Managing Financial Decisions Final (1) (1)

Business Sample Assignment

London School of Science & Technology

Assignment front sheet

QualificationUnit number, title and level

Pearson BTEC Level 5 HND Diploma in Business (QCF)Unit 2: Managing Financial Resources and DecisionsLevel : 4

Student name and ID number Assessor name

Simon Masuku

Interval VerifierAlan Jeffery

Date issuedCompletion dateSubmitted on

1st May 20153rd July 2015 before 12:00 midday

Assignment titleManaging Financial Resources and Decisions - Shaping Your Future A Vocational Scenario

LOLearning OutcomeAssessment CriteriaIn this assessment you will have the opportunity to present evidence that shows you are able to:Task no.Evidence

(page no)

LO1

LO2Understand the sources of finance available to a business

Understand the importance of financial planning and information needs.1.1Identify the sources of finance available to a business

1.2Assess the implications of the different sources

1.3Evaluate appropriate sources of finance for a business project

2.1Analyse the costs of different sources of finance

2.2Explain the importance of financial planning

2.3Assess the information needs of different decision makers

2.4Explain the impact of finance on the financial statements

LO3

Be able to make financial decisions based on financial information 3.1Analyse budgets and make appropriate decisions.

3.2Explain the calculation of unit costs and make pricing decisions using relevant information.

3.3Assess the viability of a project using

investment appraisal techniques.

LO4

Be able to evaluate the financial performance of a business.4.1Discuss the main financial statements.

4.2Compare appropriate formats of financial statements for different types of business.

4.3

Interpret financial statements using appropriate ratios and comparisons, both internal and external.

Instructions

An electronic copy of your assessment must be fully uploaded by the deadline date and time.

You must submit one single PDF or MS Office Word document. Any relevant images or screenshots must be included within the same MS Office Word or PDF document.

The last version you upload will be the one that is marked. Your paper will be marked if you have indicated this as your final submission.

Review the mitigating circumstances policy for information relating to extensions. The file size must not exceed 20MB.

Answer the criteria in order, clearly indicating the pass criteria number. Ensure that all work has been proof-read and checked prior to submission. Ensure that the layout of your documents are in a professional format with font style Arial, font size 12 for the text, font 14 for sub heading and font 16 for main heading, line spacing 1.5 and justified. Use the Harvard referencing system; otherwise it will be considered as plagiarised work. Ensure that you back-up your work regularly and apply version control to your documents. Ensure that any file you upload is virus-free, not corrupted and not protected by a password otherwise it will be treated as a non-submission.

You must NOT submit a paper copy or email of this assessment to any member of staff at LSST.

Your work must be original with the appropriate referencing

Learner declaration

I certify that the work submitted for this assignment is my own and research sources are fully acknowledged.

Student signature: Date:

In addition to the above PASS criteria, this assignment gives you the opportunity to submit evidence in order to achieve the following MERIT and DISTINCTION grades

Grade DescriptorIndicative characteristicsContextualisation

M1Identify and apply strategies to find appropriate solutionsEffective judgements have been made.

M1: To achieve M1, you are required to match the above ratios (i.e., current ratio, ROCE etc.) to the following interested parties; suppliers, investors and competitors. Provide clear justification for your answer. (Task 4)

M2 Select / design and apply appropriate methods / techniques

A range of sources of information have been used.M2: To achieve M2, in a report format, assess the reasons why the other sources of finance would be considered inferior to the ones selected in 1.3. Justify your position, explaining why you have arrived at your conclusions with reference to the organisation outlined in the Shaping Your Future future plans. Present your answer in a report format. (Task 1)

M3 Present and communicate appropriate findingsThe appropriate structure and approach has been used.

M3: To achieve M3, you will identify the individual needs of the stakeholders in The organisation outlined in the Shaping Your Future section. This will be presented in a suitable business format (a report or a formal letter) or a comparison table and will include business terminology accurately. (Task 3)

D1 Use critical reflection to evaluate own work and justify valid conclusionsConclusions have been arrived at through synthesis of ideas and have been justified.

D1: To achieve D1, this question relates to 3.3. Justify the use of investment appraisal techniques and other financial planning methods in the process of strategic investment decision making for a business. (Task 3)

D2 Take responsibility for managing and organising activitiesImportance of interdependence has been recognised and achieved.

