Is The Business Profitable? Essay
Is The Business Profitable?
The closing capitals for both years are very similar and propose that not only is the business very profitable but it is also maintaining its financial position within the market. In 2011 the closing capital was £2,500,000 and for 2012 the closing capital was £2,425,000. This is interesting because as a business progresses you would think that the closing capital would increase not decrease although this is not too large a decrease when compared with the general current financial instability and the number of businesses which are struggling to stay afloat. The gross profit would also suggest that both years were profitable but with a decrease from £1,000,000 for 2011 to £740,000 for year 2012. The Net Profit for 2011 is £370,000 which seems reasonably high although this cannot be confirmed since there is no information from previous years to compare this to. So this could suggest good profits but cannot be sure as we do not know what the organisations ideal profit is, for 2012 it is £7,000 showing a huge decrease and fewer profits compared with the previous year. Is The Business Liquid?
In 2011 the business is very liquid as their stock levels are low
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Their money that was in the bank in 2011 has completely gone from the £60, 00 in 2011 to nothing in 2012. XYZ Ltd.’s finances have reduced even further into an overdraft of £30,000 in 2012. In 2012 XYZ Ltd is very illiquid as their availability to funds is almost non-existent. They still have creditors to pay which have gone down £10,000 as they have paid some of the money back. What Is Meant By The Term Working Capital?
Working capital is the amount of money the business has available for its daily operations. It is used in its day-to-day trading operations, calculated as the current assets minus the current liabilities. What Is The Figure For Working Capital?
The figure for working capital in 2011 is £120,000. In 2012 it is £45,000. This has decreased meaning the business has less money available for its daily operations. Working capital is the amount of current assets minus the current liabilities.
Is Working Capital Important To Businesses?
Working capital is important to businesses as it will let them know if they have the funds to pay their creditors, buying stock and most importantly if they can afford to expand the business. The business needs to know they have the money available when it needs it. What Has Happened To Gross And Net Profit Over The Two Years. Over the two years both the Gross and Net Profit figures have dramatically decreased. The Gross Profit has dropped from £1,000,000 in 2011 to £740,000 in 2012. The Net Profit has dropped from £370,000 in 2011 to £7,000 in 2012.
It has decreased because most of their expenses have increased slightly with a larger increase in salaries from £525,000 in 2011 to £620,000 in 2012. What Has Happened To The Value Of The Business Over The Two Years? The value of the business has decreased. The closing capital shows there is a difference of £75,000 over the two years. In 2011 the closing capital was £2,500,000 and in 2012 it is £2,425,000. Overall in 2012 the business has not altered much other than the decrease in value leaving the business with fewer profits, more debt and assets that are illiquid. Is Net Profit More Important Than Gross Profit?
I think that Net profit is more important than Gross profit because although the business could have £740,000 (2012) in Gross Profit, the business may have very high expenses therefore the net profit figures offer a more realistic figure of the finances available. The Net profit shows the actual profit once all expenses are deducted from the Gross profit. The expenses could be higher than the Gross profits which once deducted would leave the business at a loss when they thought they were making a profit from the Gross Profit. In 2012 the expenses were £733,000. Once this was taken off the Gross Profit it left a Net profit of £7,000. If the expenses were even higher than the Net profit figure this would have been a negative balance causing problems for the business. What Is The Difference Between Current And Fixed Assets?
The difference between Current and Fixed assets is that fixed assets are things the business intend to keep, they will not be selling them in order to turn them into money. Fixed assets are non-moveable in the business and lose value over time. Current assets are things the business owns and intend on selling (e.g. stock) or turning into cash for the business (or already have e.g. in the bank). Current assets are designed to be cash eventually and are much more liquid than fixed assets. What Is The Difference Between Current And Long-Term Liabilities? The difference between current and long-term liabilities is that current liabilities are supposed to be short-term such as creditors and overdrafts. The money owed is not too excessive and therefore they should be able to pay this back fairly quickly. Long-term liabilities are things such as a loan or mortgage that is a debt owed to someone. It is usually a large sum of money and has been arranged to be paid back in set amounts of money, over a long period of time.
What Is Meant By Closing Capital?
