Customer 3213), the fall in working capital could decrease

Customer Relationship Management:

The organisation has designed and followed
effective customer relationship management for providing better convenience and
satisfaction to the customers in terms of quality and services. The company has
been providing information to the customers about the introduction of new
products and services to keep them up-to-date with the organisational news.
This has helped the company to increase and develop a loyal customer base for
increasing its profits (Hull, 2012, pp. 780). However,
Lam (2014, pp. 1002) argued that the company needs to hire additional
marketing employees to provide information to the customers, which might
increase its operating cost and result in low profits.

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

Suppliers and Inventory:

 It
has been assessed that the company has incurred additional payments to the
suppliers, which might be because of the increased demands and wants of the
customers. The company has been releasing its inventory within a short span of
time and therefore, it depicts that there is a strong demand of the company’s
products in the market. This has largely benefitted the company in increasing
its sales revenue, thereby resulting in increased profits. In this context, Merna and Al-Thani (2011, pp.
801) cited that generating greater demand in the market always enables an
organisation to enhance its productivity and profitability. On the contrary, Saunders
and Allen (2010, pp. 1011) are of the view that the company also needs to pay
additional amount to the suppliers and thereby, it can result in lower
profitability of the business.

Interest
on Investments:

It has been evaluated that the company has experienced a
decline in the interest on investments and therefore, it has affected the
profitability of the company largely.  The
company has failed to generate sufficient reruns from the investments, which
has reduced its working capital in the business. As per the view of Aebi et al. (2012, pp. 3213), the fall in
working capital could decrease the operational efficiency of the firm, which,
in turn, might create problems for the organisation to run its daily business
operations. On the contrary, Ageron et al.
(2012, pp. 180) stated that the decline in working capital could reduce the
quality of products due to the lack of capital.

c.
Identifying major variances in the profit and
loss budget and explain the likely impact on annual performance:

The major variances in the profit and loss
budget of the organisation and their likely effects on the annual performance
of the company are briefly discussed below:

Total Income:

It has been assessed from the profit and
loss budget of the company that the there is major variance in the total income
because of the declining sales of the company in the year 2015. The reason
behind such decline might be due to the inadequate standard and quality of the
products and failing to assess the customer demands and wants. As a result, the
revenues of the company have experienced a sharp decline. This might negatively
affect the annual performance of the company, as the company needs to incur
additional sum of money from its working capital (Beck et
al. 2011, pp. 111). Thus, the company might face difficulties in running
its day-to-ay activities.

Salaries and Non-Costs:

There has also been a major variance in the
salaries and the non-costs section of the organisation because the company has
paid additional amount to its staffs more than the budgeted cost. This would
largely affect the profitability of the company and thereby, hampering its
productivity (Borio and Zhu, 2012, pp. 249). However, as argued by Carter
and Liane Easton (2011, pp. 57), paying additional amount to the employees
could result in increased morale, thereby, enhancing the productivity of the
business. 

x

Hi!
I'm Angelica!

Would you like to get a custom essay? How about receiving a customized one?

Check it out