Managing Financial Resources and Decisions

Assessment Brief
Unit and Assessment Details
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HND Business
02
Managing Financial Resources and Decisions
Syeda Sana Naseem
Bilal Ahmad
Financial Planning and Reporting in Business Context
Report
Individually
4500 (Max 20 pages)
Outcomes 3.1, 3.3, 4.3

Issue Date:
Pre-Submission Date:
Due Date:
Statement of authenticity
College No.

Learner Name

Learner Signature

Learners Declaration: I confirm that the work submitted for this assignment is my
own.
Date
Outcomes Covered
OUTCOME
3
4

1.1

Analyze and evaluate the financial performance of a business

Criteria Grid
1.2 1.3 2.1

2.2

2.3

2.4

3.2

4.1

4.2

M2

D1

Learners Comments

NOTE: Attach this page as first page of your report and the remaining pages at the
end of your report.
Purpose and Aim

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Managing Financial Resources and Decisions

This assignment is aimed to develop a thorough and detailed understanding of how to
manage finance in organizations. Students are required to evaluate different sources of
finance for business and will they assess the implications of these sources on the firm.
They will also learn how to use financial information to make decision. Different
techniques for evaluating the financial performance of the firm will be applied as
well.
Scenario 1
Select any organization from the list given below:

United Bank Limited

Khyber Match

Lucky Cement Limited

PTCL

Engro

Nestle

Any shopping store (Jans arcade, Imperial, Wadood Sons etc)

Tasks
1. Analyze the financial statements (of last 03 years) of the company by using
appropriate and relevant accounting ratios. Give comments on each ratio
calculated to analyze the financial performance of the company. Also compare
these ratios with competitor and industry standards to draw valid conclusions
and recommend the company to start its new business on the basis of its
financial performance. (Outcome 4.3)
Use a range of different ratios (liquidity ratios, profitability ratios, efficiency
ratios, and investment ratios) and give proper analysis on each to draw
conclusion about the financial performance of the company. (M2)
Guidance Notes:
Obtain financial statements of the selected organizations and calculate ratios to
analyze the performance of the company.
Give proper comments on the ratios. Simply providing the calculations of ratios
are not sufficient to achieve the pass criteria.
The financial statements can be downloaded from internet or you can visit the
organization and get the financial statements if possible.
www.kse.com.pk
www.nestle.com/.../NestleDocuments/.../Financial_Statements/
2010-Financial-Statements-EN.pdf

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If learner use different ratios (in all the four categories) and had given proper
analysis and comments of the ratio he/she will be eligible for M2. Using
competitors ratios and industry standards for justifying the analysis will be also
be marked as M2.
Pre-Submission: 19th Jan 2012

Managing Financial Resources and Decisions

Scenario 2
Hillyard Company , an office supplies specialty store, prepares its master budget on a
quarterly basis. The following data have been assembled to assist in preparation of the
master budget for the first quarter:
a. As of December 31 (the end of the prior quarter), the companys general
ledger showed the following account balances:
Debits
Credits
Cash
$ 38,000
Accounts Receivable
196,000
Inventory
55,800
Property and Equipment
(net)
295,000
Accounts Payable
$ 52,000
Capital Stock
400,000
Retained Earnings
0
102,800
$584,800 $584,800
b. Actual sales for December and budgeted sales for the next four months are as
follows:
December
(actual)
January
February
March
April
May

28000
31000
32000
29000
26000
27000

c. The price of the product was 10$ per unit in the month of December. The price
is expected to increase by 4% every month.
d. Sales are 30% for cash and 70% on credit. All payments on credit sales are
collected in the month following sale. The accounts receivable at December 31
are a result of December credit sales.
e. At the end of each month, inventory is to be on hand equal to 30% of the
following months sales needs.
f. 6.5 pounds of raw material is needed to complete one unit of product. 40% of
a months raw material are purchased before hand (in previous month).
g. The raw material costs $0.50 per pound. Purchases of raw material are paid in
the following pattern: 60% paid in the month the purchases are made and the
remaining 40% paid in the following month.
h. Monthly expenses are budgeted as follows: salaries and wages, $22,000 per
month: advertising, $52,000 per month; shipping, 2% of sales; other expense,
3% of sales.
i. During February, the company will purchase some equipment for $20,000
cash. During March, more equipment will be purchased for cash at a cost of
$15,000.
j. During January, the company will declare and pay $50,000 in cash dividends.