D2: To achieve D2, Use the draft balance sheet below. Please note that the balance sheet does not balance. Include a recent loan of 7,000 which will be paid back in 3 years time with a fixed charge of 1500 per year payable at year end. Show all your calculations that enable the financial report below to balance.(Task2)

D3 Demonstrate convergent /lateral / creative thinkingEffective thinking has taken place in unfamiliar context.D3: To achieve D3, explain the differences (and the importance of this differentiation) between:

I. Current and acid test ratiosII. Gross profit and net profit (Task 4)

Assignment Brief

Unit number, title and levelUnit 2:Managing Financial Resources and Decisions ; Level : 4

QualificationBTEC Level 5 HND Diploma in Business

Date issued1st May 2015

Completion date3rd July 2015 before 12.00 midday

AssessorSimon Masuku

Internal VerifierAlan Jeffery

Assignment titleManaging Financial Resources and Decisions Shaping Your Future- A Vocational Scenario

Level : 4

Purpose of this assignment

This unit is designed to give learners a broad understanding of the sources and availability of finance for a business organisation. Learners will learn how to evaluate these different sources and compare how they are used. They will learn how financial information is recorded and how to use this information to make decisions for example in planning and budgeting. Decisions relating to pricing and investment appraisal are also considered within the unit. Finally, learners will learn and apply techniques used to evaluate financial performance.

Instructions The pages which follow under the heading Shaping Your Futures section needs to be to be developed as part of your learning journey. Once written, the aim is that the plan is revisited occasionally and, towards the end of your course, it will act as a portfolio document. This document will reflect and evidence your learners journey, demonstrating the application of the relevant learning outcomes to the business depicted in the Shaping Your Future section of this paper. It is envisaged that you will able to use this document as an accessible illustration of your learning and understanding. Please carry out the following steps in order to complete the Shaping Your Future section: 1. Select an organisation. The organisation that you chose should be either an organisation that you own, an organisation that you would like to own, or one that you work for.

2. Complete the Shaping Your Future section before attempting to answer any of the questions. Many of the questions in this paper will require that you refer to the information in the Shaping Your Future section

3. Please read all the questions in this paper and apply your learning to the Shaping Your Future section. This section will act as the case study for your assignment paper.Please note that LSST will not publish or use this information for commercial purposes.

Section two

Products and services

2.1 What is the nature of your business?

2.2 Describe the different types of product/service you are going to be selling:

2.3 Additional information:

Section three

The business environment

3.1 Who are your customers:

3.2 Describe your typical customer:

3.3 Where are your customers based?

3.4 What factors help your customers choose which business to buy from?3.5 Have you sold products/services to customers already?

If you answered yes, give details:


Section four

Market research

4.1 What market information have you obtained so far?

4.2 Do you intend to conduct further market research? If so, discuss briefly:

4.2 Key findings from research:


Section five

Marketing and Business Strategy

What are you going to do/ How are you going to market your products?

Why have you chosen this marketing method?How much will it cost to develop and market your product TOTAL COST

Section six

Competitor and market analysis

6.1 Table of competitors (top 5 competitors only)

Name, location

and business size Product/service

Price

Strengths

Weaknesses

6.2 SWOT analysis:

StrengthsWeaknesses

Opportunities

Threats

6.3 PEST analysis

PEST analysis (political, economical, social, and technological) assesses a market, including competitors, from the standpoint of a particular proposition or a business.

criteria examples

ecological/environmental current legislation

future legislation

international legislation

regulatory bodies and processes

government policies

government term and change

trading policies

funding, grants and initiatives

home market pressure- groups

international pressure- groups

wars and conflicts PoliticalEconomiccriteria examples

home economy

economy trends

overseas economies

general taxation

taxation specific to product/services

seasonality issues

market/trade cycles

specific industry factors

market routes trends

distribution trends

customer/end-user drivers

interest/ exchange rates

international trade and monetary issues

criteria examples

lifestyle trends

demographics

consumer attitudes and opinions

media views

law changes affecting social factors

brand, company, technology image

consumer buying patterns

fashion and role models

major events and influences

buying access and trends

ethnic/religious factors

advertising and publicity

ethical issuesSocialTechnologicalcriteria examples

competing technology development

research funding

associated/dependent technologies

replacement technology/solutions

maturity of technology

manufacturing maturity and capacity

information and communications

consumer buying mechanisms/technology

technology legislation

innovation potential technology access, licensing, patent intellectual property issues global communications

6.4 Unique Selling Point (USP):Unique Selling Point (USP)

Section seven

Operations and logistics

7.1 Production:

7.2 Delivery to customers:

7.3 Payment methods and terms:

7.4 Suppliers:

Name and location of supplier

Items required

and prices

Payment arrangements

Reasons for choosing supplier

7.5 Premises:

7.6 Equipment:

If being bought

Item required

Already owned?

New or second hand?

