Date: 29/10/2014

Business Management.

2013 to 2015

Regent College,.

London.

Name Daniel P.

(Your work will not be accepted without a signed copy of this authentication.)

Content

Introduction pg. 4

LO . John Lewis Company pg. 4

Sources of finance available to a business pg. 5

Sources of finance internal and external pg. 6

Sources of finance short and long term and External sources pg. 7

Internal and external sources of finance pg. 8

External and internal sources of finance pg. 9

LO 2. Int. and ext. short, medium and long term. Int. Adv. Disadvantage pg. 10

Table as External sources of finance adv. and disadvantage pg. 11

The main financial sources and subsidiaries John Lewis Partnership pg. 12

John Lewis Partnership statement of sources and Mezzanine tool pg. 13

INTRODUCTION and CONCLUSION pg. 14

LO 3. Analyse Budget and make appropriate decisions pg. 15

Cost, Price, Turnover pg. 16

Investment appraisal techniques pg. 17, 18

Break-even point pg. 18

Break-even point and chart pg. 19

Assumptions and Methods pg. 20

LO 4. Financial performance of Businesses pg. 21

Balance sheet 2011, 2012, 2013 pg. 22

Consolidate Income Statement (profit & loss account), 2011, 2012, 2013 pg. 22

Cash Flow of John Lewis Company, 2011, 2012 and 2013 pg. 23

Comprehensive Income Statement pg. 24

Different comparison on Waitrose, Partner, John Lewis, calculation pg. 25

Different comparison, statements calculation pg. 25

Conclusion, Criticize pg. 26

References pg. 27

Introduction

On this report I will write about the strategic review, investment appraisal of John Lewis (plc), as being in charge like a newly appointed assistant to carry out and identify the most suitable and optional whether a decision is more beneficial than possible many others and as first part will be mentioned the financial sources which businesses are more likely to identify in order to build/set up driven sources on achieving, adequate and valuable future decisions into their fundamental tasks. Financial sources and range of sources connect as Partnership, Shareholders and Stakeholders.

John Lewis plc, which its first shop was built in Oxford Circus in 1864. In our days is recognised as industry retailer, the third largest private company in UK and becomes very popular as department store chain retailer. Owned by its employee and Partnership who have a say in how it is runed. Although has a 112 Waitrose supermarkets, where staff employees in 43 store cross the UK. John Lewis was non-profit organisation for a period back in time. John Lewis Partnership is subsidiary of John Lewis plc. Although their market function capabilities and operation process, place a joint business as agreement to share in the profits and losses of the enterprises, with more than two as contribution on their Working Capital and a turnover of GBP 2.8 bill and a pre-tax profits of GBP 150 mill. It’s free from special Gov’t regulation and also with shares on London Stock Exchange. Produce, Cosmetics, Clothing, Housewares, Food and direct services.

LO 1, Sources of finance available to the business.

As first appropriate direction is the financial sources which one should be taken into investment options such as designing their appropriate costing, on discussing and describing the main financial statement, by comparing them format of financial statement for different types of businesses and which decisions should mostly fit better on this kind of processes.

The Financial part, can be seen as any business small or large size needs money to finance on ruling their activity. Finance is basically two steps the involvement of decision in spending

(providing) money for any kind of project and as second involves the willing and decision on rising it.

The Finance behaviour it is the counter invention of kindred instruments of present and implying the future, which one has a constantly adopting, present term acts on focusing into the future term acts of random, by enlarging the possible opportunities such as wide investment projects and system technology on working developing and achieving continuous a better results.

Regarding the type of rising Financial Sources chosen, depend the nature of the business if they are large industries, organisation are able to use a wider possible opportunities on diverse and various activities, than the smaller organisations.

Sources of Finance to which one we can apply are four as numbers were linking on row together generally.

Before going into business an entrepreneur needs to secure sufficient financial resources. As strategic review John Lewis make further encouraging investments as long-term by 13 .6 million in modernising as introducing technical initiative in store, having concierge style welcome desk, where shoppers will be able to browse goods and services, also investment in new shops infrastructure.

Bellow you will see a guide model format as Sources of Finance such as basic option for Business Plan.

Such as sources of Finance available are:

As sources of Finance they are classified as follow:

Shareholders, (Large companies, frequently they have often thousands on variety of shareholders).

Banks.

Government.

Family (friends), such as small businesses, by issuing shares rise finance.

Sponsorship.

Business Angel.

Donations.

Leasing and Hire Purchase.

Mortgage.

Venture Capital.

Donations.

Debentures.

Bellow you can find figured the combination as Sources of Finance and their subsidiary process, optional for project plan.

Here I would mention the position of John Lewis plc which is a public limited company which one has available shares to the public sector (shareholders). For better understanding the John Lewis plc is a private sector company which one can offer their share on stock exchange. John Lewis decided to make weekly information as such workers and business affair should understand how trade degree was doing on report basis.

The above figure as part of Sources of Finance you can see the process and subsidiary of profit.

