Accounting Essays | The Penarth's Stores Allocation Needs To Be Reduced

The Penarth's stores allocation needs to be reduced to a percentage that approximates Aberdare's 22%. This would open up 28% to be devoted to profitable sales such as diary products and general groceries, significantly expanding these sections as well as providing additional space for small increases in the other departments, fresh meats frozen foods and space for alcoholic drinks and beverages which is completely missing from the Penarth mini market.

Because each mini market was henceforth to be operated as individual business entities, options as well as constraints with regard to raising capital to expand operations at the Aberdare location also were to be included.

Options for raising capital at each mini market are governed by prudent business practice. The calculation of factors such as 'interest cover and gearing provide guidelines by which to operate in constraining the raising of capital beyond acceptable levels. Interest Cover represents an important financial variable for business entities in that it provides a gauge concerning the interest paid on the businesses borrowings as measured against its operating profit (HM Revenue & Customs, 2005).

This figure is arriving at by dividing the operating profits of the mini market by the interest paid during the same fiscal period. The preceding ratio illustrates the relationship of gearing with respect to the profit and loss. Simply stated, 'gearing' describes the debt compared with the mini market's equity capital (Randall, 2003)

Budgetary planning and control was delegated to the manager of the Penarth mini market.
In fulfilling this aspect of the directives discussed in the manager's meeting the balance between improving operational performance through decision making precedes budgetary planning as the direction and changes to be employed must first be decided upon and all impacting variables considered.

One such example is the allocation of space at the Penarth mini market whereby the stores department occupies 50% of available floor space. The decision making process in this instance revolves around how to reapportion space and to what departments to maximize the return. Another decision-making process entails the introduction of film processing at the Aberdare mini market and the allocation of resources as well as space based upon projections and market research.

Decision making entails utilizing a checklist of steps to assist in arriving at the most viable selection based upon a consideration of factors, facts, influences and alternative options.