AJACC7032AJ Managerial Finance - 2021-22 - Chandigarh Assignment Help

BIRMINGHAM CITY BUSINESS SCHOOL POSTGRADUATE DEGREES

COURSEWORK FRONT SHEET

MODULE TITLE: Managerial Finance

MODULE CODE: ACC7032

LECTURER: Amerdeep Jakhu

ISSUE DATE: February 2022

HAND IN DATE: 12th May 2022 at 12.00pm (midday)

HAND BACK DATE: 9th June 2022

Learning outcomes and pass attainment level:

Evaluate the different competing financial objectives of the firm and the agency problem between shareholders and managers in publicly listed companies.
Analyse financial data, conduct cost-benefit analysis and financial planning for effective business decisions using spreadsheet software package.
Critically evaluate investment projects using appropriate investment appraisal techniques to assess suitability and viability of the projects consistent with the overall strategy and business model(s) of the firm.
Critically appraise the major issues of capital management, relative advantages and disadvantages from the various perspectives of the stakeholders of the firm.

General guidance

The assessment for this unit is one coursework assignment. The required mark has been set at 50%. If you are attempting a first or second re-sit attempt your pass mark will be capped 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

MODULE TITLE: Managerial Finance

MODULE CODE: ACC7032

LECTURER: Amerdeep Jakhu

ISSUE DATE: February 2022

HAND IN DATE: 12th May 2022 at 12.00pm (midday)

HAND BACK DATE: 9th June 2022

Learning outcomes and pass attainment level:

Evaluate the different competing financial objectives of the firm and the agency problem between shareholders and managers in publicly listed companies.
Analyse financial data, conduct cost-benefit analysis and financial planning for effective business decisions using spreadsheet software package.
Critically evaluate investment projects using appropriate investment appraisal techniques to assess suitability and viability of the projects consistent with the overall strategy and business model(s) of the firm.
Critically appraise the major issues of capital management, relative advantages and disadvantages from the various perspectives of the stakeholders of the firm.

General guidance

The assessment for this unit is one coursework assignment. The required mark has been set at 50%. If you are attempting a first or second re-sit attempt your pass mark will be capped at 50%.

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. There is no word limit to questions. If any part of the assignment is ignored this reduces the maximum marks which could potentially be awarded. The assignment answer should be carefully checked before submission for the use of appropriate and acceptable grammar. The correct use of English spelling is to be employed throughout.

All the numbers should be reported in 2 decimal points.

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. Only Microsoft Word file will be allowed for submission.

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.

You are strongly advised to use Turnitin to check the similarity count with other sources and therefore avoid plagiarism. You will find a link to Turnitin on the module Moodle site (please include the link) which allows you to submit your work and check it before submitting it through the usual submission portal.

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

Fail

(0%-49%)

Pass

(50%-59%)

Commendation

(60%-69%)

Distinction

(70%-100%)

Question 1: LO1 (40%)

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.

Question 2 and 3 LO2, LO3 and LO4 (60%)

A lack of understanding of management accounting and decision making. Unable to produce the correct format and calculations. Limited or no narrative discussion or recommendations and conclusions. Poor academic writing and referencing.

Ability to apply some management accounting decision making techniques. Demonstrates an adequate understanding of the principles and techniques involved. Reasonable attempt at analysis and discussion of findings, though of limited depth.

A good application of management accounting for decision making. Demonstrates a good understanding of the principles and techniques involved. Good analysis and discussion of findings, with good use of academic references which support clear and well explained conclusions.

Excellent application and understanding of management accounting for decision making. Thorough and detailed critical discussion with excellent use of a range of academic references which support clear, practical, and well explained recommendations and conclusions.

Question 1

The scenario

Jupiter Holdings Plc has a portfolio of investments in subsidiary companies and is seeking another acquisition that complements the others.