The sources of Finance they are two types.Short-Term Long-Term

Must be paid back within a year, also it is a settlement to pay back a large bill set up monthly, or Medium-term.

Banks, to pay back to the bank a bill overthrown.

Banks, overdraft facility.On rising founds as it is popular venture capital.

Merchant Banks, as fast-growing such as small business, such as package on mix of share loan capital.

By Government or (EU), businesses may qualify for Grants and Loans.

Leasing companies, (were items that are expensive can be leased).

Trade credit, (were items can be purchased and pay for them later).

Hire purchase, (were items can be hired and can be purchased on instalments, but never own it, until your instalment has been finish and paid), As final you become the owner of that items.

Must be paid back within /over more than one year.

a small thriving Banks also provide long-term loan on (property, land).

Fixed assets, (buildings, and equipment).Investment and saving that provide financial service.

Government grant, were Student Financial England is a (long term), local authority, national government. Organisations, Building Association Organisation or Individuals lend money as capital for selling shares, Mortgage such as (property, land).

Lending institutions as borrowing, Long-term loan, known as (risk/return, trade-off).Shares as part ownership of company set up as private limited and public limited companies.

Venture Capital as invest in developing (generally very wealthy).

Appropriate sources of finance for a business project are:

Internal Sources of Finance and External Sources of Finance.

1) Internal Sources, are raised from within the business, organisation, can be find and create from the interior/inside of business for example: As way in which a profit can be kept back to finance expansion of business it’s can be assets which one it is counted, resource and which one is expected to provide future economic benefit by reducing future cash outflow also the possibility to generate cash inflows. a resource is an by selling assets (items owns by the business) which one no longer needs really anymore and by freeing on converting them to cash up for eventuality as regain, Revenue and Sales Income.

a) Internal Sources such as Sale of Fixed Assets where the money it is come from selling an assets, machinery which one the business doesn’t need it anymore.

b) Working Capital the money is coming from owner’s own savings.

c) Sale of Stock where money comes into the business from selling off the stock

d) Retained Profits is the profit used for purchase of different of assets, value of profits keeps hold to use it within for business.

2) External Sources.

a) Trade Credit is type (short-term, 30 days) of buy now pay later.

b) As conceding External Sources, are raised from an outside of the business, can be found and create from exterior/outside of the business, such as creditors (bonds holders, loans companies) or banks by repayment agreement. Development, Grants from (EU), Selling Shares, Share Issue.

c) Among external sources, the Business Angels can be seen as external investors into start up a business, Are professional investors and as proven entrepreneurial expertise and typically invest around £ 10K to £ 750K, their optional preference is to be involved in businesses with high growth prospect, where often offer their own skills and contacts available as a significant advantage for organisations.

d) Banks loan or Overdrawn which can be long term or short term, where stating usually the requirement of fixed of assets as security for loan. Overdraft facility, wider for starting-up small businesses as short-term period handling seasonal fluctuation in cash flow.

e) Share Capital, Issue Based on 1st February 2010, UK law, as Share there are different classes of share (four at number). Share capital is suitable for limited businesses, can be seen as external source which easy ca be family and friends members.

f) Additional Partners, Partnership this source also use John Lewis as involvement in financial source and is suitable for a partnership businesses where the new partner/s can contribute with extra capital.

g) Venture Capital called risk capital and is the three stage financial process (start-up, mezzanine level and publicly share stock offering), although can be seen as specific kind of sharing investment which is made by funds managed by professional investors and the minimum requirement is £1 million, where is the involvement of risk money for high risk return in investment. Venture Capital (VC) has slightly middle common with Private Equity (PE).

h) Leasing and hire purchaser can be seen as external part of financing into business and is related to paying (in instalment part, monthly) one hired equipment, items and machinery and not owned by the business organisation, until. The hired equipment, items and machinery is owned by the business, organisation when is paid off the final payment. On Leasing (no need to pay a large sum up front), but on Hire Purchase (need to pay a large sum up front).

i) Sponsorship is when a business, company give support to another business, company in exchange of promotional display can be for short or large term.

j) Donations is kind of financial gifts from individuals or organisations to a business, company.

k) Mortgage is type of secured loan (usually banks), such as for buying property (land, house), and the payment method is long term spreads, typically 25 years. Once the final payment is done the business, organisation (borrower) will fully own the respective (property, land). Although all these imply when a business need to expand and need a new shop.

l) Government Grants the request of low profit or at all, generally aid to hold and help reduction as producer’s cost of production. The Gov’t organisations such as invest NI offer grants to businesses at bought ready established and news. Certain condition such as where the business has to locate.

m) Debentures (holders), is type of long-term loan such as promise on fixed payment of annual interest. The debentures holders doesn’t have voting right on how the business run.

SHORT-TERM MEDIUM-TERM LONG-TERMInternal Sources

Retained Profits.Working Capital.Debt Collection.Sale of Stock.

Sale of Fixed Assets.Retained Profits.

Working Capital.

External Sources

Gov’t GrantsTrade Credit.Overdrafts.Leasing Hire Purchase.Sponsorship.Donations.Venture Capital.

