Helpful as always! Thanks a lot1. Generally, with respect to the interdependence between finance and operations:
In the case of the pizza chain restaurant, finance is required for inputs to be made available, including both transformed resources (such as materials and information) and transforming resources (such as employees and facilities). Those inputs will be turned into outputs via the transformation process, which are to be sold, allowing the business to make a return on their investment.
- Finance is required for inputs, machinery, land etc. to create value whilst receiving a return on investments.
- Operations manages stock and outsourcing whilst finance monitors the cost.
Managing stock is also important to consider regarding the interdependence of finance and operations as it allows the pizza chain restaurant to determine appropriate quantities to be used in the production process as well as whether or not such quantities are available. Finance ensures spending relevant to managing stock is adequate, i.e. the business is not paying too much for stock-related costs.
2. You can technically discuss any two limitations of financial reports of your choice, as long as you can effectively establish the link between those limitations and the business.
Instead of discussing valuing assets, I would suggest discussing debt repayments along with capitalising expenses as limitations of financial reports for this business.
The main problem with financial reports relevant to debt repayments is that they can be limited because they do not have the capacity to disclose specific information regarding debt repayments, including:
This limitation would be particularly relevant to the pizza chain restaurant because the stimulus states AJ's Pizza Pty. Ltd. has recently purchased an existing large pizza chain restaurant with falling sales and increasing debt.
- When the debts are due
- How long the business has had or has been recovering the debt
- The capacity of the business or its debtor to repay the amount/s owed
I hope this helps!