2. Identify and discuss specific issues that could impact both the manufacturing and production of the Gaia Niche EV, and consumer demand for the product

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Coursework Assessment Brief

Assessment Details

 

Module Title:

Understanding Finance

Module Code:

 

Module Leader:

 

Level:

3

Assessment Title:

Budget report

Assessment Number:

AE1 MAIN

Assessment Type:

Individual report

Restrictions on Time/Word Count:

1000 words (+/- 10%)plus Excel spreadsheet

Consequence of not meeting time/word count limit:

There is no penalty for presenting below the word limit, but students should be aware that there is a risk they may not maximise their potential grade.

Assignments should be presented appropriately in line with the restrictions stated above; if an assignment exceeds the time/word count this will be taken in account in the marks given using the assessment criteria shown.* 

Individual/Group:

Individual

Assessment Weighting:

100%

Issue Date:

 

Hand In Date:

 

Planned Feedback Date:

 

Mode of Submission:

On-line

Number of copies to be submitted:

One copy submitted to ‘Solent Online Learning’

Anonymous Marking

 

This assessment is to be marked anonymously

Assessment Task

You are required to produce a budget report, complete with analysis and commentary, on a given scenario.

The report consists of THREE compulsory parts.

  • You MUST submit an Excel spreadsheet with your report to demonstrate your Excel skills.
  • Students who fail to submit an Excel spreadsheet, or who only provide a screenshot of Excel within their reports, will not achieve full marks.

Gaia Ltd

Assessment Scenario

Gaia Ltd is an established vehicle manufacturer operating across the UK and Europe. The directors of Gaia Ltd are considering expanding manufacturing of their new Electric Vehicle (EV), named the Gaia Niche, over the next 12 months.

PART A (35% weighting)                                          

The directors of Gaia Ltd have asked you, as a recently employed assistant management accountant, to prepare and review their cash budget. Their bookkeeper started the cash budget but was unable to complete it due to ill health.

In addition, Gaia Ltd requires you to evaluate the different funding options for its expansion plans.

Estimated sales and purchases for each of the nine months to September are given below:

 

Jan

Feb

Mar

April

May

June

July

Aug

Sept

Credit sales

3,900,000

4,000,000

4,200,000

4,200,000

4,200,000

4,300,000

4,305,000

4,400,000

4,450,000

Cash sales

79,500,000

79,000,000

79,900,000

82,500,000

85,500,000

90,000,000

92,000,000

99,000,000

120,000,000

Credit purchases

70,000,000

72,000,000

72,000,000

80,500,000

84,000,000

87,000,000

91,000,000

93,000,000

102,000,000

Trade Receivables: Credit sales are to be collected one month after the date they have been sold.

Trade Payables: Credit purchases are to be paid one month after the date they have been purchased.

Borrowings: The terms of a 5-year loan are coming to an end and Gaia Ltd are due to repay the capital of £10,000,000 on 31st July.

Current Liabilities: Corporation tax of £500,000 is due to be paid to HMRC in the month of May.

Other overheads: Other overheads will be £9,000,000 per month settled on a monthly basis in the month incurred.

Cash: Gaia Ltd expects to have £10,000overdraft at the beginning of April.

You are required to:

  1. Use Excel to prepare a cash budget for the business for the 6-month period from April to September(15% weighting)

NOTE:  To achieve full marks you MUST submit an Excel spreadsheet with your report (not a screenshot) to show your working sand demonstrate your Excel skills, e.g. cell referencing and formula.

  1. Examine the cash budget you have prepared and advise the directors of Gaia Ltd of any possible solutions to solve any cash flow problems that might be evident. You should conduct appropriate research using academic sources to generate ideas and discussion. Marks will be awarded depending on the depth of discussion. (10% weighting)
  1. Gaia Ltd are listed on the London Stock Exchange and are considering raising finance for the expansion plans through the issue of shares. You have been asked to identify additional suitable sources of finance that may be available to Gaia Ltd. You should consider the advantages and disadvantages of the sources of finance you have identified, including the issue of shares. You should then make a recommendation to the directors of Gaia Ltd of the most appropriate source of finance for the proposed expansion plans. You should conduct appropriate research using academic sources to generate ideas and discussion. Marks will be awarded depending on the depth of discussion. (10% weighting)

PART B (40% weighting)

The Directors of Gaia Ltd are considering expanding manufacturing of their new Electric Vehicle (EV), named the Gaia Niche, over the next 12 months. Gaia Ltd have asked you to calculate and compare ratios for 2019 and 2020 before making a recommendation as to whether to proceed with expansion plans or not.