Gov’t Grants.Leasing &Hire Purchase.Sponsorship.Bank Loans & Mortgages.Venture Capital.

Gov’t Grants.Share Capital.Leasing & Hire Purchase.Sponsorship.Bank Loans & Mortgages.Debentures.Share Capital.

Above I will present a table classifying the different sources as finance such as parameters of time and type.

Internal Sources of FinanceAdvantages Disadvantages

a) Good Opportunity to raise finance from a) Some of businesses are unlikely to have

an assets that is no longer need.b) Doesn’t have to pay back.No interest payable (easily accessible).c) By selling of stock it is reduce the cost associated with holding them.Quick way on raising finance. d) No need to rely as borrowing.Doesn’t have to be repaid back.

assets to sell.b) There is a limit of the amount one owner can invest.c) Business will have to take a reduced price for stock.d) May not be sufficient, then other sources still be needed.Less is available for distributing to shareholders.

I will develop a closer consideration whether I consider that is beneficial to John Lewis Partnership.

External Sources of FinanceAdvantages Disadvantages

a) Less strain on cash flow.Trial use of product is possible. Can sell the goods first and pay for them later.Good for cash flow.No interest charge if money is paid within agreed period.b) Don’t have to be repaid.

No interest is payable. c) As addition to their money invested, Angels often make their own skills (involving experience and contacts available to business).d) Set repayment are spread over a period of time which is good for budgeting.This is good way to cover the period between the money going out of and coming into a business.If it’s used in the short-term it’s usually cheaper than a bank loan. e) Don’t have to be repaid, No interest is payable.f) Don’t have to be repaid, No interest is payable.g) Ability for company expansion (a way that will be not possible through the loan, bank or other ways. As addition to financial capital venture capitalists provide valuable expertise, industry connection and advice. i) Reduce the cost of company (as being sponsored) into growth and expansion. Enable small businesses to increase public profile in cost such as effective manners. Compete more effectively against other

a) More financial processing is required.Easy to buy more than business can pay for.Discount given for cash payment would be lost.Business need to be carefully to manage their cash flow to ensure that they would have money available when the debt is due to be paid. b) Profits will be paid out as dividends to more shareholders.

Ownership of the business could change hands.

c) Entrepreneur needs to accept a loos of control over the business.d) Can be expensive due to interest payment.Bank may require security on the loan.Can be expensive if used for a longer period of time. Interest is repayable on the amount overdrawn. e) Profits will be paid out as dividends to more shareholders. f) Diluting control of the partnership. Profit will be split more ways.g) Accounting and legal costs a business/company must balance/shoulder. Start-up business must also give up some ownership stake to VC.i) Difficult to obtain this sources of finance.In individual businesses fail into problems.

k) Very hard to obtain. Is sometimes not enough. Not all businesses may be eligible

firms in market. k) External but not need to be paid back. Allows the producer to sell the products at cheaper prices. m) Businesses is making money. They receive annual interest benefits (VIP status of free passes) Debenture holders do not have the right to vote at the company general meeting on how the business is run.Debentures can be redeemed when the business/company/firm has surplus funds.

for grants. Certain condition apply/request on location.

m) Not being say in how the business run.Extremely high depend on the business’ success to rise its value The money borrowed has to be paid back on the time agreed date. Debenture interests has to be paid back either the business has reach/make a high profit, either not (loses).

The financial source identified for John Lewis as partnership in part imply the contribution of Personal Capital (personal saving). Retained earnings (profits), Bank loan, Hire Purchase, Sale and lease back, Trade Credit, Sale of Assets, Admission of new partners, Although another source applied in part by John Lewis is Share Capital (equity and preference capital), Issuing rights or right issue. Differed end ordinary shares, Bank loan, Trade Credit, Debentures, Venture Capital, Lease and Hire Purchase, Factoring and International money as plc which want to expand their capital market.

Consolidate Financial Statement as combined financial statement of subsidiaries, divisions or sub organizations

The growth of the business can be measured in different ways.

Growth of a business can be measured in several ways such as.The value of the firm's sales turnover (sales revenue)

The firm's market share (the sales revenue of the business as a percentage of the industry's sales)

The value of the firm's capital employed

The number of employees hired by the business. There are reasons for growth, which includes:

Economies of scale

Gaining a larger market share

Survival against rivals in the industry

Spreading risks by diversifying into new markets and industries

On assessing the sources listed and mentioned before about their implication as financial sources. Dilution of control implications. Legal implication. Financial implication and Bankruptcy.

1 DLUTION OF CONTROL IMPLICATION

The reduction in the ownership percentage of share of stock caused by issuance of new entrance as stocks. Reduces the value of existing shares by reducing stock’s earning per share.Can also occur when holders of stocks options (ex. Company, Employees) or holders of other possible optional securities exercise their options.The smaller ownership percentage retain, mean that diminishes each investor power. A capital increase whether or not it is reserved for current shareholders. As Mergers and assets transfer.Share dilution maybe liable to happen any time a company needs

additional capital. The potential upside of share dilution is that the additional capital the company receive from issuing additional shares can improve the company’s profitability and the value of its stock.

