I would like to choose business scenarios: Ali’s franchise Subway outlet
The assignment as a report with a brief introduction and conclusion. All sources should be referenced using the style prescribed in APA 6th edition. All work should be the students own and any plagiarism will result in a nil grade and a notice being sent to the Academic Dean.
Word limit should be no more than 1,200 words, a margin or 10% more or less than 1,200 words is permissible.
Solution
Factors required in selecting an appropriate business structure.
In selecting appropriate business structure, the factors which need to be considered are as follows:
- 1) Limitation of liability- This aspect is very important to be considered as different form of business has different liability obligations(Becker, Kugeler&Rosemann, 2011). If the owner is interested in limited liability, the structure of business would be company.
- 2) Complication of formation and legal structure- A sole proprietary business is simplest in formation and company is difficult in formation. Hence depending on the extent of legal formalities which the owner wants undertake would help in deciding the appropriate business structure.
- 3) Flexibility of the company- Sole proprietary form of business is highly flexible as the owner itself is responsible to take important decision for the business and hence can avail opportunities in shorter time. Whereas in the partnership or company form of business, the decision making involves all the partners and hence take time.
Advantages and disadvantages of a sole proprietary, partnership and a company
The advantages of sole proprietary, partnership and company form of business are as follows:
- Sole Proprietary – It is the simplest form of business as the obligations which need to be fulfilled for setting up such business is very less.
- Partnership– This form of business can be managed in a better way are the availability of the resources and knowledge is increases with each partner(Fontana, 2010).
- Company– The greatest advantage of this business that each member of the company has limited liability towards the business and is restricted by the amount of capital invested in the company.
- Sole Proprietary– The greatest disadvantage of such business is that the liability of the owner is unlimited, i.e. he would be liable to pay all the obligations from his personal wealth in case when the company does not have sufficient resources to pay its creditors.
- Partnership– The greatest challenge is establishing proper co-ordination among the partners(Thorne &Piekarski, 1995). There can be many situations of conflict which can severely affect the operations of a business.
- Company– The greatest disadvantage is the cumbersome formalities which need to be fulfilled for formation of such business.
Identify and describe the nature and types of:
- Financial information; and
The financial information for our company would include information related to the income and expenses occurred in the course of our business. It would also include purchase of any asset or incurring any liability which is expected to involve monetary transactions in future.
- Non-financial information required.
The non-financial information of our company would include, the productivity of our labour, the external and internal environment affecting our business, etc. These does not have any direct monetary effect on our business but indirectly increases or reduces the effectiveness of our operations(Welsch, 1964).
Outline the main accounting and supporting systems
Main accounting and supporting systems would include:
- Accounting Information System- This system which records, stores and processes the data related to the finance of our franchise outlet would be required for important decision making.
- Decision Support Systems- Other systems which would support our business include supply chain management system, quality control management system, human resource management system, etc. These automation system helps in proper functioning of the different activities of our business(Abraham, 1965).
Significance and applicability of the 4 main accounting assumptions
The four main accounting assumptions that would help to sustain our business are:
- Going concern –The assumption of going concern requires companies to prepare its financial statement as if it would continue its operations for the foreseeable future. This assumption would help us to plan and record the events in such a way to maintain continuity of our business.
- Conservative– The assumption of being conservative in recording the events would help our company to be less optimistic and truly evaluate the earnings.
- Accrual basis – the accrual basis of reporting of events will helps our organization to successfully audit the activities which is related to a specific business period.
- Separate economic entity– This assumption would help our business to earn the profits as the owner and the business are not intermingled.
Capital expenditure decisions that could arise the course of your business.
Capital expenditures are those expenditure which are incurred to establish the assets of the company. These expenditure for the franchise subway outlet can be as follows:
- Designing the interiors- The interiors of the site need to be designed and constructed according the design set by the parent company(Calderon-Monge& Huerta-Zavala, 2015). This would also include purchase of furniture, installation of air conditioners, installation of working table, etc.
- Purchase of technology- The machinery and instruments required to prepare the food which would be supplied by the franchise outlet need to be purchased. This can include, sauce preparation tools, baking machine, frying machines, etc.
Planning and budgeting for the business
The planning and budgeting for Ali’s franchise Subway outlet is important to identify the important objectives of the company and work for its achievement.
Budgeting
As the Subway is an American fast food chain of restaurants, opening up of franchise would require certain expenditure. These expenditure can be classified into capital expenditure and operational expenditure. The capital expenditure is required to set up the store, building of the interiors, purchasing equipment,etc.
Whereas the operational expenditure would include the working capital required to continue the operations like purchasing of the raw materials for the food, salary payments to the staff and employees, electricity, rent of the site, etc. Proper estimation of the finances required for each activity and identifying the sources of those financial needs would help the company successfully establish the franchise outlet.
Planning
Planning is an important part of the management activity which indicates the set of activities which need to perform to experience a desired result. This planning can be for short term i.e., for the immediate future and for the long term, i.e. for the period of next 3 to 5 year period.
- Short term planning- This is generally related to a particular accounting year and is more detailed as each and every aspect of business operations need to be clear. As the external environmental factors affecting a business become clear, the planning is done to develop a competitive strategy in order to successful do business in such environment.
- Long term planning- The long term planning is generally done to fulfil the mission and vision of the company for over the period of 3 years and beyond. This type of planning is less detailed and generally indicate the broad objectives. As the external environmental factors like economic health of the country, social changes, etc. is not clear at that situation, it is not possible to construct a detailed plan.
References
- Becker, J., Kugeler, M., &Rosemann, M. (2011). Process management. Berlin: Springer.
- Fontana, P. (2010). Choosing the right legal form of business. Ocala, Fla.: Atlantic Pub. Group.
- Thorne, H., &Piekarski, J. (1995). Techniques for capital expenditure analysis. New York: M. Dekker.
- Welsch, G. (1964). Budgeting. Englewood Cliffs, N.J.: Prentice-Hall.
- Abraham, W. (1965). Annual budgeting and development planning. [Washington]: National Planning Association.
- Calderon-Monge, E., & Huerta-Zavala, P. (2015). Brand and Price: Key Signals when Opening a Franchise Outlet. Journal Of Promotion Management, 21(4), 416-431. http://dx.doi.org/10.1080/10496491.2015.1050946