Closing capital is the amount of money the business is worth at the end of a set period. In this case it is a year for 2011 and a year for 2012. The closing capital is how much cash the business has as well as the value of everything it owns. This is worked out by totaling the cost of sales and deducting the total expenses, this produces the figures for the Net Profit. This is then added to the opening capital and then minus the drawings. This figure for the closing capital should match the figure for Net assets which is worked out by totaling the fixed assets, adding the working capital (current assets minus current liabilities) and deducting the long-term liabilities. This shows how much money is in the business and how much it is
actually worth. Who Needs This Information?
This information is needed by the owner of the business so they can have a good idea of how well the business is doing financially when compared with previous years that they would have also collected the data from. The businesses accountants will need to know so they can provide the business with full financial information and use ratios to give the business more information of how well they are doing. The government may need to know how well the business is doing to make sure they are paying the right taxes etc. All of the businesses stakeholders will be interested in this information. Another stakeholder is the customers, they will want to make sure that the business they like to shop in is doing well so they can hopefully guarantee more years of satisfied shopping with them. Other businesses will want to know how their competitors are doing to see if they are doing better or worse than them, they need to know if their customers are drifting to their competitors shop instead of their own. Suppliers will need to know if it looks like the business is able to pay the money they owe, if a supplier finds out they are not particularly good at paying their creditors or other suppliers then this supplier may lose interest in selling to them. This is because the suppliers may feel that the debt may not be paid especially if the business goes bankrupt and cannot pay for the stock that they previously bought. The people with the most interest in a business could be the shareholders. They will want to know whether the business is doing well so they know if they should sell their shares if the company is going ‘downhill’ or buy shares if the business is doing particularly well. What Is The Difference Between The Balance Sheet And The Profit And Loss Account? The difference between the balance sheet and the profit and loss account are that a profit and loss account calculates whether the business has made a profit or a loss by totaling the expenses and deducting them off the cost of sales (revenue). This calculates the Net profit. The balance sheet calculates the net worth of the business by balancing what the business owns against what the business owes.
The financial state of XYZ Ltd with the use of ratios:
170,000 / 50,000 = 3.4:1
115,000 / 70,000 = 1.64:1
They have become less liquid. In 2012 they also have less money available for each £1 owed. Previous year had loads of money. Acid Test Ratio
170,000 – 5,000 / 50,000 = 3.3:1
115,000 – 55,000 / 70,000 = 0.86:1
Very bad liquidity. Not enough money to pay what they owe. Not enough money to pay each £1 owed. Previous year had loads of money. Stock Turnover
30,000 / 500,000 x 365 = 21.9 Days
30,000 / 260,000 x 365 = 42.1 Days
Time it takes to sell stock has almost doubled since 2011. Very bad for a supermarket. Return On Capital Employed
370,000 / 2,500,000 x 100 = 14.80%
7,000 / 2,425,000 x 100 = 0.29%
Hardly any return on what they have invested. The return on capital has fallen dramatically. Gross Profit Percentage
1,000,000 / 1,500,000 x 100 = 66.67%
740,000 / 1,000,000 x 100 = 74%
The business has become better at generating profits. An increase in the Gross Profit Percentage. Net Profit Percentage
370,000 / 1,500,000 x 100 = 24.67%
7,000 / 1,000,000 x 100 = 0.70%
The Net profit has decreased by a lot. Much less profit compared with last year.
Current Ratio And Acid Test Ratio
Current Ratio Formula: Current Assets / Current Liabilities = ?:1 Results for XYX Ltd: 2011: 170,000 / 50,000 = 3.4:1
2012: 115,000 / 70,000 = 1.64:1
Acid Test Ratio Formula: Current Assets – Stock / Current Liabilities = ?:1 Results for XYX Ltd: 2011: 170,000 – 5,000 / 50,000 = 3.3:1 2012: 115,000 – 55,000 / 70,000 = 0.86:1
The current ratio shows how much money the business has for every £1 owed. For XYZ Ltd, in 2011 they had £3.30 for every £1 owed and in 2012 the business had £1.64 for every £1 owed. An ideal amount would be £2 for every £1 (2:1). In 2011 they had a lot of money spare which should have been re-invested in further business development. In 2012 the business did not have a lot of money and did not have enough to pay back debtors. For every £1 in debt that they owed, the business only had £0.86. This would suggest that in 2011 the business was reasonably liquid and in 2012 the business was not liquid at all.
