Reference no: EM133509469

Manage finances for new business ventures

Assessment

To be assessed for this competency, you must demonstrate your ability to:

• Operate the business according to the business plan, including:

• Adhering to legal requirements

• Meeting requirements of financial backers

• Defining strategies for debt collection and contingencies for debtors

• Managing cash flow

• Defining key performance indicators

• Communicating with relevant people.

• Monitor the business against financial plan and make changes as required.

The following Assessment Tasks must be completed by you to enable you to demonstrate these skills. These must be conducted:

Using the simulated business Bounce Fitness or In your own workplace if you are able to access all the documents and conduct all of the activities.

If you are using your own business, simply replace references to Bounce Fitness
with the name of your organisation.

Information Regarding the Assessment

Using the business you have or will establish or the simulated business Bounce
Fitness, complete the Tasks.

If you are using your own business, you will need to have Task 4 - Evidence Record completed and signed by one of your advisors. This will provide evidence that you completed the necessary requirements accurately on your business.

If you are using the simulated business, Bounce Fitness, you will need to print copies of any documentation to which you refer or use as evidence to support your information.
Ensure that you gain the approval of your choice from your Assessor before progressing.

Task 1 - Practical: Develop Financial Policies and Procedures

This Task requires you to develop financial policies and procedures that describe the activities that will be undertaken in your business or for the simulated business Bounce Fitness.

To complete this you must:

1a Write a policy for all financial practices in your business.
1b Write a procedure for each of the financial policies developed in (a).

Task 2 requires you to create a plan to monitor and respond to the financial management of your business on a day-to-day basis. To complete this you must:

• Discuss each of the items following

• Compile this into a report for your Assessor and include a checklist for your use.

The items you must discuss are:

2a How will you establish benchmarks for your financial performance?
2b What will you monitor and in what timeframe?
2c What are the primary financial indicators that you will use in your business?
Why?

2d How will the financial reports that you generate from the data you've collected be used?
2e How often will you prepare and report on your budgets, profit and loss accounts and balance sheets? Why did you choose this timeframe? What will you do with the results?
2f How often will you monitor your stock records? Why?

Task 3 requires you to answer the following questions to demonstrate your knowledge. Complete the answers in the space provided and if you need more space, use your own paper putting your name at the top and the Task and Task letter beside each answer.

3a A business has a gross operating income of $50,000 and its total operating expenses are $6200. These operating expenses include insurance ($1,500), utilities ($700), and taxes ($4,000). What would be the Operating Expense Ratio?

3b Bounce Fitness has an Inventory Turnover Ratio of 13.5 for the year.
Calculate its Days' Inventory On Hand Ratio.

3c Beginning Inventory

$ 213,000
Ending Inventory $ 265,000
Cost of Goods Sold (for the quarter) $5,712,000
Calculate the Days' Sales In Inventory Ratio using the information given above.

3d A company has the following assets and liabilities at the year ended December 31, 2009:

Cash $34,390

Marketable Securities 12,000

Accounts Receivable 56,200

Prepaid Insurance 9,000

Total Current Liabilities 73,780

Calculate Quick Ratio from the above information.

3e Cash

$21,720
Treasury Bills 18,500
Accounts Receivable 35,930
Total Current Liabilities 82,960
Calculate Cash Ratio from the above information.

3f Bounce Fitness nationally has $1,000,000 of sales in its most recent month, as well as sales returns of $40,000, a cost of goods sold (CGS) of $550,000, and administrative expenses of $360,000. The income tax rate is 35%. Calculate the Net Profit Percentage.

Total assets
$950,000
Intangible assets 150,000
Stockholder 's equity 440,000

3g Calculate the Proprietary Ratio from the above information.

3h Bounce Fitness is reviewing its inventory levels. The related information is
$8,150,000 of cost of goods sold in the past year, and ending inventory of
$1,630,000. What is the Total Inventory Turnover?

Task 4 - Evidence Record

This Evidence Record must be completed if the Learner has used their business as the topic of this assessment. It must be completed to support the information supplied to support the decisions of the Assessor and completed by an advisor of the Learner used to establish their business. This Third Party individual MUST be a professional and could include:

• Business advisors (Solicitor, Accountant, Financial Advisor)

• Financial planners.

This unit describes the performance outcomes, skills and knowledge required to develop a financial plan to support business viability and acknowledges that there are specific legal requirements which may apply to the management of a small business.

It applies to individuals who operate a small business and is suitable for existing micro and small businesses or setting up a new business or a department in a
larger organisation.

The Assessor will observe aspects of this from the Learner as much as possible but may also require information from the advisor to the Learner to corroborate and verify their assessment.

This form provides verification and evidence that the Learner has been accurate in their reflection relating to their organisation.