The subsidiary companies already in the group include: machinery and commercial vehicle dealership; finance company; equipment leasing company; haulage company with a fleet of 200 heavy goods vehicles (HGV), and a chain of value hotels across the UK, one of which is making a loss.

Two possible acquisition targets have been identified:

Griffin Care Services Ltd is based in leased converted hotels and provides care services for young people unable to be cared for in the foster system. Jupiter Holdings Plc are looking into the possibility of converting their failing hotel into a provider of care services and Griffin Care Services Ltd is looking for another property to continue expanding around the UK;

Midlands Commercials Ltd has a large unit and caters for the storage and repair of up to 70 commercial vehicles at one time, and has the potential for more space as it is based in a large empty industrial area. Midlands Commercials is looking for a contract with a fleet operator to stabilise their income and growth.

Extracts from the financial statements of both target companies are shown below:

Statements of Profit or Loss (SoPL)

	GRIFFIN CARE SERVICES Ltd		MIDLANDS COMMERCIALS Ltd
	GRIFFIN CARE SERVICES Ltd		MIDLANDS COMMERCIALS Ltd
		vertical analysis	£	vertical analysis
Turnover	3,084,560	100%	3,147,375	100%

Cost of sales	(1,567,592)	50.82%	(939,630)	29.85%
	__________		__________
Gross profit	1,516,968	49.18%	2,207,745	70.15%

Administrative expenses	(735,096)	23.83%	(1,049,413)	33.34%
Other operating income	18,030	0.58%	0	0.00%
	__________		__________
Operating profit	799,902	25.93%	1,158,333	36.80%

Other interest receivable and similar income	2,408	0.08%	3,770	0.12%
Interest payable and similar charges	0	0.00%	(96,263)	3.06%
	__________		__________
Profit on ordinary activities before taxation	802,310	26.01%	1,065,840	33.86%

Tax on profit on ordinary activities	(78,810)	2.55%	(158,056)	5.02%
	__________		__________
Profit for the year	723,500	23.46%	907,784	28.84%
	__________		__________

Statements of Financial Position (SoFP)

	GRIFFIN CARE SERVICES Ltd		MIDLANDS COMMERCIALS Ltd
	£	vertical analysis	£	vertical analysis
Fixed assets
Tangible assets	9,312	1.1%	728,865	27.2%

Total Non Current Assets	9,312	1.1%	728,865	27.2%
Current assets
Trade receivables	156,350	18.5%	855,825	31.9%
Cash at bank and in hand	677,710	80.4%	1,098,480	40.9%

Total Current Assets	834,060	98.9%	1,954,305	72.8%

Total Assets	843,372	100.0%	2,683,170	100.0%

Liabilities
Current liability: Trade payables	414,448	49.1%	245,888	9.2%
Non current liability: Bank borrowing	0	0.0%	742,670	27.7%

Total Liabilities	414,448	49.1%	988,558	36.8%

Equity and reserves
Called up share capital	2	0.0%	2	0.0%
Profit and loss account	428,922	50.9%	1,694,610	63.2%

Total Equity	428,924	50.9%	1,694,612	63.2%

Total Equity and Liabilities	843,372	100.0%	2,683,170	100.0%

The ratio analysis below is in 4 categories (Profitability, Management Efficiency, Liquidity and Gearing), and needs completing:

Ratios	Formulae		GRIFFIN CARE SERVICES Ltd	MIDLANDS COMMERCIALS Ltd
*Profitability Ratios*
ROCE	PBIT	%	95%
	Cap Employed

Return on Assets	PBIT	%	95%
	Total Assets

Asset Turnover	Revenue	x	3.7
	Total Assets

Gross Profit Margin	Gross profit	%	49.2%
	Revenue

Net Profit Margin	PBIT	%	26%
	Revenue
*Efficiency Ratios*
Receivables Collection period (R)	Trade receivables x 365	days	19
	Sales

Payables payment period (P)	Trade payables x 365	days	97
	Cost of sales

Cash Cycle	R – P	days	-78

*Liquidity Ratios*
Current Ratio	Current Assets	x:1	2.0
	Current liabilities
*Financial Risk or GEARING Ratios*
Gearing	Fixed int capital	%	0.0%
	Total capital employed

Interest cover ratio	PBIT	x	0.0
	Interest charges

Requirements

Prepare a business report, maximum 2 pages long (approximately 800 words) with an appendix for your ratio analysis.

