Managing Financial Resources and Decision


























































       Assignment
Course   Title:HND in Business ManagementStudent Name: 
Unit No. & Title:Managing Financial Resources and Decision.Edexcel No.: 
Semester/ Batch No. Centre Ref. No.: 
Learning Outcomes:LO1, LO2, LO3, LO4E-mail: 
Issued    Date:16th August 2016Submission Date:20th of September, 2016
Assignment Title:Understanding Business Finance Fundamentals.Assessor:Mr. Mohammed Mafrash
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GradeComments*Achieved Criteria
P  
M  
D  
* The assessor has made sufficient comments within the work and brief is mentioned here.
Final Grade Awarded :Assessor Signature:Date:
IV  Signature:Date:
Student Agreement:  I understand the feedback given to me and agree to carry out the actions in future works as required and indicated.

 

Student Signature:                                                                                                                             Date:











































































































To be filled by the Student: (Unit -02–MFRD)
CriteriaP1.1P1.2P1.3P2.1P2.2P2.3P2.4P3.1P3.2P3.3P4.1P4.2P4.3
Task             
Page Nos.             
 
CriteriaM1M2M3D1D2D3
Task      
Page Nos.      

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Declaration of Academic Honesty
Student’s Full Name:Edexcel No.Centre Ref. No.
  
Declaration(Insert YES or NO)
1. I confirm that this assignment is my own work: 
2. I confirm that where ever I have used someone else’s words, concepts, graphics or data in my work, I have clearly indicated exactly where I have done so, using the Harvard referencing system. 
3. I confirm that I have clearly indicated, by referencing, where I have used someone else’s words, concepts, graphics or data, irrespective of whether I have quoted verbatim or I have paraphrased in my own words. 
4. I have clearly indicated in my assignment any work that has been contributed by another student. 
5. I have clearly indicated in my assignment any work that has been carried out collaboratively with another student/s. 
Student Signature :Date:
Grading Criteria - Pass Criteria                              (Managing Financial Resources and Decision)





















Learning OutcomeAssessment CriteriaTasks
P 1. Understandthesourcesof finance available toa businessP1.1 Identifythesourcesoffinanceavailable toa business

P.12 Assesstheimplicationsofthedifferentsources

P1.3 Evaluate appropriatesourcesoffinancefora business project
1.1

 

1.2

1.3
P 2.Understand the implications of finance as a resource within a businessP2.1Assesscostsofdifferentsourcesof finance

P2.2 Explaintheimportanceoffinancialplanning

P2.3 Assestheinformationneedsofdifferentdecision makers

P2.4 Explain the impact of finance on the financial statements
2.1

2.2

2.3

2.4
P 3.Be able to make financialdecisions based onfinancial informationP3.1 Analyzebudgetsandmakeappropriatedecisions

P3.2 Explain the calculation of unitcostsandmakepricingdecisionsusing relevant information

P3.3 Assesstheviabilityofa projectusinginvestment appraisal technique
3.1

3.2

 

3.3

 
P 4.Be able to

evaluatethe

financial

performance ofa

business
P4.1 Discuss the mainfinancialstatements

P4.2 Compare the appropriateformatsof financial statementsfordifferentbusiness

P4.3Interpret thefinancialstatementsusingappropriateratiosand comparisons,bothinternalandexternal
4.1

4.2

 

4.3


 

 















 

Grading Matrix – M & D Criteria (Managing Financial Resources and Decision making)
Learning OutcomeAssessment Criteria / Possible Evidence
M1.Identyfy and apply the strategies to find appropriate solution.M 1.1Effective judgments from a financial perspective have been made regarding the required activity base on the findings gathered from the analysis, comparison and interference made. (Assignment task 1.2 OR  1.3 OR 2.2)

M1.3 The student has used correct approach and research on financial statements. (Assignment task 4.1)
M2.Select design and appropriate method/techniqueM2.3A range of information has been used by using appropriate financial analysis techniques and clearly presenting them through financial statement.

(Assignment task 2.4)

 

M2.5Complex data has been accurately processed using required techniques and students are required to have an effective blend of information is along with the calculation.(Assignment task  3.3 Or 3.1 Or 3.2 Or 2.4 )
M3.Present and communicate the appropriate findings.M 3.3A range of presentation methods have been used and technical financial language and terms have been accurately used where appropriate, to justify the decisions recommended for the proposed project (Assignment task 4.2 OR 4.3).

