unit 2 m1 resub

UNIT 2 M1

Dear the Manager of Carmeli's bakery, and whom it may concern,

I am writing to inform you about how each of the physical, human and technological resources can be managed effectively to improve the performance of Carmeli's bakery.

Physical resources are resources that you can move, smell, feel, taste, touch etc. They are made by man and help us to do everyday activities easily. Examples of physical resources are chairs, desks, rooms, tables. The physical resources team can improve the performance of Carmeli's bakery by developing the bakery by redecorating it to feel more like a bakery and to ensure it is safe. This will attract more customers which will result in increasing sales and more people will want to become staff at the bakery because of the look of it and its hygiene level. Secondly, if Carmeli's have the latest and state of the ark machines and equipment such as; machines, tills, stools, coach, booths etc. This will make Carmeli's stand out from their competitors and get the majority of the customers go to them because of their up-to-date equipment. This will also increase sales and income which is exactly what Carmeli’s business wants to happen. This will allow Carmeli's bakery to be known worldwide and become even more talked about and popular than it already is because it will be stand out from their competitors. Furthermore, if the business has the latest equipment such as security then this allows Carmeli's to not have anything stolen from them which mean’s Carmeli's can keep all their profit and won’t need to worry about theft. It would also help the store if they installed the latest cameras where you can see clearly on them to help recognise faces or get a high end security team in. Another way Carmeli's could increase their sales is by thinking about having sample food tasting going on around the store to entice customers to come back and get a free taste and then buy it.

Human resources is the personnel of a business and are regarded as a significant part of the business in terms of skills and abilities. Examples of human resources are programmers, painters, waiters, accountants. They are responsible for the recruitment of suitable staff for the business which is extremely important. The human resources team can improve the performance of Carmeli's bakery by firstly recruiting the right and appropriate staff because they are in charge of the hiring and firing part of the staff which means they are essential for making sure they have hired the right staff otherwise Carmeli's won’t be successful and it will be blamed on the human resources team. They need to hire staff that has the correct skills such as; working well in a team, being friendly and approachable, ability to work independently etc. As well as that, they need to have had previous work experience at a similar or same business (bakery) for them to know what they are doing and have the right qualifications to suit the job working in a bakery. By recruiting the right staff, Carmeli’s can guarantee themselves that they will make the best decisions they can make as well as making the experience of the store the best it can be. Carmeli's should implement staff rewards/motivation scenes to encourage staff to work harder and complete tasks in order to get praise at the end. Also, the business could provide better training for their staff in the products they sell so that the staffs are able to provide a more personal customer service approach.

Technological resources are systems and tools which are required to effectively create or produce a product or service. Examples of technological resources are machines, software licenses, patents, time, people, copyright, energy. The technological resource team can improve Carmeli's by making sure that Carmeli's has their own brand, logos etc. This is protected by having copyright and most if not all businesses have copyright because it is so important to protect your brand so no-one else can copy it and take your profit away from your business. Additionally, Carmeli's should make sure they have insurance on the store floor as well as the stock room, factory and wherever else they store stock in case of an emergency and they lose it all and need to replace it. This is to make sure Carmeli's bakery aren’t in trouble if anything happens to anything they own and it means they are covered and can start the businesses stability up again. The management of their resources can be improved is Carmeli's keep their IP up to date and fully updated because this will make them stand out and have an advantage over their competitors. Carmeli's bakery's IP is how the business is recognised and how most people know the business which is why if you keep it up to date then this will keep Carmeli's in a good customer light and the customers will trust Carmeli's because they are familiar and feel they connect with the business.

unit p3 resub

UNIT 2- P3

Describe the main physical and technological resources required in the operation of a selected organisation and my selected organisation is a small local bakery called Carmeli’s Bakery.

