Financial Analysis Jet2 Task 2

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A1. Discuss specific budgetary items that raise concern in the budget planning Budget serves two main purposes – planning and control. Budget is used to plan for sales, purchases, production, cash flow and profits. Long term capital budget allows business to plan for major expenses, like new plant development. Another purpose is controlling: controlling expenditures and evaluating performance. It provides with a set of goals which the company expect to meet. (1) Competition Bikes, Inc also plans its budget. The provided data shows scheduled budget/ ProFormas of the company as well as flexible budget performance report for 2009. Along with provided data the company has its financial statements for the years range from 2006 to 2008. Evaluation of this data will help to highlight budgetary items that raise concern in the budget planning. Sales budget The company plans to realize 3510 units in 2009, which is 110 units more considering realized units in 2008. In its statement, the company noted that the current economic situation and declining sponsorships are the reason for the decrease in sales and it is expectation of the further decline for the three following years. However, the company doesn’t provide strategy to support its plan to realize more units. There are no clear marketing policy and allocation of resources to bolster economic growth on the factory and advertisement campaign. Therefore, this is should be re-considered and adjust to realistic goals. Schedule of cash receipts The company planed its budget based on projected sales in units. It is noted that company calculated cash receipts from collection based on total budgeted revenue, however as it said before the number of projected units to sell may not be realistic to support these numbers as well as to collect the cash. As it stated in the budget statement “ for accounts receivables the

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