The acid test ratio is the same as the current ratio except they do not count the stock in the current assets as it is regarded as illiquid due to it being hard to turn into cash. It shows that in 2011 the business had £3.30 for every £1 owed without stock. This is a healthy financial position, for the business to benefit fully they should invest the spare money. In 2012 the business only has £0.86 for every £1 owed. This is unacceptable for a business as it means they are unable to pay their debts. The business has too much money in stock and is causing them to be illiquid and currently unprofitable.
With the use of the Acid test ratio which deducts the stock which is harder to transfer into cash, the business can see that the current ratio results are useful but not as informative about their current financial stability as the acid test ratio shows with a more realistic approach of removing the illiquid assets.
Since 2011 the business has clearly made use of their money but has used too much causing their financial stability to change. They previously had a positive financial position but this seems to have resulted in them becoming overconfident during 2012 causing them to have a financial short fall.
Further analysis of whether this is regular of irregular can only be determined with previous year’s balance sheets and profit and loss accounts.
Ratio Formula: Average Stock / Cost of Sales x 365 = ? Days
Results for XYX Ltd: 2011: 30,000 / 500,000 x 365 = 21.9 Days
2012: 30,000 / 260,000 x 365 = 42.1 Days
The stock turnover ratio shows the business how long, on average, the stock is held for. In other words how long it take for them to sell their stock once it is on the shelves. This can measure liquidity as if the stock turnover is high it means they are selling their items quickly producing the cash quickly. If they sell faster they will be earning profit much more quickly. From the ratios for XYZ Ltd I have determined that for a supermarket this sales turnover is shocking. Obviously this could vary from the frozen foods to fresh and previous years information would be needed to obtain an accurate assessment of the situation. For 2011 the stock turnover is 21.9 days. This is very bad for a supermarket as they realistically would want the items to have a much higher turnover of say three to seven days, especially with the perishable stock. For 2012 the stock turnover is 42.1 days, this has almost doubled since 2011 showing productivity has decreased dramatically and ultimately causes low profitability and liquidity.
The stock turnover has changed over the years and has ultimately changed the business performance as they will now need to investigate why there is such an increase in the number of days that the stock remains on the shelf. This may be due to buying too much, losing customers to their competitors or that they need to buy different stock. The results for net profit show that the net profit percentage has gone from 24.67% in 2011 down to 0.70% in 2012. This could relate with the stock turnover as it shows that they aren’t producing as much profit and this could relate to the slow stock turnover. The longer it takes to sell stock means they will be selling less stock over the year and producing fewer profits.
Return On Capital Employed
Ratio Formula: Net Profit / Net Assets x 100 = ?%
Results for XYX Ltd: 2011: 370,000 / 2,500,000 x 100 = 14.80%
2012: 7,000 / 2,425,000 x 100 = 0.29%
The Return on Capital Employed ratio is regarded as the key ratio. This ratio considers how effective the assets of the business are in generating profits. It can be linked with the Gross Profit Percentage and Net Profit Percentage to establish how effective the business is at making profits and how effective they are in their trading operations. From the results of 2011 this could mean that they aren’t very profitable or liquid. This can’t be fully assessed as we do not know what their projected profits are or what they have previously made. The 2011 percentage is 14.80%, this seems quite low although for 2012 the percentage is 0.29% this is very low. Even without previous years to compare to this is still obvious that the numbers should not be that low. Their productivity and profitability is very low and should be investigated to see what they can do to improve their effectiveness of generating profits with the use of their assets.
The business performance has changed from 2011 to 2012 as it appears to have declined rapidly and they have become less effective at generating profits which has shown throughout their accounts. The gross profit makes it looks like they have done better at generating profits but this is misleading as the net profit shows that once the expenses have been deducted they have a very poor figure for actual profits. This suggests low liquidity and low profitability caused by low productivity.