When opening a small local bakery, the cost of everything can be costly and if not a lot of profit is made then this will be hard for small businesses. There are a lot of different factors to consider including technological and physical resources. Technological resources are intangible resources which are split into 4 areas which consist of software licenses, accumulated experiences and skills, intellectual property and property via patents and copyright. Physical resources are tangible resources that a business needs to maintain in order to carry out its activities. Examples of physical resources are premises, materials, equipment etc. Both technological and physical resources have to be managed extremely careful because they are essential in the business.

Technological Resources

Resources	Use	Cost of this
Intellectual Properties	The first technological resource is intellectual properties and this is having the right to own ideas including what happens to them and how often they are used or if they have permission to use them. An example of this is a patent, which is a product/service which is protected by anyone or any business who tries to company any business ideas. Another example of this is copyright which is a legal term that describes the rights a creator has over e.g. work, music. Having intellectual properties is important for a small business because it provides protection to the business and increases the bakery’s profits.	A patent in the UK=£3,000 Copyright for 5 years=£39.50 Copyright for 10 years=£65.00 As Carmeli's is a small local bakery they may not want to invest in buying 10 years’ worth as it’s only a small business which may not be running for 10 years so they don't want to take that risk.
Accumulated experience and skill	Having experience from those who have done a job for a long period of time. Businesses want to keep people who have experience and skills because these people help the business grow and they may get paid more to keep them however they need to make sure they build up everyone’s skills so they are not left short changed. This means employees build up skills over a period of time. This is used within a local bakery because it ensures staffs know the right stuff and have the knowledge to run the business. No one wants to employ staffs who don’t have any skills or any idea of the products they are selling. Especially being a shop that specialises in food, the staffs need to make sure they know all the hygiene rules and the difference between the foods. Employing staff can be difficult as you will have to pay each staff money before you make a profit. For a small bakery they will need around 3 staff including the owner.	Staff wage= £6.50 for 6 hours work
Software licenses	This is a legal agreement that specifies the terms of use for an application and defines the rights of the software produce and of the end-user. This is important in a bakery because without software licenses they wouldn’t be able to have any machines or systems because they wouldn’t get a license to have them. It is also important because none of the businesses systems would be compatible without software licenses.	Software licence for Carmeli;s= £100
Protection via patents and copyright	This is having protection using these protection factors. Some people may think it’s pointless though because it is difficult to prove that someone has stolen your idea.	Patent for Carmeli's for 1 year= £260 Copyright= £265

