PGBM01 - FINANCIAL MANAGEMENT AND CONTROL

Module leader:

Assessment weight: 100% of the module

Outcomes Assessed: All

This assessment is in three parts, please answer all elements.

 Please note that this is an individual assignment and the universities “Policy on Cheating, Collusion and

 Plagiarism” applies. All calculations and tables are subject to plagiarism policy of the University. All tables and calculations should be your own work.

Please write your Tutor’s name clearly on the front of the assignment.

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

PGBM01 - FINANCIAL MANAGEMENT AND CONTROL

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.

Statement of financial position as at 31st of December 2018 and 2019.

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. (25%)
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. (5%)

Total marks for Part A: (30)

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. A critical understanding of the key strategic financial statements of an organisation. 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:

Calculate using the following investment appraisal techniques, and provide recommendations as to the economic feasibility of acquiring the suitable machine:

1. The Payback Period.
2. The Discounted Payback Period.
3. The Accounting Rate of Return.
4. The Net Present Value.
5. The Internal Rate of Return (to two decimal places) Marks (15%)

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. Marks (20%)

3. You are also required to critically evaluate three suitable sources of finance to fund this investment as compared to a listed company. Marks (15%)

A critical understanding of the key strategic financial statements of an organisation