COURSEWORK QUESTION PAPER: Autumn Semester 2017

Module Code: BA 4006

Module Title: Understanding Business Information

Module Leader: Samjhana Gorkhali (Islington College)

Coursework Type: Individual coursework

Financial Statement Analysis
Investment Appraisal
Coursework Weight: This coursework accounts for 30% of your total module
grades.

Submission Date: Week 28, 5pm (look for RTE notice for due date)

When Coursework is April 15, 2018

given out:

Submission Submit the following to Islington College RTE department

Instructions: before the due date:
• Report in PDF format
• Excel File

Warning: London Metropolitan University and Islington College

takes Plagiarism seriously. Offenders will be dealt with
sternly.

© London Metropolitan University

Task 1
Analyse and evaluate the performance, liquidity and financial structure of
Tesco plc over the three-year period 2014 – 2016.
You should calculate the following accounting ratios for the year 2014,
2015 and 2016 and analyse the performance and position of the
company based on the ratios.
You should also highlight any limitations in the use of accounting ratios
that you found in your analysis and evaluation of the company over the
three-year period. This may include reference to the movements in the
company’s share price.
This task contributes 30% to the overall coursework mark.
Word limit 300 Words
TESCO PLC
2016 2015 2014
Performance ratios

Pre-tax profit margin ( % )

Return on total assets ( % )
Return on capital ( % )

Liquidity ratios

Current ratio ( : 1 )
Acid test ratio ( : 1 )
Stocks/ sales ( % )

Gearing ratio

Total debt/ net worth ( % )

SOURCES AND HYPERLINKS

Tesco plc Annual Report and Accounts 2016 and 2015

https://www.tescoplc.com/investors/reports-results-and-
presentations/reports-archive/

Understanding Tesco plc

http://www.tescoplc.com/index.asp?pageid=656

Key Note Financial Database

https://0-www.keynote.co.uk.emu.londonmet.ac.uk/company-
report/financials/key-ratio/00445790

Tesco settles US lawsuit over profit overstatement BBC Business

26 November 2015
http://www.bbc.co.uk/news/business-34930313
TASK TWO
Senior management at LMU Plc have identified that there is a strategic
need for a replacement machine to be acquired in one of its production
departments. They have to make a choice between two models of the
machine they have in mind. Model 1 is called Super and model 2 is
called Deluxe. They are unsure as to which of the two models they
should buy. They have given you the following profiles of the two models.
Super Deluxe
Cost £500,000 £800,000
Net Cash Inflow £ £
Year 1 250,000 150,000
2 100,000 200,000
3 100,000 250,000
4 50,000 100,000
5 150,000 100,000
6 100,000 250,000

Scrap value 20,000 80,000

Cost of Capital 12%

They want you to appraise the two prospective projects using the
following investment appraisal techniques:
(i) Payback
(ii) Accounting rate of Return
(iii) Net Present Value
(iv) Internal Rate of Return
You are told that funds are only available for only one model.
Required
(a) Write a report to the senior management of the company
explaining how each of the aforementioned techniques works.
Your report should include the advantages and disadvantages of
each technique. 50% 500 Words

(b) Explain briefly which machine you would recommend to senior

management of LMU Plc under each technique and state your
reason why you would recommend that machine. 20% 200 Words

ALL WORKINGS SHOULD BE SHOWN