Gaia Ltd Income Statements for the year ended

 

 

31st Dec 2020

 

31st Dec 2019

           

 

Sales revenue

 

954,500,000

   

1,291,400,000

 

Cost of sales

 

(872,800,000)

   

(1,185,800,000)

 

Gross profit

 

81,700,000

   

105,600,000

 

Operating expenses

 

(82,300,000)

   

(88,809,000)

 

Operating profit

 

(600,000)

   

16,791,000

 

Finance charges (interest)

 

(1,220,000)

   

(1,644,000)

 

Profit before tax

 

(1,820,000)

   

15,147,000

 

Taxation

 

(418,000)

   

(3,000,000)

 

Profit for the year

 

(2,238,000)

   

12,147,000

 

 

Gaia Ltd Statement of Financial Position (Balance Sheet) as at

 

 

31st Dec 2020

 

31st Dec 2019

 

           

 

Non-current assets

 

12,200,000

   

15,700,000

 

           

 

Current assets

         

 

 Inventory (finished goods)

110,100,000

   

128,600,000

 

 

 Trade receivables

4,800,000

   

4,770,000

 

 

 Bank

0

   

7,000

 

 

 Other current assets

     47,504,000

   

  124,523,000

 

 

   

162,404,000

   

257,900,000

 

Total assets

 

174,604,000

   

273,600,000

 

           

 

Equity

         

 

Issued share capital

       2,800,000

   

     2,800,000

 

 

Reserves

9,500,000

   

   32,600,000

 

 

   

     12,300,000

   

       35,400,000

 

           

 

Current liabilities

         

 

 Trade payables

52,300,000

   

78,700,000

 

 

 Taxation

0

   

2,600,000

 

 

 VAT and social securities

20,000,000

   

38,200,000

 

 

 Other current liabilities

41,000,000

   

81,500,000

 

 

 Bank overdraft

4,000

   

0

 

 

   

   113,304,000

   

      201,000,000

 

           

 

Non-current liabilities

         

 

Loans

     10,900,000

   

    12,000,000

 

 

Pension Liabilities

     38,100,000

   

    25,200,000

 

 

   

     49,000,000

   

       37,200,000

 

Total equity and liabilities

 

 174,604,000

   

   273,600,000

 

                             

You are required to:

  1. Use your Excel skills to calculate the following ratios for both years.

You should then present your calculated ratios within your report in a simple table format for ease of comparison. (15% weighting)

NOTE:  To achieve full marks you MUST submit an Excel spreadsheet with your report (not a screenshot) to show your workings and demonstrate your Excel skills, e.g. cell referencing and formula.

 

  1. Gross profit margin
  2. Operating profit margin
  3. Return on capital employed
  4. Asset turnover
  5. Current ratio
  6. Acid test
  7. Inventory days
  8. Trade receivable days
  9. Trade payable days
  10. Working capital cycle/operating cycle
  11. Gearing
  12. Interest cover
  1. Compare the performance for both years in the 4 key areas of profitability, efficiency, liquidity and gearing using the ratios calculated in part 1 and make a recommendation as to whether Gaia Ltd should proceed with expanding manufacturing of their new EV, Gaia Niche. Marks will be awarded depending on the depth of discussion. (25% weighting)

PART C (25% weighting)

Gaia Ltd has experienced fluctuating consumer demands since the beginning of the Covid-19 pandemic but are cautiously optimistic now that restrictions appear to be easing.

Their latest product is a new Electric Vehicle (EV) called the Gaia Niche and have a supply chain through which they import components and EV batteries from Europe. The following information is available for the year ending 31st Dec 2022.

  1. 1.   Due to fluctuating and unpredictable consumer demands, you have been asked to use Excel to prepare a flexible sales budget for quantities of 25,000 units and 35,000 units. Sales revenue is fully variable. (10% weighting)

NOTE:  To achieve full marks you MUST submit an Excel spreadsheet with your report (not a screenshot) to show your workings and demonstrate your Excel skills, e.g. cell referencing and formula.