 

M3.1Student has used an appropriate structure and approach on stake holders.(Assignment task 2.3)
D1.use critical reflection to evaluate own work and justify the valid conclusion.D 1.1Conclusion has been arrived at through synthesis of idea and has been justified. (Assignment task3.1 OR 2.1Or 2.4 )

 

D 1.3 Student has comment on the cash flow and the suggestion was given.

(Assignment task 3.1)
D2.Take responsibility for managing and organizing activities.D2.2Substantial financial analyses activities and studies into financial management has been planned, managed and organized to analyze the business project. (Assignment task3.2 Or 3.3 )

 

D 2.3 Student has managed all the activities and submits the assignment on time using proper Harvard referencing.(ALL TASKS)

 
D3.Demonstrate convergent lateral creative thinking.D 3.7Effective thinking (Analysis and Comparison) has been taken place in unfamiliar context.

(Assignment Task 4.3)

 

D 3.1 Students should be able to generate the ideas of the given scenario and decision need to be taken base on the output of the discussion.

(Assignment task  4.3  OR 2.2 OR 1.3)



 

Scenario 01

Mr. Mark Stephens is an Entrepreneur from London who is willing to start up a new venture in New Castle. As the tourism industry is booming and due market potential, he is interested to invest money in tourism industry. Two other investors are also agreed about the business proposal. Company name is registered as a Heavenly Resorts.

Task 01: Understand the sources of finance available to a business
  • Identify and explain the sources of finance available for the new investment of Mr. Mark Stephens.

  • Assess the implications of different sources of finance identified for the task 1.1( it should be highlighted in terms of risk, accessibility, cost ,duration, security etc)

  • Evaluate the appropriate sources of finance for the proposed investment

 

Task 2: Explore the sources of finance available to Heavenly Resorts

After 10 years period of time, Company is registered as public listed company in the London Stock Exchange share market. Following market information’s are given for your evaluation.

2.1.      Capital structure of the Heavenly Resorts shows following status at 31/March/2016.

Ordinary share capital                      GBP 1.00 each                        1,000,000

Bank borrowings    15%                     GBP 500,000.00

Debentures 22%                                  GBP 50.00 each         GBP 500,000

Market value per ordinary share       GBP 1.50

Dividend per Ordinary Share            GBP 00.42

Return on Equity 28%                        (Rf-15%, Rm-31.25%, SD/Beta 0.8)

Market value per debenture               GBP 85.00

Corporation tax rate 30%

 

Calculate company overall cost of capital or WACC

Analyze the costs associate with each sources of finance for the Heavenly Resortsplc. Your answer should be supported by the cost of capital for each of the above sources and conclusion about WACC.

2.2       Explain the importance of proper financial planning toHeavenly Resorts plc.

2.3       Asses the stakeholders ofHeavenly Resorts plc and their impact to the current business operation.

2.4       Explain the impact of appropriate sources finance (Both capital and cost of capital) identified in task 1.3on the financial statements. You are required to explain how it is recorded in the financial statements with clear formats to justify it.

Task 03: Make a financial decision based on the financial information.

3.1       Prepare a cash flow budget and performance report for a given scenario and recommend the management on the possible remedies available to overcome the cash flow issues and the adverse variances. (Remedies are required to justified)

Heavenly Resorts Plc restaurant transactions are below. The following sales are expected over the next six-month period from May to October.





















-PurchasesSales
May£12,000£17,000
Jun£14,000£22,000
Jul£13,000£18,000
Aug£14,000£14,000
Sep£15,000£16,000
Oct£18,000£18,000

 
  • Wages are paid each month of £1,000 which are paid in month that they are incurred.

  • Overhead expenses are due each month of £800 and these are paid one month in arrears.

  • On 1 June, a new van is purchased for £8,000. The old van is sold on 15 July for £1,500.

  • Sales are all on credit and we allow a -month credit period

  • Half of the purchases are on credit - we are allowed a month credit period

  • The balance at the bank as at 30 April was £1000 (overdrawn)

  • Produce a cash budget for the four-month period ending 30th


 

3.2.      Heavenly Resorts is planning to expand their products portfolio in next budget period. Company chief chef is proposing two menus targeting the session.

