Managerial Finance

BIRMINGHAM CITY BUSINESS SCHOOL

POSTGRADUATE DEGREES

 

COURSEWORK FRONT SHEET

MODULE TITLE: Managerial Finance

MODULE CODE: ACC7032

LECTURER: Amerdeep Jakhu

ISSUE DATE: 23rd September 2019

HAND IN DATE: 15th January 2020

HAND BACK DATE: 12th February 2020

 

Learning outcomes and pass attainment level:   · Evaluate the different competing financial objectives of the firm and the agency problem between shareholders and managers in publicly listed companies. · Demonstrate the ability to analyse financial data, conduct cost-benefit analysis and financial planning for effective business decisions using spreadsheet software package. · Critically evaluate investment projects using appropriate investment appraisal techniques to assess suitability and viability of the projects consistent with the overall strategy and business model(s) of the firm. · Critically appraise the major issues of capital management, relative advantages and disadvantages from the various perspectives of the stakeholders of the firm.

 

 

General guidance

The assessment for this unit is one coursework assignment. The required mark has been set at 50%. If you are attempting a first or second re-sit attempt your pass mark will be capped at 50%.

This is an individual assessment. Whilst there is no objection to you discussing the content of this assignment with your peers, your final submission must be completely your own work. Plagiarism and copying will not be tolerated and may lead to subsequent penalties being imposed. This is an individual assignment and all calculations, analysis and narrative submitted must be your own work.

The assignment will require a considerable personal investment of time and effort.

 

Structure of the assignment

There are three separate questions included within the assignment and you should attempt all three questions. There is no word limit to questions. If any part of the assignment is ignored this reduces the maximum marks which could potentially be awarded. The assignment answer should be carefully checked before submission for the use of appropriate and acceptable grammar. The correct use of English spelling is to be employed throughout.

All the numbers should be reported in 2 decimal points.

Submission of the assignment

All three questions must be attempted and submitted in one document. You are advised to prepare your assignment in Word format and copy and paste contents from Excel where spreadsheets have been used to support your work. Only Microsoft Word file will be allowed for submission.

Your student ID number should be shown on each page of your assignment.

Your assignment should be submitted electronically via Moodle and you are advised to do this well in advance of the submission deadline to avoid any system related issues. Feedback on your assignment will also be provided via Moodle once the marking has been completed.

Marking of the assignment

The matrix on the following page has been provided to assist you in completing your assignment and is an indicative guide only, not a formal marking scheme.

 

 

 

 

 

Page 7 of 7

Indicative marking guide

 

Fail (0%-49%)	Pass (50%-59%)	Commendation (60%-69%)	Distinction (70%-100%)
Question 1
A lack of breadth and depth of financial analysis techniques accompanied by incorrect formulae or calculation without appropriate explanation. Poor layout or presentation in anything other than business report style. Inadequate grammar and lacking in overall knowledgeable synthesis.	Evidence of some financial analysis techniques but with errors of formulae and calculation with insufficient explanation and adequate presentation. Attempt at a business report format with some supportive appendices. Mainly descriptive with some attempt at synthesis. Grammar and structure being adequate.	Wide range of financial analysis techniques evident and supported by full disclosure of formulae and accurate calculation in a clear format. Presented in business report format and coherently structured. Supported by referenced appendices. Effective and well-reasoned narrative discussion.	An excellent range of financial analysis techniques which are supported by full disclosure of formulae and accurate calculation in a clear format. Excellent business report format and well structured. Supported by fully referenced appendices. Excellent analytical and justified explanations showing synthesis and application.
Question 2
A lack of understanding of management accounting and decision making. Unable to produce the correct format and calculations. Limited or no narrative discussion or recommendations and conclusions. Poor academic writing and referencing.	Ability to apply some management accounting decision making techniques. Demonstrates an adequate understanding of the principles and techniques involved. Reasonable attempt at analysis and discussion of findings, though of limited depth.	A good application of management accounting for decision making. Demonstrates a good understanding of the principles and techniques involved. Good analysis and discussion of findings, with good use of academic references which support clear and well explained conclusions.	Excellent application and understanding of management accounting for decision making. Thorough and detailed critical discussion with excellent use of a range of academic references which support clear, practical, and well explained recommendations and conclusions.
Question 3
A lack of understanding of the topic and the related literature. Limited or no narrative discussion or recommendations and conclusions. Poor academic writing and referencing.	Ability to research and apply theory to a reasonable degree. Demonstrates the ability to critically evaluate and make the appropriate conclusions. Reasonable attempt at analysis and discussion of findings, though of limited depth.	A good understanding of the topic. Demonstrates a good understanding of the principles and techniques involved. Good analysis and discussion with good use of academic references which support clear and well explained conclusions.	Excellent understanding of the topic. Thorough and detailed critical discussion with excellent use of a range of academic references which support clear, practical, and well explained recommendations and conclusions.

 

 

Question 1

Requirements

Prepare a business report, 6 pages long (+/- 10%), to the board of directors of Sainsburys Plc with tables and graphs that analyse the performance and financial position over at least 5 financial years and recommend actions that the board should take.

 

Utilise search data about the subject company and its competitor(s) from university databases (FAME, MINTEL) examined during seminars as well as the company financial reports and a range of other sources that you are to find for yourself.