   

Budget

Sales (units)

 

30,000

     
 

£/unit

£

Sales revenue

39640.00

1,189,200,000

Variable produce costs

33539.07

(1,006,172,000)

Variable production overheads

2666.67

(80,000,000)

Fixed production costs

 

(80,000,000)

Fixed administration costs

 

(7,000,000)

Profit

 

16,028,000

  1. Identify and discuss specific issues that could impact both the manufacturing and production of the Gaia Niche EV, and consumer demand for the product. Issues should be in context with the given scenario and current economic climate. You should conduct appropriate research using academic sources to generate ideas and discussion. Marks will be awarded depending on the depth of discussion. (15% weighting)

Assessment criteria (Parts A, B and C will be marked against the following criteria in accordance with the indicated weighting)

PART A:

A1-A2

A3-A4

B1-B3

C1-C3

D1-D3

F1

F2-F3

PART A1 (15%)

Prepare cash budget in Excel LO1, LO2, LO3

 

Excel spreadsheet submitted. An excellent Cash Budget format showing exemplary Excel skills with correct calculations throughout.

Excel spreadsheet submitted. An excellent Cash Budget format showing excellent Excel skills with mostly correct calculations throughout.

Excel spreadsheet submitted. A good Cash Budget format showing good Excel skills with mainly correct calculations.

Excel spreadsheet submitted. A recognised Cash Budget format showing adequate Excel skills with many correct calculations.

Excel spreadsheet submitted. A fairly recognisable Cash Budget format showing marginally adequate Excel skills with some correct calculations.

Excel spreadsheet submitted but Cash Budget is not in a recognisable format and/or marginally inadequate Excel skills with few correct calculations.

Excel spreadsheet NOT submitted, or submitted Excel spreadsheet Cash Budget is not in a recognisable format and/or is inadequate Excel skills with mostly incorrect calculations.

PART A2 (10%)

Analysis of cash budget and solutions

LO2, LO3, LO4

Demonstrates an understanding of the concepts and key terminology of cash budgets that substantially exceeds expectations for the level in many aspects.

Demonstrates an understanding of the concepts and key terminology of cash budgets that exceeds expectations for the level in several

Recognises and demonstrates clear understanding of the concepts and key terminology of cash budgets

Recognises and demonstrates basic understanding of the concepts and key terminology of cash budgets

Recognises the concepts and key terminology of cash budgets but little demonstration of understanding

Occasional errors/omissions/misrecognitions of cash budgets concepts and/or key terminology

Fails to recognise the basic concepts and key terminology of cash budgets

Analysis of cash budget within the given context is exceptional for this level;

Analysis of cash budget within the given context is excellent

Analysis of cash budget within the given context is good

Analysis of cash budget within the given context is satisfactory

Analysis of cash budget within the given context is adequate

Analysis of cash budget within the given context is marginally inadequate for this level;

Analysis of cash budget within the given contextis inaccurate or absent, with reliance on description

Demonstrates outstanding ability to apply learning to real life financial scenarios and draw conclusions

Ability to apply learning to real life financial scenarios and draw conclusions exceeds expectations for this level in some aspects.

Evidences a good ability to apply learning to real life financial scenarios and draw conclusions

Applies learning to real life financial scenarios and draws satisfactory conclusions

Limited application of learning to real life financial scenarios and draws limited conclusions

Marginally fails to apply learning to real life financial scenarios with little or no conclusions

Fails to apply learning to real life financial scenarios and inaccurate or absent conclusions

Demonstrates an understanding of the factors impacting on business performance that substantially exceeds expectations for the level in many aspects.

