establish strong link to strategic planning rolling forecasts: follow the changing market conditions by not restricting the planning to the financial reporting requirements

[Task 5] Appraise the importance of internal communication within the Ajax Plc and evaluate how these can be used to improve the current situation: Miscommunication is a major source of intercultural discomfort and conflict. Communicationverbal, written, and nonverbalgoes beyond what is said, written, or expressed. The diversity of cultures in the workplace of today can lead to

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misunderstandings,

miscommunications

and

missed

opportunities

for

the

improvement of both workers and management. Good communication skills are the key to promoting efficient working relationships in the workplace. One of the most important skills that an employee or manager can have is a positive attitude. With a positive attitude, problems do not seem to be as overwhelming and stressful. We must also be less judgmental and more accepting of others. Ajax plc should not jump to conclusions about anything diversity they hear but should wait to be given all the facts. Improving their employee skill of listening to what is being said and clarifying what is being implied will lead to better communications. Resolving conflict in the early stages keeps the conflict from

becoming a major issue. Treating everyone with respect will lead to fewer and less costly conflicts. Managers of the Ajax plc should be equipped with and practice effective communication skills, which can transcend any or all kinds of cultural barriers. To alleviate the tension between different groups and their differences by understanding their differences we must practice good communication skills can improve the current situation of Ajax plc. [Task 6] Assess the impact on communication strategies of the relative power and importance of individual stakeholder groups of Ajax Plc A stakeholder, then, is an individual or group that has one or more of the various kinds of stakes in a business. Just as stakeholders may be affected by the actions, decisions, policies, or practices of the business firm, these stakeholders also may affect the organizations actions, decisions, policies, or practices. With stakeholders, therefore, there is a potential two-ways interaction or exchange of influence. Stakeholders are individual and groups that have an involvement or an investment in the companys decisions and in its social and economic exchanges. Different Stakeholders groups of Ajax plc and communication policy:

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Customers: This is their key stakeholder group of Ajax plc, because without their customers they would go out of business. They interact with their customers every day in their stores, over the telephone and through the website. They have several methods of obtaining customer feedback. They also communicate with their customers through their in-store catalogue as well as by talking to them every day. Owner: The managing director has the interests of at heart today just as much as he did when he started the company. Managers should be equipped with and practice effective communication skills, which can transcend any or all kinds of cultural barriers. They can communicate and concentrate on keeping their prices competitive for the customers in the national and international market and paying good salaries to the colleagues rather than allocating part of their profits for external shareholders. Suppliers: Ajax plcs purchasing department would consider this its key group of stakeholders. Without suppliers they would not be able to obtain the stock they sell to their customers. For purchasing and delivering the materials communication is responsible for forming and keeping good relationships with their suppliers and they communicate with their suppliers every day. Financier: Ajax plcs main financier is their bank. They have a bank overdraft and also have bank loans, which are listed in their business accounts. Over the years they have developed a close relationship with their bank manager by keeping a good communication. This is important in here because it is always helpful if a bank manager understands how a business operates and the type of problems or difficulties which might occur and why. The bank is also far more likely to support a business during any difficult times if it is confident that the business is financially sound and well run. Managers: Managers must know the difference between good and bad conflict as well. Good conflict means that team members trust each other enough to disagree and know that all ideas are valued and aired. Conflict can mean that ideas are aggressively debated but when a team decision is made it will be followed with passion. Conflict while essential is only allowed while the team is debating and only

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within the confines of the meeting room. Once the issue is aired and decided the conflict ends. The impact on communication strategies of the relative power and importance of individual stakeholder groups: Ajax plc uses various communication strategy tactics to win the trust and acceptance of their different stakeholders group as employees, board members, and customers. According to me as a public trainee relationship manager, "Ajax plc is able to offer lower prices and better values by eliminating virtually all the frills and costs historically associated with conventional wholesalers and retailers, including salespeople, fancy buildings, delivery, billing, and accounts receivable. We can run a tight operation with extremely low overhead which enables us to pass on dramatic savings to our members." Ajax plc uses "Consultation Tactic (involves getting others to participate in planning, making decisions, and changes) and "Employee Empowered" (employees have increased powers to function freely, with higher authority and decision-making capabilities). Ajax plcs intent is not to tell their managers how to run their places because our managers are entrepreneurs, not somebody who just comes in and unlocks the doors. Conclusion: The goal of both aspects of budget and communication are to analyse the Ajax plcs ability to survive or not. In view of the fact that this statement must be confirmed by a calculation of the large number of ratio indicators and the interpretation of these indicators can give rise to contradictory opinions, we have tried to find out how can we tried to improve the miscommunication and other problems. The stakeholders effort has led to the construction of a series of the summarized indices of evaluation which are used for the overall characterization of the total financial-economic situation and performance of the company by one number. However, since their reputable ability is lower, they are suitable only for a quick global comparison of the group of companies and can serve as an orientation basis for the next evaluation. We maintain that the growing number of indices enables the situation in a firm to be depicted in more detail. On the other hand, we would like to notice that the extremely high number of indices in the system.
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May aggravate the orientation and thereby distort the analysts view of the firm. From the formal aspect, for the construction of the system of ratio indices is no less essential the construction of a simple model demonstrating mutual links among particular, higher-order indices. The model then creates a sum of indicators which can be gradually decomposed into fractional indicators up to more details.

Bibliography and references: [1] Les Heitger,2001 Forecasts and Budgets, from The Portable MBA in Finance and Accounting, John Leslie Livingstone. [2] Weston. F and Copeland. Thomas. (1979). Managerial Finance. CBS College, New York. [3] Hubbard, Douglas (2009). The Failure of Risk Management: Why It's Broken and How to Fix It. John Wiley & Sons. p. 46. [4] ISO/IEC Guide 73:2009 (2009). Risk management Vocabulary. International Organization for Standardization. http://www.iso.org/iso/iso_catalogue/catalogue_ics/catalogue_detail_ics.htm?csnum ber=44651. [5] ISO/DIS 31000 (2009). Risk management Principles and guidelines on implementation. [6] Drury, Colin, Tayles, Mike. The misapplication of capital investment appraisal techniques. London: 1997. Vol. 35, Iss. 2; pg. 86

[7] Shapiro, A. (1996), Multinational Financial Management, 5th edn, Englewood Cliffs: Prentice-Hall. [8] Weingartner, H.M. (1977), Capital rationing: n authors in search of plot, Journal of Finance 32: 140332.

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[9] Comprehensive Annual Financial Report (2007) The City of St. Louis. [10] De Janasz, Suzanne C., Dowd, Karen O., & Schneider, Beth Z. (2002). Interpersonal Skills in Organizations. New York: The McGraw-Hill Companies [11] Kinicki, Angelo, & Kreitner, Robert. (2003). Organizational Behavior (6h ed.). New York: The McGraw-Hill Companies

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