2 Trade Credit2 Legal implication The owner can be sued in case of non-payment.2 Financial Implications The business has to agree be responsible of non-payment on time

but have discount for prompt payment. 2 Dilution Control over the company is not diluted.2 Bankruptcy implication Suppliers must file cases for first payment in case of Bankruptcy.3 Overdraft3 Legal implication Need to fill up promise to pay requirements and other repayment

term documents. 3 Financial implication The organisation is obliged to pay the payment charges. Penalties

and other charges are extra worry/burden if not paid on time.3 Dilution Control over the company is not diluted.3 Bankruptcy Among the first to be paid from the residual asset of the company. 4 Lease4 Legal implication The requirement of Lease agreement.4 Financial implication GST-(a value added tax or good and service tax) is charged in a

monthly lease rental on the residual value where at the end of the Lease. The customer can claim the Lease rentals as a tax deduction.The purpose of VAT is to generate tax revenues to the government and is similar to personal income tax or corporate income tax.

4 Dilution The control over the company is not diluted but pull-out of assets in case of default that may prevent/hamper operations.

4 Bankruptcy Suppliers must file cases for first payment in case of bankruptcy.5 Lease Purchase5 Legal implication Agreement is required.5 Financial implication Tax credit can be enjoyed. The customer can claim depreciation of

their equipment as a tax deduction.5 Dilution The control over the company is not diluted but pull-out of asset in

case of default that may prevent/hamper the operations.5 Bankruptcy Implication none.

The current use of financial sources less or more but not accurate, is less risky part as source of finance for John Lewis Partnership. Where also there is an inclination of acceptance that more businesses will try to use an optional financial tool as Mezzanine Financing.

LO 2. Implications of finance as a resource within a business.

Financial cost can be seen in the world of business as Cost on nearly any decision. Capital cost where a Company and its shareholders invest to rise founds known as interest expected from investment or the risk free rate on return. The tangible cost where a Company can’t conduct the Company without spending on tangible cost, like (Product quality services, employee medical benefit, salaries and wages, commercial insurance and transportation), the tangible cost produce obviously benefit. Furthermore intangible cost it seen as pattern of loss and result from intangible resources also has a negative effect on cutting staffing/personnel level and benefits. Borrowing cost.

Total cost = (total fixed cost + variable cost) / total number produced.

Fixed cost: If the company has zero output or higher output the level of fixed cost will remain broadly the same but in the long-term fixed cost can alter. Example of fixed costs: Rent and rates. Depreciation. Research and development. Marketing cost (non-revenue related). Administration cost.

Variable Cost: Are those costs which vary directly with the level of output (they represent payment output-related input such as raw material, revenue-related cost such as commission).

A distinction is often made between “Direct” variable coat and “Indirect” variable cost. Direct variable cost are those which can be directly attributed to the production of a particular product or service and allocated to a particular cost centre (e.g. Raw materials and the wages those working those working in the production line).

Indirect variable cost are those which one cannot be attributable to the production but they do vary output (these include “Depreciation” where it is calculated related to output, (e.g. machine hours maintenance and certain labour cost).

Financial planning is a continuous process. Budgeting is the comprehensive of expenditure and income over a specific period which determine the most efficient and effective strategies as opportunity resources for Company. John Lewis Company use many types of budgets. A good budgeting assists the amount of money to invest the number of employee to hire and the market strategy requirement (short-term or long-term) to conduct on going for company performance. Budget function are the planning and control over the Company concerned with investing founds for capital expenditure machinery, equipment Additional deal with sources of sale, labour, dividends income, interest, taxes and insurance. Moreover predict the amount of found to have at the end of the year.

The financial plan is key documents which are linking each other and the first two which feed into the others (the budgetary plan, cash flow forecast, the profit and loss forecast and the two which feed into the others are owners and managers own survival budget and break-even analysis).

As one point if Company create a surplus is good to pay out money to the shareholders, fund a capital investment for extension and development, deposit with the bank or proprietary money to earn interest until are ready to use it elsewhere.

If there is shortage and require to meet either short-term or long-term payments, Company should negotiate with the bank an overdraft facility and to agree as acceptable limits on competitive interest rates.

Company failure can be caused by the debtors failing to pay the invoices on time arise the causes of bankruptcy. Also failure is often achieved by overtrading (selling more than the business is capable to deal with). The insolvency by overtrading might arise, where is important the Company to avoid to overtrade.

Decision making, John Lewis Partnership is a business idea skills and talents in such a way that they can form a good business team where the business owners necessarily share the profits, liabilities and the decision making, in a few words this is the advantages as partnership principle where partner’s share the decision making and can help each other out when they need. More partners mean more brain as ideas on solving any problem the business encounter.

The impact of finance on financial statements. Two main financial statements are recognised international as standard, (IAS) and (IFRS). Every transaction that the Company gets involved. The two main types of financial reports of accounts are:

Management accounting. Present and analyse financial data to help management to monitor performances and take decisions.