Demonstrates an understanding of the factors impacting on business performance that exceeds expectations for the level in several

Recognises and demonstrates clear understanding of the factors impacting on business performance

Recognises and demonstrates basic understanding of the factors impacting on business performance

Recognises the factors impacting on business performance but little demonstration of understanding

Occasional errors/omissions/misrecognitions of the factors impacting on business performance

Fails to recognise the factors impacting on business performance

Drawn from a wide range of sources, and with exemplary referencing

Drawn from a wide range of sources, and with consistently accurate referencing

Drawn from a wide range of sources, and with accurate referencing

Drawn from an appropriate range of sources, and with mostly accurate referencing

Drawn from an adequate range of sources, and with inconsistencies/minor errors in referencing

Drawn from a limited range of sources, and with omissions/errors in referencing

Drawn from an inadequate range of sources, and with significant errors in referencing or none

PART A3 (10%)

Advantages and disadvantages of sources of finance, and recommendation

LO1, LO2, LO4

Demonstrates an understanding of sources of finance that substantially exceeds expectations for the level in many aspects.

Demonstrates an understanding of sources of finance that exceeds expectations for the level in several

Recognises and demonstrates clear understanding of sources of finance

Recognises and demonstrates basic understanding of sources of finance

Recognises sources of finance but little demonstration of understanding

Occasional errors/omissions/misrecognitions of sources of finance

Fails to recognise sources of finance

PART B:

A1-A2

A3-A4

B1-B3

C1-C3

D1-D3

F1

F2-F3

PART B1 (15%)

Calculate ratios in Excel and present in table format

LO1, LO2, LO3

 

Excel spreadsheet submitted. An excellent format for ratio analysis showing exemplary Excel skills with correct calculations throughout.

Excel spreadsheet submitted. An excellent format for ratio analysis showing excellent Excel skills with mostly correct calculations throughout.

Excel spreadsheet submitted. A good format for ratio analysis showing good Excel skills with mainly correct calculations.

Excel spreadsheet submitted. A recognised format for ratio analysis showing adequate Excel skills with many correct calculations.

Excel spreadsheet submitted. A fairly recognisable format for ratio analysis showing marginally adequate Excel skills with some correct calculations.

Excel spreadsheet submitted but is not in a recognisable format for ratio analysis and/or marginally inadequate Excel skills with few correct calculations.

Excel spreadsheet NOT submitted, or submitted Excel spreadsheet ratio analysis is not in a recognisable format and/or is inadequate Excel skills with mostly incorrect calculations.

PART B2 (25%)

Analysis of ratios for profitability, efficiency, liquidity and gearing, with recommendation

LO1, LO2, LO3, LO4

Demonstrates an understanding of the concepts and key terminology of ratio analysis that substantially exceeds expectations for the level in many aspects.

Demonstrates an understanding of the concepts and key terminology of ratio analysis that exceeds expectations for the level in several

Recognises and demonstrates clear understanding of the concepts and key terminology of ratio analysis

Recognises and demonstrates basic understanding of the concepts and key terminology of ratio analysis

Recognises the concepts and key terminology of ratio analysis but little demonstration of understanding

Occasional errors/omissions/misrecognitions of ratio analysis concepts and/or key terminology

Fails to recognise the basic concepts and key terminology of ratio analysis

Analysis of ratios within the given context is exceptional for this level;

Analysis of ratios within the given context is excellent

Analysis of ratios within the given context is good

Analysis of ratios within the given context is satisfactory

Analysis of ratios within the given context is adequate

Analysis of ratios within the given context is marginally inadequate for this level;

Analysis of ratios within the given context is inaccurate or absent, with reliance on description;

Demonstrates outstanding ability to apply learning to real life financial scenarios and draw conclusions

Ability to apply learning to real life financial scenarios and draw conclusions exceeds expectations for this level in some aspects.

Evidences a good ability to apply learning to real life financial scenarios and draw conclusions

Applies learning to real life financial scenarios and draws satisfactory conclusions

Limited application of learning to real life financial scenarios and draws limited conclusions

Marginally fails to apply learning to real life financial scenarios with little or no conclusions

Fails to apply learning to real life financial scenarios and inaccurate or absent conclusions

Demonstrates an understanding of the factors impacting on business performance that substantially exceeds expectations for the level in many aspects.

