CIMA MANAGEMENT CASE

STUDY ANALYSIS
NOVEMBER 2019
NUFAIL NALEEM ACMA CGMA ACCA MEMBER
THINKS TO REMEMBER

• Marking Scheme
• Skills in Examination
MARKING SCHEME
MARKS BREAKDOWN SCENARIO
WHAT IS TECHNICAL SKILLS

• Technical skills is the use of theories in the answer, for example cima official terminology
for a particular concept or detailed definition of accounting standards…. In Most of the
past exam answers the examiner is clearly using more theories in details
• The students are used to do OTQ exams for E2 P2 F2 therefore they are not familiar to
the definitions so they need to have a revision on the theories rather than detailed
research on the case study
BUSINESS SKILLS

• This is the knowledge of the industry it does not mean that you need to know the in
depth knowledge but the basic knowledge is more than enough to support your answer
with logical flow
• Students should be very careful when relating to the industry for example a service
industry may usually have less inventories compared with manufacturing industry, so the
students need to be very sensible when writing the answers
PEOPLE SKILLS

• This is the application to the stakeholders who are getting impacted due a business
decision taken by the company…
• Students should be able to discuss how there is an impact rather than just briefing out
what is the impact
LEADERSHIP SKILLS

• This is the decision making skills by the accountant in simple language what is the choice
and the actions that will be taken when executing
• Please ensure you consider the ethical implication when making decision relating to
business .
ALERT

• IFRS 16 – Lease
• IFRS 15 – Revenue Contracts
• IAS 12 – Deferred Tax
• These two topics must be revised high chances are there for being tested
CASE ANALYSIS BRIEF SUMMARY
YOUR ROLE

• You are the finance Manager of GSC Plc

• You are reporting to the CFO
• You are mostly performing management accounting tasks
GSC COMPANY INTRODUCTION

• GSC is a public Limited Company located at Goeland

• The company is a global company where they design market and sell sportswear items
• In Geoland the population is 200 million, a highly developed economy.
• The country is the home for two major sports
• There are two largest sportwear company in the world located in Geoland
BACKGROUND OF SPORTWEAR INDUSTRY

• The sportwear industry has the following types of segment

- Sports Clothing
- Footwear
- Accessories
• The industry revenue has grown by 4%
• The main reason was health awareness and disposable income
• Further the women consumption has also increased
BACKGROUND OF GSC

• The company was founded in the year 2000 by 4 friends

• The focused on developing a niche for high quality and performance driven fabrics
• The company was very successful in the first 4 years
• The company has taken debt for the growth
• In 2012 the company was listed in the local stock exchange
• In 2013 the acquired 100% stake in Sports stepper
• Currently the goods are sold in 150 countries
• They do also sell online
FINANCIAL HIGHLIGHTS
GSC PRODUCTS

• GSC products focus on differentiation factors

- Performance based rather than fashioned based
- Products are made from moisture wicking fabrics, heat dispersing fabrics
- The logos and trademarks are registered and the company charges premium
FABRICS DESIGNS AND DEVELOPMENTS

• 2050 skilled designers are working at GSC

• Sources fabrics from small retailers
• 75% of the fabrics are purchased from 6 specialist manufacturers
MANUFACTURING AND QUALITY MANAGEMENT

• The manufacturing takes place in 14 different countries

• With 30 contracts manufacturers
• 65% of the production is at asia and middle east, 25% latin America
• Of the 30 contract manufacturers 8 produce 40% of the goods
• They do have an online tendering process
• GSC has good audit system and code of conduct are strictly monitored
CODE OF CONDUCT

• Workplace health and safety

• Fair remuneration and working hours
• Zero tolerance of workforce exploitations
• Documented employee report
• Environmental protection activities
DISTRIBUTION

• The information system tracks the logistics till the product reaches the customer
• Planning to go ahead with robotic process automation for packaging
INVENTORY MANAGEMENT

• The inventory management is very robust and proactive

• They usually give lower price for unsold inventory
SALES AND MARKETING

• Target market 18 – 35 years

• Creating brand awareness in superior athletic performance
• Keen to develop target audience for (13 – 17 years)
RETAIL SALES

• 70% of sales are from GSC retail partners

• At present GSC is launching Concept shops “Shop in Shop” where they are planning to
sell exclusive GSC products
ONLINE SALES

• 30% of the sales are from websites

SPONSORSHIP

• They usually sponsor high Schools, Colleges and athletics

COMPETITION

• The company has the following competitors who are ahead

1. Slate
2. Rollercoaster
3. Athletica
EXHIBITS

• Exhibit 1 – About Sponsorships of major sports events by rollercoaster and blue cat
• Exhibit 2 – GSC products are renowned for elite class
• Exhibit 3 – European Company Acquires Lynx Pro
FINANCIAL HIGHLIGHTS

Growth 2019 - 2018

Revenue 5%
Cost of Sales 4.6%
Gross profit 5.7%
Operating Expenses 4.35%
Operating Profit 11.8%
Finance Cost 2.5%
Profit Before tax 13.5%
Tax 11.9%
Profit for the year 13.94%
FINANCIAL RATIOS
Ratios 2019 2018
Gross Profit Margin 39.58% 39.34%
Operating Profit Margin 7.76% 7.23%
Profit Before Tax Margin 6.63% 6.14%
Profit for the year Margin 5.30% 4.89%
ROCE 13.9% 12.7%
Interest Cover 6.875 Times 6.308 Times
Gearing 27.35% 27.63%
Current Ratios 2.17:1 2.16:1
Quick Ratio 1.5:1 1.48:1
Inventory Days 89 Days 90 Days
Trade Recievables Days 64 Days 61 Days
Cash Cycle 153 Days 151 Days
Payable Days (103 Days) (104 Days)
Working Capital 50 Days 47 Days