Gross Profit Percentage And Net Profit Percentage
Gross Profit Percentage Ratio Formula: Gross Profit / Sales x 100 = ?% Results for XYX Ltd: 2011: 1,000,000 / 1,500,000 x 100 = 66.67%
2012: 740,000 / 1,000,000 x 100 = 74%
Net Profit Percentage Ratio Formula: Net Profit / Sales x 100 = ?% Results for XYX Ltd: 2011: 370,000 / 1,500,000 x 100 = 24.67%
2012: 7,000 / 1,000,000 x 100 = 0.70%
The gross profit percentage ratio shows how effective the business is with their trading operations in generating profit. For 2011 the results are 66.67% this is a reasonably high amount of profit to make from their sales. The amount goes up in 2012 to 74%. This would be good for most businesses as it means that they are generating more profits with the items they sell. Although for XYZ Ltd they aren’t making as much profit as they should be. This could be because their prices are too high, so they don’t sell as many products but they make more profit on each one. If they reduced the prices they may sell more which ultimately results in more profits.
The net profit is how much profit the business is earning once all of the operational costs (expenses/overheads) have been deducted. This is the gross profit percentage with the expenses taken off to see more realistically the amount of profit they have. This can be used with the gross profit percentage to create a more detailed result of their financial stability. The net profit for 2011 is 24.67% this is much lower than the gross profit percentage showing that they aren’t making as much profit as they thought. In 2012 the net profit percentage was 0.70%. This is much lower than the gross profit percentage. If XYZ Ltd just went by the gross profit percentage they could believe that they were doing better than 2011 but looking at the net profit percentage shows that they are doing worse than 2011. This is because their expenses are higher and this is mainly due to the salaries going from 525,000 in 2011 to 620,000 in 2012. Although the other expenses went up slightly the salaries hugely increased, this may not have been necessary or advisable. This information shows that the business is becoming less profitable due to the higher overheads.
The business performance has changed as the profitability has decreased causing the business to be worth less money. The expenses have changed by increasing and to be fixed they should consider reducing ages or getting rid of some staff members that aren’t vital to the business.
Ratios help to give the business a better understanding of their financial state by monitoring the state with the use of data collected from the
previous year and comparing this with the current year’s figures. From this the business can identify if they are making more profit, a loss or if they have break-even.
The financial manager or the businesses accountant uses the information gained from these ratios to assist in their decision making. They will use the financial statements prepared by the manager/accountant to make important decisions concerning the business and its financial state. Ratios are a guideline to evaluate a company’s efficiency, effectiveness and its financial position. This information enables the business to make comparisons within the industry and with its competitors. Most importantly this information is also used to check the businesses current performance against its previous years. Ratios can also act as a warning indicating any areas of concern for firms such as areas requiring further investigation
XYZ Ltd does not seem to be in a sturdy financial state and with the use of ratios they can further assess the state of the finances for the business. The ratios don’t fix things or answer their questions, all they do is ask more questions. Such as why the stock turnover is so low when they are a supermarket. One possible flaw with ratios is that if a business does not closely monitor its financial condition regularly throughout the year they may only realise their lack of profit, low stock turnover and high overheads at the end of the year when they compare it to their previous years data.
Ratios do give a good indication of the financial position of the business but if they are only checked once a year this is too long a period to go without adequately assessing its performance. This is because if the business is not doing well you have waited 52 weeks to find out, therefore other monitoring will also be required so that after about 3 months if there is an indication that the business is running at a loss, changes can be made to combat this.
In the case of XYZ Ltd the ratios are important for them to see in more detail a measure of how they are doing financially. For example the ratios have helped them to discover that in 2012 they have done less well than they
did in 2011 even though the figure by themselves may not have suggested this.
From 2011 to 2012 there has been a marked increase in salaries of about £95,000 this has drastically decreased their net profit by a staggering £363,000 when compared with the previous year. On assessing the stock turnover ratio you can clearly see that the stock turnover has almost doubled from 21.9 days in 2011 to 42.1 in 2012. This ratio can help XYZ Ltd find out why it is not earning enough profits and it is because they aren’t selling the stock fast enough. For a supermarket selling perishable goods the low stock turnover of 42.1 is disastrous. XYZ Ltd risk losing money on products which are close too or past their sell-by-date forcing them to throw away the stock without any chance of making a profit or recuperating what they spent on the items. This is a huge waste of money and needs investigating. This could involve changing stock to suit what is currently on high demand or purchasing stock in smaller quantities. A factor for this lower turnover of stock could be that they have overstocked products from the previous year. The products may not be popular with their customers or they may have not advertised the name of the business enough to reach their target market.
