MANAGEMENT ACCOUNTING ASSIGNMENT

Management Accounting Assignment



PART A

A) Financial Performance

(i) Financial Performance FY 08- FY 11:

Financial performance of Xplora Xperiences Pty Ltd was good during FY08; it can be seen from the net income during FY 08, which was $ 235,395. But after this year Xplora Xperiences Pty Ltd faced a loss from its operations, their sales level declined, and resulted in a loss of $ 717,512. Furthermore, in FY 10 loss was covered they made an improvement their sales level increased and helped them in covering their loss, moreover reduction in Administrative cost have helped them in lowering down loss. During FY 11 Xplora Xperiences again experienced a tremendous loss, due to higher interest expense, and substantial reduction in interest income. Although sales were higher, but due to the higher interest expense and admin expense company faced loss again. I have analyzed interest expense, Interest income, admin expense and sales level for making financial performance analysis of Xplora Xperiences Pty Ltd.

(ii) Financial Performance FY 12

Forecasted financial performance of FY12 predicted that Xplora Xperiences Pty Ltd will recover themselves from loss, it has been shown that company loss will reduce to ($ 28,000) from ($ 673,884). In forecasted financial performance, it has been predicted that sale level will increase tremendously from $ 6,857,692 to $ 8,050,000. On the other hand cost of sales have been increased and resulted in an increasing gross profit. Moreover, declining Administrative and salaries expense Xplora Xperiences Pty Ltd operating loss have been recovered and turned into positive figures. Finally, declining interest expense has also helped company to improve their financial performance. I have selected four key points, including sales, gross profit, operating profit and net profit. As these are the key indicators for showing financial performance of any firm (MELVILLE 2011 Pp. 155-160).

(iii) Key Risk

Xplora Xperiences Pty Ltd financial performance in past years is not remarkable, whereas forecast of FY12 shows some positive scenario, but there are certain risks, which can become hurdle for achieving the target of FY 12. Firstly, operational risk is very high, as company have faced substantial increase and decrease in their admin and salaries expense. Company can face trouble from their employee and administration. On the other hand interest risk is another factor which can affect the forecasted financial performance of Xplora Xperiences Pty Ltd. Interest expense is not consistent, it varies with respect to economic conditions and variation in an interest rate can affect the forecasted improvement.

B) In relation to XX's funding position:

XX's have acquired funding from bank, Cash flow of a firm show a tight position, it can be witnessed that from October to February, firm have taken overdraft and borrowing facility from bank, in order to continue their operations smoothly, although this have affected their financial performance because interest expense cost have kept increasing each year and resulted in loss. On the other hand company has some shareholder for funding, and major shareholder of a firm is an unsecured creditor, there are short terms components for funding ...