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K1. A critical understanding of the key strategic financial statements of an organisation
PGBM01 - FINANCIAL MANAGEMENT AND CONTROL Module leader:
Tutors:
Assessment weight:
100% of the module
Outcomes Assessed:
All
Please note that this is an individual assignment and the universities “Policy on Cheating, Collusion and
Plagiarism” applies. All calculations and tables are subject to plagiarism policy of the University. All tables and calculations should be your own work.
This assessment is in three parts, please answer all elements.
Please write your Tutor’s name clearly on the front of the assignment.
This assessment covers the following learning outcomes from the module.
Knowledge
K1. A critical understanding of the key strategic financial statements of an organisation
K2. Understanding and evaluation of the uses of both quantitative and qualitative accounting information within an organisation
K3. Knowledge and understanding of theoretical concepts and frameworks to a range of practical situations in order to propose solutions to strategic business problems
Skills
S1. The cognitive skills of critical thinking and analysis in showing how the finance function can make a significant contribution to the successful strategic management of an organisation
S2. The skills necessary to communicate effectively at a senior level and be able to put these skills into practice
S3. Development of the skills required to independently access and process financial data
Part A
Question 1: Kadlex Consultancy (KC) PLC
Kadlex PLC is well established Financial Consultancy company in London. The board of directors have investigated the financial statements of the last two years and have noticed significant changes in different elements of Income statements and Balance sheets. You are working in the same company as a junior management accountant and directors have asked you to prepare a report on results of the two year’s financial statements. The financial statement of the KC PLC are given below:
Statement of Comprehensive Income for the year ended 2020 and 2021.
2021
2020
£000
£000
£000
£000
Revenue
58,700
48,600
Less: Cost of sales:
Opening Inventory
5,250
4,840
Manufacturing cost
27,000
21,800
Total cost of goods available to
sell
32,250
26,640
Less: Closing inventory
4,750
4,160
Total cost of sales
27,500
22,480
Gross profit
31,200
26,120
Less: Operating expenses:
Selling & distribution expenses
6,000
4,800
Administrative expenses
2,750
2,250
8,750
Operating profit
22,450
Less: Interest payable
5,250
4,975
Profit before tax
17,200
14,095
Less: Corporation tax (20%)
3,440
2,819
Profit after tax (Net profit)
13,760
11,276
Less: Dividend paid (10%)
1376
1,128
Retained profit for the year
12,384
10,148
Statement of financial position as at 31st of December 2020 and 2021.
2021
2020
£000
£000
£000
£000
Non-current assets (net):
Land and building
40,500
30,800
Equipment
12,750
15,500
Motor vehicles
5,250
4,320
Current Assets:
Inventory
15,950
12,160
Trade receivables
12,875
11,920
Bank
20,445
20,520
Cash
1005
900
50,275
45,500
Current liabilities:
Trade payables
(10,375)
(10,800)
Net current assets
39,900
34,700
98,400
85,320
Non-current liabilities:
Loan stock
(34,375)
(34,375)
Net assets
64,025
50,945
Equity:
Ordinary shares of £1 each
24,000
24,000
Share premium
8,000
6,000
Retained earnings
32,025
20,945
Total equity
64,025
50,945
Required:
Prepare a structured report for Board of Kadlex PLC, which evaluates the performance of the company in relation to relevant ratios of the Profitability, Liquidity, Gearing, Asset utilisation, Investors’ potential Marks (20%) Easy-Life Limited, a London based Event Organiser is as a strategic business unit of KC PLC . Sales revenue and direct costs for one event is £1000 and £600 respectively.
Total fixed cost for the year ending December 2021 was £160,000.
Calculate breakeven in both sales (unit and cash), contribution margin ratio, and operating leverage (assuming actual sales quantity of 700 units was increased by 10%). Critically discuss how each of these three metrics can impact on any of the profitability ratios in Task 1 Marks (10%)
All calculations should be clearly shown including all appropriate workings and should be
made to the nearest £000 or two decimal places where required
Total marks for Part A: (30)
Part B
Perri-perri Sauce (PPS)Ltd , is well established London based fast-food company. The directors are expecting that demand of meal in future will increase significantly and with current capacity company will not be able to meet the demand. Therefore, directors have decided to purchase a new machine to enhance the capacity to benefit from the expected increase in demand. Two versions of machines are available from different manufacturers at the same cost of £600,000. Both machines have six years useful life and will be sold at estimated price of
£60,000 at the end of sixth year. PPS Ltd will use straight line method for depreciation of these machines. Cost of capital for both machines is 8%.
