Part I

1.a) Detecting the earnings per share, cash flow from operations, and profit margin if sales commission increases by 2%:

From the overall evaluation of the calculation it can be detected that the overall profits of the organisation have mainly declined, which is due to the expenses incurred from operations. In addition, from the evaluation it can be detected that the alternations in the current commission condition of the organisation will eventually increase losses, where the values of the EPS will be at the levels of -$0.08, while the overall profit margin ratio is at -0.40% under the specified conditions. The commission condition will also have negative impact on the current cash position of the organisation, which will deteriorate and the ending balance will be negative -$71.816. Ax and Greve (2017) argued that commission provision directly allows the organisation to boost its sales volume, while raising the bar for expense and income of the organisation. Hence, the commission condition proposed for the organisation will not be beneficial, as no other conditions has been identified.

The case study currently does not have any kind of commissions, which are given for sales, while increase in commission by 2% will reduce the profits of the organisation. The above table directly indicates that the issue of commission would have negative impact on performance of the organisation, while it will reduce the level of income making the EPS, cash flow and profit marring negative for the organisation. Hence, using commission is not recommended for the organisation (Bromwich and Scapens 2016, p.2).

1.b) Detecting the earnings per share, cash flow from operations, and profit margin if 3% of the raw materials are kept in hand:

The condition of keeping the 3% raw materials in stock would eventually allow the organisation to generate high level of income from investment, which can be detected from appendix 2. The values of the organisation will eventually generate high level of income from investment when the raw material condition is imposed. The measure directly indicates the level of income such as the EPS will directly provide a value of $0.25, while the overall profit margin will be at the level of 1.27%. The organisation will eventually generate high level of income from investment, which as be detected from the appendix 2. In addition, the cash flow position of the organisation will also be evaluated from the change in the condition or measures, where the ending cash flow position will be at the levels of $52,044. Bromwich and Scapens (2016) stated that the companies controlling and managing the investors are able to save essential working capital, which is mainly blocked by inventory and improve their current financial performance.

The use of 3% ending inventory system of raw materials would eventually improve the current cash flow condition of the organisation, which can be seen from the above table. However, the values of the net profits will decline, which will reduce the overall EPS and decline the profit margin of the organisation. Hence, the organisation is partially recommended to use the provision.

1.c) Detecting the earnings per share, cash flow from operations, and profit margin if collection rate is 80%, 15% and 5%:

The changes in the overall collection rate is mainly evaluated in the section, which can help in improving the profits from operations. The change in the collection period relevantly helps in improving the level of cash position of the organisations, which can be detected from appendix 3. The overall EPS value will be at the levels of $0.33, while the profit margin is at 1.69%, which indicates appropriate measures that could be generated by the organisation in implementing the alternative collection rate. In addition, the implementation of the collection period will also have effect on the cash position of the organisation, where the ending cash balance of the company will be at the levels of $143,901. This improvement in the overall collection period will boost the profitability and cash collection period of the organisation, while improving its current financial performance. Fullerton et al. (2014) indicated that improvements in the collection period will eventually allow the organisation to raise its current financial performance.

Data Input Sheet

The use of different collection rate would eventually allow the organisation to improve its overall cash flow condition, which can be seen in the above table. In addition, boost in the current EPS and profit margin is also witnessed, which indicates the financial viability of the above suggested recommendation. Hence, the organisation could adopt the measure and improve its overall cash flow conditions (Cooper, Ezzamel and Qu 2017, p.999).

1.d) Detecting the earnings per share, cash flow from operations, and profit margin if revision price increase:

The changes in the current revision of price increase is mainly conducted in the proposal, which will directly have impact on performance of the organisation. The reduction in prices will eventually have impact on performance of the organisation, which will negatively impact its profits. The implementation of the revision price will not have adequate impact on the performance of the organisation, where the overall EPS will be at the level of $0.25, while the profit margin is mainly at the level of 1.09%. However, the implications of the measure can be problematic for cash flow conditions of the organisation, where the company will be reducing the level of income from investment. The cash flow position of the company will reduce to the levels of negative -$115,608, due to the implementing of the revision prices of its products. Hall (2016) argued that reducing the selling price of products will directly decline the overall income, which can be generated from the operations of an organisation.

