Need help- ACC7001:Managerial Finance
COURSEWORK FRONT SHEET
MODULE TITLE: Managerial Finance (1)
MODULE CODE: ACC7001
ISSUE DATE: 10th Oct
HAND IN DATE: 11th Dec, 12.00 PM Midday
HAND BACK DATE: 13th Jan, Next Year
|Learning outcomes and pass attainment level:
1. Evaluate the financial performance of an organisation using financial and narrative information.
The assessment for this unit is one coursework assignment. The required mark has been set at 50%.
This is an individual assessment. Whilst there is no objection to you discussing the content of this assignment with your peers, your final submission must be completely your own work. Plagiarism and copying will not be tolerated and may lead to subsequent penalties being imposed. This is an individual assignment and all calculations, analysis and narrative submitted must be your own work.
The assignment will require a considerable personal investment of time and effort.
Structure of the assignment
There are THREE separate questions included within the assignment and you should attempt all THREE questions. When determining the amount of effort and words for each section of the assignment it will be advisable to examine the weighting of the marks allocated to each question. If any part of the assignment is ignored then this reduces the maximum marks which could potentially be earned.
The word limit to any potential narrative question in the third section alone will be a maximum of 1,500 words excluding the cited references. There is no word limit to questions 1 and 2.
Submission of the assignment
All THREE questions must be attempted and submitted in one document. You are advised to prepare your assignment in Word format and copy and paste contents from Excel where spreadsheets have been used to support your work.
Your student ID number should be shown on each page of your assignment.
Your assignment should be submitted electronically via Moodle and you are advised to do this well in advance of the submission deadline to avoid any system related issues. Feedback on your assignment will also be provided via Moodle once the marking has been completed.
Marking of the assignment
The matrix on the following page has been provided to assist you in completing your assignment and is an indicative guide only, not a formal marking scheme.
Indicative marking guide
|A lack of breadth and depth of financial analysis techniques accompanied by incorrect formulae or calculation without appropriate explanation.
Poor layout or presentation in anything other than business report style. Inadequate grammar and lacking in overall knowledgeable synthesis.
|Evidence of some financial analysis techniques but with errors of formulae and calculation with insufficient explanation and adequate presentation.
Attempt at a business report format with some supportive appendices. Mainly descriptive with some attempt at synthesis. Grammar and structure being adequate.
|Wide range of financial analysis techniques evident and supported by full disclosure of formulae and accurate calculation in a clear format.
Presented in business report format and coherently structured. Supported by referenced appendices. Effective and well-reasoned narrative discussion.
|An excellent range of financial analysis techniques which are supported by full disclosure of formulae and accurate calculation in a clear format.
Excellent business report format and well structured. Supported by fully referenced appendices. Excellent analytical and justified explanations showing synthesis and application.
|A lack of understanding of preparing cash budget and capital budgeting techniques is evident. Unable to correctly prepare cash budget and apply techniques of capital budgeting. Has limited or no narrative discussions.
|Some understanding of preparing cash budget and capital budgeting techniques is evident. Partially correct cash budget and application of techniques of capital budgeting. Narrative analysis partially covers the requirements.
|A good understanding of preparing cash budget and capital budgeting techniques is evident. Correct cash budget and A good application of techniques of capital budgeting in the given scenarios. Narrative analyses are adequate and explain the use of financial information for decision making.
|Excellent understanding of preparing cash budget and capital budgeting techniques is evident. Cash budget and application of techniques of capital budgeting in the given scenarios are both correct and exceptionally well presented including workings. Narrative analyses are quite objective and well-written and explain in detail the use of financial information for decision making. .|
|Failure to engage with the topic and lacking credible academic argument. No evidence of research other than internet sites of dubious quality. Poorly structured and partial coverage of the contents with weak grammar.
|Partial engagement with the topic with some limited evidence of research. Some analysis of the two approaches provided. Grammar, structure and layout adequate.||Identification and conclusion of arguments surrounding the topic with reference to credible academic citations that are fully referenced in a bibliography. Well-structured and coherent narrative employing above average grammar and evidencing significant student research.
|Thoroughly developed arguments with well referenced credible academic sources. Well-structured and presented evidencing excellent grammar and extensive student research and analysis of the topic area.|
Alliance Pharma is a British Pharmaceutical firm. The company’s financial statements for the period 2011-2015 are presented below.