Directors are to purchase one machine from the available two, same cost and net cash inflow from both machines is confusing them to take decision. You are Finance Manager of PPS Ltd and directors have asked to produce a report which should highlight the economic feasibility for decision making. Further information regarding net cash inflow from both machines is provided below:
Machine A Machine B
Years Cash flow Cash flow
0
(600,000)
(600,000)
1
300,000
95,000
2
250,000
100,000
3
200,000
150,000
4
150,000
200,000
5
100,000
250,000
6
95,000 300,000
Requirements:
Calculate (2-decimal places ) using the following investment appraisal techniques, and provide recommendations as to the economic feasibility of acquiring the suitable machine:The Payback Period.
The Discounted Payback Period.
The Accounting Rate of Return.
The Net Present Value.
The Internal Rate of Return (to two decimal places) Marks (15%)
Critically evaluate the key benefits and limitations of each of the differing investment appraisal techniques, supporting the response with relevant academic research as to
whether each of the differing techniques is applied in practice within a real-life business context. Marks (10%)
Blue-drum PLC is a listed company planning to meet the environmental protection strategy including an introduction using the UN approved 120-litre plastic open-top drums, known as the ‘Blue-drum’. Cost of manufacturing a drum includes direct material at £18, direct labour is £10 and variable overheads at £2. The depreciation of a special equipment is £4 with no resale value, supervisors’ wages is £6. Including the general factory overheads which is allocated based on direct labour hours, the total cost manufacturing is £50 per a drum, based on 30,000 units of drum produced each year. However, an external supplier has offered to provide the same quantity at £40 per drum.
Critically discuss factors that Blue-drum PLC should consider in making a choice between the making or buying of the ‘Blue-drums’. Marks (15%)
You are also required to critically evaluate three suitable sources of finance to fund PPS Ltd investment in the machine projects compared to the listed company, Blue-drums PLC in task 1 and task 3 respectively. Marks (10%)
All calculations should demonstrate the appropriate workings that are used to derive the solution and should not be performed in Microsoft Excel.
Total marks for Part B – (50)
Part C: Budgeting and Financial plan Required:
Research a multinational organisation of your choice and complete the following task:
1. Critically evaluate the budgeting process and demonstrate how budgets, objectives, and strategic plans are related. Marks (12%)
2. Briefly discuss the significance of Business plan and analyse the key elements of it financial plan section. Marks (8%)
Total marks for Part C: (20) Note:
To obtain a high mark, you should:
Make your report concise, precise and well-presented and structured; Draw logical conclusions from accounting information;
Synthesise information in a coherent and useful way;
Show evidence of key text and background reading;
Incorporate your knowledge into an integrated piece of work;
Demonstrate critical understanding of financial management
A Harvard standard referencing is required for the report
Limit overall words 3,500 (+- 10%) excluding calculations in appendix
Generic Assessment Criteria – Postgraduate
These should be interpreted according to the level at which you are working as specified in this assignment
Assessment Criteria
Categories
Grade
Relevance
Knowledge
Analysis
Argument and Structure
Critical Evaluation
Presentation
Reference to Literature
86 –
The work examined is exemplary and provides clear evidence of a complete grasp of the knowledge in all calculations, understanding and skills appropriate to the Level of the
100%
qualification. Student must have demonstrated an excellent knowledge and understanding of theoretical concepts and frameworks to all practical situations in order to propose solutions
to strategic business problems. There is also ample excellent evidence showing that all the learning outcomes and responsibilities appropriate to that Level are fully satisfied. Prepare a structured report for Board of Kadlex PLC, which evaluates the performance of the company in relation to relevant ratios of the Profitability, Liquidity, Gearing, Asset utilisation, Investors’ potential .
At this level it is expected that the work will be exemplary in all the categories cited above. It will demonstrate a particularly compelling evaluation, originality, and elegance of argument, interpretation or Discourse. There must be a perfect match of ALL above criteria to at least 90% calculations and interpretations of each task attempted.
76-85%
The work examined is outstanding and demonstrates comprehensive knowledge in calculations, understanding and skills appropriate to the Level of the qualification. Student must have
demonstrated a very good knowledge and understanding of theoretical concepts and frameworks to all practical situations in order to propose solutions to strategic business problems
There is also excellent evidence showing that all the learning outcomes and responsibilities appropriate to that level are fully satisfied. At this level it is expected that the work will be
outstanding in majority of the categories as cited above or by demonstrating particularly compelling evaluation and elegance of argument, interpretation or discourse.
