BIRMINGHAM CITY BUSINESS SCHOOL
POSTGRADUATE DEGREES
COURSEWORK FRONT SHEET
MODULE TITLE: Managing Financial Performance
MODULE CODE: MAN7040
LECTURER: Jonathan Mills
ISSUE DATE: 2nd October 2017
HAND IN DATE: 15th January 2018 at 12.00pm (midday)
HAND BACK DATE: 12th February 2018
Learning outcomes and pass attainment level:
• Evaluate the financial performance of an organisation using financial and narrative information prepared under International GAAP
• Apply appropriate costing and budgeting techniques to a specific scenario.
• Evaluate alternate investment projects using appropriate techniques.
• Evaluate alternative methods of corporate financing on financial performance.
• Demonstrate a level of competence in the preparation and analysis of financial information.
General guidance
The assessment for this unit is one coursework assignment. The required mark has been set at 50%. If you are attempting a first or second re-sit attempt your pass mark will be capped at 50%.
This is an individual assessment. Whilst there is no objection to you discussing the content of this assignment with your peers, your final submission must be completely your own work. Plagiarism and copying will not be tolerated and may lead to subsequent penalties being imposed. This is an individual assignment and all calculations, analysis and narrative submitted must be your own work.
The assignment will require a considerable personal investment of time and effort.
Structure of the assignment
There are three separate questions included within the assignment and you should attempt all three questions. There is no word limit to questions. If any part of the assignment is ignored this reduces the maximum marks which could potentially be awarded. The assignment answer should be carefully checked before submission for the use of appropriate and acceptable grammar. The correct use of English spelling is to be employed throughout.
All the numbers should be reported in 2 decimal points.
Submission of the assignment
All three questions must be attempted and submitted in one document. You are advised to prepare your assignment in Word format and copy and paste contents from Excel where spreadsheets have been used to support your work. Only Microsoft Word file will be allowed for submission.
Your student ID number should be shown on each page of your assignment.
Your assignment should be submitted electronically via Moodle and you are advised to do this well in advance of the submission deadline to avoid any system related issues. Feedback on your assignment will also be provided via Moodle once the marking has been completed.
Marking of the assignment
The matrix on the following page has been provided to assist you in completing your assignment and is an indicative guide only, not a formal marking scheme.
Indicative marking guide
Fail
(0%-49%) Pass
(50%-59%) Commendation
(60%-69%) Distinction
(70%-100%)
Question 1
A lack of breadth and depth of financial analysis techniques accompanied by incorrect formulae or calculation without appropriate explanation.
Poor layout or presentation in anything other than business report style. Inadequate grammar and lacking in overall knowledgeable synthesis. Evidence of some financial analysis techniques but with errors of formulae and calculation with insufficient explanation and adequate presentation.
Attempt at a business report format with some supportive appendices. Mainly descriptive with some attempt at synthesis. Grammar and structure being adequate. Wide range of financial analysis techniques evident and supported by full disclosure of formulae and accurate calculation in a clear format.
Presented in business report format and coherently structured. Supported by referenced appendices. Effective and well-reasoned narrative discussion. An excellent range of financial analysis techniques which are supported by full disclosure of formulae and accurate calculation in a clear format.
Excellent business report format and well structured. Supported by fully referenced appendices. Excellent analytical and justified explanations showing synthesis and application.
Question 2
A lack of understanding of management accounting and decision making. Unable to produce the correct format and calculations. Limited or no narrative discussion or recommendations and conclusions. Poor academic writing and referencing.
Ability to apply some management accounting decision making techniques. Demonstrates an adequate understanding of the principles and techniques involved. Reasonable attempt at analysis and discussion of findings, though of limited depth. A good application of management accounting for decision making. Demonstrates a good understanding of the principles and techniques involved. Good analysis and discussion of findings, with good use of academic references which support clear and well explained conclusions. Excellent application and understanding of management accounting for decision making. Thorough and detailed critical discussion with excellent use of a range of academic references which support clear, practical, and well explained recommendations and conclusions.
Question 3
A lack of understanding of the topic and the related literature. Limited or no narrative discussion or recommendations and conclusions. Poor academic writing and referencing.
Ability to research and apply theory to a reasonable degree.
Demonstrates the ability to critically evaluate and make the appropriate conclusions. Reasonable attempt at analysis and discussion of findings, though of limited depth. A good understanding of the topic. Demonstrates a good understanding of the principles and techniques involved. Good analysis and discussion with good use of academic references which support clear and well explained conclusions. Excellent understanding of the topic. Thorough and detailed critical discussion with excellent use of a range of academic references which support clear, practical, and well explained recommendations and conclusions.