Physical Resources

Resources	Use	Cost of this
Location/space	As it is a small business it only needs a small space and has to be affordable as it is a local business therefore it is probably run by a family who may not have a lot of money to spend on the business until they make profit. It could also be someone’s home, office or etc. If they cannot afford to buy a building as that will be a cheaper option and may be able to negotiate the price or be able to pay it off in equal payments monthly etc. buildings need to have an area where customers can shop and a place where staff can cook the food. This applies for the bakery because there needs to be an area where you can cook the food as bakery food needs to be fresh otherwise no one would buy food that has been sitting on the shelf for 2 days. The location of the bakery is important when thinking about distribution and accessibility to customers to encourage buying and increase profits. The better and more central and busy the location is, the more expensive the store is going to be because people want a store which is in a busier place than not because it will get more business as a lot of people will walk past it and see it and maybe go in if they like the look of the outside.	A small store in a quite busy area would cost annum=£35,000
Materials and waste	The business needs to supply all the ingredients to make the food as well as providing a place to dispose all the waste. Some businesses can use recycles materials which are renewable where as other businesses use new materials or non-renewable materials such as oil, fuel. To make sure they dispose their waste effectively, they should place recycle bins in the bakery.	The 5 basic ingredients that a bakery needs are: sugar, milk, eggs, flour and butter. A big bag of sugar=£3.20. A large carton of milk=£1.50. A large carton of eggs= £2.50. A big bag of flour= £1.15. A large tub of butter= £3.30.
Equipment	Carmeli’s will need furniture. tables, chairs, stools etc. They will need utensils such as cutlery, plates, glasses, mugs etc. Furthermore, they will need cooking equipment to make all the food for the bakery such as ovens, toasters, fridges, freezer, counter etc. Along with that they need basic hygiene and safety equipment such as a toilet, sinks, soaps, antibacterial hand sanitisers etc. For the business to run they need equipment such as a telephone, computer, till etc. They will use a telephone to communicate with people as some people can’t always get to the store destination especially if it is a small local business. It is also important because customers can phone up the bakery and get enquires, place orders or ask any questions they have regarding the business via telephone which makes sales increase as if they didn't have a telephone they will lose sales because not everyone can access the local store. Computers help to transfer data to a spreadsheet to make it easy to access and clear to read and understand. Being a small business, a computer may not be necessary however, it is extremely useful and work investing in one as it will help a lot. It will help with things such as creating an online website, advertising online, creating marketing campaigns, creating questionnaires, surveys etc. The bakery will need to make sure they have an up-to-date till system or a computer system which is easy and clear for staff to use. The use of IT equipment can save a lot of time and also money as they will have to pay for a till upfront whereas with IT they won’t need to replace it after a while because you can just update the software. Also, this is good because it saves time if customers are in store and the till broke whereas the till won't break with the IT system. The business can also use the IT system not just for the till, but also to measure attendance of staff on a daily basis, how much stock they sold annually, achievements of staff etc.	2 computers= £800 2 tills= £132 A fridge= £129 A freezer= £84 40 plates= £160 40 mugs= £80 40 glasses= £100 40 sets of knifes and forks= £88 Soap/sanitizer= £9 Toilet= £110 Sink= £170 Toilet paper= £25 Napkins/paper towels= £30 Plenty more equipment costs...
Insurance	This protects businesses from losing money or possessions due to any type of events which could occur. There are various different types of insurances within a business which include; property insurance, legal insurance, employee insurance etc. The bakery would use all three of these types of insurances as they will have a property where the bakery is located, along with staff and employees. Businesses use insurance because it reduces the financial impact of risk to occur within the business. By having insurance it gives everyone in the business a sense of security and reliability because they are all protected if anything happens therefore businesses do not need to worry about the risk of having to pay a large amount to repair the business. Another benefit of having insurance is because in case of a horrific world event such as a flood, you are insured so you do not need to worry.	Insurance for 1 year= £2,500
Security alarms and locks	Some businesses invest in security cameras which focus on different views of the shop. Depending on how small the shop is this may not be necessary however, it is a very important thing to have to prevent stealing etc. By having cameras in the shop it gives the employees a sense of security and they can feel safe as they can feel relaxed because none will do anything because it is clear there are cameras facing different angles of the store. Moreover, the bakery could use the security cameras to monitor the staff and see how they are doing and what they are doing throughout the day. You will be able to see how professional the employees are and how they handle customer situations. This provides them with valuable feedback to talk about with their employees and if necessary, fire them.	1 security alarm= £550 2 security cameras= £110

unit 2 p5 p7 m3 d2 RESUB

UNIT 2 P5

Businesses who work on a daily basis, must ensure they check up on their financial statements so that they can judge how well their doing financially. Financial statements allow Johnsons Hardware store to measure their financial resources and stability. PLC (public limited companies) must publish their accounts so that investors can see how the business is doing. The 2 main final statements are; profit and loss, balance sheet. A profit and loss sheet shows you how much Johnsons Hardware stores has made at the end of a financial year. This is useful for e.g. if you wanted to lend money from the bank, the bank will look at this and determine whether or not it’s worth the investment and if yours good at making profit and not spending too much or going overdraft. Smaller businesses e.g. sole traders, LTDS find it useful when they want to see how much profit they have made at the end of the year and this helps them plan finances and budget settings. A profit and loss has a lot of features that are included within it and they have purposes. A sale is the amount of money which is generated by selling a product/service. This allows the manager of Johnsons Hardware Store to understand and see where the money is coming from and how well the business is performing. The cost of sales is the cost of marketing the goods or buying them. Its purpose on the profit and loss sheet is so that you can see where the money is coming in or out of the business and to understand how the business is performing. Next is usually gross profit which is the sales revenue minused by the cost of goods sold. The purpose of gross profit is so you can see how much profit has been made after all the costs are deducted and it indicates how a product is performing. Net profit is the gross profit minused by the expenses. Examples of this is rent, advertising etc. this is to see the final profit when all costs have been deducted and to also see how successful a profit is. Expenses is another feature on the sheet which is the overheads and expenses which are basically necessity costs, examples of this is wages, staff, advertising, salaries etc. This is shown on the sheet to see how Johnsons Hardware store is operating and if it is efficient or working in the best possible way. 

