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Category : bonds

3People from departments, branches, or any other unit can combine their estimates and analyze their group rating. Some may see themselves as being close to the future orientation end of the spectrum; others may see themselves at the opposite end. Assessing each department using a graph like the one in Exercise 11 should help identify prospective areas where readiness for partnering activities is evident—and indicate where more developmental activities are needed before the decision to create a partnership is made.

Articulating a vision that is consistent with the leadership’s actions and cultural readiness can motivate everyone to participate in its implementation. Goals such as sales targets, revenue growth, and market penetration are strategic directions that organizations should address in their mission statements. But without a vision to channel the ethereal energies of each participant, such goals alone are not compelling enough to break through to the creative zone.

The costs of acquisition, enhancement and disposal of an asset can be deducted from the gain. Also, the cost of defending your right to ownership of the asset can be deducted, whilst the normal cost of repairs and maintenance and interest payments cannot. Special rules apply to the costs of ‘wasting assets’ (which are defined as assets which had a predictable life of less than 50 years when acquired).

Acquisition costs are defined as being costs wholly and exclusively incurred in acquiring the asset. Where the asset is business goodwill, any capital costs expressly incurred wholly and exclusively in creating the asset can be deducted. Enhancement costs are those costs wholly and exclusively incurred to enhance the asset as long as the costs are still reflected in the nature of the asset at the date of sale.

Incidental costs include costs of transfer or conveyance; and fees, commissions and remuneration for professional advice.

47Focus on major items of expenditure. Costs should be categorised as major or peripheral items. Undue emphasis is often given to the 80% of activities accounting for 20% of costs, rather than focusing on the priorities:

The activities generating the majority of costs. Reduce costs through cost awareness. While focusing on major items of expenditure, it may also be possible to reduce the overall level of cost of peripheral items. Costs can be reduced over the medium to long term by influencing people’s attitudes towards cost and wastage. In particular, examine managers’ attitudes to cost control and reduction and the effects of expenses on cash flow and profitability.

Maintain a balance between costs and quality. Commercial management and cost control mean getting the best value possible. This requires a balance between price paid and quality received.

Knowing when a project or new business will break even is important in any decision to invest money, time and resources in it. Break-even point is when sales cover costs, where neither a profit nor a loss results. It is calculated by dividing the costs of the project by the gross profit at specific dates, making an allowance for overhead costs. Break-even analysis is used to decide whether to continue development of a product, alter the price, or provide or adjust a discount, or whether to change suppliers in order to reduce costs. It also helps with managing the sales mix, cost structure and production capacity, as well as forecasting and budgeting.

For break-even analysis to be reliable, the sales price per unit should be constant, as should the sales mix, and stock levels should not vary significantly.