Corporate Treasury

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BFW3652 Corporate treasury and credit management

S1 2019

Assignment Task 2 (Individual) - Credit Management

Title: Individual case study exercise on the credit assessment and financial analysis of FHB (based on Annual Report 2018 provided) and credit evaluation report for its newly set-up wholly-owned subsidiary, iFan Electrical Products Marketing Sdn. Bhd.

Unit learning objectives assessed:

This assessment tthe ask is designed to test student’s achievement of learning objectives 1 to 5 for Part 2: Credit management. Students are expected to demonstrate comprehension and application of the theory, practice, and the use of credit management, and analyse and communicate credit management information.

Weighting:

This assessment is worth 15% of your final semester mark.

Word limit: (for report): 1500 - 2000 words

Due date: On Lecture Week 11 (Thursday, 23 May 2018) by 5 pm.

Overview of assessment:

This assessment requires students to demonstrate an understanding of how the financial ratios are calculated. Students are required to interpret the key financial ratios for credit granting/extension decision-making.

The assessment utilises a pre-populated Excel spreadsheet that contains summarised financial statements and ratios for FHB. Students are required to:

1. Operationalise the excel worksheets for the basic “+, - , x, /” and @SUM functions, etc. Advanced functions like macros are not required.

2. Incorporate the figures and calculate the ratios for the year ended 30 September 2018 (only 2018 figures). Insert your reference to the relevant sections/pages of the AR2018 in the remarks column. State the ratio formula in the remarks column.

This assessment is designed to ensure that students fully understand the inter-relationships that exist between the figures in financial statements based on the principles of financial management, specifically, credit management. Secondly, this assignment is designed to ensure that students are able to interpret the relevant ratios derived from financial statements for the purposes of credit assessment and credit granting evaluation. Lastly, the credit evaluation report preparation test the student’s writing and critical thinking skills in credit evaluation.

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The context for Assignment 2 (Individual)

Smart Magic Fans Manufacturing Sdn Bhd (SMF) has just started manufacturing of highly innovative decorative energy-saving ceiling fans in Malaysia three years ago. This high technology smart fan is dubbed to replace air-conditioners in public areas, restaurants and bars, offices and commercial areas; and in domestic areas - at homes and residential areas. SMF products (with various models and colours) are now available for sale and their current turnover is approximately RM20 million per annum for the year ended 31 December 2018.

FHB, a Bursa Malaysia listed company, the wholesaler of electrical appliances with more than forty (40) years of establishment in Malaysia is keen to set up a new trading arm dealing with home, industrial, commercial fans under a newly incorporated subsidiary iFan Electrical Products Marketing Sdn Bhd (iFan). SMF is desirous to have FHB as one of its distributors due to FHB’s extensive network and experience dealing with electrical home appliances through Peninsular Malaysia, Sabah and Sarawak.

FHB has submitted to SMF their application to open a trading account for SMF fans under iFan, that as incorporated on 15 April 2019 under the Companies Act 2016 with a paid-up capital of RM100,000. iFan estimated that they can sell between RM600,000 to RM 1 million worth of SMF fan products per month and is seeking a credit term of 120 days and apply for a credit limit of RM4 million. To support their application as iFan is a new set-up with no own track record, the company offer a corporate guarantee from its holding company, FHB (attached) of up to RM4 million (the credit limit sum) as the collateral.

You have just joined SMF as a Credit Control Executive and you are tasked to evaluate the application for the trading account of iFan with a credit limit of RM4 million with 120 days term secured by a corporate guarantee of FHB for up to RM4 million.

Required

(a) Download the assignment spreadsheet from the Moodle and rename the spreadsheet

by inserting your given name and student ID in front of the existing file name followed

by parentheses. You are required to collect and insert the year ending 30 September

2018 data and compute the key ratios for 2018 (highlighted in yellow) based on the

Annual Report 2018 of FHB (the softcopy is downloadable at

www.bursamalaysia.com or at the investor's relation section of

www.fiamma.com.my). You need to operationalise the excel worksheets to the extent

possible for efficiency and accuracy purposes and provide page and resource

references and ratio calculation formulas,

(b) Based on the available financial statements analysis in Part (a) and the publicly available information on FHB and its businesses, prepare a credit evaluation report to your Credit Manager and recommend your proposed credit limit, credit terms, collateral/s to be obtained and any other terms and conditions, if any.

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REPORT STRUCTURE

Your report should contain the following:

 Introduction: The proposition, justification of the topic, its relevance and its currency. A brief description of the structure of the essay that is, what you are going to discuss and a sense of what you found or conclude through your investigation of this topic.

 Evaluation and Analysis: description and analysis of Fiamma Holdings Berhad and its

new subsidiary company and their request for credit trading account. Your analysis in this section should show a clear understanding of credit management and insight into the client. Make full use of the information available in the spreadsheet in (a).

 Recommendations/Conclusion: Your recommendations and conclusion should seek to bring together your key arguments/ points in a summary at the end of the essay. You should avoid raising new issues in the conclusion of your essay.

 Presentation/Referencing: You should use the APA referencing system. You need to

show usage of a range of references in your essay. Good essay presentation entails a well-written fluid piece of work devoid of grammatical and spelling mistakes.

Students are expected to have used a variety of sources including journal articles, books, newspapers, and the internet (should be citable references) to develop their arguments. Remember to acknowledge your sources throughout the report using the APA referencing system. The report is to be typed using a standard 12-point font and 1.5 spacing. It should be checked for spelling, consistency, and clarity of expression.

Criteria for marking: The individual assignment will be assessed and marked based on:

 knowledge and understanding of the assignment topic

 conciseness, comprehensiveness and cohesiveness of the manuscript submitted

 Proper and adequate references.

NOTE: You are writing a formal report to the Credit Manager, and so consistency of argument

needs to be maintained. You can use headings and sub-headings to 'sign-post' the essay however it still needs to be consistent and retain a certain degree of fluidity. It is a referenced piece of work and as such citable references are expected to support your arguments and contentions. Tables, graphs, etc. can be used to argue and support your case. A list of references/brochures which were used to write the essay should be provided at the end of the report.

Due date: Thursday, 23 May 2018 by 5 pm. Please submit the excel file and the credit evaluation report online via BFW3652 Moodle. No hard copies are required to be submitted but you should retain a copy of your work as proof of submission should there be any technical issues in your online submission.

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BFW3652 Corporate treasury and credit management

S1 2019

SELF-REFLECTION - INDIVIDUAL SUBMISSION

a) Each student is to submit a one-page summary of how they managed the task in their

group assignment #1 and the key learning goals they achieved. b) This is a self-reflection task based on the opinion of the individual student and not a

summary of the group assignment questions. You should also include your reflection on Assignment #2 and whether this assignment should be the group assignment

instead. c) The individual submission has to be in Times New Roman, 12 font size, 1.5 spacing and

1-inch page margins. d) No cover or feedback sheet is required. Student name and ID should be clearly

indicated on the page.

e) No word count is specified – strictly one A4 page based on above font size and margin

spacing.

INSTRUCTIONS: Each member of the group is to lodge their one-page self-reflection sheet into the Moodle latest by Lecture Week 12, 30 May 2019 by 5 pm.