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Managing Financial Resources and Decisions

k. The company must maintain a minimum cash balance of $25,000. An open
line of credit is available at a local bank for any borrowing that may be needed
during the quarter. All borrowing is done at the beginning of a month, and all
repayments are made at the end of following month. Borrowing and
repayment of principal must be in multiples of $1,000. Interest is paid only at
the time of payment of principal (interest will be charged for two months). The
annual interest rate is 12%. (per month interest will be 1%, for two months 2%
and so on)
Tasks
Using the data above, complete the following Budgets and Schedules for the first
quarter:
1. Sales Budget
January

February March Quarter

Budgeted Sales (units)

Per unit Price
Budgeted Sales ($)
2. Schedule of expected cash collections:
January

February March

Quarter

Cash sales
Credit sales
Total cash collections
3. Production Budget
January

February

March

Quarter

Budgeted Sales (Units)

Add: Desired Ending Inventory
Total need
Less: Beginning inventory
Required Production
4. Raw Material Purchase Budget:
January
Required Production
Required raw material (per unit)

Raw material needed

Add: Desired Ending Raw
material
Total need
Less: Beginning raw material
Required raw material purchases
Material Cost Per pound
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February

March

Quarter

Managing Financial Resources and Decisions

Total Material Cost
5. Schedule for Cash Disbursement for purchases
January

February

March

December purchases
January purchases
February purchases
March purchases
Total cash disbursements for
purchases
6. Schedule for Cash Disbursement for Expenses
January February
Salaries and wages
Advertising
Shipping
Other expenses
Total cash disbursements for
operating expenses

March

7. Cash Budget
January
Cash balance, beginning
Add cash collections
Total cash available
Less disbursements:
Purchases of inventory
Operating expenses
Purchases of l equipment
Cash dividends
Total disbursements
Excess (deficiency) of cash
Financing:
Borrowing
Repayment
Interest
net balance

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February

March

Managing Financial Resources and Decisions

Guidance Notes:
Use data from the given scenario and complete the given budgets.
Learner can use excel sheets for making the budgets, or they can do the
calculations manually as well.
After analyzing the situation given in the scenario if the learner suggests
the financing options in the cash budget, and estimates the quarter end
values, he/she will be marked for D1.
Pre-Submission: 26th Jan 2012
Scenario 3
Peter Storm has conducted a financial analysis of the Warm Breezes expansion
projects. At this stage it would only be possible to fund one of the two proposed
projects. Inflation in the Caribbean is a problem and the costs of capital
comparatively high at 14%. Peter presents the following figures to Joseph and
Manjit for their consideration. Details of cash inflows have only been presented
for 6 years as Peter considers that financial information after this date is likely
to be highly inaccurate, especially as the Caribbean economies had been
unstable in recent times. Predictions are based on an average occupancy rate of
75% for the cottages for the first year, rising to 85% in years 4, 5 and 6.
Peter has decided that the investments will only be considered if they meet the
following criteria:
Payback
Average Rate of Return
Net Present Value

3.5 Years
35%
$2m

OPTION 1
Commercial centre
$m
Initial Cost
8.4
Cash inflows at end of:
Year 1
1.6
Year 2
2.8
Year 3
3.4
Year 4
3.6
Year 5
4.0
Year 6
4.2

OPTION 2
New cottages
$m
4.4
0.8
1.4
2.0
2.4
2.3
2.6

Tasks
1. (a) From the information presented in the case study, identify two reasons
why Peter has chosen such a short Payback period and high Average Rate
of Return.
2. (a) Using the information provided, calculate the Payback, Average Rate of
Return and Net Present Value, and IRR for both Option 1 and Option 2,
and state whether the options satisfy Peters criteria for investment.
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Managing Financial Resources and Decisions

(b) Using the investment appraisal information you have just calculated and
additional financial and non-financial information provided in the case
study, select an expansion option and justify your choice. (D1)
Guidance Notes:

Give clear and proper reasons by closely going through the scenario given.
Mention the reasons and also relate the reason to payback period and
accounting rate of return.
Use all the project appraisal techniques mentioned and clearly show all the
calculations made in the report. (learner can even provide rough work of
calculation)
Select the best option based on the appraisal techniques applied and give
proper and justified reasons for the selection (D1)
Pre-submission: 2nd Feb, 2012

Notes to Students

Include a last chapter in your report about the limitations of your report and
write any difficulty you faced while collecting data. Give conclusions and
critically evaluate your work if possible.
After the 3rd pre-submission organize your work in proper report format and
submit it in printed form on 6th Feb, 2012.
Viva will be taken from the students after submission of their assignment to
analyze the personal efforts of each student in carrying out their tasks.
Clearly mention if any assumptions are undertaken for the given scenario.
Student could research together but you must analyze, evaluate and critically
appraise the requirements of your assignment and produce the work on your
own. Every student should provide evidence of his/her own work
The safety of your assessments is your responsibility. You must not permit
another student access to your work.

Plagiarism Policy
The college has strict penalty for plagiarism and the assignment will be cancelled if
the assignment is observed for this.
The definition and scope of plagiarism are presented below:
Plagiarism occurs when a student misrepresents, as his/her own work, the work,
written or otherwise, of any other person (including another student) or of any
institution. Examples of forms of plagiarism include:
The verbatim (word for word) copying of anothers work without appropriate
and correctly presented acknowledgement;

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Managing Financial Resources and Decisions

The close paraphrasing of anothers work by simply changing a few words or

altering the order of presentation, without appropriate and correctly presented
acknowledgement;
Unacknowledged quotation of phrases from anothers work;
The deliberate and detailed presentation of anothers concept as ones own.

All types of work submitted by students are covered by this definition, including,
written work, diagrams, designs, engineering drawings and pictures.

Grading Statement (For Report)

Pass
3.1: Analyze budgets and make appropriate decisions
3.3: Assess the viability of the projects using investment appraisal techniques
4.3: Analyze financial statements using appropriate ratios and comparisons, both
internal and external
Merit
M2: Identify and apply strategies to find appropriate solutions
Distinction
D1: Use critical reflection to evaluate own work and justify valid conclusions
Resources Required:
Lectures slides
Managing Finance BTEC Course Book
Cox D and Fardon M Management of Finance (Osborne Books, 2003)
Business magazines, journals and Newspapers
General Instructions

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Books and online resources can be used of the college library and Central
Computer Lab for any assistance. But direct copying from these resources is
not allowed.
Visits need to be arranged and made to the organizations. For meeting the
respective managers, the college will provide a reference letter for the project
and the manager of the organization is welcome to contact the administration at
the college.
The college has strict penalty for plagiarism and the assignment will be
cancelled if the assignment is observed for this.
Proper referencing should be given in the Harvard Style/Chicago/MLA etc.
All work should be comprehensively referenced and all sources must be
acknowledged fully, this includes books & journals used as well websites
visited. Details such as page numbers, publishers and publication year should
also be stated, in addition to the name of the author(s) and publication. Books,
articles and journals should be the main sources; online sources are allowed up
to 15%
The Assignment should have a cover page that has assignment title, assignment
number, course title, unit title, lecturer / tutor name and students name.

Managing Financial Resources and Decisions

Attach all the pages of assignment brief with your report as annexure at the
end.
Ensure that statement of authenticity has been signed and attached as the first
page of your report.
Contents sheet (TOC) with a list of all headings and page numbers is must for
your report.
Use A4 page size, 12 point Arial or Times New Roman font with 1.5 line
spacing.
Your assignment should be word-processed and should not exceed 4500 words
in length (or 20 pages). Exhibits / appendices are outside this limit
Pages should be numbered (bottom right hand corner)
Spell-check the document and read thoroughly for grammatical errors

Feedback to Learner
Criteria

Feedback to learner
(Evidence presented against the published criteria)

Achieved
Y/N?

1.1

Y/N

1.2

Y/N

1.3

Y/N

2.1

Y/N

2.2

Y/N

2.3

Y/N

2.4

Y/N

3.2

Y/N

4.1

Y/N

4.2

Y/N

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Managing Financial Resources and Decisions

M1

Y/N

M3

Y/N

D2

Y/N

D3

Y/N

General
comments

Assessor signature

Date

Internal Verifier signature

Date

Internal Verifier

Page 10

Assessor