Purchased from

Price

7.7 Transport:

7.8 Legal requirements:

7.9 Insurance requirements:

7.10 Management and staff:


Task 1 Understand the sources of finance available to a business

This tasks offers you an opportunity to achieve L.O1: 1.1, 1.2, 1.3 and M2You have been asked to identify a range of sources of finance available to the organisation outlined in the Shaping Your Future section. These can include raising funds through a combination of finance areas. Please identify at least three sources (1.1).Assess the implications of your choices: What are the legal, financial and dilution of control implications and other risks involved? (1.2)After assessing the possible sources of finance, you must chose a source(s) that would be appropriate for the organisation outlined in the Shaping Your Future section. (1.3)

Guidelines:

You are required to: Evaluate the benefits of the different sources for the organisation outlined in the Shaping Your Future;

Match the term of finance to period of project

M2:

To achieve M2, In a report format, assess the reasons why the other sources of finance would be considered inferior to the ones selected in 1.3. Justify your position, explaining why you have arrived at your conclusions with reference to the organisation outlined in the Shaping Your Future future plans.

Present your answer in a report format.

Interim Completion date : 15th May 2015

Word Count: 500 words approx.

NB: When the question refers to an organisation, the learners will need to discuss their organisation as detailed in the Shaping Your Future section above OR the organisation from the designated list held and approved by Student Support.

Task 2 Understand the importance of financial planning and information needs.This tasks offers you an opportunity to achieve LO2: 2.1, 2.2, 2.3,2.4 and D2Analyse the financial costs of your chosen sources of finance for the organisation outlined in the Shaping Your Future section. (2.1)Using a report format and with reference to the activity of financial planning, you will need to explain why financial planning is important for the success of the organisation outlined in the Shaping Your Future section? (2.2)Assess different information needs for each decision maker within the organisation outlined in the Shaping Your Future section. Identify and assess the information that is needed for a range of decision makers. (2.3)Explain how a bank loan and investments (issue of ordinary shares) impacts the balance sheet and income statement (2.4)D2:To achieve D2, Use the draft balance sheet below. Please note that the balance sheet does not balance. Include a recent loan of 7,000 which will be paid back in 3 years time with a fixed charge of 1500 per year payable at year end. Show all your calculations that enable the financial report below to balance.

Assets

Fixed Assets

10000

Accumulated Depreciation

1000

Total Fixed Assets9000Current Assets

Stock

2500Debtors

1500

Bank

12500

Total Current Assets16500Total Assets

Liabilities

25,500

Creditors

3000

Loan

2000

Credit card

750

Total Liabilities5750

Total Assets - Liabilities

Equity

19750Capital

2000

Retained Profit

16250Total Equity

18250

Interim Completion date : 29th May 2015



Task 3: Be able to make financial decisions based on financial information

This tasks offers you an opportunity to achieve LO3: 3.1, 3.2, 3.3,M3 and D1Task 3a. Analyse budgets and make appropriate decisions:

The CEO of the organisation outlined in the Shaping Your Future section has asked you to prepare a Cash Budget for the four months ending October 2015, and identify whether the business has a surplus or a deficit. If the organisation outlined in the Shaping Your Future has a surplus, suggest two ways in which it could utilise this and if it has a deficit, suggest two ways it could deal with this. (3.1)The CEO of the organisation outlined in the Shaping Your Future has asked you to prepare the Cash Budget based on the following information:

1. The Bank Balance on 1st July2015 will be 50,000.

2.Total monthly sales for the four month period ending October2015 are forecasted as:

July

150,000

August

100,000

Sept

125,000

October

120,000

3.Cash purchases during the relevant period are:

July

52,000

August 32,000

Sept

74,000

October

82,000

4.A new supplier has offered the organisation outlined in the Shaping Your Future section two months credit starting in July 2015; this means that materials bought on credit in July will be paid for in September and so on. The organisation outlined in the Shaping Your Future section plan to make the following credit purchases from this supplier:

July

46,000

August

20,000

Sept

30,000

October

20,000

5. The organisation outlined in the Shaping Your Future section pays rent of 15,000 per month quarterly in advance. Payments are due on 1st July, 1st October etc.

6.Other expenses are forecasted as follows:

July

10,000

August

15,000

September

20,000

October

20,000

7.The organisation outlined in the Shaping Your Future section is repaying a bank loan at the rate of 10,000 per month. The last installment is due in September 2015.

Task 3b.

The organisation outlined in the Shaping Your Future section is considering selling high quality luxury exercise equipment.

Its costs for 500 units are as follows:

Total Direct Cost

20,000

Fixed Cost

10,000

Total Cost

30,000

The organisation outlined in the Shaping Your Future section is currently reviewing its selling prices and is considering cost-plus pricing based on:

Either a 33.33 % mark-up on cost price (i.e. profit is 33.33 per cent of cost price)

Or a 20 % return on capital employed.

The organisation outlined in the Shaping Your Future section will choose the method that provides the highest return.

