Myob Accounts and Proposal Analysis - Essay Example

Something material appears to have happened in the immediate past but there is no information about this or the potential long-term effects. The whole proposal has not been thought through: if it had, there would be a formal proposal document with relevant and timely information for a potential investor.

b The past three years’ accounts should be provided as a minimum, to enable a full financial assessment that reveals trading patterns and trends in the areas of liquidity, profitability, the speed of debtor and creditor payments, sales and their associated costs, as well as expenses and owner’s drawings.
The information provides the reasons for the proposed expansion of the business and why a partnership approach has been chosen, rather than, say, a bank or other loan. The proposal as it stands seems to allow Chris Wren to take advantage of the increased capital base provided by a partner’s investment, without giving them any say in how the business is run or allowing them to get involved. He wants more supporting funds, and he wants to continue running the business as he has been doing for the past few years, which may not be the best way to do it.
If the new partner is not to undertake any work, who will be doing the extra work that an expansion should be aiming to acquire? There are no projections for increases in sales or the associated increased cost of sales and support expenses. There is no business plan at all and a basic plan should be in place at the moment to provide an objective for the business to achieve. If there is no plan, then what precisely is the investment needed for?
What’s in it for the potential investor, specifically? What sort of profit levels will be generated by the expanded business and what rate of return does this represent? How does this compare with other businesses in the same sector, a basic bank savings account or perhaps a managed stock market investment plan? Why is this a good idea for the investor?


c Financial statements present a picture of the past, not of the present or future. The past can be a useful guide to future performance but does not guarantee that performance will continue.
Important information that cannot be provided in numbers is missing, such as the business reputation and skill and experience of staff. Non-financial information, such as firm location, supplier and customer relationships, and business sustainability, is equally important.
Financial statements present a particular view of the business as prescribed by law, rather than an accurate picture of what is really going on. A business is more than its accounting statements; it is part of society.