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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 31^st 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:

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.

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)

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:

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.

Gross profit margin
Operating profit margin
Return on capital employed
Asset turnover
Current ratio
Acid test
Inventory days
Trade receivable days
Trade payable days
Working capital cycle/operating cycle
Gearing
Interest cover

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 31^st Dec 2022.

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

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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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