Management Report Regarding the Financial Performance of the National Folk Festival Ltd for Year Ended 30 June 2007 Essay

Submitted By peach25
Words: 2440
Pages: 10

Contents Page

Section.......................................................................................Page Number
1. Introduction.............................................................................. 1
2. Overview of Working Capital...…………….................................. 1
3. Analysis and commentary on the 2007 Income & Expenditure... 3
4. Overview of sponsorship funding.............................................. 4
5. Conclusion……………………………………………………................. 6
6. Appendix……………………………………………….......................... 8
6.1. Income and Expenditure for year 2007............................... 8
7. Bibliography............................................................................... 9

1. Introduction
The financial performance of a business or an organisation is a particular evaluation in which determines the business’ overall financial health over a period of time and in addition determines whether it is generating revenues. It is, therefore can be applied to contrast similar business corresponding the same sector or industry.
Thus, this report will focus on the financial performance of the National Folk Festival Ltd for the year ended 30 June 2007. It will address three different parts: Part A will provide an overview of working capital and the working capital position of the National Folk Festival Ltd for 2007 versus 2006. Part B will focus on a variance analysis and a comparison on data in the Income and Expenditure for year 2007 and 2006. Lastly, Part C will consider different factors to take into account in seeking and managing sponsorship funding.
2. Part A - Overview of Working Capital
In this section, the relevance of working capital and the working capital position of National Folk Festival Ltd will be analysed.
The working capital has various objectives: it is to make certain that adequate money is accessible for the day to day cash flow necessity, to pay taxes and capital dividends for the government and providers, to pay salaries and wages as scheduled, to pay creditors to guarantee continuous resources of services and goods, and to make certain that the business will survive in long term period (Atrill & McLaney, 2011).
Conversely, a management with deficient working capital may show different issues such as overtrading, aims to sustain a level of sales which is superior to the working capital can maintain, for example, if there are further debtors, the attached money is more; as a result the working capital involved is higher. Due to poor inventory control and supplier relationships there could be an increased cost of sales and operational costs and due to poor credit policies, it may also lead to deficiency of sales and/ or elevated percentage of bad debts. Lastly, overcapitalisation, whereas waste through underutilisation of assets (Atrill & McLaney, 2011).
“The working capital is defined as the cash profit of current assets less the current liabilities” (Atrill & McLaney, 2011). Therefore, for the year 2007, with the current assets of $558,839 and current liabilities of $120,452, the working capital of National Folk Festival Ltd was $438,387 whilst in year 2006, with the current assets of $446,369 and current liabilities of $185,187, the working capital was $261,182. As of 2007, the working capital of National Folk Festival Ltd has improved primarily because almost all of the current assets has increased such as the cash and cash equivalents, trade and other receivables, inventories and others whilst the current liabilities: the trade and other payables has significantly decreased even though short term provisions has increased. It has been a excellent year for the festival.
The current ratio for year 2007 was 4.64 and for the year 2006 was 2.41. The current ratio has improved and doubled meaning the organisation has met its day by day commitments for the whole year.
The acid test ratio for year 2007 was 4.62 and for the year 2006 was…