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Show the effects on profitability, liquidity and performance of the company, through the ratio calculations both before and after the sale of Property Plant and Equipment.
Faculty of Business and Law
Assignment Brief 2022-23
ACFI2208 Performance Measurement in Organisation
Module Title
Performance Measurement in Organisation
Assignment Number
Assessment 1
Module Code
ACFI2208
Assignment Title
Essay
Module Leader
Assignment Weighting
30%
Assignment Release Date:
Submission Date/Time:
Assessment Information – What you need to do
This assignment is an individual assignment.
This assignment requires you to attempt all questions from Section A and any two questions of your choice from Section B.
Criteria for Assessment - How you will be marked
Assessment Criteria
%
Section A- Compulsory
Question 1
50
Section B- Answer any 2 questions
Question 2
25
And/ Or
Question 3
25
And/ Or
Question 4
25
Total Marks
100
Further information on University mark descriptors can be found here.
This assignment is designed to assess the following learning outcomes:
Subject specific skills and knowledge
Calculations and analysis of ratios
Harmonisation of accounting standards
Investment appraisal
Non-subject specific skills
The ability to work independently.
Efficiently plan and manage, including improved time-management and self-motivation skills.
Carry out self-managed study and research to extend the boundaries of knowledge.
Assessment Details
The word count is 1500 words.
There will be a penalty of a deduction of 10% of the mark for work exceeding the word limit by 10% or more.
The word limit excludes figures, tables, references list and appendices. Please note that the reference list should be line in with Harvard referencing and should be displayed at the bottom of your essay.
How to Submit your Assessment
The assessment must be submitted by 12:00 noon (GMT/BST) on 20/01/2023 . No paper copies are required. You can access the submission link through the module web.
Your coursework will be given a zero mark if you do not submit a copy through Turnitin. Please take care to ensure that you have fully submitted your work.
Please ensure that you have submitted your work using the correct file format, unreadable files will receive a mark of zero. The Faculty accepts Microsoft Office and PDF documents, unless otherwise advised by the module leader.
All work submitted after the submission deadline without a valid and approved reason will be subject to the University regulations on late submissions.
If an assessment is submitted up to 14 days late the mark for the work will be capped at the pass mark of 40 per cent for undergraduate modules or 50 per cent for postgraduate modules
If an assessment is submitted beyond 14 calendar days late the work will receive a mark of zero per cent
The above applies to a student’s first attempt at the assessment. If work submitted as a reassessment of a previously failed assessment task is submitted later than the deadline the work will immediately be given a mark of zero per cent
If an assessment which is marked as pass/fail rather than given a percentage mark is submitted later than the deadline, the work will immediately be marked as a fail
The University wants you to do your best. However, we know that sometimes events happen which mean that you can’t submit your coursework by the deadline – these events should be beyond your control and not easy to predict. If this happens, you can apply for an extension to your deadline for up to two weeks, or if you need longer, you can apply for a deferral, which takes you to the next assessment period (for example, to the re-sit period following the main Assessment Boards). You must apply before the deadline. You will find information about applying for extensions and deferrals here.
Students MUST keep a copy and/or an electronic file of their assignment.
Checks will be made on your work using anti-plagiarism software and approved plagiarism checking websites.
Return of Marked Work
You can expect to have feedback returned to you on. If for any reason there is a delay you will be kept informed. Marks and feedback will be provided online. It is important that you access the feedback you receive as this will help to make improvements to your later work, you can request a meeting with your Module Leader or Personal Tutor to discuss your feedback in more detail.
Marks will have been internally moderated only, and will therefore be provisional; your mark will be formally agreed later in the year once the external examiner has completed their review. More information on assessment and feedback can be found here .
Academic Integrity
In submitting a piece of work for assessment it is essential that you understand the University`s requirements for maintaining academic integrity and ensure that the work does not contravene University regulations. Some examples of behaviour that would not be considered acceptable include plagiarism, re-use of previously assessed work, collusion with others and purchasing your assignment from a third party. For more information on academic offences, bad academic practice, and academic penalties, please read chapter four of our academic regulations .
Academic Support and Your Well-being
Referencing is the process of acknowledging other people’s work when you have used it in your assignment or research. It allows the reader to locate your source material as quickly and easily as possible so that they can read these sources themselves and verify the validity of your arguments. Referencing provides the link between what you write and the evidence on which it is based.
You identify the sources that you have used by citing them in the text of your assignment (called citations or in-text citations ) and referencing them at the end of your assignment (called the reference list or end-text citations ). The reference list only includes the sources cited in your text. The main referencing guide can be found here and includes information on the basics of referencing and achieving good academic practice. It also has tabs for the specific referencing styles depending on whether you require Harvard style used in business or OSCOLA style used by the Law school.
Section A
Question 1 Richard Plc
Richard Plc is based in Bangladesh and engages in the production of leisure and sports clothes for retailers in the UK. It makes up its accounts to 30th September each year.
