UNIT 2

Managing Financial Resources and Decisions

Unit 2 – MFRDName of Assessor (s): Ryk Ramos/

Rosalinda Caoile

Name of Internal Verifier: Leo Anoche

TopicsClass room procedures Levelling of ExpectationsScheme of WorkTitle PageAssignment BodyIndividual and Group AssignmentsHarvard Referencing SystemBook ReferencesDiscussion of Assignment 2-01 Go Top

Class Room Procedures

Levelling of Expectations

Scheme of Work

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Week Topics To Be Covered Mode Remarks

1a Class room procedures Levelling of Expectations Scheme of Work Title Page Assignment Body Grouping Individual and Group Assignments Harvard Referencing System Book References Discussion of Assignment 2-01

Orientation/Planning Session

1b Review of Last sessionTest of baseline knowledgeLong term Source of capital:

share capital, retained earnings, loans, third-party investment,

short/medium term Source of Capital:hire purchase leasing, working capital stock control, cash management, debtor factoring

Identify the sources of finance available to a business

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2aReview of Last sessionSources of CapitalAssignment for Next MeetingGroup Research

Seatwork/ Recitation

2b Review of Last session Test of baseline knowledge Implications of choices:

o legal, o financial o dilution of control implications, o bankruptcy

Choosing a source: o advantages and disadvantages of

different sources, Suitability for purpose

o matching of term of finance to term of project

Group Reporting/ Lecture/ Class Discussion

assess the implications of the different sources

select appropriate sources of finance for a business project

3a Review of Last session Implications of Choices Choosing a Source Suitability of Purpose Assignment for Next Meeting Group Research

Seatwork/ Recitation

3b Review of Last session Test of baseline knowledge Finance costs:

o tangible costs eg interest, dividends; o opportunity costs eg loss of

alternative projects when using retained earnings;

o tax effects Financial planning:

o identify shortages and surpluses eg cash budgeting;

o implications of failure to finance adequately,

o overtrading

Group Reporting/ Lecture/ Class Discussion

assess and compare the costs of different sources of finance

Explain the importance of financial planning

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4a Review of Last session Finance Costs Financial Planning Assignment for Next Meeting Group Research

Seatwork/ Recitation

4b Review of Last session Test of baseline knowledge Decision making:

o information needs of different decision maker

Accounting for finance: o how different types of finance and

their costs appear in the financial statements of a business,

o the interaction of assets and liabilities on the balance sheet

Group Reporting/ Lecture/ Class Discussion

describe the information needs of different decision makers

describe the impact of finance on the financial statements

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5a Review of Last session Decision making Accounting for finance Assignment for Next

Reporting Group Research

Submission of Assignment 2-01 Draft

5b Submission of

Assignment 2-01 Final

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6a Review of Last session Test of baseline knowledge Budgeting decisions:

o analysis and monitoring of cash and other budgets

Costing and pricing decisions: o calculation of unit costs, o use within pricing decisions, o sensitivity analysis

Group Reporting/ Lecture/ Class Discussion

analyse budgets and make appropriate decisions

calculate unit costs and make pricing decisions using relevant information

6b Review of Last session Budgeting Decisions Costing and Pricing Decisions Assignment for Next Reporting Group Research

Seatwork/ Recitation

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7a Review of Last session Test of baseline knowledge Investment appraisal:

o payback period, o accounting rate of return,o discounted cashflow techniques ie

net present value, o internal rate of return

Nature of long-term decisions: o nature of investment o importance of true value of money,o cash flow, o assumptions in capital investment

decisions, o advantages and disadvantages of

each method

Group Reporting/ Lecture/ Class Discussion

assess the viability of a project using investment appraisal techniques

7b Review of Last session Investment Appraisal Nature of Long-Term Decisions Assignment for Next Reporting Examination 02-02a

Seatwork/ Recitation

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8a Review of Last session Test of baseline knowledge Terminology:

o introduction to debit, credit, o books of prime entry,o accounts and ledgers, o trial balance, o final accounts

Group Reporting/ Lecture/ Class Discussion

explain the purpose of the main financial statements

8b Review of Last session Financial Statements –

Explanation and Purpose Assignment for Next Reporting Group Research

Seatwork/ Recitation

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9a Review of Last session Test of baseline knowledge Financial statements:

o basic form, o structure and purpose of main

financial statements ie balance sheet, profit and loss account cashflow statement, notes,

o preparation not required; distinctions between different types

of business ie limited company, partnership, sole trader

Group Reporting/ Lecture/ Class Discussion

describe the differences between the formats of financial statements for different types of business

9b Review of Last session Formats of financial statements Distinctions between types of

businesses Assignment for Next Reporting Group Research

Seatwork/ Recitation

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10a Review of Last session Test of baseline knowledge Interpretation:

o use of key accounting ratios for profitability, liquidity, efficiency, and investment,

Comparison o external ie other

companies, industry standards and

o internal ie previous periods, budgets

Group Reporting/ Lecture/ Class Discussion

analyse financial statements using appropriate ratios and comparisons, both internal and external

10b Review of Last session Interpretation Comparison Examination 02-02b

Seatwork/ Recitation

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11a Submission of Assignment 2-02 Draft

11b Submission of Assignment 2-02 Final

12 CEO FORUM

TITLE PAGE

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Assignment Body

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Writing Rules

• Text font Arial 12 points. • Alignment should be justified • Double spacing • Left and top margins should be set to 1½ inch. • Right and bottom margins should be set to 1

inch. • Page numbers should be centered down • End noting should be applied.

