Assignment 2 – ACC5502 Accounting and Financial Management Assignment

Weighting: 25%

This assignment is designed to give you an opportunity to:

 

• apply financial statement analysis, management accounting concepts and finance frameworks to identify and solve complex organisational problems creatively and practically to increase the effectiveness of management decision making that provides solutions to real world problems

 

• apply financial statement analysis, management accounting concepts and finance frameworks to changing global and economic conditions and to help assess the impact on organisational systems

 

• apply and use financial statement analysis, management accounting concepts and finance frameworks with other evidence to provide solutions to real world problems

 

• demonstrate applied knowledge of the accounting and finance processes, systems, concepts and techniques used globally in business practice

 

Questions on this assignment are drawn from work covered in topics 5, 8 and 9 of your course

 

PART A

BUSINESS BACKGROUND

The Leather family runs 2,200 Hereford breeders across five properties near Moura, Gin Gin and Mt Perry in the State of Queensland. The family’s business is a cattle-grazing business, which buys and breeds cattle and sells to both the domestic and international markets. Currently managed by Mazie Leather, the eldest daughter of the Leather family, the business has been operated by the family for fifty-five years on these properties located in Central Queensland.

The family is very concerned about the impact of record high temperatures and the possible extension of the drought into 2019 on its likely slaughter activity and exports this year. The obvious key driver of business success is water for pasture growth and stock use, and lower temperatures.

The business has also set up a Producers Group for educational purposes. The educational program aims to help producers develop a cattle breeding program or improve an existing one. Topics include examining your current situation, reproduction issues, genetics, setting breeding objectives, livestock selection and managing the herd to capture benefits. Members pay an annual fee of $60 including GST with fees payable on 1 May for the following year. There are currently 180 members. Mazie’s younger brother, Frank, manages this Group and conducts the educational programs.

Required:

Question 1

The Leather family engages you to provide them with an analysis of the performance of their business.

You have calculated various financial ratios, the results of which are presented in the table below.

Your report to the family needs to address the following:

 

1. A discussion of two (2) recent events which have recently occurred in the business environment which may have impacted on/or will impact on results of this type of business. Where possible support your argument with newspaper articles or other references e.g. extracts from reports from cattle industry.

2. Comments on trends revealed by these ratios in the table under the headings profitability, liquidity, operating capability and financial flexibility. Where possible relate the changes observed in the ratios to events in the business environment in general discussed in (1) above.

3. The findings of research that you have conducted in relation to the use of non-financial performance measures in the cattle-grazing business. You should research whether there are existing systems of measuring the performance of beef supply chains in Australia; and how such systems may improve the process of analysing performance for their business.

RATIOS	2016	2017	2018
Profitability
Profit margin	15.9%	7.6%	5.2%
ROA	6.16%	4.7%	3.3%
ROE	15.38%	7.3%	6.8%
Liquidity
Current	1.82:1	2.16:1	2.1:1
Quick	.87:1	.84:1	.6:1
Operating Capability
Accounts  Receivable	4.8 times or	4.14 times or	4.3 times or
Turnover	75.92 days	88.16 days	84.9 days
	1.48 times or	1.35 times or	0.55 times or
Inventory Turnover	247 days	270.37 days	663.6 days
Financial Flexibility
Debt Ratio	50.77%	45.9%	64%
Equity Ratio	49.22%	54.1%	36%
Times Interest Earned	4.12 times	2.76 times	1.8 times

 

Word count for Question 1: 1000-1500 words

 

PART B:

 

Question 1:

 

As early as 1973, Cherrington and Cherrington state that it is not budgets per se, that have an effect on people, but the positive and negative consequences associated with budgets. That is, it is not the numbers that form the budget that have behavioural effects on participants, but rather the intentions behind the numbers, the intentions that are read into the numbers by participants, personalities of parties involved and so on.

 

Mazie Leather prefers to involve staff in the annual budgeting process. Mazie, however, has found the process to be very time consuming. Consider the above statement as you provide Mazie with an analysis of the possible advantages and limitations of the role of participation in budget setting. Also, consider the impact this style of budgeting has on human behaviour.

Question 2:

Provide a brief introduction describing the budgeting technique used by the organisation at which you are employed.

Considering the budgeting technique you described, on reflection, what benefits and negative consequences result from the budgeting technique that your organisation uses. From a personal perspective, what changes do you think might result in a better budgeting process and greater buy in from employees to achieving the targets set down in the budget.

(Note: if you are not directly responsible for or are not involved in budgeting in your organisation, seek this information from your Supervisor or Manager who would be involved in the budgeting process for your organisation)

 

Word count for Question 2: (2500 – 3000 words)

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