Today, many companies face budgetary challenges on a continual basis. Two critic
ID: 2612272 • Letter: T
Question
Today, many companies face budgetary challenges on a continual basis. Two critical aspects that businesses lack are effective control practices and monitoring. You have been asked by your manager of the Money Cares Investment Corporation, to outline problematic or risk areas in the company’s financial procedures. Upon reviewing the budget, you notice that there is overspending in marketing supplies, transportation, and workshop items that include hospitality items such as food and drink for the customers. Each investment specialist is given a company credit card for the above expenses but there are no policies established for monitoring. Money Cares is a small business of 8 employees: CEO, Financier, a manager, 3 investment specialists, and 2 clerical assistants.
For this assignment you must identify possible risks for the Money Cares Investment Corporation. In establishing an investment company, you must answer the following
What could go wrong?
Identify at least 3 possible risks.
What must happen in order for the company to succeed?
What are the company’s most vulnerable areas?
Identify the company’s assets
Where is the most money spent?
How should the budget activities be regulated?
Explanation / Answer
Answer: The first risk that Money care would be exposed to is financial risk. This would be if money care wasn’t able to repay its depositors as there is no asset liability management in place. What this means is money care will not be able to repay its depositors on time leading to legal issues. The second money care might face is risk of bankruptcy. This could be bought on by creditors of the company. The third risk money care might face is they might get penalize by authorities and compliances for not keeping their accounting practices right. They may even have their license to operate as an investment organization taken away. Money care is also at risk of being exposed to business risk, valuation risk and force of sale risk. Business risk by definition is “ the potential for loss of value through competition, mismanagement, and financial insolvency” (three types of rick). The way to avoid business risk is to presence of franchise value. Companies that have franchise value can raise their prices to adjust for increases in things like labor, taxes or material costs. Valuation risk business is trading at a price of its current and average earnings where the dangers of investing in companies appear to be overvalued. Force of sale risk led to remarkable amount of risk. Investment analysis been absolutely correct but are forced in a time limit.
Answer:In order for the company to succeed the company should gain more market share, to make the customers satisfied and honor their deposits in time. A good risk management policy should be in place and business goals and employee policies should be first brought into place, to reduce the cost of operations by cutting down on employee benefits and streamlining their expenses and to incentive sales. . The company needs to define business goals and clear targets in order to solve the business problem. To succeed the company should be determined to do to avoid the generation of these risks, and to overcome the risks if they actually occur.
Answer: One of the companies vulnerable areas are policies for employee practices and appraisals. This will led to unnecessary spending on the part of the employees of money care. This has to be made right so that money care can show some signs of good authority within the company. Lack control over practices and monitoring of the employees and their work is not shown.
Answer: One of the assets that the company has is the investments it giving from their investor’s money and the organization under which it currently holds office. The company must have made investments in many banks and non financial banking companies. These are the assets.
Answer:I would have to say that most of the company’s money is being spent on thing like marketing supplies, transportation, and workshop items. That would also include things like food and drink for their customers. Money would also be spent on paying the expenses of the investment specialists for things like business trips.
Answer:The budget activities can be regulated by tracking the expenses of all Money care employees. The company should also put an expenses budget so that they know what not to go over. By doing this money care would be able to track its incomes and make necessary cut in areas of unnecessary spending. It should be regulated with great concern and its only target should be cost cutting and the budgeting method should be used though all levels of the organization