ALL the above criteria must have a perfect association to at least 80% of the expected calculations and interpretations in each task attempted,
70 – 75%
The work examined is excellent and is evidence of comprehensive knowledge in calculations, understanding and skills appropriate to the Level of the qualification. Student must have demonstrated a very good knowledge and understanding of theoretical concepts and frameworks to most practical situations in order to propose solutions to strategic business problems There is also excellent evidence showing that all the learning outcomes and responsibilities appropriate to that level are satisfied. At this level it is expected that the work will be excellent in majority of the categories cited above or by demonstrating particularly compelling evaluation and elegance of argument must be clearly linked with at least 70% of calculations, and interpretation or discourse of each task attempted.
60 – 69%
Directly relevant to the requirements of the assessment
A substantial knowledge of at least 60% of overall calculations with a clear and relevant interpretations, showing a clear grasp of themes, questions and issues therein
Good analysis, clear and orderly approaches associated with relevant theories and model(s).
Generally coherent and logically structured, using an appropriate mode of argument and/or theoretical mode(s) and frameworks to a range of practical situations in order to propose solutions to strategic business problems
May contain some distinctive or independent thinking; may begin to formulate an independent position in relation to theory and/or practice. Good evaluation of the uses of both quantitative and
Well written, with standard spelling and grammar, in a readable style with acceptable format
Critical appraisal of up-to- date and/or appropriate literature. Recognition of different perspectives. Very good use of source material. Uses a range of sources
50 – 59%
Some attempt to address the requirements of the assessment: may drift away from this in less focused passages
Adequate knowledge of a fair range of at least 50% of overall calculations with a clear and relevant interpretations, with some intermittent evidence of an appreciation of its significance
Some analytical treatment, but may be prone to description, or to narrative, which lacks clear analytical purpose
Some attempt to construct a coherent argument, with appropriate frameworks but may suffer loss of focus and consistency, with issues at stake stated only vaguely, or theoretical mode(s) couched in simplistic terms
Sound work which expresses a coherent position only in broad terms and in uncritical conformity to one or more standard views of the topic
Competently written, with only minor lapses from standard grammar, with acceptable format
Uses a variety of literature which includes some recent texts and/or appropriate literature, though not necessarily including a substantive amount beyond
library texts. Competent use of source material.
40 – 49%
Some correlation with the requirements of the assessment but there is a significant degree of irrelevance
Basic understanding of the subject but addressing a limited range of
calculations with relevant and basic interpretations
Largely descriptive or narrative, with little evidence of analysis of theories and model(s)
A basic argument is evident, but mainly supported by assertion and there may be a lack of clarity and coherence
Some evidence of a view starting to be formed but mainly derivative.
A simple basic style but with significant deficiencies in expression or format that may pose obstacles for the reader
Some up-to-date and/or appropriate literature used. Goes beyond the material tutor has provided. Limited use of sources to support a point. Weak use of source material.
35 – 39%
Relevance to the requirements of the assessment may be very intermittent, and may be reduced to its vaguest and least challenging terms
A limited understanding of a narrow range of at least 30% of overall calculations associated with relevant interpretations
Heavy dependence on description, and/or reliance on paraphrase been commonly identified.
Little evidence of coherent argument with lacks development and may be repetitive or thin
Almost wholly derivative where
writer’s contribution rarely goes beyond simplifying paraphrase
Numerous deficiencies in
expression and presentation; the writer may achieve
clarity (if at all) only by using a simplistic or repetitious style
Barely adequate use of literature. Over reliance on material provided by the tutor.
The evidence provided shows that the majority of the learning outcomes and responsibilities appropriate to that Level are satisfied.
30 – 34%
The work examined provides insufficient evidence of the knowledge in calculations with appropriate interpretations, understanding and skills appropriate to the Level of the qualification. The evidence provided shows that some of the learning outcomes and responsibilities appropriate to that Levelare satisfied. The work will be weak in some of the
15-29%
indicators.The work examined is unacceptable and provides little evidence of the knowledge in calculations with basic interpretations, understanding and skills appropriate to the Level of the qualification. The evidence shows that few of the learning outcomes and responsibilities appropriate to that Level are satisfied. The work will be weak in several of the indicators.
0-14%
The work examined is unacceptable and provides almost no evidence of the knowledge in calculations with few interpretations, understanding and skills appropriate to the Level of the qualification. The evidence fails to show that any of the learning outcomes and responsibilities appropriate to that Level are satisfied. The work will be weak in the majority or all of the indicators.
AQH-F6-15 Guidelines on Generic Assessment Criteria, v3
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