It is to be addressed to the board of directors of Jupiter Holdings Plc.

You must evaluate the financial statements, interpret the ratio analysis and make a convincing argument for investment in one of the two target companies.

Your report should be supported with academic references throughout, and your ratio analysis should be put in an appendix to the report.

(800 words, 30 marks)

Critically evaluate the working capital management (WCM) of both companies using academic references and draw conclusions on which is stronger. (200 words, 5 marks)
1. Create a table that lists the advantages and disadvantages of all the finance options available to Jupiter Holdings Plc. Explain, with references, the source of finance you recommend as most suitable way to finance the investment in either Griffin Care Services Ltd or Midlands Commercial Ltd.
(200 words, 5 marks)

Question 1 total 1200 words, 40 marks
Marking guide

Carefully examine the marking guide below to ensure that you structure your answer to include every element:

Mark allocation		RATIO CALCs	INTERPRETATION	OTHER	TOTAL
Q1.1
	Profitability	4	3		7
	Management efficiency	4	3		7
	Liquidity	2	3		5
	Gearing	2	3		5
	Conclusion & recommendation			2	2
	Credible academic citations			2	2
	Layout, structure and grammar			2	2
Q1.2 Working Capital Management				5	5
Q1.3 Sources of finance				5	5
Total		12	12	16	40

Question 2 A

Requirements

You work for Alphabet Holdings Plc as a junior management accountant.

The board of directors are considering ways to improve the suboptimal performance of an investment in a manufacturing company called AC products Ltd.

As you can see from the table below the directors are considering closing products gold and platinum in an effort to improve overall profitability.

You spot that marginal costing would show the results differently and may affect the directors’ decision.

		Silver	Gold	Platinum	Total
		(£m)	(£m)	(£m)	(£m)
Sales		16,236.00	10,824.00	7,749.00	34,809.00

Cost of sale
	Material	– 5,166.00	– 3,444.00	– 3,444.00	– 12,054.00
	Labour	– 5,065.20	– 5,115.60	– 5,216.40	– 15,397.20
	Overheads	– 2,583.00	– 2,583.00	– 2,583.00	– 7,749.00
Profit /(Loss)		3,421.80	– 318.60	– 3,494.40	– 391.20

Requirements for Question 2

Use your knowledge of management accounting and marginal costing to calculate the contribution of each product 5 marks

Use your findings from part (a) and appropriate academic references to explain whether the company should stop making product gold. 2 marks

Use your findings from part (a) and appropriate academic references to explain whether the company should stop making product Platinum. 2 marks

Discuss how and why marginal costing calculates contribution to pay overheads and why this is useful in evaluating product value to a firm? 3 marks

Do you agree that profitability will improve by ceasing to make Products gold and platinum? What do you suggest the company does to increase profitability? 3 marks

Question 2 Totals: 300 words/equivalent, 15 marks

Question 2 b (continued)

The board have approached you to get your opinion of their expansion plan, which includes a chain of factory outlet stores. Below are the figures for the first one that is planned for a central Birmingham location next year.

Company policy dictates that any decision should be based on the results of calculating Net Present Value (NPV) of 3 years cash flows using a cost of capital of 12%, Payback Period (PBP) must be less than 3 years, and the Internal Rate of Return (IRR) of the project should provide a 5% cushion in case of increases in inflation or interest rates.

The investment consists of £105,000 for the land, building costs of £150,000 and £82,050 for fittings and equipment.