An advantage of ratios can reveal financial weaknesses and opportunities to enable the business to make decisions regarding their future plans to improve their performance. This also allows them to find the areas of their financial state that need to be reassessed and any possible changes that could be made to improve the effectiveness of the way they do business. Another advantage of ratios is that it offers a common language generally understood by investors when they are evaluating the strengths and weaknesses of a company they are considering investing in.
XYZ Ltd bought £55,000 worth of stock in 2012. This is a very illiquid current asset of the business as it is harder to turn into cash and with their stock turnover percentage it could take them even longer than it should. Although once this stock has been sold or is starting to sell it has the potential to produce a large amount of profits for the business. For
most supermarkets this profit would be earned quickly but for XYZ Ltd their stock turnover percentage suggests this could take a long period of time to achieve its full potential.
A change in the business that has not shown or explained in the ratios is that some of their fixed assets have been sold. There is a reduction in the equipment of £30,000 and a reduction in vehicles of £40,000. This is a lot of money which the business should have gained from if the business sold these assets.
Overall I think that ratios helps the business to evaluate its performance year by year which is very useful for the business to determine how financial stable it is and if they can make any improvements and hopefully expand their business.
Although the quantitative data is vitally important it is also important look at the qualitative data which shows what other resources could be used to measure the state of the business.
The financial performance data suggests the staff members might be treated very well as from 2011 to 2012 their salaries went up a fair amount, this shows that they must be valuable as they are being paid more for their good work and can be used as a way to keep the employees to stay with the organisation. If staff members were treated badly they may rebel against the organisation and treat the customers badly which would give the company a bad name for poor customer service and cause the customers to not go back to buy their products. This could be a way of measuring the lack of customer satisfaction.
The Quantitative data is very useful for a business to determine financial stability but they don’t solve problems, they merely provide further questions. They cannot tell everything about a business such as they are unable to provide information on how the staff are treated, or if their resources are valuable. Qualitative data is needed for this which can help the business to further understand their current success rate. Technological
resources need to be made use of so the business can maintain a satisfactory image. It is important that their intellectual property is made use of in the best way to effectively reach their target market. This could be with a change of logo, name or colour scheme. The customers need to be attracted to the business so they will want to shop there and with the resulting customer satisfaction the business can create the well-known name that it desires. An effective and attractive company can successfully increase its productivity, via the use of design and customer care. Productivity can show the state of the business as if it is low then the organisation will know they need to do better and probably more advertising to get their brand out to the public. The popularity and recognition of the businesses brand can help the business to understand the image they are portraying is being perceived correctly by the customers. If a lot of people do not know the name of the business then they will know they need to do more to get their target markets attention. To do this they could advertise their businesses name and to convince the customers even more they could advertise offers that the business have. This should help the target audience to want to go there for the great prices which should ultimately increase productivity.
Overall I think it is very important to measure the business on both quantitative and qualitative data as they both suggest different views of how an organisation is doing and when used together can help the business to discover where it is going wrong and how they can effectively fix any problems. Although the quantitative data is very important as it is the facts for the business financially, the qualitative data is revealing important aspects of the experience in-store that the financial data cannot reveal.
For this task I will be evaluating how The Isle of Man College manages its resources and controls its budget and how it can improve their performance.
The Isle of Man College needs to manage their human resources in order to
operate and complete their business activities. The college is a fairly large organisation that requires many employees to enable the organisation to function and complete its objectives. The effective management of human resources is essential to ensure the right employee with the required skills is hired. This will ultimately help The Isle of Man College to control its budget costs and improve its performance. It is essential that the management of human resources is managed appropriately so that costs can be reduced. Advertising and interviewing new applicants takes time and money. Training an employee who then proves to be unsuitable is also a waste of the organisations resources as it is more expensive to keep training new staff that may only remain with the company a short time. Having the right employee improves performance such as a well-qualified lecturer will have the ability to bring out the best in the student who is then more likely to achieve their goal of passing the course and gaining their qualifications.
