Maximizing efficiency and effectiveness as a business manager is critical for the success of the business. James as the manager of the Jones and Sons Company can maximize his efficiency and effectiveness as a manager by organizing his business in various aspects as follows;
Jones and Sons Company has various functions such as logistics, marketing, finance, and operations, among others. The organizational chart below illustrates how James can organize functions in Jones and Sons Company to increase his efficiency.
Organizational Chart for Jones and Sons
Note. The flow chart above is an illustration of how James can organize the Jones and Sons Company.
For James to maximize his efficiency in the business, he needs to organize the products offered by the company effectively. In organizing the company in terms of its products, James needs to allocate employees into independent divisions based on the particular type of products being sold and the type of customers involved (Joseph et al., 2016). Some of the products offered by Jones and Sons are petrol and petroleum products, through their petrol franchise. As such, James would need to allocate a marketing team and sales team specifically for the petrol franchise. He will also need a manager for the petrol franchise, who will be managing the operations of the franchise and will be reporting to him.
Organizing business in terms of services is critical in ensuring the manager involved can work efficiently and effectively to meet the goals and objectives of the company (Joseph et al., 2016). Jones and Sons Company offers several services, some of them being garage services to the locals and other clients, servicing of vehicles for the local ministry of works, and repairing of cars for the New Zealand (NZ) rail. For all the services offered by the company, James would need to have a centralized advertising director, who would oversee the marketing and advertisement of the services. For the repair and servicing services offered to individuals and organizations such as the ministry of works and the NZ rail, James would need a manager who will be reporting directly to him to ensure that the employees are supervised, and to monitor the workshop conditions.
As a result of the continued expansion of the Jones and Sons company, James needs to organize the company's infrastructure effectively to increase his efficiency and to reduce unnecessary costs that may be incurred by having the company's operations in separate buildings. James needs to have a manager in charge of the company's building to ensure that the building is maintained and can are sufficient to facilitate all the operations of the company. The manager will also be in charge of the equipment to ensure that all the equipment is well maintained and are used for the intended purposes, therefore avoiding loss and frequent malfunction of the equipment. He will be reporting directly to James.
To organize a business in terms of the stakeholders, James would need to classify his stakeholders into two categories, i.e., internal and external stakeholders (Mancini, 2013). The external stakeholders would include the employees, managers, and owners of the company. In contrast, the external stakeholders would consist of both the individual customers and corporate customers, suppliers, and society and the government (Mancini, 2013).
Functions and Capabilities of an Accounting System
James should organize the accounting system of the company into financial accounting reports and managerial accounting reports. The financial accounting reports will give periodic financial statements of the company and any other related disclosures on finances. In contrast, the managerial accounting reports will provide continuous performance reports of the employees and company in general as well as detailed plans for the company (Mancini, 2013). The managerial accounting reports will then help the managers to make internal decisions while the financial accounting reports will help investors and creditors to make external decisions.
Part Two: Analysis and Interpretation
The current ratio of 1.6:1 for Jim and Sons implies that the company is financially healthy and can meet its short-term liabilities such as debts and is also able to invest a significant percentage of its working capital on various investments (Asmi, 2014).
The current ratio can be used to assist in decision making in various ways, some of them being to creditors and investors. A current ratio that is below one may indicate that the company may have difficulties in settling its short-term debts, and thus, the risk for short-term lenders, in this case, might be high (Asmi, 2014). However, a current ratio of above one may give insights to the investors that the company can meet its short-term obligations. Thus, the risks associated with lending the company on a short-term basis are low (Asmi, 2014).
Acid Test Ratio
Acid test ratio is a liquidity ratio that measures the ability of a company to pay its short-term liabilities using its quick assets only (Weil et al., 2013). Quick assets are the current assets that can easily be converted to actual money within a short period of 90 days.
The acid test ratio for Jim and Sons is 1.1:1 is a good indicator that the company can pay off its short term liabilities using its quick assets without necessarily using its long term assets and still have some remaining quick assets left to the company after settling the current obligations (Edmonds et al., 2013).
If the acid test ratio was very, Jim and Sons should be concerned because it indicates that the lot of accumulated cash that is unutilized and is lying idle rather than being reinvested in other productive investments or returned to the company's shareholders (Edmonds et al., 2013).
If the acid test ratio for Jim and Sons was unfavorable, Jim and Sons could reduce the period of invoice collection, which would consequently increase their cash flow in the short-term and ultimately increase their acid test ratio. Jim and Sons could also increase their inventory sales and turnover, which would increase their cash at hand and eventually help to improve the company's acid test ratio. Another effective way through which Jim and Sons can make their acid test ratio favorable is through making quick payments of current liabilities. Ensuring that all the company's current liabilities are put continuously under control would significantly improve the acid test ratio of the company (Muller, 2019).
