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London School of Business & Management BTEC Levels 4 & 5 HND Business

Centre No 79829

Unit No & Unit Title

Unit No 2; Managing Financial Resources and Decisions

Course Title BTEC Level 4- HND (Business)

Assessor’s Name Asif Sadiq

Assignment Title MFRD Individual Assignment

Date Set 14th January 2016

Due Date 9th January 2017

Semester / Academic Year September 2016 Semester

Unit Outcomes Covered: On successful completion of this unit a learner will: 1 Understand the sources of finance available to a business. 2 Understand the implications of finance as a resource within a business. 3 Be able to make financial decisions based on financial information. 4 Be able to evaluate the financial performance of a business.

GRADING OPPORTUNITIES AVAILABLE Outcomes/ Grade Descriptors

AC1.1 AC1.2 AC1.3 AC2.1 AC2.2 AC2.3 AC2.4 AC3.1 AC3.2 AC3.3

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Outcomes/ Grade Descriptors

AC4.1 AC4.2 AC4.3 M1 M2 M3 D1 D2 D3

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Assessor: Signature: ______________ Date: ___/___/___

Tutor Notes

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Key Points:

 Your work should be submitted by the deadline.  The assignment must be your own work and original in all answers to the tasks.  All sources used should be correctly referenced in Harvard format.  You will be expected to check spelling mistakes and grammar before submitting your

work.  The London School of Business and Management Cover sheet should be used in

every submitted work.  An appropriate report structure should be used, which may include headings such as:

Table of Contents, Introduction, Discussion/Evaluation, Conclusions, References and Appendices (if necessary).

 There should be clarity of expression in your work.  Your work should demonstrate, for example, relevant factual content and

understanding of the subject, critical analysis, evaluation, justifications, key arguments, correct use of appropriate models/framework etc.

Submission Regulations

1. “Assignment Front Cover Sheet” must accompany every submitted work [Cover sheet is

available from our Virtual Learning Environment - Moodle].

2. Assignments must be submitted on or before the due date, via Turnitin. Please refer to the LSBM Moodle for detailed assignment submission instructions.

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Assignment Brief 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 various techniques to assess the financial performance of an organization.

Task 1 (LO1: Understand the sources of finance available to a business) Scenario: You work as a finance manager within the Head Offices of Green Supplies Ltd. You have been asked to assist the management team in preparing and forecasting the company’s expansion. Green Supplies Ltd is a small private company who began trading in April 2013. The company supplies fitness products online to the public; specialising in mid- range sporting goods and equipment. In 2014, it wishes to increase its activity in the market and as such need to identify a variety of options for finance. Your research has shown that the Celtic Group would be interested in investing in Green Supplies Ltd. This could be an option for the company and will be something for you to consider, however, in the event that this investment is not viable, other options of finance must be explored. The Celtic Group has been keen to enter into a deal of this nature as market research indicates that internet related businesses are expected to grow in the UK and globally. Your line manager has asked you to explore the cost and profit implications of various sources of finance that would be available to Green Supplies Ltd. In particular, the executives within the group want to know what the costs would be if the group was to accept the investment offer from the Celtic Group. Requirements: Task1: (a) Identify different sources of finance available to Green Supplies Ltd. This should include raising funds through a combination of internal and external sources of finance. You are required to select at least 5 sources of finance. (Covers AC1.1) (b) Assess the implications of different sources of finance and what are the legal, financial and dilution of control implications (percentage ownerships) and risks of bankruptcy. (Covers AC1.2)

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(c) Evaluate appropriate sources of finance for your business: you must choose 3 sources that would be appropriate for Green Supplies Ltd; and discuss the advantages and disadvantages of your financing choice. (Covers AC1.3) (d) Analyse the costs of your chosen sources of finance for Green Supplies Ltd. Provide a brief explanation of how they would be shown in the Income Statement and in the Balance sheet. (Covers AC2.1) To achieve M1, State which of the source of finance explored in part (c) is a best fit for Green Supplies Ltd. Justify your choice and explain why you consider this choice to be the best fit for the company’s future plan. (Task 1 covers assessment criteria AC1.1, AC1.2, AC1.3, AC2.1 & M1)

