Business Accounting Finance Individual Assignment

Business Accounting and Finance – Individual Assignment

Business Accounting and Finance – Individual Assignment

Business Accounting and Finance – Individual Assignment

Diploma in Management Studies

Module Name:	Business Accounting and Finance
Component:	Individual Assignment
Due date:	2 November 2021
Weight:	30% (of total weightage)
Word count:	1,500 words (+/- 10%)

Assignment information:

· This is an individual assignment.

· Format of the assignment submission should include a standard cover page, table of contents and reference list. The font should be Times New Roman 12 point font size, with 1.5 line spacing, printed on A4 paper (portrait orientation) with proper margins in top/bottom and left/right-hand sides and proper page numbering.

You are not required to bind your assignment – staple the sheets of paper together at the top left hand corner.

· The Cover page of the assignment should state: o Module and course name o Student’s name and NRIC number o Name of the lecturer o Assignment submission date

· Make use of your own comments, in-depth analysis and conclusions to evaluate the issues tabled.

· Consider to use tables and graphs to illustrate your analysis.

· All information extracted from other sources must be duly acknowledged via proper referencing. Penalties will be applied to assignments with high similarity to other sources.

· The word count stipulated excludes any references, charts, tables or figures.

Submission requirements:

Upload the softcopy of your assignment to email

Assignment Question:

Atom Trading has been expanding rapidly over the recent years. In 2020, there was a major expansion which included the acquisition of new equipment and premises to cater for a new range of products. The owner of the business has requested you to conduct a review of the business performance and advise on how to improve the financial performance of the business.

A. The financial information for Atom Trading Ltd for 2019 and 2020 are as follows:

Atom Trading Income Statements for the year ended 31 December
	2019	2020
Revenue	10,915,000		15,682,000
Cost of Goods Sold: Opening Inventories	1,052,000	1,786,000
Purchases	8,868,000	13,970,000
Closing Inventories Cost of Goods Sold Gross profit	1,786,000 (8,134,000) 2,781,000	3,560,000	(12,196,000)
			3,486,000
Expenses	780,000		1,186,600
Interest Expense Net Profit for the year	19,200 1,981,800		356,400
			1,943,000

Atom Trading Ltd Balance Sheet as at 31 December
	2019	2020
ASSETS Fixed assets: Land and building (net)	3,594,000	6,630,000
Plant and equipment (net) Total fixed assets	2,242,000 5,836,000	4,171,000	10,801,000
Current assets: Cash	23,500	0
Inventories	1,786,000	3,560,000
Trade receivables Total current assets Total assets EQUITY AND LIABILITIES Long term liabilities: Borrowing – loans	1,920,500 3,730,000 9,566,000 320,000	4,180,000	7,740,000
			18,541,000
			3,105,000
Current liabilities: Trade payables	1,047,000	2,445,000
Other current liabilities	179,000	193,000
Bank overdraft Total current liabilities Total Liabilities	0 1,226,000 1,546,000	2,835,000	5,473,000
			8,578,000
Equity: Share capital	2,000,000	2,000,000
Retained Profit	4,038,200	6,020,000
Current year profit Total Equity Total equity and liabilities	1,981,800 8,020,000 9,566,000	1,943,000	9,963,000
			18,541,000

B. Comparable industry average for Atom Trading Ltd are as follows:

Ratios	Industry Average
(a) Gross profit margin	24%
(b) Net profit margin	14%
(c) Return on Asset	15%
(d) Current ratio	2 times
(e) Quick ratio (Acid-test ratio)	1 time
(f) Debtor collection period	50 days
(g) Average Inventory turnover period	60 days
(h) Creditor payment period	50 days
(i) Debt ratio	20%

Required: Answer all questions.

1. Calculate the following ratios for 2019 and 2020 separately (Show all your workings). (a) Gross profit margin (%).

(b) Net profit margin (%).

(c) Return on Asset (%).

(d) Current ratio (in times).

(e) Quick ratio (Acid-test ratio) (in times).

(f) Debtor collection period (in days).

(g) Average Inventory turnover period (in days).

(h) Creditor payment period (in days).

(i) Debt ratio (%)

[27 marks]

2. Using the computed ratios in Part 1, and any information you consider relevant, evaluate the performance of the business and provide detailed suggestions on how to improve the business based on the following areas:

(i) Profitability (250 words) [10 marks]

(ii) Liquidity (250 words) [10 marks]

(iii) Efficiency (250 words) [10 marks]

(iv) Leverage (250 words) [10 marks]

For part (i) to (iv), your report should address the following areas:

· Compare the current year performance with the previous year.

· Compare the performance of the company with the industry average.

· Provide detailed suggestions, with reasoning, on how to improve on the performance of the business.

3. Answer the following questions:

(i) Discuss the difference between a Fixed Asset and an Expense. (100 words)

[8 marks]

(ii) Assess the implication when an Expense is wrongly classified as a Fixed Asset in the financial statements. (100 words)

[7 marks]

4. Answer the following questions in the context of Atom Trading:

(i) Evaluate the advantages and disadvantages of using debt financing. (150 words)

[10 marks]

(ii) Provide your comments on whether bank overdraft should be used for the purpose of long term financing. (150 words)

[8 marks]

End of the Assignment Question