On a balance sheet, it has a separate set of features which are different to the features on a profit and loss sheet. A balance sheet gives Johnsons Hardware store a snippet of the businesses assets, abilities and equity. By producing a balance sheet it is important because it shows Johnsons stores finance and where they are getting their money from. It also shows investors how much Johnsons Hardware store is worth based on their assets. The first feature is fixed asset, which are assets that are owned or expected t be kept by the business for 1 year or more and this is on the sheet to see where money is being invested. They are to see what the business has invested Johnson’s money into. Secondly, current assets can be converted into cash more quickly and are only kept for a short period of time, usually under a year. An example of a current asset is stock which is used up under a year an then you rebut more stock. Its purpose is to show where finances are available. Current liabilities are amounts due to be paid to creditors within twelve months and it shows where expenses are. Liabilities mean responsibilities that a business has. Johnsons must make sure their extremely responsible for their current liabilities or they could be forced into going bankrupt. Moreover, long term liabilities are liabilities with a future benefit over a year and they are shown on the balance sheet representing the sources of funds. An example of a long term liability that Johnsons Hardware Store own, is their mortgage. Share capital is the amount of money invested into a company by shareholders and its purpose is to show how much capital was raised or invested in Johnsons Hardware store. Lastly, reserves are the profits that have been kept for a particular purpose which is shown on a balance sheet to see the purchase of fixed assets, legal settlements, and pay bonuses. It is back-up money incase something in the business goes wrong it is there to use in an emergency.

P7 and M3

A ratio analysis is an explanation of financial information to satisfy the needs of various interested parties. Stakeholders in the business, internally and externally seek information to find out the fundamental questions. There are different categories of a ratio analysis to help us understand more about financial accounts. One of them is liquidity/solvency which is the ability of Johnsons Hardware store to pay its way. Another one is profitability which is how effective the business is at generating profits given sales and or its capital assets. Also, financial/performance is the rate at which a Johnsons sells its stock and the efficiency with which it uses it assets. 

Liquidity/solvency ratios show the cash levels of Johnsons Hardware store and the ability to turn other assets into cash to pay off liabilities and other current obligations. Liquidity is not only a measure of how much cash Johnsons Hardware store has but it is also measured of how easy it will be for a business to raise enough cash or convert assets into cash. The ratios that are included are current ratios and acid test ratios. Current rates are worked out by dividing the current assets from the current liabilities and this will work out the liquidity and efficient ratio that measures Johnsons ability to pay off its short term liabilities with its current assets. If this rate is too high then this means a business has too much stock and if the ratio is too low this means the business is not able to pay it back. Acid test ratios are worked out by minusing the stock from current assets then dividing that by the current liabilities. By doing this you will get the liquidity rate that measures the ability of Johnsons Hardware store to pay its current liabilities when they become due with only quick assets. Quick assets are current assets that can be converted into cash within 90 days or in a short period of time.