When managing human resources care must be taken to not just choose the applicant most highly qualified but to consider how able they are at interacting with others such as students and how well they are able to pass on information. The lecturer not only needs to be approachable but also needs to be able to communicate well and connect with the students and their colleagues. This creates a mutual respect and liking which increases the students’ interest in attending classes and learning the subject. When there is not a connection between the lecturer and student there is a risk of a mutual lack of respect which could result in a lack of interest in the subject or attending the classes.
If the right employee is hired the college will not be wasting their money by paying somebody unsuitable. This is more cost effective for the college who will not be losing money by paying an unsuitable employee to work for the college until they are replaced.
In conclusion it is essential to manage human resources effectively. The Isle of Man College does this by hiring lecturers who are highly qualified in the subject that they will be teaching. This improves the businesses performance because the students are more likely to obtain their qualifications.
Although businesses do sometimes hire employees that prove to be unsuitable for the position, it is important for the efficiency of the business that they manage this accordingly as it may be difficult to remove an unsuitable employee.
The technological resources are intellectual property, software licenses, accumulated experience and skills. This also includes music, designs and drawings relating to the business. These need to be managed and maintained so that the college can function successfully and does not risk other organisations stealing their ideas  .
It is important for the Isle of Man College to manage their technological resources because they spend a lot of money training their employees and helping them to obtain qualifications so that they can give the best service to the students. Highly qualified teaching staff may be more able to motivate the students and increase their knowledge so that they are able to obtain good grades. Managing this type of intellectual training and experience is essential so that employees with the right skills are hired and are able to complete tasks successfully. If the Isle of Man College can keep their highly qualified and experienced employees this is cost effective as it is more expensive to keep training new staff that may only remain with the company a few months. The Isle of Man College pay their employees with higher level qualifications and accumulated experience more money so that they will stay with the organisation.
The technological resources of employee’s skills and experience are essential to the smooth running and development of the organisation although it is important not to just have one employee capable of certain tasks because if they are off sick or leave the organisation it could be difficult for the organisation to fulfil its aims. The organisation can ensure that this does not happen by cascading training so no one person is indispensable. Software licences make programmes and the skills available throughout the college for use of the lecturers and students. Without software such as Microsoft office the students would not be able to complete their courses to the
standard that is required for them to pass. Copyrights and patents protect the technological resources of the college by stopping others from copying or using their intellectual property. The employee’s skills and experience contribute to the smooth running of the organisation. Technical resources must be correctly managed to ensure there is enough of the right equipment such as computers, photocopiers etc. for the college to continue and for it to improve its performance. If there are not enough technical resources for the lecturers to do their job such as overhead projectors, interactive Smart boards etc. or if there were not enough computers for the students, the performance of the college would decline and grades could possibly drop. This would have disastrous effects on the students and would be very bad for The Isle of Man College as a business. Controlling the budget costs of the technical resources will enable the college to pay for the continued maintenance of the equipment and when required the purchase of replacement for items that cannot be repaired. This will ensure technical resources that are up to date, well maintained and in full working order are always available to the lecturers and students. This will maintain and improve production.
The Isle of Man College must manage technical resources and control their budget so that enough technical resources are available to enable the college to continue its business. New technology is required to enable the college to maintain a high level of tuition and practice skills for the students. Maintaining technical resources can be cost effective because costs will be reduced if the equipment works well for a long time. The college will not have to keep paying for new and expensive equipment. Utilisation of technical resources is important because these are very expensive items. Recently The Isle of Man College transferred computers that weren’t being used at the nunnery to the college which made full utilisation of their resources and aided the productivity because students did not have to wait for new computers to arrive. This also reduced costs for the college because they no longer needed to purchase new computers.
The physical resources of the Isle of Man College are the Nunnery (the
business school), Elmwood House, the college itself and other buildings where classes take place or where machinery, computers and other equipment is used or kept. It also includes the maintenance, insurance and security of these premises. The technological equipment such as computers are also a physical resource. The management and maintenance of these physical resources, ensures the buildings are well kept, safe to use, and makes sure all the facilities that could help towards the student’s educational goals and skills are available.
