NZDB6213 Planning and Managing Business Finances- Question

Assignment Help Business Management

Reference no: EM132409991

NZDB6213 Planning and Managing Business Finances, ICL Graduate Business School, New Zealand

Task 1: Analyse and apply financial information to make decisions (practical questions)

Task 2: Analyse and apply financial information (Theory questions)

Assessment 1 - Assignment

Task 1: Analyse and apply financial information to make decisions. (This part has to be submitted under the assignment one-task link)

Read each scenario and answer the questions that follow.

Scenario1: Clayton Associates

Rayon Associates is an investment bank who are currently evaluating three options for their client, the BG Group. The options are called Project Diamond, Project Coral and Project Copper.

Rayon Associates have hired you to help them make the correct recommendations to their client. They have provided you with the information given below and have asked you to answer a set of questions.

Q1. The cost of capital, initial outlay and the cash inflows of each project are shown in the table below.

Calculate the values below and fill in the table:

NPV of each project, and provide a brief explanation of its viability. Your answer should include the acceptance criteria for NPV and explain

how time value money is related to this investment decision.

IRR for each project, and provide a brief explanation for your decision.

Cost of capital	10%
	Project Diamond	Project Coral	Project Copper	Allocations of Marks
Initial outlay	($2,400,000)	($2,100,000)	($1,500,000)
Inflow year	$	$	$
1	250,000	350,000	140,000
2	310,000	410,000	150,000
3	450,000	520,000	160,000
4	520,000	480,000	140,000
5	600,000	510,000	150,000
6	520,000	610,000	160,000
7	540,000	625,000	125,000
8	710,000	650,000	130,000
9	650,000	400,000	150,000
10	700,000	190,000	70,000

a. NPV

Based on the NPVS calculated, provide a brief explanation of its viability. Your answer should include the acceptance criteria for NPV and explain how time value of money is related to this investment decision.

b. IRR

Based on the calculations of IRR, provide a brief explanation for your decision?

Scenario 2: Tegal Limited

Q2. Given below are the Statement of Financial Performance and the Statement of Financial Position for Tegal Limited.

Tegal Limited

Statement of Financial Performance	Year 2019	Year 2018	Year 2017	Year 2016
for the Year Ended 31 March	$	$	$	$
Net Sales	580,000	620,000	750,000	830,000
Less: Cost of goods sold	423,000	571,000	630,000	699,000
Gross Profit	157,000	49,000	120,000	131,000
Less: Operating Expenses	57,000	50,000	68,000	52,000
Net profit/(loss) before interest and taxes	100,000	(1,000)	52,000	79,000
Less interest	12,000	18,000	25,000	35,000
Net profit/(loss) before tax	88,000	(19,000)	27,000	44,000
Less tax	19,000	0	7,000	12,000
Net profit after tax	69,000	19,000	20,000	32,000


Statement of Financial Position	Year 2019	Year 2018	Year 2017	Year 2016
As at 31 March	$	$	$	$
Trade receivable	52,000	50,000	65,000	72,000
Inventory	36,000	60,000	75,000	82,000
Total current assets	88,000	110,000	140,000	154,000
Buildings	250,000	250,000	250,000	250,000
Vehicles and Equipment	50,000	60,000	60,000	60,000
Total fixed assets	300,000	310,000	310,000	310,000
Total assets	388,000	420,000	440,000	464,000

Bank overdraft	12,000	12,000	12,000	12,000
Accounts payable	30,000	35,000	40,000	50,000
Total current liabilities	42,000	47,000	52,000	62,000
Loan	-	60,000	120,000	130,000
Mortgage	125,000	125,000	125,000	125,000
Total non-current liabilities	125,000	185,000	245,000	255,000
Issued capital (120,000 $1 shares)	120,000	120,000	120,000	120,000
Retained earnings	139,000	68,000	23,000	27,000
Total shareholders' equity	259,000	188,000	143,000	147,000
Total liabilities + Shareholders equity	388,000	420,000	440,000	464,000

Additional information:

The following balances ($) existed at 31 March 2015

Total assets for 2015 $410,000

Total equity for 2015 $150,000

Inventories for 2015 $60,000

Trade Receivable for 2015 $48,000

Trade Payable for 2015 $32,000

Write out the formulae and calculate the ratios in the table below by using correct final unit for each ratio.

Ratio Formula Year 2019 Year 2018 Year 2017 Year 2016

1. Gross profit margin

2. Net profit margin

3. Operating profit margin

4. Return on equity ratio (use average)

5. Return on assets ratio (use average)

6. Total asset turnover ratio

7. Fixed asset turnover ratio

8. Inventory turnover ratio (Use average)

9. Trade receivable turnover ratio (Use average)

10. Age of trade receivable ratio

11. Age of creditors ratio (use average)

12. Current ratio

13. Quick ratio

14. Interest coverage ratio

15. Debt Equity Ratio

16. Proprietary Ratio

Scenario 3 Enzed Industries

Enzed Industries is considering two assets for investing. The probability distributions of expected returns for these two assets are shown in the table below.