Question 1
Presented below are the simplified Consolidated Statement of Comprehensive Income and Consolidated Statement of Financial Position of BT Group plc for the financial years 2015 to 2017.
Required
Prepare a business report for the attention of the board of directors which analyses the performance and financial position of BT Group plc over the financial years 2015 to 2017 and recommend any action the board should take.
Your report should utilise key ratios, horizontal and vertical analysis and include in-depth critical discussion with appropriate academic references.
Marking guide
Financial analysis (using 4 categories of ratios and vertical and horizontal trend analysis) Vertical trend analysis 4 marks
Horizontal trend analysis 4 marks
Profitability ratio analysis 6 marks
Liquidity ratio analysis 6 marks
Efficiency ratio analysis 6 marks
Gearing ratio analysis 6 marks
________
Total for analysis 32 marks 32 marks
Interpretation with academic references
Vertical analysis narrative 1 marks
Horizontal analysis narrative 1 marks
Profitability narrative 2 marks
Liquidity narrative 2 marks
Efficiency narrative 2 marks
Gearing narrative 2 marks
________
Total for interpretation 10 marks 10 marks
Conclusions and recommendations 6 marks
Layout, structure, grammar and referencing 2 marks
Total 50 marks
Question 2
You work for VR Wholesale Plc, a wholesale distribution company that has a very wide range of products. Three categories of products within the range have been code named Alpha, Beta, and Gamma. The basic cost card for these is shown below.
The market for these products is highly competitive, but demand is increasing, so the Directors are optimistic about the future and have expansion plans, but first they need your advice to maximise profits from the existing range of products. The board of directors are considering halting the supply of Beta and Gamma that appear to be making no profit.
As you can see from the table below the directors are considering closing products Beta and Gamma in an effort to improve overall profitability, but using your knowledge of cost and management accounting techniques do you agree with this?
You spot that marginal costing would show the results differently and may affect the directors decision.
Requirements for Question 2 part (a)
i. Use your knowledge of management accounting to calculate the contribution of each product 5 marks
ii. Use your findings from part (a) and appropriate academic references to explain whether the company should stop making product Beta 1 mark
iii. Use your findings from part (a) and appropriate academic references to explain whether the company should stop making product Gamma 1 mark
iv. Discuss how and why marginal costing calculates contribution to pay overheads and why this is useful in evaluating product value to a firm? 1 mark
v. Do you agree that profitability will improve by ceasing to make Products Beta and Gamma? What do you suggest the company does to increase profitability? 2 marks
Question 2 (a) total 10 marks
Question 2 (continued)
The board have approached you to get your opinion of their expansion plan, which includes a chain of factory outlet stores. Below are the figures for the first one that is planned for a central Birmingham location next year.
Company policy dictates that any decision should be based on the results of calculating Net Present Value (NPV) of 3 years cash flows using a cost of capital of 12%, Payback Period (PBP) must be less than 3 years, and the Internal Rate of Return (IRR) of the project should provide a 5% cushion in case of increases in inflation or interest rates.
The investment consists of £2,000,000 for the land, building costs of £3,950,000, and £915,000 for fittings and equipment.
The cash flows in year 1 are expected to be: total sales revenue £14,300,000; the cost of Alpha products sold £3,950,000; Beta stock sold £2,830,000; staff costs £590,000; light & heat £838,000; other overheads £3,212,000. The cash flows for the following years are the same, but are expected to increase by 2% inflation each year.
Requirements for Question 2 part (b)
Using the information above and in accord with the above stated company policy you are required to calculate:
i. Net Present Value (NPV) 5 marks
ii. Payback period (PBP) and Discounted Payback Period (DPBP) 5 marks
iii. Internal Rate of Return 1 marks
iv. Based on your calculations do you recommend the investment is made and the new outlet store is built? 2 marks
v. Critically discuss the limitations of the above project appraisal techniques used and any other recommendations to the board. 2 marks
Question 2 (b) total 15 marks
Question 2 (a) and (b) Total 25 marks
Question 3 – Essay question
Please write a short academic paper (between 1000 and no more than 2000 words) that critically evaluates the importance of considering financial and non-financial factors when managing the performance of a business.
Question 3 Total 25 marks
Total 100 marks
End of Paper
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