Task 2 (a) Explain the importance of financial planning and discuss why it is important to the success of Green Supplies Ltd. (Covers AC2.2) (b) Assess different information need of each decision makers of an organisation. Identify and assess the information that is needed for a range of decision makers. (Covers AC2.3) (c) Explain the impact of loan and equity finances or investment on the balance sheet and income statement. (Covers AC2.4) To achieve M2, You are required to identify the information needs of internal and external stakeholders and you must choose at least five stakeholders for Green Supplies Ltd. (Task 2 covers assessment criteria AC2.2, AC2.3, AC2.4 & M2)

Task 3. Scenario: Heath limited is a medium size company dealing with the production and sales of electronic parts. The management of the company has decided to expand and locate its production capacity locally. The company has presented its expansion plan to the finance manager to evaluate the financial position of the company and its ability to expand locally. You have been asked to prepare a cash budget for four months starting from June 2015 on the basis of the information given below: The opening balance of cash on 1st June 2015 is £50000. Monthly credit sales for the four months ending September 2015 are forecasted below: Customers are allowed one month credit from the date of sale.

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Months Amount (£)

June 750,000

July 812,000

August 970,000

September 910,000

Cash sales between June and September 2015 are:

Months Amount (£)

June 45000

July 50000

August 65000

September 82000

Cash purchases during the relevant periods are:

Months Amount (£)

June 410,000

July 480,000

August 510,000

September 550,000

A new supplier has offered 30 days credit to Heath limited starting from June 2015; this means that goods bought on credit in June will be paid in July and so on. The company plans to make the following credit purchases from the supplier.

Months Amount (£)

June 76,000

July 82,000

August 86,000

September 90,000

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The company pays rent of £10,000 per month quarterly in advance. Payments are due on 1st June & 1st September. Other expenses are estimated as follows:

Months Amount (£)

June 82,000

July 83,000

August 94,000

September 110,000

The company will be repaying a Bank Loan of £20,000 per month. The last instalment is due in September 2015. Other expenses are paid in cash within the same month. Requirement: Prepare the Cash Budget for four months ending September 2015. (Covers AC3.1) To achieve M3, You are required to explain whether the business has a surplus or a deficit. If Heath limited 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 deficit situation. ……………………………………………………………………………………………………………

Task3 (b) Paracha limited deals in the production of sports equipment. You have been appointed as a production manager in the company and you have been asked by your line manager to calculate the selling price and the targeted profit of the business. The cost of equipment per unit is as shown below: Variable Cost per unit: £200 Fixed Cost per unit: £100 Total Cost per unit: £300 The company is currently reviewing its selling prices and is considering cost-plus pricing based on: Requirement: (i) Calculate the selling price per unit with 33% mark up on cost and calculate profits on 500 units sold. (Covers AC3.2) You have been informed the fixed cost is fully recovered if 500 units are manufactured and further production will not result in any additional fixed cost. The manager wants to know: (ii) Calculate the selling price per unit after 500 units sold with 30% mark up and the profit on additional 1000 units sold. (Covers AC3.2) ………………………………………………………………………………………………………………

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Task 3C. Scenario: Day Choice Ltd is a small company which manufactures electric items. The company has three investment options. As a finance manager of the company you are required to provide an investment appraisal report on which project would generate more benefits to Day Choice Ltd. You are required to use the Net Present Value (NPV) and Payback Period techniques to evaluate which project the company should select for its investment. The following information is provided: Discount rate: 10% (The estimated cost of capital per annum). Note –The discount factors are as follows: Year 1 = 0.909 Year 2 = 0.826 Year 3 = 0.751 Year 4 = 0.683

Cash Flow Project A Project B Project C

Investment (Cash Outflow) £150,000

£175,000 £160,000

Year 1- Cash Inflow £30,000

£55,000 £33,000

Year 2- Cash Inflow £48,500

£55,000 £40,000

Year 3- Cash Inflow £56,000

£55,000 £55,000

Year 4- Cash Inflow £70,500

£55,000 £58,000

Requirement: Assess the viability of each project using the following investment appraisal techniques and briefly explain which project you would recommend and why? (Covers AC3.3)

 Net present value (NPV)

 Payback Period (years) To achieve D1: You are required to discuss the advantages and disadvantages of both (NPV & Payback Period) methods as well as provide justification of their use for strategic decisions making.