 

Organise the ratios into the 4 categories (Profitability, Liquidity, Efficiency, and Gearing) and calculate horizontal and vertical analysis.

 

Apart from the graphs, put all the ratios, tables, and analysis in appendices.

 

Your 6-page business report must include in-depth critical discussion with appropriate academic references and graphs.

 

 

 

Marking guide

 

Financial analysis (using 4 categories of ratios and vertical and horizontal trend analysis)

Sainsbury Competitor Graphs

Vertical trend analysis 1 mark 1 mark 1 mark

Horizontal trend analysis 1 mark 1 mark 1 mark

Profitability ratio analysis 1 mark 1 mark 1 mark

Liquidity ratio analysis 1 mark 1 mark 1 mark

Efficiency ratio analysis 1 mark 1 mark 1 mark

Gearing ratio analysis 1 mark 1 mark 1 mark

Presentation marks 2 marks

________ ________ ________

Total for analysis 6 marks 6 marks 8 marks 20 marks

 

Interpretation (1-2 marks per relevant point, with academic references)

 

Vertical analysis narrative 2 marks

Horizontal analysis narrative 2 marks

Profitability narrative 4 marks

Liquidity narrative 4 marks

Efficiency narrative 4 marks

Gearing narrative 4 marks

________

Total for interpretation 20 marks 20 marks

 

 

Conclusions and recommendations 6 marks

 

Layout, structure, and grammar 2 marks

 

Referencing, reference list, and bibliography 2 marks

 

Total 50 marks

 

Question 2

 

 

You work as management consultant and have been approached by a client who is concerned about the future of their engineering business. The board of directors are considering halting the production of 2 of their products that appear to be making no profit.

 

As you can see from the table below the directors are considering closing production of Y and Z in an effort to improve overall profitability.

 

You establish that management accounting would show the results differently and may affect the directors’ decision.

 

			X	Y	Z	Total
			(£m)	(£m)	(£m)	(£m)
	Sales	432	288	216	936
	Cost of sales
		Materials	(144)	(96)	(96)	(336)
		Labour	(144)	(144)	(144)	(432)
		Overheads	(72)	(72)	(72)	(216)
	Profit/(loss)	72	(24)	(96)	(48)

 

 

 

Requirements for Question 2 part (a)

 

i. Calculate the contribution of each product? 5 marks

 

ii. Use your findings from part (a) and appropriate academic references to explain whether the company should stop making product Y 1 mark

 

iii. Use your findings from part (a) and appropriate academic references to explain whether the company should stop making product Z 1 mark

 

iv. Discuss how and why marginal costing calculates contribution to pay overheads and why this is useful in evaluating product value to a firm? 1 mark

 

v. Do you agree that profitability will improve by ceasing to make Products Y and Z? What do you suggest the company does to increase profitability? 2 marks

 

Question 2 (a) total 10 marks

 

 

 

 

 

 

 

 

Question 2 part a (continued)

 

The company board have approached you to get your professional advice opinion on their expansion plan, which entails opening another firm. Below are the figures for the first one that is planned for in the north of Birmingham location next year.

 

Company policy dictates that any decision should be based on the results of calculating Net Present Value (NPV) of 3 years cash flows using a cost of capital of 12%, Payback Period (PBP) must be less than 3 years, and the Internal Rate of Return (IRR) of the project should provide a 5% cushion in case of increases in inflation or interest rates.

 

The investment consists of £5,000 for the land, building costs of £9,480, and £2,196 for fittings and equipment.

 

The cash flows in year 1 are expected to be: total sales revenue £34,320; the cost of X products sold £8,004; Y stock sold £5,660; staff costs £1,416; light & heat £2,011; other overheads £7,708. The cash flows for the following years are the same, but are expected to increase by 2% inflation each year.

 

Requirements for Question 2 part (b)

 

Using the information above and in accord with the above stated company policy you are required to calculate:

 

i. Net Present Value (NPV) 5 marks

 

ii. Payback period (PBP) and Discounted Payback Period (DPBP) 5 marks

 

iii. Internal Rate of Return 1 marks

 

iv. Based on your calculations do you recommend the investment is made and the opening of the new manufacturing unit? 2 marks

 

v. Critically discuss the limitations of the above project appraisal techniques used and any other recommendations to the board. 2 marks

 

 

Question 2 (b) total 15 marks

 

 

 

Question 2 Total 25 marks

 

 

Question 3 – Essay question

 

 

Question 3

 

Over the last two decades, companies across the world have been found to be increasingly engaging in corporate social responsibility (CSR) activities as well as sustainability of the environment. Companies are now increasingly publishing substantial amounts of CSR and environmental information within annual reports.

 

Required

 

Write an essay covering a critical discussion of the drivers and motivations of companies to disclose this type of financial and non-financial information about their interactions with wider society and the environment and evaluate the usefulness of doing so.

 

Word count: 1000

 

Mark allocation

 

Regulation surrounding CSR reporting	4
Drivers of CSR reporting	4
Motivators of CSR reporting	4
Analysis and critique of CSR reporting	5
Conclusion	3
Credible academic citations	3
Layout, structure and grammar	2
Total	25

 

 

 

Question 3 Total 25 marks

 

 

 

Total 100 marks

 

 

 

 

 

 

 

 

End of Paper