Demonstrates an understanding of the factors impacting on business performance that exceeds expectations for the level in several

Recognises and demonstrates clear understanding of the factors impacting on business performance

Recognises and demonstrates basic understanding of the factors impacting on business performance

Recognises the factors impacting on business performance but little demonstration of understanding

Occasional errors/omissions/misrecognitions of the factors impacting on business performance

Fails to recognise the factors impacting on business performance

Drawn from a wide range of sources, and with exemplary referencing

Drawn from a wide range of sources, and with consistently accurate referencing

Drawn from a wide range of sources, and with accurate referencing

Drawn from an appropriate range of sources, and with mostly accurate referencing

Drawn from an adequate range of sources, and with inconsistencies/minor errors in referencing

Drawn from a limited range of sources, and with omissions/errors in referencing

Drawn from an inadequate range of sources, and with significant errors in referencing or none

PART C:

A1-A2

A3-A4

B1-B3

C1-C3

D1-D3

F1

F2-F3

PART C1 (10%)

Prepare flexible budget in Excel

LO1, LO2, LO3

Excel spreadsheet submitted. An excellent format for flexible budget showing exemplary Excel skills with correct calculations throughout.

Excel spreadsheet submitted. An excellent format for flexible budget showing excellent Excel skills with mostly correct calculations throughout.

Excel spreadsheet submitted. A good format for flexible budget showing good Excel skills with mainly correct calculations.

Excel spreadsheet submitted. A recognised format for flexible budget showing adequate Excel skills with many correct calculations.

Excel spreadsheet submitted. A fairly recognisable format for flexible budget showing marginally adequate Excel skills with some correct calculations.

Excel spreadsheet submitted but is not in a recognisable format for flexible budget and/or marginally inadequate Excel skills with few correct calculations.

Excel spreadsheet NOT submitted, or submitted Excel spreadsheet flexible budget is not in a recognisable format and/or is inadequate Excel skills with mostly incorrect calculations.

PART C2 (15%)

Analysis of flexible budget

LO2, LO3, LO4

Demonstrates an understanding of the concepts and key terminology of flexible budgets that substantially exceeds expectations for the level in many aspects.

Demonstrates an understanding of the concepts and key terminology of flexible budgets that exceeds expectations for the level in several

Recognises and demonstrates clear understanding of the concepts and key terminology of flexible budgets

Recognises and demonstrates basic understanding of the concepts and key terminology of flexible budgets

Recognises the concepts and key terminology of flexible budgets but little demonstration of understanding

Occasional errors/omissions/misrecognitions of flexible budget concepts and/or key terminology

Fails to recognise the basic concepts and key terminology of flexible budgets

Analysis of flexible budget within the given context is exceptional for this level;

Analysis of flexible budget within the given context is excellent

Analysis of flexible budget within the given context is good

Analysis of flexible budgets within the given context is satisfactory

Analysis of flexible budget within the given context is adequate

Analysis of flexible budget within the given context is marginally inadequate for this level;

Analysis of flexible budget within the given context is inaccurate or absent, with reliance on description;

Demonstrates outstanding ability to apply learning to real life financial scenarios and draw conclusions

Ability to apply learning to real life financial scenarios and draw conclusions exceeds expectations for this level in some aspects.

Evidences a good ability to apply learning to real life financial scenarios and draw conclusions

Applies learning to real life financial scenarios and draws satisfactory conclusions

Limited application of learning to real life financial scenarios and draws limited conclusions

Marginally fails to apply learning to real life financial scenarios with little or no conclusions

Fails to apply learning to real life financial scenarios and inaccurate or absent conclusions

Demonstrates an understanding of the factors impacting on business performance that substantially exceeds expectations for the level in many aspects.

Demonstrates an understanding of the factors impacting on business performance that exceeds expectations for the level in several

Recognises and demonstrates clear understanding of the factors impacting on business performance

Recognises and demonstrates basic understanding of the factors impacting on business performance

Recognises the factors impacting on business performance but little demonstration of understanding

Occasional errors/omissions/misrecognitions of the factors impacting on business performance

Fails to recognise the factors impacting on business performance

Drawn from a wide range of sources, and with exemplary referencing

Drawn from a wide range of sources, and with consistently accurate referencing

Drawn from a wide range of sources, and with accurate referencing

Drawn from an appropriate range of sources, and with mostly accurate referencing

Drawn from an adequate range of sources, and with inconsistencies/minor errors in referencing

Drawn from a limited range of sources, and with omissions/errors in referencing

Drawn from an inadequate range of sources, and with significant errors in referencing or none


 


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