The organisation outlined in the Shaping Your Future section has capital employed of 10,000.

Calculate the unit price based on both costing methods and select the price you think is most appropriate. Explain why you think it is the appropriate price.

You may round up your figures to nearest 1 when calculating your answers. (3.2)..Task 3c. The organisation outlined in the Shaping Your Future section has been presented with three new product opportunities. You have been asked to identify which product the company should produce and sell.

You need to use the Payback Period and Net Present Values (NPV) for each of the products. Based on the table below, identify which new product (A, B or C) you would select for manufacturing and selling by the organisation.

Yr.

Product A

Product B

Product C

0

Investment 50,000

Investment 50,000

Investment 50,000

1 Cash Inflow

20,000

23,750

20,000

2 Cash Inflow

17,500

23,750

15,000

3 Cash Inflow

25,000

23,750

12,500

4 Cash Inflow

32,500

23,750

25,000

Total

95,000

95,000

72,500

The estimated cost of capital is 10% per annum.

Note The discount factors are as follows:

Year 1 = 0.909

Year 2 = 0.826

Year 3 = 0.751

Year 4 = 0.683To assist the organisation outlined in the Shaping Your Future section in making a decision, you are required to calculate the following for each of the three projects. (3.3)Payback period

The accounting rate of return(ARR)

The net present value (NPV)M3:

To achieve M3, you will identify the individual needs of the stakeholders in The organisation outlined in the Shaping Your Future section. This will be presented in a suitable business format (a report or a formal letter) or a comparison table and will include business terminology accurately.D1:

To achieve D1This question relates to 3.3.Justify the use of investment appraisal techniques and other financial planning methods in the process of strategic investment decision making for a business.Interim Completion Date: 5 June 2015



Task 4: Be able to evaluate the financial performance of a business

This tasks offers you an opportunity to achieve LO4: 4.1, 4.2, 4.3, M1& D.3You have been tasked to prepare a report for the Managing Directors of your organisation outlined in the Shaping Your Future section. They will attend the British Investment Group Head Office to meet with key decision makers in the venture capitalist department. They have asked you to provide them with an explanation of the purpose of the Trading Profit and Loss Account or Income Statements and the Balance Sheet. How would the capital appear in the balance sheet and the income statement for the organisation outlined in the Shaping Your Future section? (4.1)

Compare appropriate formats for financial statements for different business organisations. That is, compare the balance sheet formats and also compare the income statements/profits and loss accounts formats. (4.2)ABC Ltd runs a chain of small shops and you have just received the following extracts from the audited accounts for the period ending 30th September 2013.

PROFIT AND LOSS ACCOUNT FOR THE PERIOD ENDED 30th SEPT 2013

000

000Sales

800

Cost of goods sold

(150)

Gross Profit

650Wages400

Other Expenses 20

(420)

Net Profit

230

STATEMENT OF FINANCIAL POSITION AS AT 30 SEPT 2013 (Balance Sheet)

000

000Fixed Assets

650

Current Assets

Stock 300

Debtors 100

Bank

280

680

Total Assets

1330

Financed by:

Equity and Liabilities

Share Capital

500

+Net Profit 230

Total equity capital

730

Non-Current Liabilities

150

Current Liabilities

Creditors

450

Total Equity and Liabilities

1330Required:

(a) Calculate the following accounting ratios for ABC Ltd:

Current ratio

Acid test ratio

Return on capital employed (ROCE)

Gross profit margin

Net profit margin

For each ratio, include the formula in words together with your workings, and explain what each ratio measures. (4.3)

M1:

To achieve M1, you are required to match the above ratios (i.e., current ratio, ROCE etc.) to the following interested parties; suppliers, investors and competitors. Provide clear justification for your answer.

D3:

To achieve D3, explain the differences (and the importance of this differentiation) between:

I. Current and acid test ratios ii. Gross profit and net profit

Word Count: 500 words approx.Interim Completion date : 27th June 2015


Answer Sheet

Task 1 (L.O. 1: 1.1, 1.2, 1.3, 1.4, & M1)

Please type your answer here

Task 2 (LO2: 2.1, 2.2, 2.3, M2, D1 & D2)


Task 3 (LO3: 3.1, 3.2, 3.3, & M3)


Task 4 (LO4: 4.1, 4.2, 4.3, & D.3)


IMPORTANT

CHECK THAT YOUR ANSWERS MEET THE CRITERIA

COMPLETE THE ASSIGNMENT CRITERIA AS YOU GO ALONG

DO noT LEAVE THINGS TO THE LAST MINUTE

Unit 2: Managing Financial Resources and Decisions Level 4 May 2014

2

Managing Financial Decisions Final (1) (1)

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