Income Statement for the year ended 30 September 2022 is as below:
Richard Plc
2022
£000
Revenue
98,000
Cost of Sales
(56,600)
Gross Profit
41,400
Administration Expenses
(20,100)
Trading Profit
21,300
Finance Costs
(6,600)
Profit on Ordinary Activities Before Taxation
14,700
Taxation on Profit on Ordinary Activities
(7,938)
Profit for the Year
6,762
Richard Plc
Balance Sheet as at 30 September 2022
2020
Non-Current Assets
£000
Intangible Assets
22,450
Property, Plant and Equipment
87,200
Other Investments
17,800
127,450
Current Assets
Inventories
18,700
Trade and Other Receivables
27,530
Cash and Short-Term Deposits
13,400
59,630
Total Assets
187,080
Current Liabilities
Bank Overdrafts
12,600
Unsecured Bank Loans
8,400
Trade and Other Payables
13,200
Current Tax Liability
9,320
43,520
Non-Current Liabilities
Medium Term Bank Loans
22,000
Finance Leases
9,600
Provisions
10,200
41,800
Total Liabilities
85,320
Net Assets
101,760
Equity
Called Up Share Capital
37,200
Share Premium
24,000
Other Reserves
12,400
Retained Earnings
28,160
101,760
a) The Directors of Richard Plc are considering to sell £50 million worth of Property, Plant and Equipment to pay off their Medium-term bank loans; any excess cash left over will then be used to increase current assets and working capital. No profit or loss arises on the transaction and there is no effect on market capitalisation. Show the effects on profitability, liquidity and performance of the company, through the ratio calculations both before and after the sale of Property Plant and Equipment.
(i) Gross Profit % (2 marks)
(ii) Gearing ratio (6 marks)
(iii) Current ratio (4 marks)
(iv) After tax profit as % of fixed assets (4 marks)
(v) Z scores, if market capitalization is £60,000,000. (12 marks)
b) Explain the impact of the directors’ decision on the ratios calculated above in part (a). List any three reasons as why the directors of the Richard Plc are engaged in Off Balance Sheet financing to improve the financial outlook of the company? (350 words)(10 marks)
c) Bangladesh, adopted International Financial Reporting Standards (IFRS) in 2006. Critically evaluate the impact of adopting IFRS in the developing countries.
Note: Please use in-text citations and referencing in this section. (350 words) (12 marks)
Total 750 words
Total 50 marks
Section B
Answer only 2 of the 3 questions in this section
2. Investment Appraisal Technique:
Jacobson Limited is considering two mutually exclusive projects with the following details, with a cost of capital of 12%
Cashflow
Year
Project A (£)
Project B (£)
0
(550,000)
(550,000)
1
270,000
170,000
2
170,000
210,000
3
130,000
150,000
4
150,000
180,500
Calculate the Payback Period and NPV for each project (15 Marks)
Using the above techniques briefly discuss why you chose project A or B. (5 Marks)
Jacobson limited is considering evaluating the projects using MIRR instead of IRR and has asked you for advice. Discuss some of the limitations of IRR and how MIRR overcomes them. (5 Marks) (200 words max)
3. Risk and Uncertainty:
Peter&Co is considering investing in three mutually exclusive investment opportunities. The cashflows from each project is dependent upon the market conditions that prevail over the life of the project.
If the market conditions are POOR during the life of the projects, there is a 15% probability that Project A would return £600,000; Project B would return £150,000; and Project C would make a loss of £1,600,000
If the market conditions are AVEARGE during the life of the projects, there is a 60% probability that Project A would return £850,000; Project B would return £970,000; and Project C would return £700,000
If the market conditions are GOOD during the life of the projects, there is a 25% probability that Project A would return £2,500,000; Project B would return £3,630,000 and Project C would make a loss of £5,200,000
YOU ARE REQUIRED TO:
a) Prepare the payoff table showing clearly cashflow for each project with all possible combination of market conditions. (4 marks)
b) Using the payoff table you prepared, recommend which investments are most suitable to undertake using the following decision criteria:
Maximax
Maximin
Minimax regret
Expected Values
(16 marks)
c) The directors of Peter&Co are considering evaluating the risk of each project using other method of dealing with risk. Explain to the directors usefulness of decision trees in dealing with risk. (5 marks)
4. Divisionalisation and Transfer Pricing:
WetWell is a producer of canned carbonated drinks. It has several divisions which supply materials to each other. Division C has offered to supply the Division T with aluminium cans at the transfer price of £0.15 per can. Division C calculates the transfer price based on full cost. Division C can also sell the cans to external customers for £0.16 per can. Division C has estimated that 80% of their full cost is variable, and the other 20% is fixed
Division T uses the cans to produce the carbonated drinks, which it can then sell to external customers.
YOU ARE REQUIRED TO:
Evaluate the transfer prices at which Division C should charge Division T if the group’s objective is to maximise profit across the whole group for the following three scenarios:
i. Division C has an external market for all the cans it produces at £0.16 per can (2 Marks)
ii. Division C has the capacity to produce 25 million cans and has an external market for 13 million cans and the transfer price is set at the full cost. (5 marks)
iii. Division T has found an external supplier that will supply as many cans as they require for £0.13 per can. Division C is still charging Division T £0.15 per can. Discuss whether Division T should buy externally and show the range of transfer prices that Division C could sell to Division T at.(6 marks)
Discuss briefly the benefits and drawbacks of negotiated transfer prices. (6 marks)
The company is considering adopting a policy that involves evaluating the performance of each department using Return on Investment. Discuss the measure and how it contrasts from Residual Value. (6 marks)
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