Financial accounting. Formally record transactions of the Company and summarises the reports of the Company.

Financial accounting focus on reports that Company is required to produce. The three main elements of financial accounts are:

1 Income statement. Measure the performance over a given period, usually six mounts and one year, comprise the income of the Company against of cost of goods or services and expenses incurred in that revenue.

2 Balance sheet. Snapshot of the Company what is owed and what is owns and its liability what is owes

3 Cash flow statement. Shows how the business has generated, disposed of cash and liquid founds under the period under review.

May be found detailed information for investors, (Report of the Corporate Governance and Director Report), and auditor’s statement.

Mezzanine Financing

Corporate Bonds

Gov't Grants

Asset based finance

Secured Commercial Loans

Leasing or Hire/Purchase

Trade Credit

0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00%

0.29

Taskforce for Mezzanine Financing in UK 2009 to 2010

Column1 Series 2 Series 1

Conclusion

Regarding the source on financing investments, Banks loan is more likely if exist fixed assets and generally provided as low interest rate. John Lewis, generally in major part of the activity issue share. Regarding the Bank Loan (lending for businesses) our days has fallen tremendously. Although is mentioned that different financing choices differ from business to business, but choosing the right financing sources where some sources are more flexible than the other sources helps. John Lewis has a large turnover as modern company system created a wealth connection as partnership with its stakeholders. Choosing the right financing source is vital points for business interest rate or different other cost of financing.

INTRODUCTION

John Lewis Partnership is composed from three segments John Lewis Waitrose, and other Corporate. With a revenue of GBP 9.27 bill, a Net Income of GBP 145.30 m, Interoperated 1929 and Employees 81.90K. Financial Planning of a business as John Lewis section is the section that determine whether or not a business idea like financial planning expect to shows if is viable where is the most important part from the business plan, a key component in determining whether the plan is going to be able to attract growth any profit for the investment in your business idea. This report basically describe three variety of financial information planning which consist in three form as decision making: Income statement, cash flow projection, the balance sheet and also a view as better understanding of financial ratio analysis on profitability. Although financial planning helps to reduce uncertainties in changing market trends, uncertainty to hindrance on growth of the company by ensuring stability and profitability.

Toward companies as John Lewis Partnership is important point on framing, objectives, polices, procedure, and financial knowledgeable pool and view, as details on profit and losses which one will be shared commonly by theirs professional service accountants, solicitors and operational management (limited to 20 persons as partnership).

LO 3. A partial ANALISYS list for business expenses and operational expenses: Starting Inventory, Rent deposit, down payment on property, and down payment on equipment, utility and set up fee. Also Operating expenses include the cost such as keeping the business running which should make sense as monthly payment, view and calculated monthly: Salary ( if co-workers or staff), Rent or mortgage payments, Telecommunications, Utilities, Raw materials, Storage, Distribution, Promotion, Loan Payments, Office Suppliers, Maintenance,

The John Lewis stepping on little by little have propelled the brand into the nation’s hearts.

Choosing an investment option is an important decision which one has a big impact on investing for income or investing for growth.

Budgeting Decisions Is the process of planning for projects on assets for a period greater than one year, in businesses it is important for many reasons. Replacement decisions to maintain the company, Market expansion of existing product. When making the decision to purchase an asset, managers need to forecast the revenue for over the life of the asset. Although the measurement to evaluate projects using IRR and NPV where using IRR is not as effective as using NPV to Discount Cash flow.

Bellow I will view the Performance in 2012 of John Lewis Partnership, Waitrose, and John Lewis, Where sale excluding VAT are gross sale net of value added tax.

The main financial statement from different businesses (as comparing them on basis). In addition the different companies either fallow the calendar year (beginning of January) or ending December or they fallow their own fiscal year, also (quarterly or whenever necessarily). Financial statements according to (SFAC), provide information useful in investment and credit decisions and in assessing cash flow prospects

Accountants of the companies prepare statements on the assumptions that each enterprise is a separate entity. As segment of John Lewis Partnership I have viewed on basis few of their activity as subsidiary on comparison of their statement. The elimination of intercompany transactions between parent and subsidiary companies is when a parent company owns less than 100% of the subsidiary’s stock, the part owned by outside investors is referred as minority interest.

As example: The Working Capital of John Lewis for the period of one year of 2012 is £ 1,637.7 m

Working Capital can be found by Current Liabilities – Current Assets = Working Capital (calculating the working capital, indicate whether or not it can afford to pay its bills). Another equation is: Liability + Equity = Assets. Also Liability – Assets = Equity.

Current Assets represent the assets that a firm expects to turn into cash after one year.

Current Liabilities represent the liabilities that a firm expects to pay within one year.

John Lewis has unlimited liability.

Note

Fixed Assets = frequently called plant and equipment (buildings, musical and lighting equipment and drinks equipment behind the bar, setting and table).

Current assets =are assets that are likely to be changed into cash.

Other Assets = resources not listed here but if incuse is kind of (intangibles goodwill, trademark, patents and tangibles is outdated equipment which can be sold to the scrap yard).

