Reference no: EM132362225
Assignment -
Task 1: Analyse and apply financial information to make decisions
Read each scenario and answer the questions that follow.
Scenario1: Clayton Associates
Clayton Associates is an investment bank who are currently evaluating three options for their client, the BG Group. The options are called Project Star, Project Fish and Project Cream.
Clayton 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.
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.
Based on the calculations of IRR, provide a brief explanation for your decision?
Word count should be 70 + to explain the time value of money, NPV and IRR decision rules.
Scenario 2: Tom's Processed Foods Limited
Q2. Given below are the Statement of Financial Performance and the Statement of Financial Position for Tom's Processed Foods Limited.
Additional information: The following balances ($) existed at 31 March 2015
Total assets for 2015 $460,000
Total equity for 2015 $400,000
Inventories for 2015 $80,000
Trade Receivable for 2015 $68,000
Trade Payable for 2015 $52,000
Write out the formulae and calculate the ratios in the table below by using the correct final unit for each ratio.
1. Gross profit margin
2. Net profit margin
3. Operating profit margin
4. Return on equity ratio
5. Return on assets ratio
6. Total asset turnover ratio
7. Fixed asset turnover ratio
8. Inventory turnover ratio
9. Trade receivable turnover ratio
10. Age of trade receivable ratio
11. Age of creditors ratio
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.
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 (sd) and state which asset has a higher risk.
Coefficient of variation (CV) and state which asset has a 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.
Q1. Briefly explain three different roles of financial manager in financial management. Your answer should include a relevant example from the given scenario.
Q2. 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.
Q3. 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.
Word count should be 250 + to answer for all 3 questions.
Scenario 2: Tom's Processed Foods Limited
Use the ratio analysis that you have done in 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 Tom Processed Foods Limited's return and risk elements.
Liquidity and solvency
Profitability
Efficiency of operations
Word count should be 300 words + with 100 words for each of the above areas (Total 10 marks)
General Questions -
Q5. Briefly explain the scope and function 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 financial 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 working of the business.
Factors may include (select any two)
Divisional differences
Currency
Taxation
Country risks
Adaptable incentive systems.
Note - For table and detailed information please see attached file.
Attachment:- Question paper Assignment File.rar