Using the old selling price and the estimated sales volume would eventually increase problems for the organisation, as cash condition of the company will be negative due to high receivables. The organisation would make profits from the setting and generate higher income, while the overall cash flow condition of the company will deteriorate due to high receivable values. Hence, the recommendation is partial conducted for the management to taken into consideration.

2. Indicating which changes will recommended for the organisation to conduct:

After evaluating the tables in appendix, it could be understood that the organisation can only generate high level of income from investment when applying the alternative collection rate condition in their operations. Therefore, with the measure of changing the collection rate the organisation would eventually increase the level of cash position, which can help in supporting the financial performance of the organisation. The collection rate would boost cash position of the cash accumulated at the end of the financial period, which will be at the levels of $143,901. Kihn and Ihantola (2015) argued that improvements in the cash collection provision of the organisation can only improve the cash capability of the organisation, while it does not have any impact on improving its sales condition.

3. Indicating which two recommendations can be proposed:

The calculations have been depicted in appendix 5, which has relevantly allowed the organisation for generating high level of income from investment. The increment in the current financial performance of the company has been depicted in appendix 5, where the financial performance of the organisation will increase, while generating high cash flow. The overall cash flow condition of the organisation will be at the levels of $149,871, which directly indicates the improvement in financial performance of the organisation. The combination of the overall two recommendation could also have a positive impact on their profit margin, which is mainly at the levels of 1.25%, while EPS value is at the levels of $0.25. This directly indicates that the recommended measure could eventually allow the organisation to boost its current cash position and profitability from operations. Lavia and Hiebl (2014) mentioned that companies using the low inventory provision and high receivables collecting measure could eventually improve its financial position and generate adequate cash level for improving its financial condition.

Cash Flows Budget

The above table directly indicates that use of 3% raw material need for the organisation with the alternative collection rat of 80%, 15% and 5% can be recommended for the organisation, as it will drastically improve its overall cash condition. The company’s profitability will also be maintained and eventually higher cash inflow will be generated by the organisation over the period.

4. Providing two additional changes, this can be made by the organisation:

The use of additional changes such as reducing the cost of raw materials and labour cost might allow the organisation to benefit from the endeavour and generate high level of income from investment. The reduction in labour cost and raw material cost would eventually boost the profitability of the organisation and maximise the level of income from operations (Hall 2016, p.65). The additional measure might directly allow the organisation to generate high level of income from operations. The reduction in current raw materials price would directly help in detecting the overall expenses of operations, which might directly raise the level of profits from operations. The other decline in labour cost of the organisation can be conducted for adequately improving the level of income, which can be generated from operations. Therefore, the combination of reduced prices of raw materials and labour would eventually help in generating high level of income from operations, as the overall cost incurred for producing the relevant goods will be reduced. Otley (2016) mentioned that the company using latest technology can adequately reduce the level of cost from operations and maximise its income. On the other hand, Quattrone (2016) argued that inclusion of additional machinery would directly increase the expenses of the organisation, which will be supported by debt or equity.

5. Indicating whether investment can be conducted in Buns after seeing the overall values:

Adequate investment can be conducted in the operations of Buns, as the company has higher growth prospects, which can eventually allow them to generate higher income and eventually boost returns of the investor. From the overall evaluation of different scenarios, it can be detected that the organisation is mainly able to improve its financial performance under the recommended conditions. The increment in the current financial performance can eventually help in improving their performance and reduce the chance of slow growth. The company’s overall financial health is adequately depicted in the calculation depicted in the appeal, where the performance of the company will eventually increase from the changing alternatives over time. These improvements could eventually benefit the investors and maximise the level of returns from investment, as the organisation will obtain higher income over time. Renz (2016) mentioned that share investments are mainly based on fundamental and technical analysis, which allows the investor to detect the investment opportunity and maximise the level of income from investment. However, Wagenhofer (2016) argued that investments in shares need to be conducted with adequate research, as the lingering risk from investment can hamper the invested capital and raise the level of losses for the investor.

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