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Introduction: Financial Performance Review and Strategic Analysis of ATC
Ananda Tropic Collections Pty Ltd owns a range of businesses involved in fashion retailing and fashion wholesaling, and the business mainly specialises in the provision of attractive, comfortable and brightly colored apparel. There were some problems with the company in 2023, like a net loss and problems with liquidity. It also explains working capital management, financial performance, and strategic planning to the company, in a proposal to improve its operations and therefore its future growth.
Part A: Performance Analysis
Working Capital Management Analysis
Working capital management is an important aspect of business since it affects the availability of funds for operating activities. The indices like inventory management, receivables, payables, and the overall working capital days give the viewpoint of the firm’s financial status. It has also calculated ATC’s days’ inventory outstanding, which is 95 days more than the industry average of 88 days, showing inefficiency of inventory management to a certain level.
Figure 1: Working Capital Days over Time
The average collection period again refers to receivables management, where there are issues with collecting payments from wholesalers that influence cash flow (Anton & Afloarei Nucu, 2020). Management of payables and credit options agreed with suppliers is under pressure, resulting from, among other things, the current economic systems.
Figure 2: Sales Revenue
The trends for ATC show that the working capital cycle is longer for the company, which means that cash is locked in for a longer time, and hence it affects the liquidity position of the company.
Financial Performance Analysis
ATC’s financial performance requires analysis through different measures in its business. Slightly lower numbers are the gross margin of 60.7% for the period up to 30th June 2024, and the operating cost has remained high at 49.4% of trading income.
Figure 3: Gross Margin over Time
Marketing expenses, constituting 21.3% OSH, come next at trading income, though the amount has also increased above the target and managed to shift the net result to the red in the 2023-2024 financial year (Olayinka, 2022). Also, from the financial analysis point of view, the bad debts ratio has slightly risen; this may pose a certain threat to the company’s credit management. The proportion of rent expenses to the trading income has gone up. By doing so, recruits and outsourced workers account for 1.96% of a firm’s staff, thus reducing profit margins.
Figure 4: Rent Expenses over Time
(Source: Self-created in Excel)
It is necessary to point out that solving these problems is crucial for increasing financial stability.
Part B: Strategic Planning
Evaluation of Key Performance Indicators (KPIs)
It can be stated that the KPIs suggested to drive the monitoring of operational efficiency and financial performance are useful for the current situation in ATC. The credits of inventory should be processed based on the following days. For any inventory credit, processing should occur not more than two business days, considering the financial management and customer satisfaction (Hidayat & Saleh, 2020). The inventory accuracy should stand at 95 per cent as this reduces the variance of the physical inventory and the recorded stock, which would contribute to low losses due to stock out or overstocking.
Figure 5: Marketing Expenses over Time
The other regulatory measure to hold operating expenses down is the limitation of marketing expenses to not more than 15% of the sales revenue. Hence, the strategic objective of increasing trade income by 2% per quarter is consistent with improving the company’s revenues, especially from wholesalers.
Critique of Reward-Based Remuneration System
The revealed reward-based payment system on the subject of overturning the conversion rate from 2% to 4% by September 2024 seems rather groundbreaking. Although it motivates performance, the target may not be genuine because there are conditions beyond the organisation’s control, such as market forces and consumers (Fulmer, Gerhart & Kim, 2023). A perhaps more realistic goal, with a gradual increase in the frequency of such activities, would probably be more effective and might contribute to maintaining the motivation among people.
Figure 6: Financial Ratio Table
This is the financial ratio table pictured above in the form of a doughnut chart. Also, the approach of connecting bonuses to several KPI instead of one, for example, conversion can be equally effective in motivating overall performance.
Part C: Dashboard Development
Dashboard Creation
They are more and more using a one-page dashboard – a single page that contains all the key information that can give a quick, measurable view of ATC’s performance. Some of these are a bar chart on the sales revenue by period, a line graph showing the turnover of inventory and a pie chart on marketing expense distribution. A stacked bar chart is used to show the breakdown of working capital (Victor & Farooq, 2021). Finally, a doughnut chart presents a snapshot of the key financial ratios like gross margin and operating expense percentage and so on. Alongside the one-line graph of working Capital days was also added.
Figure 7: Created Dashboard
Justification of Dashboard Elements
The selected features on the dashboard are crucial for monitoring ATC’s performance and informing decision-making. The chart that represents the sales revenues allows one to track trends and special variants, which is crucial for making decisions. The inventory turnover graph assists in monitoring an organisation's performance on stock management (Sugiyanti et al., 2022). Marketing expenses are also maintained using the pie chart that shows expenditure so that one does not exceed the other. The specific type of the bar chart, namely the stacked bar chart, helps to consider the elements that make up working capital, which remain the key to liquidity management. The financial ratios doughnut also proves useful to check conclusions about profitability and cost control efficiency.
Conclusion
The recommendations involve the implementation of sound efficiency measurement and working capital management to support ATC’s future success. Optimising inventory, accounts receivable, and managing costs of marketing will help stabilise the company’s financial status. Measurable goals will be established in the form of specific KPIs to be achieved in the implementation process to enhance improvement. The reward, on the other hand, will be made balanced to encourage the employees to achieve the specified goals. Altogether, these actions will promote growth, integrate business processes with the company’s strategy, and guarantee sustainable profitability for ATC to adapt to future adversities and benefits.
