Reference no: EM132776759 , Length: word count:3500

PGBM01 Financial Management And Control - University of Sunderland

This assessment covers the following learning outcomes from the module.

Knowledge
K1. A critical understanding of the key strategic financial statements of an organisation
K2. Understanding and evaluation of the uses of both quantitative and qualitative accounting information within an organisation
K3. Knowledge and understanding of theoretical concepts and frameworks to a range of practical situations in order to propose solutions to strategic business problems

Skills
S1. The cognitive skills of critical thinking and analysis in showing how the finance function can make a significant contribution to the successful strategic management of an organisation
S2. The skills necessary to communicate effectively at a senior level and be able to put these skills into practice
S3. Development of the skills required to independently access and process financial data

Part A
Bitmap plc is well established manufacturer of furniture in London. The board of directors have looked into the financial statements of the last two years and have 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 are given below:

Statement of comprehensive income for the year ended 2018 and 2019.

		2019		2018
	£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 2018 and 2019.

		2019		2018
	£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. Your report must be supported by the calculations of relevant ratios in the five areas mentioned above.

2. Calculate working capital cycle in days for the Bitmap plc based on the information above, assuming 365 days, for the years 2019 and 2018 you are also required to evaluate results briefly.

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

Part B-

Toyland ltd, is well established London based company which manufactures toys for children. The directors are expecting that demand of toys in future will increase significantly and with 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 useful life and will be sold at estimated price of £50,000 at the end of sixth year. Toyland will use 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 is confusing them to take 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 decision.Further information regarding net cash inflow from both machines is provided below.

Requirements:

Required:
1. Calculate using the following investment appraisal techniques, and provide recommendations as to the economic feasibility of acquiring the suitable machine:
a. The Payback Period.
b. The Discounted Payback Period.
c. The Accounting Rate of Return.
d. The Net Present Value.
e. The Internal Rate of Return (to two decimal places)

2. Critically evaluate the key benefits and limitations of each of the differing investment appraisal techniques, supporting the response with relevant academic research as to whether each of the differing techniques is applied in practice within a real-life business context.

3. You are also required to critically evaluate two suitable sources of finance to fund this investment.

Part C: Budgeting:

Required:

1. Critically evaluate the budgeting process and demonstrate how budgets, strategic objectives, and strategic plans are related.

Notes:
1. To obtain a high mark, you should:
a. Make your report concise, precise and well-presented and structured;
b. Draw logical conclusions from accounting information;
c. Synthesise information in a coherent and useful way;
d. Show evidence of key text and background reading;
e. Incorporate your knowledge into an integrated piece of work;
f. Demonstrate critical understanding of financial management
2. A Harvard standard referencing is required for the report

Attachment:- Financial Management And Control.rar