 

 

 

Golden Syrup pudding

Menu ingredient requirement is given in the first table. Labour cost allocated to each menu is 5 pounds. Fixed cost per menu 2.00 pounds. Budgeted sales menu per month is 1500 menus. Target profit is 1000 pounds per month.

Chicken with avocado

Menu ingredient requirement is given in the second table. Labour cost allocated to each menu is 5 pounds. Fixed per menu 2.00 pounds.

Company is adding 60% gross profit margin for any new menu is developed. General fixed overhead of the hotel per month is 2000 pounds. Budgeted sales menu per month is 800 menus. Target profit is 1000 pounds per month.

Carry out Cost-volume- profit (CVP) analysis for the Heavenly Resortsand explain the outcome of the each figure you calculated to make a decision. Answer should highlight the selling price, cost, breakeven point, margin of safety, C/S ratio and target profit.

 

3.3

 
  1. Explain the importance of investment appraisal (P3.3)

  2. Explain the available techniques to appraise an investment (P3.3)

  3. Evaluate each technique from the investors point of view (P3.3, M1, D1)

  4. Identify the Net Present Value of the above project (P3.3, M1)


 

 

 

 

 

 




































YearCash Flow (£)Discount Factor (5%)Present Value (£)

(CF x DF)
0- 800,000
1+56,000
2+700,000
3+150,000
4+90,000
5+210,000
6+250,000
Total

 

Task 04: Analysis and evaluate the financial performance of a business.

4.1.      Explain the main financial statements prepared by a public quoted company and identify the purpose of each statement.

Students are required to refer an annual report of any listed company in the world and refer your answerto the components of the financial statements. Copies of the financial statements should be attached to the final assignment.

4.2       Explain how financial statements of Heavenly Resorts Plcare differing from financial statements of the following business organization.
  • Partnership business

  • Sole proprietorship business

  • Nonprofit organization

 

 

 

 

 

 

 

 

 

 

 

4.3       The following is the balance sheet of a partner company of Heavenly Resorts

 



































































































































































































































































Balance Sheet as on 31 March
(GBP)
LIABILITIES20102011201220132014
Equity
    Paid-up equity capital29.7729.7729.831.431.4
Profit or Loss475.77512.65522.2429.8508.1
505.54542.42552461.2539.5
Borrowings228.9352.09266.3442.9405.7
Other longterm liabilities0039.590.5107.2
Current liabilities & provisions
        Sundry creditors75.8766.9275.9155.8164.6
        Other current liabilities18.986.29.216.517.3
    Provisions19.3823.6225.33757.1
114.2396.74110.4209.3239
Total liabilities848.7691.25968.21,203.901,291.40
ASSETS
Gross fixed assets
    Land & building65.9477.8782.3222206.5
    Plant & machinery117.87144.18183.9296.3338.6
    Furnitures and fittings27.3434.6630.747.150
    Other fixed assets24.9324.6945.22941.6
236.08281.4342.1594.4636.7
    Less: cummulative depreciation20.9833.5248.1113.4136.1
Net fixed assets215.1247.88294481500.6
Investments10.09176.64188.294.8153.9
Inventories
Raw materials and stores27.7827.9430.965.356.1
    Finished goods32.8139.947.471.970.3
    Other goods10.1115.927.438.433.9
70.783.74105.7175.6160.3
Receivables
Sundry debtors59.1351.6166.9136.8165.9
Others62.3174.98218.582.670.1
121.44126.59285.4219.4236
Cash & bank balance378.6641.875.7937.2
Intangible Assets52.7114.5389.2224.1203.4
Total assets848.7690.25968.21,203.901,291.40
Income Statement20002001200220032004
Sales1161.191192.151273.25978.51169.5
Cost of sale560.22580.9600.25459.2558.9
Other Expenditure125.298.6150.889.5102.5
Profit475.77512.65522.2429.8508.1

 

 
  1. Calculate the following ratios for the above company as of the above years (P4.2, M1, D2)


 
  1. Current ratio

  2. Quick ratio

  3. Cash ratio

  4. Inventory turnover period

  5. Receivables turnover period

  6. Payables turnover period

  7. Working capital cycle

  8. Fixed asset turnover ratio

  9. Sales to working capital

  10. Total asset turnover ratio

  11. Debt-to-equity ratio


 
  1. Analyze the company performance over the period based on the findings above (P 4.2, M3, D1)

 

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