Working Capital is called also Nett Current Assets.

Equity is the value, after John Lewis Partnership has paid all liabilities (is what is left after you subtract the value of all liabilities).

Equity is also referred as shareholder equity

The value of Total Assets can be found by (Fixed Assets + Current Assets) – Current Liabilities = Total assets.

It is important to look after it day by day at the cash flow (working capital) to ensure that the cost of finance is effectively managed when the finance is put to work. The John Lewis Partnership and Financial Performance which shows how much profit or loss has the company made at the end of accounting period.

Note

The John Lewis Partnership has a higher Turnover or Sales Revenue is the annual sale volume net of all discounts and sale taxes, also the income from selling goods or services for the given year period.

Cost of Sale is the main cost directly linked to the goods sold by John Lewis (calculate as opening stock + purchase – closing).

Revenue is the gross income (Rev’s).

Below is a column chart of the results of increase in sale from the previous years.

2009 2010 2011 20120

500

1000

1500

2000

2500

3000

3500

4000

The Key Business Results John Lewis Gross Sales

Series 1 Column2 Column1

As I have stated above the balance sheet and the profit and loss account is part of historically record which is prepared at the end of each year. Although the Budgetary Annual Plan the Cash Flow and Breakeven, where all this information put together will draw from the total Budgetary Plan.

For example a non-profit organisation may not need to forecast all this comparison of statements mentioned before but it is still need to know if it is breakeven. The analysis of break-even point is widely used by production management and management of accounts for the company and it’s based on categorising the production cost as variable (costs that change when the production output change) and fixed cost (costs not directly related to the volume of production). In order to understand the total variable and fixed cost are compared with sale revenue in order to determine the sale volume. The Break-even point is sale value of production where the company doesn’t loss neither make profit.

Bellow you will see the break-even chart (at the intersection of two line A and C).

Related to the diagram above:

The line OA represent

the variation of income at varying level of production activity (output). Line OB represent the total fixed cost in the business (as output increase, variable coast are incurred and as mining, where total cost (fixed +variable) also increase. At low level of output, Costs are greater than Income. At the intersection of point P, cost are exactly equal to income (neither profit nor loss is made).

Sale revenue = fixed costs + variable costs + profit.

The Investment appraisal techniques rely on accurate calculation to come up with useful answers some differ in effects and investment which can be considered in cash flow as expected return to the cost and the return offered by the others potential investors. Consequence as investment can be e.g. on buying more expensive machinery might be worth if it is more efficient and use cheaper suppliers also other impacts in positive way can be:

Greater flexibility and quality of production.

Faster time-to–market resulting in bigger market share.

Better staff moral and job satisfaction leading to greater productivity.

As general benefit such as quality on break it down with estimate saving.

Better quality product will increase sale by 6% and will increase the company current position further among its competitors.

procedure in investment can be to not change the machinery which you work with and just do the minimum necessary to maintain the existing machinery and outsourcing production to a supplier and invest in alternative projects instead. Timescale can be an issue on investment appraisal where shareholders may prefer an investment that are expected a quick return as Payback as short-term expectation to provide annual cash flow and it’s helps to avoid giving to much weight to risk, long-term projections. Related to John Lewis Partnership as we have seen in their statements the company under their management commitment has identified these type of decision making into better investment appraisal by taking benefits of them. Further appraising any investment from different angles can be most effective way of deciding whether it is worth.

The Marketing sections of the business plan will analyse the financial planning in which the businesses operate.

Year 2010 Year 2011 Year 2013 Year 20140

1

2

3

4

5

6

7

8

9

10

6.67.3

8.89.3

0 0 0 00 0 0 0

Revenue of John Lewis Partnership

Series 1 Column1 Column2

Gross margin 33.68% Net Profit margin 1.57% Operating margin 5.23%

Year 2012 Year 2011 Year 2010 year 20090

1

2

3

4

5

6

4.8

4.1

3.5

4.54.5 4.34 3.8

4.7 4.54.2

3.93.8

2.8

1.91.5

Calculating the profi tability of John Lewis Partnership

Return on Capital Employed SerieGross ProfitOpetating Profit Net Profit

Note

Total assets (TA), Equity (E) and Total liabilities (TL) where TA = E + TL

The law of bankruptcy for small businesses and large national businesses are not so easy applied to international governments.

If any project passes the first test can be took in consideration the next more complex stage being clear of their assumptions and how reliable they are, assessing the expected return and using a range of different assumptions. Such as the discount cash flow (DCF) allows to put the cash flows received into two different times on a comparable basis to evaluate potential

investments of methods appraisal. The NPV (net present value) and IRR (internal rate of return).

The NPV calculate the present value of all cash flow associated with the investment (the initial investment outflow and the future cash flow returns). The higher the NPV the better. Also the NPV help as to decide whether an investment will add value in the long run and compare different investment options and finally decide whether to introduce a new product. In addition its additive if there are two or more projects and the project choices made on the basis of NPV are value-maximising and should lead of shareholders wealth. Some disadvantage is that it is not easy to explain to managers, it is relatively complex and it’s require knowledge of the Cost of Capital

The NPV > 0 would add value to the company (viable and accepted project). If the NPV < 0 subtract value from the company (nonviable and the project is rejected.)