(Task 3 covers assessment criteria AC3.1, AC3.2, AC3.3, M3 & D1)

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Task 4: Scenario: The following information relates to the financial performances of a wholesale and a Retail business.

Wholesale Business

Retail Business

£ £

Sales 580,000 426,000

Cost of sales 430,000 325,000

Gross Profit 150,000 101,000

Total expenses 65,000 40,000

Net Profit 85,000 61,000

Wholesale Business

Retail Business

£000 £000 £000 £000

Fixed assets 4,440 6,550

Current assets

Stock 1,420 2,370

Debtors 1060 2,690

Bank 30 10

Total Current Assets 2510 5,070

Total Assets 6,950 11,620

Capital 3,000 5,500

Long Term Loans 2400 3,170

Current Liabilities 1550 2,950

Total Liabilities 3,950 6,120

Total Capital + Liabilities

6,950 11,620

Requirement: (a) Explain the main financial statements produced by a business. (Covers AC4.1) (b) Compare appropriate formats of financial statements (Income statement and balance sheet) for a Sole Trader and a Public Limited Company. (Covers AC4.2) (c) Interpret financial statements using appropriate financial ratios and compare the following ratios for the wholesale and retail businesses: (i) Gross Profit Margin (ii) Net profit Margin (iii) Current Ratio (iv) Quick Ratio (v) Gearing

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To achieve D2, you must use the Harvard style of referencing and you must adopt an effective approach to independent academic research. To achieve D3, you must analyse the above financial ratios and interpret the ratios for wholesale and retail business. (Task 4 covers assessment criteria AC4.1, AC4.2, AC4.3, D2 & D3)

Grading Criteria (Pass, Merit, Distinction) Learning Outcomes Assessment Criteria for Pass

LO1 Understand the sources of finance available to a business

AC1.1 Identify the sources of finance available to a business. AC1.2 Assess the implication of different sources. AC1.3 Evaluate appropriate sources of finance for a business project.

LO2 Understand the implications of finance as a resource within a business

AC2.1 Analyse the cost of different sources of finance.

AC2.2 Explain the importance of financial planning. AC2.3 Assess the information needs of different decision makers. AC2.4 Explain the impact of finance on the financial statements.

LO3 Be able to make financial decisions based on financial information.

AC3.1 Analyse budgets and make appropriate decisions. AC3.2 Explain the calculation of unit costs and pricing decision using relevant information. AC3.3 Assess the viability of a project using investment appraisal techniques.

LO4 Be able to evaluate the financial performance of a business.

AC4.1 Discuss the main financial statements.

AC4.2 Compare appropriate formats of financial

statements for different types of business.

AC4.3 Interpret financial statements using appropriate

ratios and comparisons, both internal and external.

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Grade Descriptors for MERIT

Possible evidence that the learner may provide

M1 Select / design appropriate methods / techniques M2 Select / design appropriate methods / techniques M3 Present and communicate appropriate findings

To achieve M1, State which of the source of finance explored in part (c) is a best fit for Green Supplies Ltd. Justify your choice and explain why you consider this choice to be the best fit for the company’s future plan. (Task 1) To achieve M2, You are required to identify the information needs of internal and external stakeholders and you must choose at least five stakeholders for Green Supplies Ltd. (Task 2) To achieve M3, You are required to explain whether the business has a surplus or a deficit. If Heath limited 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 deficit situation. (Task 3)

Grade Descriptors for DISTINCTION

Possible evidence that the learner may provide

D1 Use critical reflection to evaluate own work and justify valid conclusions.

D1: To achieve D1: You are required to discuss the advantages and disadvantages of both (NPV & Payback Period) methods as well as provide justification of their use for strategic decisions making.(Task 3C)

D2 Take responsibility for managing and organising activities D3 Demonstrate convergent / lateral / creative thinking

D2: To achieve D2, you need to show the use of Harvard style of referencing. You must demonstrate an effective approach to independent research in (Task 1–Task 4) D3: To achieve D3, you must analyse the financial ratios and interpret the results of financial ratios for wholesale and retail business. (Task 4)

MFRD ASSINGMENT 1 (2).pdf

• MFRD ASSINGMENT 1
• by Cisco Lawal
• MFRD ASSINGMENT 1
• GRADEMARK REPORT
• FINAL GRADE
• GENERAL COMMENTS
• Instructor