Asset X	Asset Y
i	Pr_i	Return r_i(%)	Pr_i	Return r_i(%)
1	0.10	50	0.40	46
2	0.20	10	0.30	20
3	0.40	0	0.30	10
4	0.20	20
5	0.10	10

Q3. Calculate the following for both assets and describe the degree of asset risk and return.

Expected value of return (r) and state, which provides the highest, expected return.

Standard deviation (σ) and state which asset has the higher risk.

Coefficient of variation (CV) and state which asset has the higher relative risk.

TASK 2: Analyse and Apply financial information (Theory questions)

Scenario 1: ElectroChip Limited

ElectroChip Limited is a producer and supplier of machine parts to local and Australian customers. Five years ago, it appeared that the company was in danger of closing down. Profits were down, and shareholder confidence was very low.

In an effort to reduce costs and increase profits, the Chief Financial Officer and the Chief Operating Officer put in a number of efficiency and cost-saving measures. These measures include:

Ensuring wasteful processes in the company are overhauled and efficient methods of working are introduced.

Borrowing from the Green Bank to invest in new machinery. The Green Bank was selected because the Managing Director of ElectroChip is a member of the bank’s Board.

Not upgrading their pollution control systems to match the requirements of the new machinery. This has resulted in an increase in emissions.

Not upgrading their safety systems and providing safety training to workers to match the requirements of the new machinery.

Not paying cash dividends to shareholders for the past six years.

Stopping the company’s support to the local charity.

Laying off older workers who were on a higher pay scale in favour of recruits straight out of college for lower pay.

Implementing a profit-sharing plan where managers are given a percentage of the company’s profits.

As a result of these measures, the company’s profits in the past three years have been consistently rising. However, although profits are up, the company’s stock price has declined by $5.50 per share over the past 15 months. The perception in the market is that ElectroChip does not care for its shareholders.

Answer the following questions based on Scenario 1.

Q 1. Briefly explain three different roles of financial manager in financial management. Your answer should include a relevant example from the given scenario.

Q 2. List three stakeholders that have been affected by ElectroChip’s efficiency and cost-saving measures. Explain the reasons based on the given scenario.

For each stakeholder listed in Q2a, describe what steps ElectroChip might take to ensure stakeholders requirements are met. The steps described must be professional, ethical, and socially and culturally appropriate.

Q 3. In Scenario 1, identify the principal and the agent in the agency relationship. Explain the reason for the decline in the share price while the profits are up.

Scenario 2: Tegal Limited (Refer the Task 1 - Scenario 2)

Use the ratio analysis that you have done in the Task 1 to answer this question.

Q4. Analyse the trends and explain the impact of the changes in the ratios in the following areas. Your trend and ratio analysis must focus on the impacts of the Tegal Limited’s return and risk elements.

Liquidity and solvency

Profitability

iii. Efficiency of operations

General Questions

Q5. Briefly explain the objective and elements of each of the four financial statements listed below:

income statement (statement of financial performance)

balance sheet (statement of financial position)

statement of changes in equity

cash flow statement

Q6. Business investment decisions can be influenced by three main factors. These include:

Capital rationing vs unlimited funds

Independent vs mutually exclusive projects

Expansion vs replacement projects

Briefly explain each of these influencing factors.

Q7. You are hired by the local restaurant to analyse their financial state of affairs and provide a report. You realise that you need to understand how the five areas of business, viz., operations, accounting, sales and marketing, human resources, and risk management are managed in order to produce a report that is well-balanced and takes into account all aspects of the business.

Identify and explain at least one evidence for each area of business related to financial analysis.

Q8. Companies are increasingly global in their operations. Some of the factors that impact the finanical decision making and forecasting functions of such companies are listed below. Select any two factors and analyse how they may influence the global capital budgeting and valuation of the business.

Factors may include (select any two)

Divisional differences

Currency

Taxation

Country risks

Adaptable incentive systems.

Reference no: EM132409991

Questions Cloud

How you as a professional nurse demonstrate good citizenship : Review Chapter 16, Figure 16-1, page 406 of Purtilo & Doherty's textbook. What does that figure mean to you? How do you as a professional nurse demonstrate.

Challenges in cyber security for business : Challenges in Cyber Security for Business and critical reflection of their personal learning process, as experienced during this unit.

Melting temperature of a solution : Why are we able to look at the melting temperature of a solution and use Kf values in our calculations?

What are the common signs of bullying in nursing : What are the common signs of bullying in nursing? What are common stressors in the nursing workplace? What are some strategies to manage personal.

NZDB6213 Planning and Managing Business Finances- Question : NZDB6213 Planning and Managing Business Finances Assignment Help and Solutions, ICL Graduate Business School, New Zealand, How time value money is related.

Describe the steps a nurse can take to break the link : What are social determinants of health? Explain how social determinants of health contribute to the development of disease. Describe the fundamental idea that.

Briefly describe the global health issue : Select a global health issue affecting the international health community. Briefly describe the global health issue and its impact on the larger public.

What framework would you use and why : In the Hospital Hope scenario, what do you think was the most important factor that led to the change in practice in the SICU? If you worked in a facility.

Describe chosen communicable disease including complications : Epidemiology Paper Requirements: Describe the chosen communicable disease, including causes, symptoms, mode of transmission, complications, treatment.

User Account

All Pages