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Assignments

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Individual Assignments• Assignment 2-01 shall be provided today• Assignment 2-02 shall be given on the second week • Exams 2-02a and 2-02b shall be given based on

schedule• Drafts can be submitted 1 week before due dates• Draft proposals shall be discussed during scheduled

consultations• Final papers shall be entertained on or before due

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Assignments• Word-process the document using 12 point Arial or Times

New Roman Script• Use the Harvard referencing• End noting must be strictly observed• Be careful of PLAGIARISM - acknowledge materials or

research• Evidences of research must be present to support

assignments (minimum of 2 books and references)• Any computations must be done using Microsoft Excel and

placed at the appendix• Survey questionnaires, answered forms, proposed forms

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Assignments• Late work will only obtain a highest grades of PASS

should it meet all the assessment criteria indicated• A referred assignment has to be completed at the

end of the term. Work is automatically referred on the last week.

• A student with a failed assignment must repeat that assignment on the next occasion the unit is taught.

• A student who incurs at least 2 failed assignments shall repeat the entire unit when it is next offered.

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Harvard Referencing System

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Book References

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Cox D and Fardon M — Management of Finance (Osborne Books, 2003) ISBN: 1872962238

Dyson J R — Accounting for Non-Accounting Learners (Pitman, 2003) ISBN: 0273646834

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www.aat.co.uk - The Association of Accounting Technicians

www.accountingtechnician.co.uk - Accounting Technician magazine

www.bized.ac.uk - provides case studies appropriate foreducational purposes

www.ft.com - The Financial Times

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Criteria and Assignment

1st PartCriteria 1 & 2

Criteria 1 - Explore the sources of finance available to a business

1.identify the sources of finance available to a business

2.assess the implications of the different sources

3.select appropriate sources of finance for a business project

Criteria 2: Analyse the implications of finance as a resource within a business

1. assess and compare the costs of different sources of finance

2. Explain the importance of financial planning

3. describe the information needs of different decision makers

4. describe the impact of finance on the financial statements

2nd PartCriteria 3 & 4

Criteria 3 - Make financial decisions based on financial information

1. analyse budgets and make appropriate decisions

2. calculate unit costs and make pricing decisions using relevant information

3. assess the viability of a project using investment appraisal techniques

4. Nature of long-term decisions

Criteria 4: Analyse and evaluate the financial performance of a business

1. explain the purpose of the main financial statements

2. describe the differences between the formats of financial statements for different types of business

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

Assignment 2-01• SCENARIO AND ROLE:• • The second year students will soon be having their internship where they will be

exposed to the real business world. To prepare, equip and help them evaluate their knowledge and skills for their “on-the-job trainings”, a client partner, provided a case in managing financial resources for them to work on. Here’s the scenario:

• SIX SIGMA CONSTRUCTION (SSC) has three projects lined-up for immediate action. These are:

• a housing subdivision • a cell site tower construction • oil depot construction

• The housing project needs a Php 100M initial funding. The estimated cost prior to pre-selling is Php 75M plus marketing cost of Php 25M. A Cell Site Tower has an estimated cost of Php 600T with a Purchase Order amount of Php 1.76M. The contract shall require the company to build 13 towers. The oil depot which will be situated in a nearby province has an estimated total cost of Php 55M. The cost is 76% of the total contracted amount.

Assignment 2-01The following financial sources were made available:

• Shares available for selling total 200,000 with an estimated market value of Php 100 per share.

• SSC’s previous years’ earnings accumulated to Php 96M• Loans available total Php 144M with interest based on t-bill rate plus 7% or 9%

whichever is higher.

Other information follow:

• Sub-contractors are available at a 80-20 profit sharing where the sub-contractor shoulders all the expenses.

• SSC books show Php125M receivables from top 1000 companies. Rediscounting or debt factoring agencies are available with a 10% factoring rate

• There are other sources of finance for SSC in addition to those specifically provided in this case. It is now up to you to recommend these sources to finance SSC’s projects.

• REQUIRED:

• Prepare a PROFESSIONAL paper, complete with executive summary, footnotes, references, pictures, graphs, and other research related to the case provided.

• The formal report shall contain the following: (Do not itemize the following when preparing your report)

• Identify the sources of finance available to SSC. (1.1)• Provide other sources not listed in this case. Give your references for verification. (M2)• Assess the implications of the different sources. (1.2)• Give alternative solutions for negative implications. (D2)• Select appropriate sources of finance for each business project. (1.3)• Justify your choices. (M1)• Assess and compare the costs of different sources of finance.• Compute for costs (finance, opportunity, and tax effects) (D1).• Explain the importance of financial planning. (2.1)• Compute financial surplus or deficit on the given scenario. (M3)• Describe the information needs of different decision makers. (2.2)• Describe the impact of finance on the financial statements. (2.3)• Explain how a balance sheet interacts with the income statement. (D3)

Topics for Research• Long term Source of capital:

– share capital, – retained earnings, – loans, – third-party investment,

• short/medium term Source of Capital:– hire purchase – leasing, – working capital stock – control, – cash management, – debtor factoring

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RequiredIdentify the sources of finance

available to a business

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End of Session