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Calculate the bounce - Essay Example

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This has, in turn, created a substantial growth in profitability from 2007-2009. However, it would be important to identify whether earned profit is desired for capital improvements/investments…
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Download file to see previous pages There are 49 employees, with a total monthly payroll output of £101,400. Each employee, on average, earns £2069 monthly or £24,828 yearly. However, bonus amount should be based on profit figures. Employees are used to receiving £70,000 in commissions, therefore bonus should be more equal to this figure in which they have become accustomed in order to improve motivation and performance incentives.
Analysis methodology should consider current objectives, such as whether the business is looking to invest or, perhaps, expand the company which will require additional expenditures. Questions should be asked such as whether owners’ equity, for the investor stakeholder, should be considered prior to paying a bonus.
There is one important factor to consider: In 2008, the company agreed to £16.5 million in goods in exchange for 50 percent of the company, giving the business these goods for a period of one year. This agreement raised inventory assets in the company, which only improves its position for growth or perhaps access to new credit. The current global accounting standards would identify these goods or perhaps depreciate their value over time, however its rising liquidity from the goods exchange makes the company stronger at the accounting level. Therefore, bonus should not be reduced as current profit levels remain unchanged even with the new 50/50 ownership. The goods received are still part of the company’s inventory.
Profit in 2009 was £7.72 million. There was no cash balance from 2008 to consider as profit was used to expand sales for 2009. With this in mind, if the company divided the entire profit among the 49 employees, it would be calculated as:
However, this is far outside of industry norms and equates to more than the employees are used to receiving with their sales commission and would not add to the business’ cash balance, which is strategically ...Download file to see next pagesRead More
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