IRR it is another useful metric tool on analysing an investment. The higher the IRR the better.

The IRR > Cost of Capital is a (viable and accepted project). If the IRR < Cost capital is a (nonviable and the project is rejected). In addition an IRR is the discount rate that makes a project to break-even.

One of the advantages of NPV and IRR is that they take into account the time value of money (e.g. the money we expect sooner are worth more to us than the money we expect further in the future).

Methods of calculation:

Liquidity are:

Current ratio – current assets / current liability.

Acid test (current assets – inventory) / current liabilities.

Receivables days: receivables / credit sales x 365 days.

Inventory days: Inventory / cost of sale x 365 days.

Payable days: Payables / purchases (or cost of sales) x 365 days.

OPPORTING PROFIT = OPORTUNITY PROFIT X REVENUE

CAPITAL EMPLOYED REVENUE CAPITAL EMPLOYED

ROCE AND ROS are conjunction with the asset turnover.

ROCE = ROS X assets turnover.

GEARING: Non-current liabilities / (ordinary shareholders + non-current liabilities% (sometimes describe as debt to equity + debt)

INTEREST: Operating profit / finance cost.

LO. 4 The Major Financial statement, it is a formal record of financial activities for a specific period (daily, monthly, quarterly or yearly), and which provides detailed key decisions like information by understanding the complexity among different levels implied for businesses, company, organisation and industries, or other entity, such as appraisal evaluation in choosing and making various decision into the right direction.

The particular investment of Private sector where is not easy controlled by the Gov’t, mostly aims to make profit through the business action.

The balance sheet of the period from 2011, 2012 and 2013 of John Lewis Partnership which one is a consolidate statement not just simple statement. The consolidate statement is produced by the parent company and generally viewed by potentials investors, government agencies, or in case of applying for loan or grants. Also the consolidate statement combines the information from subsidiaries companies and the entire enterprise is treated as single entity for accounting purpose. The Balance Sheet records the total of assets, liabilities and equities (net worth). This kind of statement provides two kinds of view, one is what the sources the business owns and they are situated in different columns as assets, liability and equity. Although the Income statement and Cash flow. All of them stated before represent a true faire view of the company position.

The both accountant statement as balance sheet (capital, assets and liability), and profit and loss account (profitability and efficiency of trading over the year) are produced at the end of each year, both as snapshot is to understand where the trading and profitability of the company John Lewis Partnership are.

The three keys as financial statement are Balance sheet, Income Statement and Cash flow.The Balance sheet is mainly tell the position of the company for a period of time (yearly) and comprise a number of categories within three main elements assets, liabilities and shareholders’ equity.The Balance sheet and Income statement shows at the beginning and at the end of an accounting period the positions of company. Where shows doesn’t directly analyses of some of the key changes which has taken place in company financial position (e.g. how much capital expenditure for equipment, machinery and buildings has the company made). The financial performance of the company which has been achieved during the accounting period it’s shown in profit &loss account.

The Cash Flow summarise cash inflow and cash outflow and calculate the net change in the cash position for the company. An important implication including Cash flow is the Budgetary plan which attempt to assess the viability of new potential for new businesses.

Balance Sheet of The Company John Lewis for the years 2011, 2012 and 2013.

BALANCE SHEET 2013, 2012 and 2011

Notes

28/01/2013. £m 31/01/2012. £m 31/01/2011. £m

Non-Current Assets 12 Investments 102.3 87.4 70.2

Total assets 102.3 87.4 70,2Current Liability

18 Trade and other payable (2.0) (1.8) (1.4)Non-Current Liabilities

17 Borrowing (88.9) (74.4) (57.7)Total Liabilities (90.9) (76.2) (59.1)Net Assets 11.4 11.2 11.1

Equities11 Shared Capitals 0.6 0.6 0.69 Other Reserves 5.0 5.0 5.0

Retaining Earnings 5.8 5.6 5.513 Total Equities 11.4 11.2 11,1

It is important to look after it day by day at the cash flow (working capital) to ensure that the cost of finance is effectively managed when the finance is put to work. The John Lewis Partnership and Financial Performance which shows how much profit or loss has the company made at the end of accounting period. This kind of statement reflect on the fiscal year, the board of accountants should prepare the second one (profit &loss account) based on calendar year.

Below see the Consolidate Income Statement (profit & loss account) of John Lewis Company, 2011, 2012 and 2013.