Physical resources need to be managed so that planned maintenance and refurbishment can be arranged and paid for. The College’s premises give their students their first impression of the business. The building in which an organisation operates can greatly affect the success of the business, if it is in poor repair, dirty or almost derelict people will not want to go in or want to study there. The number of students applying to study could fall and businesses could feel the college was not a good training centre for their current or future employees.
Like any other organisation the College requires certain equipment in order to carry out its business. Some of the essential equipment required by the tutors are computers/laptops and overhead projectors in order to give presentations to the whole class. Some areas of the college will hopefully soon be considered for refurbishment as they are not as well maintained and decorated as some other areas.
The physical resources are important to the Isle of Man College because it would not be able to operate without its main building with the individual classrooms and other resources. The maintenance and condition of the individual class rooms is important because without these the college would not be able to offer as many different courses to accommodate the students and other businesses on the Island. The physical resources are important for the safe and smooth running of the organisation. Managing physical resources requires maintenance checks of the buildings and the equipment.
The management of physical resources ensures that The Isle of Man College has
enough tutorial rooms for the different courses that are available, this aids productivity. Too many rooms would be a waste of resources because empty class rooms do not aid productivity but will still need maintenance by the college. The maintenance of buildings and class rooms will reduce costs because general repairs are usually cheaper than replacing something for example filling in cracks before a wall falls down and has to be replaced. The Isle of Man College will carefully control its physical resource budget to ensure maintenance and repairs can be carried out promptly. Although this will be costly for the college it is essential to ensure that they can continue their business.
The Isle of Man College refectory is currently making a loss. This could possibly be rectified by outsourcing the catering to a business such as Subway. This would earn extra rent for the college, fewer expenses e.g. staff wages and stock, and it will keep the students satisfied.
The use of the college facilities is quite wasteful. In some cases the rooms for each course area are not always being used which is a waste of money and space e.g. in the office and business floors there is always several teaching class rooms that aren’t being used.
In conclusion The Isle of Man College could not continue their business without well maintained buildings and class rooms. It is therefore important they manage their budget so that they can continue in their business.
The financial resources must be controlled in order to budget for human resource expenses such as wages, training etc. Also to cover the budget for maintenance and repairs of technical and physical resources. When these resources can no longer be repaired then the financial resources needs to be available to purchase new technical equipment or to extend and renovate the physical resources owned by the college. The financial resources management is fundamental to the management of the other resources. Which all improve the productivity of the business.
For The Isle of Man College it is vital that they manage their budget to ensure they don’t over spend concluding with no money to help develop the business and if they underspend this could cause them to receive less money as their budget for the following year. To ensure this doesn’t happen the college will set budgets for each department. They will set goals of what this will spend the money on first to ensure the most important things are paid for first. They may also have a savings and investment fund which they have to save for contribution of achieving their objectives. Doing all this will protect the college from getting in any financial problems and should help them to be able to perform more efficiently.
Effective management of financial resources will give the college the ability to maintain their resources and to purchase new technology as and when it is required for the different courses. It is one of the most visible ways to view how well the organisation is doing in terms of money and progression.
Successful management of resources is a difficult process, requiring essential skills in planning, analysis and controlling of the businesses money. The primary objective of an organisation would be that the financial planning and management is prepared correctly to maximize benefits for any given resource utilised by the college.
In conclusion the management of financial resources is fundamental to the organisation and the improvement of its performance. The management of this resource is essential to the efficient operation of the human, technical and physical resources. Without available financial resources the college would be unable to purchase new equipment, renovate the buildings or to purchase up to date equipment.
The most important factors to improve the performance of The Isle of Man College is the availability of high quality lecturers, the courses that will lead to employment on the Island and the financial stability to achieve these. I believe this is important to the growth of the Islands economy and work force. The Isle of Man College is the only college on the Island and therefore it is essential to improve its performance for future generations.
 Business Level 3 Book 1 (Bevan, Coupland-Smith Dransfield, Goymer, Richards)
 Class Notes/Hand-Outs