Debts to Equity Ratio
The debt to equity ratio of Jim and Sons is at 0.3:1 and means that the company uses debt-financing equivalent to 30% of its equity (Babalola & Abiola, 2013).
From an investor or a lending institution perspective, Jim and Sons Company is more stable financially. It would, therefore, offer security to their investments and loans while reducing their risks of loss (Khadafi et al., 2014).
If Jim and Sons carried more loans, it would be advantageous because it would help the company to reduce its cost of capital. Because debt is a relatively cheaper source of business financing because of tax savings compared to business financing through equity, carrying more loans for Jim and Sons would imply that the company would be having more tax savings and thus reducing its overall cost of capital (Asmi, 2014).
Debt to Total Assets Ratio
Jim and Son's debt to total asset ratio of 0.24:1 tells me that a significant portion of the company's assets is funded by the company's equity rather than debts. It also implies that the company has more assets compared to liabilities and can, therefore, offset its obligations by disposing of some of its assets (Babalola & Abiola, 2013).
Investors would be interested in the debt to asset ratio to assess whether the company has enough cash to meet its current debt obligations, which would then help to evaluate whether the company can pay a return on their investments.
Creditors would be interested in this ratio to evaluate how much debt the company has accumulated already and whether the company can repay its current obligations. With the evaluation, creditors can then determine whether they can extend further loans to the company.
Total Assets Turnover
The total asset turnover rate of Jim and Sons is 2.06:1, and it indicates that for every dollar in assets, the company generates $2.06 in sales, and thus, the company is more efficient in using their assets to generate revenue (Asmi, 2014).
To use their assets more productively, Jim and Sons could aim at increasing their sales by offering discounts, promotions, and holding sales for old stock. Jim and Sons can also aim at improving their efficiency, both on personnel and machinery. They can also dispose-off their fixed assets that are unutilized in the company or lease their unused equipment (Asmi, 2014).
Return on Total Assets
The return on total assets for Jim and Sons is 0.49:1 and indicates that for every dollar that the company invested in assets during that year, the company produced $0.49 of net income. The use of assets by the company is efficient since the return on assets rate is healthy (Asmi, 2014).
Jim and Sons can use the return on assets information to inform their business decisions on whether to reduce or increase asset investments. Additionally, the information can help the company to assess the effectiveness of its management in using the available assets to generate earnings (Asmi, 2014).
Asmi, T. L. (2014). Current Ratio, Debt To Equity Ratio, Total Asset Turnover, Return On Asset, Price To Book Value Sebagai Faktor Penentu Return Saham. Management Analysis Journal, 3(2). http://journal.unnes.ac.id/sju/index.php/maj/article/view/3953
Babalola, Y. A., & Abiola, F. R. (2013). Financial ratio analysis of firms: A tool for decision making. International journal of management sciences, 1(4), 132-137. http://www.academia.edu/download/32371001/Paper_4.pdf
Edmonds, T. P., McNair, F. M., Olds, P. R., & Milam, E. E. (2013). Fundamental financial accounting concepts. New York, NY: McGraw-Hill Irwin. https://dphu.org/uploads/attachements/books/books_5136_0.pdf
Joseph, J., Klingebiel, R., & Wilson, A. J. (2016). Organizational structure and performance feedback: Centralization, aspirations, and termination decisions. Organization Science, 27(5), 1065-1083. https://pubsonline.informs.org/doi/abs/10.1287/orsc.2016.1076
Khadafi, M., Heikal, M., & Ummah, A. (2014). Influence analysis of return on assets (ROA), return on equity (ROE), net profit margin (NPM), debt to equity ratio (DER), and current ratio (CR), against corporate profit growth in automotive in Indonesia Stock Exchange. International Journal of Academic Research in Business and Social Sciences, 4(12). http://repository.unimal.ac.id/1351/
Mancini, M. E. (2013). Understanding and Designing Organizational Structures. Leading and Managing in Nursing-Revised Reprint-E-Book, 139. https://books.google.com/books?hl=en&lr=&id=tLHSCQAAQBAJ&oi=fnd&pg=PA139&dq=organizational+structures+major+types&ots=8mlprJvH7w&sig=Snj60Hp-SFMirK6vqq44mnFdeuc
Muller, M. (2019). Essentials of inventory management. HarperCollins Leadership.
Weil, R. L., Schipper, K., & Francis, J. (2013). Financial accounting: an introduction to concepts, methods, and uses. Cengage Learning. https://books.google.com/books?hl=en&lr=&id=aF9GnzmDoeEC&oi=fnd&pg=PR5&dq=acid+test+ratios+accounting&ots=-4I34e0o6N&sig=a3r_-6hjBjCk5i_W4I0qJUeMLRc
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