Accounting And Finance For Managers

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Accounting and Finance for Managers- ACC3015

Year 2014/2015

Detailed Instructions and Guidelines

Objective of the Case study: This case study aims at helping students to reflect on what they learnt throughout the module.

Instructions: The case study consists of three sections- Section A consists of 70 marks, Section B consist of 20 marks and Section C consists of 10 marks. Students are expected to read the case study thoroughly and to answer all the required questions in a structured and organised manner with reference to published work. This is an individual assignment and it is worth 60% of the total module mark.

SECTION A -70 marks

Question 1: (70 Marks)

You are employed by AG Finance Plc. In your capacity of financial advisor you have been chosen to advice the Managing Director on the following financial matters.

Summarized below are the annual ratios for Apple Company. Apple is world leading company which designs and manufactures mobiles, tablets and personal computers. In addition it sells a variety of related software, applications and other services.

2014 2013 2012 2011 2010
Financial Strength
Current Ratio 1.08 1.68 1.50 1.61 2.01
Quick/Acid Test Ratio 0.82 1.40 1.24 1.35 1.72
Working Capital1 3,118.0 18,498.4 11,780.6 11,023.4 13,251.5
Long Term Debt/Equity 0.26 0.14 0.00 0.00 0.00
Total Debt/Equity 0.32 0.14 0.00 0.00 0.00
Long Term Debt/Total
Capital 0.20 0.12 0.00 0.00 0.00
Total Debt/Total Capital 0.24 0.12 0.00 0.00 0.00
Payout Ratio 28.03% 28.48% 5.94% 0.00% 0.00%
Effective Tax Rate 26.13% 26.15% 25.16% 24.22% 24.42%
Total Capital 90,075.0 87,727.7 72,868.4 49,627.5 30,220.7
Efficiency
Asset Turnover 0.83 0.89 1.07 1.13 1.06
Inventory Turnover 57.94 83.45 112.12 70.53 52.51
Days In Inventory 6.30 4.37 3.26 5.18 6.95
Receivables Turnover 7.64 8.69 10.29 10.00 8.71
Days Receivables
Outstanding 47.78 42.00 35.46 36.49 41.92
Revenue/Employee2 1,210,897 1,328,876 1,325,226 1,160,903 885,088
Operating
Income/Employee2 347,798 380,982 467,751 362,377 249,480
EBITDA/Employee2 400,793 433,543 495,499 381,831 261,476
Profitability
37.62% 40.48%
38.59% 43.87% 39.38%
Operating Margin 28.67% 31.22%
28.72% 35.30% 28.19%
EBITDA Margin 32.62% 32.89%
33.10% 37.39% 29.54%
EBIT Margin 28.67% 31.22%
28.72% 35.30% 28.19%
Pretax Margin 29.35% 31.60%
29.26% 35.63% 28.42%
Net Profit Margin 21.67% 23.95%
21.61% 26.67% 21.48%
R&D Expense/Revenue 2.62% 2.24%
3.30% 2.16% 2.73%
COGS/Revenue 62.38% 59.52%
61.41% 56.13% 60.62%
SG&A Expense/Revenue 6.34% 7.02%
6.56% 6.42% 8.46%
Management Effectiveness
Return on Assets

Return on Equity

 19.34%

30.64%

 27.07%
18.01% 28.54% 22.84%
41.67%
33.61% 42.84% 35.28%
Valuation
Free Cash Flow/Share2 4.42 3.00
5.22 3.89 1.62
Operating Cash

Flow/Share 2

 5.32 3.74
6.24 4.77 1.83

Gross Margin

Required

A client approached your firm with the intention to invest in Apple and he needs guidance with regards to the following

  1. a) Identify 8 financial ratios and calculate 2 non-financial ratios that are worth considering for management decision making. You are required to explain the rationale of choosing these rati Your answer must be supported with evidence from published work including books and journals.                                                                           (20 Marks)
  1. b) Write a Report to the Managing Director interpreting and critically analysing the performance of Apple over the past five year The analysis must include an overview of the performance and financial position of the company. The analysis must be supported with evidence from the audited financial statement and independent research.                   (45 Marks)
  1. c) Discuss the limitations of relying on financial ratios to interpret firm performance?                                                                   (5 Marks)

SECTION B -20 marks

Question 2: (20 Marks)

Foxgloves Ltd is currently evaluating a proposal to invest in a new inshore rowing boat. Two possible types, A and B, have now been identified, each of which have a five-year life and zero scrap value. Their costs and anticipated cash flows are:

Year                   Type A                         Type B

£                             £

0                     (100,000)                     (100,000)

1                         35,000                     64,000

2                         25,300                       32,500

3                         24,000                       3,000

4                         28,000                       15,000

5                           5,000                       15,000

The appropriate discount rate is 10% per annum.

Year                   DF 10%

1                         0.909

2                         0.826

3                         0.751

4                         0.683

5                         0.621

Required

  1. a.     Calculate for each type
    1. The payback period (2 marks)
    2. The net present value  (2 marks)
    3. The accounting rate of return  (2 marks)
  1. b.     In a report format to you manger:
  1. i.   State the relative merits of the methods of evaluation mentioned in a) above. (7 marks)
  1. ii.   Explain which project type you would recommend for acceptance (7 Marks)

SECTION C -10 Marks

Question 3: 10 Marks

In report format write to your manager to advice on the following costumer query?

  1. a) How is a budget different from a forecast? And what is the point in flexing the budgets in the context of variance analysis? (10 marks)

ADDITIONAL GUIDANCE

  1. 1. Attempt this as three separate secti
  1. 2. Report or memo format would be ideal to ensure presentation is formal and professional
  2. 3. All calculations must be detailed and presented clearly.
  1. 4. Use of published work (citing references) within text is exp
  1. 5. A full list of references should be presented at the end of the case study.
  1. 6. Please avoid the use of ‘I, We, Us’ in your case study. You are expected to write in third p
  2. 7. Include the assignment front sheet (and marking scheme, available) which is attached to the assignment bri
  3. 8. Good use of English, referencing, presentation will earn marks.

Accounting and Finance Penalties

  1. 1. Missing References – penalty is three grade points minimum (see module guide for further details).
  2. 2. Front sheet missing-penalty one grade point

NB* The grade point refers to one grade movement. E.G. a one point penalty when the assessment grade is B+ will be downgraded to B. A two point penalty would down grade the assessment to B-, three points to C+

Accounting & Finance Front Sheet

ACC3015

Declaration by the candidate named above

  1. 1. I confirm that this is my own work (or, in the case of a group assignment, the work of my group) and that, although I may have consulted others in the course of assembling material for the work, the finished article has been completed without help or participation of any other person (other than, in group assignments, other members of the same group).
  2. 2.     The work contains no material drawn from unattributed sources.

Student Signature                                                 

Date Signed

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