Prepare a business report for Alliance’s board of directors analysing the company’s financial performance between the periods 2011-2015. Your report should utilise key ratios, horizontal and vertical analysis and make reference to relevant developments within Alliance Plc. Total Marks (50)
|Cost of sales||-19,614||-18,493||-17,944||-19,779||-21,469|
|Admin & Marketing Exps||-17,480||-12,510||-12,917||-11,856||-11,235|
|Amortisation of Intangible assets||-199||-488||-422||-573||-735|
|Share-based employee remuneration||-615||-571||-632||-369||-179|
|Share of joint venture profits||194||319||-48||0||0|
|Total operating expenses||-18,100||-13,250||-14,019||-12,798||-12,149|
|Operating profit/loss excluding Exceptional items)||10,630||11,793||13,312||12,320||12,339|
|Profit before taxes||15,182||10,157||12,009||10,809||10,712|
|Profit for the year||12,692||8,385||9,584||8,690||8,636|
|Alliance Pharma Plc|
|Property, plant and equipment||1,013||396||592||564||765|
|Joint Venture investment||1,465||1,271||533||0||0|
|Joint Venture receivable||1,462||1,462||1,462||0||0|
|Deferred tax asset||418||194||0||0||0|
|Other non-current assets||122||0||443||0||0|
|Total non-current assets||264,425||92,198||90,141||80,454||66,895|
|Trade and other receivables||11,630||8,322||10,641||10,145||8,660|
|Cash and cash equivalents||3,229||1,434||687||4,634||1,079|
|Total current assets||27,769||15,670||16,796||20,172||15,391|
|Ordinary share capital||4,682||2,641||2,641||2,430||2,401|
|Share premium account||108,308||29,388||29,380||25,297||24,866|
|Share option reserve||2,610||1,995||1,424||792||423|
|Reverse takeover reserve||-329||-329||-329||-329||-329|
|Long term financial liabilities||58,968||19,235||20,881||20,225||15,225|
|Derivative financial instruments||120||129||0||0||0|
|Deferred tax liability||37,413||6,309||6,294||6,124||4,064|
|Provision for other liabilities||0||0||199||364||510|
|Total non-current liabilities||97,997||25,673||27,374||26,733||24,299|
|Cash and cash equivalents||31||414||2,125||1||1|
|Trade and other payables||13,873||6920||8,531||10,086||8,367|
|Derivative financial instruments||0||0||0||0||6|
|Provisions for other liabilities||0||227||190||197||189|
|Total current liabilities||31,755||11,415||14,895||22,045||13,859|
|Total equity and liabilities||292,194||107,868||106,937||100,626||82,286|
- a) Cash Budget
On December 1, 2016, Zipper Co. is attempting to project cash receipts and disbursements through January 31, 2017. On this latter date, a note will be payable in the amount of £50,000. This amount was borrowed in September to carry the company through the seasonal peak in November and December.
Selected general ledger balances on December 1 are as follows:
Cash £ 44,000
Accounts payable £68,000
Sales terms call for a 3% discount if payment is made within the first 10 days of the month after sale, with the balance due by the end of the month after sale. Experience has shown that 50% of the billings will be collected within the discount period, 30% by the end of the month after purchase, and 14% in the following month. The remaining 6% will be uncollectible. There are no cash sales.
The average selling price of the company’s products is £50 per unit. Actual and projected sales are as follows:
October actual £ 140,000
November actual 160,000
December estimated 165,000
January estimated 125,000
February estimated 120,000
Total estimated for year ending June 30, 2017 £1,200,000
All purchases are payable within 15 days. Approximately 60% of the purchases in a month are paid that month, and the rest the following month. The average unit purchase cost is £40. Target ending inventories are 500 units plus 10% of the next month’s unit sales. Total budgeted marketing, distribution, and customer-service costs for the year are £300,000. Of this amount, £60,000 are considered fixed (and include depreciation of £15,000). The remainder varies with sales. Both fixed and variable marketing, distribution, and customer-service costs are paid as incurred.
Prepare a cash budget for December 2016 and January 2017. Supply supporting schedules (workings) for collections of receivables; payments for merchandise; and marketing, distribution, and customer-service costs. (15 Marks)
- b) Capital Budgeting
John Cooper Plc. is an international clothing manufacturer. One of its manufacturing units in Milan, Italy will become idle on December 31, 2016. You have been asked to look at three options regarding the plant.
Option 1: The plant, which has been fully depreciated for tax purposes, can be sold immediately for €225,000.
Option 2: The plant can be leased to the Anderson Corporation, one of John Cooper’s suppliers, for four years. Under the lease terms, Anderson would pay John Cooper €55,000 rent per year (payable at year-end) and would grant John Cooper a €10,000 annual discount off the normal price of fabric purchased by John Cooper. (Assume that the discount is received at year-end for each of the four years.) Anderson would bear all of the plant’s ownership costs. John Cooper expects to sell this plant for €37,500 at the end of the four-year lease.
Option 3: The plant could be used for four years to make souvenir jackets for the Olympics. Fixed overhead costs (a cash outflow) before any equipment upgrades are estimated to be €5,000 annually for the four-year period. The jackets are expected to sell for €27.50 each. Variable cost per unit is expected to be €21.50. The following production and sales of jackets are expected: 2017, 9,000 units; 2018, 13,000 units; 2019, 15,000 units; 2020, 5,000 units. In order to manufacture the jackets, some of the plant equipment would need to be upgraded at an immediate cost of €40,000. The equipment would be depreciated using the straight-line depreciation method and zero terminal disposal value over the four years it would be in use. Because of the equipment upgrades, John Cooper could sell the plant for €67,500 at the end of four years. No change in working capital would be required.
John Cooper treats all cash flows as if they occur at the end of the year, and it uses an after-tax required rate of return of 10%. John Cooper is subject to a 35% tax rate on all income, including capital gains.
- Calculate net present value of each of the options and determine which option John Cooper should select using the NPV criterion. (10 Marks)
- Calculate the IRR for Option 3. Can the IRR of Option 2 be calculated? Explain. (2 Marks)
- What nonfinancial factors should John Cooper consider before making its choice? (3 Marks) Total Marks (30)
Recent accounting scandals including Enron have been argued to be the result of rule based accounting. Companies, such as Enron, involved in accounting scandals have been claimed to have skilfully taken the advantage of the fine details of rule based accounting standards (US GAAPs) to manipulate accounting threshold for legal and illegal dealings (Ijiri, 2005).
There is now this debate that rules-based approach (such as the US GAAPs) should be abandoned in favour of a principle-based approach such as (IFRS).
Critically analyse both rules-based and principles-based approaches of financial accounting and reporting. Evaluate the merits and demerits of each approach and their implications for quality of accounting and financial reporting. Total Marks (20)