26/01/2012, 12 Month statement. £m

28/01/2012,12 Month statement. £m

29/01/ 2011, 12 Month statement. £m

2 Turnover 8,758.6 8,361.82 Gross Sale 9,541.3 8,729.5 8,206.32 Revenue

(cost of sales)8,465.5

(5,640.1)7,758.6

(5,166.5)7,361.8

(4,878.7)

3

Gross ProfitOther operating incomeOperating expenses

2,825.464.1

2.437.1

2,592.159.6

2,258.4

2,483.153.7

2,105.8244

Operating profitFinance costFinance income

452.4(82.9)

40.1

393.3(72.3)

32.8

431.0(69.3)

6.2Profit before Partnership bonus and taxPartnership bonus

409.6

(210.8)

353.8

(165.2)

367.9

(194.5)56

Profit before taxTaxation

198.8(47.1)

188.6(52.4)

173.4(46.0)

Profit for the year 151.7 136.2 127.4

John Lewis and the International Accounting Standard (IAS).

Cash Flow of John Lewis Company, 2011, 2012 and 2013.

Cash Flow from 2013, 2012 and 2011 26/01/2013 Month statement. £m

28/01/2012,12 Month statement. £m

29/01/ 2011, 12 Month statement. £m

Cash generated from operations 979.0 759.1 745.1Net taxation paid (53.5) (33.7) (27.5)Partnership Bonus paid (164.3) (194.5) (151.2)Additional contribution to the Pension Scheme (125.0) - (150.0)Finance cost paid (4.9) (2.3) (2.0)Net cash generated from operating activities

631.3 528.6 414.4

Cash flow from investing activitiesPurchase of property, plant and equipment (261.5) (425.7) (447.9)Purchase of intangible assets (95.5) 88.4 43.5Proceeds from sale of property , plant and equipment

1.9 11.8 3.7

Finance income received 1.9 2.4 3.1Net cash used in investing activities (354.2) (499.9) (484.6)Cash flow from financing activities Finance cost in respect of bonds (56.8) (54.7) (76.7)Payment of capital element of finance leases (3.5) (0.7) (0.4)

Payments to preference shareholders (0.2) (0.2) (0.2)

Payments to SIP shareholders ( 1.7) (1.3) (1.1)Cash inflow from borrowingCash outflow from borrowing

14.5(242.0)

71.5 151.6

Net cash (used in)/generated from financing activities

(289.7) 14.6 73.2

(Decrease)/increase in net cash and cash equivalents

(12.6) 43.3 3.0

Net cash and cash equivalents at beginning of year

490.7 447.4 444.4

Net cash and cash equivalents at end of year 478.1 490.7 447.4

Net cash and cash equivalents comprise:Cash 120.0 83.6 84.2

Short cash from investments 414.4 467.2 428.5Bank overdraft (56.3) (60.1) (65.3)TOTAL 478.1 490.7 447.4

From different type of businesses and difference of statements I will mention the follow. International transactions and operations is for businesses when occur between companies in different countries as changes in exchange rates can cause companies to have foreign currency transactions as gains and losses on credit transactions and must be disclosed in the financial statement . The personal financial statement should be prepared on accrual basis. Also is an individual or group where accountant prepare personal financial statement for obtaining bank loan, income tax planning, retirement planning, gift and estate planning and the public disclosure of financial affairs.

John Lewis Partnership:

Gross Sale up £523.2m, 6.4% to £8.3bn.

Sale excluding VAT up £400.5m, 5.4% to 7.86bn.

Group sale profit down £37.7m, 8.7% to 393.3m.

Profit before partnership bonus and tax down £14.1m, 3.8% to £353.8m.

Partnership bonus of £165.2m; 14% of salary (equal to seven weeks’ pay).

Waitrose:

Gross Sale up £425.8m, 8.6% to £5.40bn.

Sale exclusive VAT up £372.4m, 7.9% to £5.07bn.

Food only like-for-like sale up 3.6% (up 3.0% excluding VAT).

Operating profit down £14.3m, 5.2% to £260.6m.

John Lewis:

Gross sale up £97.4m, 3.0% to £33.3bn.

Sale excluding VAT up £28.1m, 1.0% to 2.79bn.

Like-for-like sale up 1.3% (down 0.6% excluding VAT).

Johnlewis.com sale up £141.7m, 26.3%, to £680.8m (up£111.2m, 24.2% excluding VAT).

INCOME STATENENT- 31/Dec/2014 SOLE TRADER Company J BloggyRevenue [net of Discount Allowed]Cost of goods soldOpening inventory 12,000Add: Purchases [net of Discount Received] 68,000

80,000Less: closing inventory 14,000

66,000Gross profit 84,000Less: ExpensesRent and rates 1,400Heat and light 1,600Wages and salaries 8,800Loan interest 1,200Van expenses 900Depreciation 2,000Sundry expenses 3,000

18,00065,100

Other operating income: Commission Received 2,000Profit for the year 67,100

As is stated in the annual report that the John Lewis stepping on little by little have propel the brand into the nation’s hearts.

CONCLUSION

John Lewis Partnership in the past has some difficulties (when it comes to make profit) but recent financial figure show, also much stronger managerial control and improvement by changing strategy. Which is mean that John Lewis Partnership it is still good potential for investors into the future and a substantial return on dividends for their shareholders.

CRITICIZE

Financial planning is a continuous process which helps to make sensible decisions