Profitability ratios compare income statement accounts and categories to show Johnsons Hardware stores ability to generate profits form its operating actions. It focuses mainly on a businesses return on investment in inventory and other assets. These ratios basically show how well Johnsons can achieve profits from their operations. Profitability ratios include; gross profit margin, net profit margin and return on capital employed and these are all percentages. Gross profit margin is worked out from dividing the gross profit by the sales revenue then timesing this number by 100 to get a percentage. This percentage will help Johnsons Hardware store to understand how much profit they are making from buying and selling goods. The higher the percentage the better because the business can assess the impact of its sales and how much it costs to generate. Net profit margin is worked out by dividing the net profit from sales revenue then timesing this by 100 which provides a much more accurate reading of how much profit Johnsons has made as its takes away all of the costs and not just those we had in the buying and selling of out goods. Lastly return on capital employed is worked out by dividing the operating profit (which can be found in the profit and loss sheet) from the capital employed (which is found on the balance sheet)then timesing this number by 100 which gives you a percentage that looks at how much money you have invested in the business. Once again the higher percentage, the better!! Operating profit only covers the gross profit minus direct expenses for the business while net profit includes all gains and loses by the business including tax payments.

Financial ratios look at how Johnsons Hardware store is performing financially. It is usually relationships determined from businesses financial information and used for comparison purposes. Financial ratios include gross profit margin, net profit margin and return on capital employed. To work out the asset turnover you divide the sales by the net assets then times that number by 100 to get a ratio. This rain measures the businesses ability to generate sales from its assets by comparing net sales with average total assets. The ratio shows how efficiently a business can use its assets to generate sales. To work out the stock turnover you would divide the cost of sales by the stock then times this by 100 to get a ratio also. The stock turnover tells you the rate at which Johnson’s stock has turned over. Lastly, debtors collection period is worked out by dividing the debtors by the credit sale then timesing this by 100 and this tells us how long it takes the business to recover its debts. This can be skewed by the degree of credit facility a firm offers, therefore the shorter the number the better it is.

In my opinion I personally feel that you, the branch manager of the bank should make the loan to Johnsons Hardware store as it is a reliable business and it checks its profit and loss account as well as their balance sheet to see the stability of their business and the measures the ability of the business and Johnsons ensure that they sort out what they need to do if the business is decreasing in sales or have any other problems.

We use ratios within a business so that they can see the financial result in the business. Johnsons Hardware Store use them so that they can evaluate the financial stability of their business and then estimate their performance and see what they can do to change and improve it. There are 3 different categories of accounting ratios which are; solvency ratios, efficiency ratios and profitability ratios.

Solvency Ratio’s

	EQUATION	WOKRING	RATIO	EXPLANATION
Current ratio	Current assets Current liabilities	32836 32451	1.01:1	This measures Johnsons Hardware store’s ability to pay off short term liabilities using current assets.
Acid test ratio	Current assets-stocks Current liabilities	32836-1354 32451	0.97:1	This measures Johnsons ability to pay off its current liabilities with only quick assets

Explanation of current ratio- Because the current ratio is 1.01.1, this means that the business it not able to pay the money back because the ratio is too low. They need to increase this ratio yet, if the ratio is too high then this will mean the business has too much stock.

Explanation of acid test ratio- This ratio is 0.97.1 which means that the business are not good at paying back their current liabilities when they become due with only quick assets as the ratio is extremely low.

Efficiency Ratio’s

	EQUATION	WORKING	RATIO
Gross profit margin	Gross profit Sales revenue x 100	256250 290000 x 100	88.36%
Net profit margin	Net profit (before tax) Sales x 100	207874 290000 x 100	71.68%
Return on capital employed	Operation profit Capital employed x 100	207874 112735 x 100	184.39%

Explanation of gross profit margin- This means the business is performing well and are earning enough money which they are making a profit on. They are not 100% which is what they should be aiming for however, at 88.36% that is a high percentage meaning the business can assess the impact of its sales and how much it costs to generate these sales.

Explanation of net profit margin- This means the business is performing in the right areas; however they should find ways to increase their profit because the percentage 71.68% is not as high as it should be.

Explanation for return on capital employed- This means that the business has invested a lot of money in the business because the percentage is 184.39% because the higher the percentage the better.

