Accounting And Financial Management Assessment

Assessment

Assessment weight:                           100% of the module

 

This Assessment is in three parts, please answer all elements.

Part A

Bitmap plc is the well-established manufacturer of furniture in London. The board of directors has looked into the financial statements of the last two years and has noticed significant changes in different elements of Income statements and balance sheets. You are working in the same company as Management Accountant and directors have asked you to prepare a report on results of the two year’s financial statements. The financial statement of the Bitmap plc is given below:

Statement of comprehensive income for the year ended 2016 and 2017.

		2017		2016
	£000	£000	£000	£000
Revenue		23,000		18,000
Less: Cost of sales
Opening Inventory	1,800		1,700
Manufacturing cost	12,000	9,000
Total cost of goods available to sell	13,800	10,700
Less: Closing inventory	3,000	1,800
Total cost of sales	10,800			8,900
Gross profit	12,200			9,100
Less: Expenses
Selling & distribution expenses	4,000		3,000
Administrative expenses	1,400	1,000
		5,400		4,000
Operating profit		6,800		5,100
Less: Interest payable		1,000		500
Profit before tax		5,800		4,600
Less: Income tax (30%)		1,740		1,380
Profit after tax		4,060		3,220
Less: Dividends paid		300		200
Retained profit for the year		3,760		3,020

 

Statement of financial position as at 31st of December 2016 and 2017.

		2017		2016
	£000	£000	£000	£000
Non-current assets (net)
Land and building		12,000		9,000
Equipment		1,400		1,250
Motor vehicles		1,800		1,100
		15,200		11,350
Current assets
Inventory	2,360		1,800
Trade receivables	2,300		1,600
Cash	500		750
	5,160		4,150
Current liabilities
Trade payables	1,100		1,500
Net current assets		4,060	2,650
		19,260	14,000
Non-current liabilities
Loan stock		3,500	2,000
Net assets		15,760	12,000
Equity
Ordinary shares of £1 each		10,000		10,000
Retained earning		5,760	2,000
		15,760	12,000

 

Required:

1. Prepare a structured report for Board of Bitmap plc, which evaluates the performance of the company in relation to profitability, liquidity, gearing, asset utilisation, and investors potential. You report must be supported by the calculations of relevant ratios in the five areas mentioned above. (25%)
2. Calculate working capital cycle in days for the Bitmap plc based on the information above, assuming 365 days, for the years 2017 and 2016; you are also required to evaluate results briefly. (5%)

 

All calculations should be clearly shown including all appropriate workings and should be made to the nearest £000 or two decimal places where required.

Total marks for Part A: (30)

Part B

Toyland ltd. is a well established London based company which manufactures toys for children. The directors are expecting that demand for toys in the future will increase significantly and with the current capacity company will not be able to meet the demand. Therefore, directors have decided to purchase a new machine to enhance the capacity to benefit from the expected increase in demand. Two versions of machines are available from different manufacturers at the same cost of £500,000. Both machines have six years of useful life and will be sold at an estimated price of £50,000 at the end of the sixth year. Toyland will use the straight-line method for depreciation of these machines. Cost of capital for both machines is 10%.

Directors are to purchase one machine from the available two, same cost and net cash inflow from both machines are confusing them to take a decision. You are Finance Manager of Toyland ltd and directors have asked to produce a report which should make things clear for them to take a decision. Further information regarding net cash inflow from both machines is provided below.

	Machine A	Machine B
Years	Cash flow	Cash flow
0	-     500,000	-     500,000
1	300,000	20,000
2	250,000	50,000
3	200,000	150,000
4	150,000	200,000
5	50,000	250,000
6	20,000	300,000

 

Requirements:

Required:

1. Calculate using the following investment appraisal techniques, and provide recommendations as to the economic feasibility of acquiring a suitable machine:

• The Payback Period.
• The Discounted Payback Period.
• The Accounting Rate of Return.
• The Present Net Value.
• The Internal Rate of Return (to two decimal places) (15%)

2. Critically evaluate the key benefits and limitations of each of the different investment appraisal techniques, supporting the response with relevant academic research as to whether each of the different techniques is applied in practice within a real-life business context. (20%)
3. You are also required to critically evaluate two suitable sources of finance to fund this investment. (15%)

 

All calculations should demonstrate the appropriate workings that are used to derive the solution, and should not be performed in Microsoft Excel.

Total marks for Part B – (50)

 

 

Part C: Budgeting:

Required:

• Define a budget and demonstrate how budgets, strategic objectives, and strategic plans are related. (10%)
• Critically evaluate the budgeting process and the interlinking of various budgets used within a business. (10%)

Total marks for Part C: (20)

Presentation

 

Please write your Tutor’s name clearly on the front of the assignment.

1. To obtain a high mark, you should:
   • Make your report concise, precise and well-presented and structured;
   • Draw logical conclusions from accounting information;
   • Synthesise information in a coherent and useful way;
   • Show evidence of key text and background reading;
   • Incorporate your knowledge into an integrated piece of work;
   • Demonstrate a critical understanding of financial management

2. A Harvard standard referencing is required for the report

 

3,500 words overall. (+- 10%)

 

Assessment Regulations

Please note that this is an individual assignment and the policy of the University on “Policy on Cheating, Collusion, and Plagiarism” applies. For further information regarding Assessment Regulations, extenuating circumstances or extensions and academic integrity, please refer to your Programme Handbook on the University of Sunderland in London information page on Canvas.

Reading List

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Submission guidelines

There are currently two steps that you need to follow to ensure that you successfully submit your work for marking. Your submission links will become available approximately 3 weeks prior to your submission deadline, along with detailed instructions on how to submit your assignment, but in the meantime, please feel free also to watch this Assignment Submission Instructions video.

Grading

You will be marked in accordance with the University of Sunderland assessment criteria attached below. The assessment criteria covers; Relevance, Knowledge, Analysis, Argument and Structure, Critical Evaluation, Presentation, Reference to Literature.