The cash flows in year 1 are expected to be: total sales revenue £620,100; the cost of cement products sold £164,195; metal stock sold £113,614; staff costs £25,523; light & heat £36,252; other overheads £138,951. The cash flows for the following years are the same, but are expected to increase by 2% inflation each year.

Requirements for Question 2 part (b)

Using the information above and in accord with the above stated company policy you are required to calculate:

Net Present Value (NPV) 5 marks
Payback period (PBP) and Discounted Payback Period (DPBP) 5 marks
Internal Rate of Return 1 marks
Based on your calculations do you recommend the investment is made and the new outlet store is built? 2 marks
Critically discuss the limitations of the above project appraisal techniques used and any other recommendations to the board. 2 marks

Question 2 (b) total 15 marks

Question 2 (a) and (b) Total 30 marks

Question 3

Global Tyres Limited manufactures three types of tyres; Premium, Standard and Budget brands. The maximum market demand and resource requirements of each of these products are shown below:

The tyres are made from an advanced slip-resistant material that gives the firm a competitive advantage. Global Tyres has established an export requirement in country B that will result in massive growth. However, an email from the purchasing manager has informed you that the supplier expects that the year’s supply of this special material is limited to 251,000 mitres.

Global Tyres Limited does not keep any inventory. Without the board of directors’ sanction, the sales director has already accepted an order for 1,000 Standard Tyres that, if not fulfilled, would incur a financial penalty of £30,000. This order is included in the Standard Tyres’ maximum market demand figure.

Global Tyres Limited’s directors need to know whether they should first satisfy the contract and then prioritise production in the normal way or whether it should consider breaching the contract and incurring the penalty.

Budgeted data for the 2022 year

	Premium	Standard	Budget
Maximum demand	2,000	1,500	1,000
Heat resistant material per unit	90	70	10

Actual results for 2020

	Premium	Standard	Budget	Total
Sales (units)	400	939	600	1,939

Sales revenue (£)	300,000	315,000	280,000	895,000

Raw materials (£)	80,000	110,000	130,000	320,000
Direct labour (£)	30,000	45,000	50,000	125,000
Overheads (£)	60,000	80,000	60,000	200,000
Total Costs	170,000	235,000	240,000	645,000
Profit / (Loss) (£)	130,000	80,000	40,000	250,000

Actual results for 2021

	Premium	Standard	Budget	Total
Sales (units)	800	1,201	1,100	3,101

Sales revenue (£)	330,000	252,000	210,000	792,000

Raw materials (£)	90,000	80,000	90,000	260,000
Direct labour (£)	40,000	34,000	39,500	113,500
Overheads (£)	85,000	92,500	78,000	255,500
Total Costs	215,000	206,500	207,500	629,000
Profit / (Loss) (£)	115,000	45,500	2,500	163,000

Required:

Prepare the following workings, analysed by product, based on the above information:
1. Calculate fixed and variable overheads using the high/low method. (4 marks)
2. Marginal cost card showing selling price, variable costs, and contribution per unit for each product. (4 marks)
3. Contribution per unit of scarce resource and your decision for ranking the product to be produced first based on the highest contribution. (4 marks)
Prepare a budgeted production schedule and a marginal cost income statement (analysed by product) for the year 2022 assuming that the Standard Tyres contract is honoured. (8 marks)
Prepare budgeted production schedule and a marginal cost income statement (analysed by product) for the first half of 2021 assuming that the Standard Tyres contract is not honoured. (8 marks)

Advise Global Tyres Limited’s directors if they should honour or not honour the Standard Tyres contract. (2 marks)

Question3 Total 30 marks

COURSEWORK TOTAL MARKS: 100

END

BIRMINGHAM CITY BUSINESS SCHOOL POSTGRADUATE DEGREES COURSEWORK FRONT SHEET

BIRMINGHAM CITY BUSINESS SCHOOL POSTGRADUATE DEGREES

COURSEWORK FRONT SHEET