Efficiency Ratio’s

	EQUATION	WORKING	RATIO
Asset turnover	Revenue Net assets	290,000 145186 x 100	199.74%
Stock turnover	Cost of sales Average stock held	33750 2155 x 100	1566.1%
Debtors collection period	Trade debtors Revenue x 365	2123 256250 x 365	3.02 days

Explanation of asset turnover- This means that for every £1 of assets, the business generates £2 in sales. The percentage is 199.74% which implies the business is very good at using assets to generate sales and they have made a lot of sales.

Explanation of stock turnover- Johnsons Hardware store’s inventory turns over 23.3 times a year. This means that the business inventory turns over 15.661 times a year. The percentage is extremely high being 1566.1% which is maybe because the goods that Johnson’s sell are expensive which will make the percentage high.

Explanation of debtor’s collection period- This denotes to us that it Johnsons Hardware store 3.02 days, so 3 days to collect debts. This means that their credit terms are too strict and the customers may want suppliers who are less harsh or have different options of payments.

D2

In this assignment I will be evaluating the adequacy of accounting ratios as a means of monitoring the state of Johnson's Hardware store, using my ratios in P7 and M3. I will clearly explain each ratios strengths and weaknesses when it comes to monitoring Johnson's financial status. Financial ratios have three main purposes, one is so that you can predict the businesses future, another is so they can compare their financial status with businesses and lastly, Johnsons can compare their financial status with competitors who are in the same industry as them. They are also good because it allows lenders to see how the business is doing. For example, if a business want to borrow money then the lenders would look into the businesses ratios and evaluate their financial stability and determine whether or not they are going to lend the money. It allows lenders to decide whether or not the business is a safe investment and whether or not the business would be able to repay their debts with interests.

Financial ratios can be useful and helpful to Johnson's Hardware store because they clearly show Johnsons financial status which is the important information the staff need to know in order to change and improve the business frequently. An example is if the staff look at the financial ratios and notice that the sales are decreasing and the price of stock is increasing. By looking at the ratios we will be able to tell that the business need to potentially replace their wholesaler for a cheaper one or they could reduce the amount of stock they by. There are plenty of other options a business could do in order to improve the business by looking at the ratios.

They can help Johnsons to predict the future for the entire business. For example the cost trends can be found out by looking at the financial ratios. This is good to analyse as it will show you previous years trends and the business will be able to see what the business makes the most profit on etc. By doing this, Johnson's can plan future years business activities however, they may change as it is is just a predicting and assumptions.

Another way in which financial ratios are useful is when you want to compare Johnson's Hardware store to other competitors and see their financial status. By comparing businesses, it will give a good representation of what Johnson's is doing well and what the competitors are doing well in and what both businesses are lacking in. Therefore, you can come to a conclusion and work out a plan in order to improve the businesses financial statement. This is helpful for the management team in the business because it easily allows them to compare how efficient they are working in comparison to other businesses and their competitors.

On the other hand, by using financial rations to judge Johnsons financial status can be inaccurate and wrong in some cases because there are a vairety of different factors that need to be considered such as; environmental, external, economic, internal etc. By comparing a business to Johnsons, could be misleading because for e.g. A business sells only Halloween equipment and therefore they are only going to make the majority of their profit around Halloween time whereas a store e.g. Bakery which sells cakes and different foods all year round will have a consistent income which is why comparing businesses financial statements using financial ratios can be extremely incorrect and false.

Financial ratios can be used to help lenders decide whether or not they should lend money to the business. This can be especially unfair and wrong in some cases. An example of this is if a businesses financial statement has a really bad month because that was the month they spent a lot of money on stock for a festive holiday yet they only do that once a year which doesn't give a wide count on the financial statement of Johnsons. This will then affect the lenders decision and will not be willing to lend Johnsons money because they think they won't be able to pay back their debts with interest therefore they won't be able to lend money which is unfair for the business.