Tiny Toes Financial Analysis Report

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Financial information for decision making

Accurate financial information is necessary so that Tiny Toes Ltd understand revenues and costs
incurred. An understanding on revenues of Tiny Toes Ltd enables decision makers to plan with
current resources so that extra pressure is not place on the companys resources. Investments can
lead to collapse of business especially when they are not funded effectively. At Tiny Toes Ltd,
financial information has already assisted the management to minimize costs so that the business
that can use extra income in other investment projects. However, Tiny Toes Ltd needs to spread
the costs over a long period of time. Mackeviius and Senkus (2010, p. 171) write that
investments and expansion into other projects should not be hurried because the company is
likely to be affected in the short-term thereby leading to loss of current children.
Cost cutting strategies to be adopted at Tiny Toes Ltd such as rfew music lessons and other
activities, as well as basic food are likely to affect the source of the cash flow. Children are the
major source of cash-flow at Tiny Toes Ltd. Service delivery should not be compromised
because they are likely to be registered in other organizations providing similar services.
Financial information such as current cash-flow is necessary so that decisions concerning extra
funding are made (Bu et al. 2015, p. 181). Tiny Toes Ltd understands the amount of funding that
is necessary for expansion and growth. However, such high levels of funding can lead Tiny Toes
Ltd intro a cash drought. Financial information enables businesses to understand the best time of
securing funding and how to use the extra funds to achieve high levels of growth. Altering cashflow through cost cutting on critical services for the kids at Tiny Toes Ltd is likely to cause
serious financial challenges to the company thereby leading to exodus of children to competitor
companies.

Benefits of a detailed business plan, cash flow forecast, and budgets

A business plan is necessary so that Tiny Toes Ltd identifies the sources of income or cash-flow
inside the business. In addition, an understanding of expenses and costs is also necessary so that
the business reduce wastage. A detailed business plan enables Tiny Toes Ltd to identify revenue
streams which are necessary for investments to succeed. Revenue streams at Tiny Toes Ltd are
children who pay high fees. Caution should be made not to increase fees for children while cost
cutting on critical services that attract more revenue stream to the organization.
Cash-flow forecasts warns Tiny Toes Ltd of tough times ahead when investments are hurried.
Tiny Toes Ltd, through cash-flow forecast, can achieve steady growth so that the company does
not experience challenges in the process of initiating investments projects. For example, the
information on annual profits and costs should be used to plan carefully so that investments are
spread over a long period of time while eliminating any need to reduce costs (Lin et al. 2013, p.
213). Investments into childcare should not strain current financial flow which guarantees quality
service delivery at Tiny Toes Ltd.
Budgets are necessary for securing extra funding from donors and financial service provider.
Banks look at profit levels so that they determine the right amount of credit sustainable based on
income levels (Ross et al. 2013, p. 759). Budgets are necessary so that cost cutting is
implemented of sectors that are not critical to the success of Tiny Toes Ltd. An understanding on
costs to be incurred in the new child care centre assist Tiny Toes Ltd to prepare for extra costs
which cannot be funded by financial service providers. And understanding on losses to be made
is necessary so that the business make right choices which do not strain resources for efficient
and quality services.

Problems with financial information at Tiny Toes Ltd

Tiny Toes Ltd lacks information concerning bank balance at the end of a financial year. Bank
balances are necessary for credit companies to assess the ability of the company to pay the loan
based on current bank balance (Kaka 2006, p. 35). Credit worthiness of a business is not
reflected in the financial information of Tiny Toes Ltd. Part from bank balance at the end of a
financial year, Tiny Toes Ltd has not provided bank balance at the start of the financial year so
that decisions for extra funding are based on bank balances. Tiny Toes Ltd cannot achieve
sustainable growth and provide quality services to current customers when there are serious
strains on resources such as bank balance.
Tiny Toes Ltd major assets are children paying school fees. However, the company has not
presented any information on any other asset that assists the business to generate more cash for
survival. According to Milewicz, Herbig, and Golden (2015, p. 43), liabilities have also not been
covered in financial information so that the business understands areas that affect cash-flow into
the business. Tiny Toes Ltd should consider a detailed balance sheet contain information on
assets, liabilities, as well as equities at certain times of the year (Fellows, 2011, p. 187). Such
information is necessary for decision making process.
Balance sheet information such as the owners equity is also lacking in the data provided about
Tiny Toes Ltd. Information concerning the owners investment into the business has not been
provided. In particular, the costs incurred since Tiny Toes Ltd started operations have not been
noted down so that potential credit companies understand the equity of the firm. Kaka (2006, p.
37) writes that the amount of assets minus liabilities leads to the identification of owners equity.

Navon (2015, p. 501) argues that owners equity states the financial position of the business so
that financial service providers can assess the ability of the company to meet the terms and
conditions of credit.
Problems for generating internal finance
Tiny Toes Ltd is likely to cut costs on crucial services that make the company competitive in the
market. A problem arises when the most basic food is provided to the children, as well as
elimination of music lessons to cut costs. Such actions are likely to make parents reconsider
decisions to allow children attend Tiny Toes Ltd. Poor service delivery, as well as strain on
current resources would lead to tough economic times thereby affecting competitive nature of
Tiny Toes Ltd.
Extra finance from lenders is likely to put Tiny Toes Ltd into serious financial challenges in the
long-term. High interest rates may affect service delivery thereby leading to exodus of children
to other nursery schools. Finance from lenders means extra fulfilment costs thereby affecting the
cash-flow in the short-term as well as long-term (Turner and Guilding 2012, p. 519). Reduced
cash-flow may arise because of cost cutting in service delivery and other critical aspects that
make children feel comfortable at Tiny Toes Ltd. In the end, Tiny Toes Ltd may not be
competitive enough to compete with other businesses have steady and sufficient cash flow which
guarantees quality service to children.
Tiny Toes Ltd may not stay strong when tough times arise. Cash-flow forecasts conducted on a
regular basis can assist Tiny Toes Ltd to be competitive in the market. In particular, the company
should have information on the cash position of the business at all times so that they survive

instead of sinking. High interests rates and a costly loan is destructive thereby leading to the
demise of Tiny Toes Ltd.
Tiny Toes Ltd may also experience challenges when negotiating for new fees with parents and
suppliers. Cash flow forecasts should be used by Tiny Toes Ltd to influence parents so that they
accept new fee levies. William R. Voorhees and Jeongwoo Kim, (2011, p. 285) write that Cashflow forecasts could also assist to negotiate or set terms so that when the business gets money,
they can meet all financial needs of building a new childcare centre. Access to loans may be
affected because the business cannot set terms on how they will pay the loan based on terms and
conditions set by the lender.
Problems in development of new projects
The development of the Guildford Nursery and child care centres will affect service delivery.
High costs of financing development and loans from lenders will lead to cost cutting. Cutting
costs of services provided to children as well as increasing fees to fund the project will lead to
poor service delivery. Competition in the business may be affected because parents are likely to
consider relocating children to other facilities.
In my opinion, based on the financial information provided, Tiny Toes Ltd should not consider
development projects within Guilford Nursery and Company Childcare centre. Cash-flow is
affected when development projects are very expensive. A loan of over 17 million is not
sustainable to a business that struggles to make profits at the end of each year. Strains on cashflow and profits are likely to cause long periods of economic turmoil thereby leading to the
demise of Tiny Toes Ltd. When liabilities exceed cash-flow and money generated from assets,
Tiny Toes Ltd is likely to be affected in terms of quality services provided to customers. The

revenue stream is too low to support a loan of 17 million so that the company competes with
others in the short-term.

References
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