Assignment front sheet

Brit College

Qualification

Unit number and title

Edexcel/BTEC Level 4 Higher National Diploma in

Business

Unit 2: Managing Financial Resources and Decision

Student name

Assessor name
Emmanuel Adjaho

Date issued

Completion date

01/03/2015

22/05/2015

Assignment title

CarmenJosh Ltd: New Business Opportunities in Europe and Africa

Learning
Outcome

Learning
outcome

Assessment
Criteria

In this assessment you will have the

opportunity to present evidence that
shows you are able to:

Understand the
sources of
finance available
to a business

1.1

Identify the sources of finance available to

a business

1.2

Assess the implications of different

sources

1.3

Evaluate appropriate sources of finance

for a business project

2.1

Analyse the costs of different sources of

finance

2.2

Explain the importance of financial

planning

2.3

Assess the information needs of different

decision makers

LO1

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

2.4

LO3

LO4

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Submitted on

Be able to
make financial
decisions
based on
financial
information

Be able to
evaluate the
financial
performance of
a business

3.1

3.2

Explain the impact of finance on the

financial statements
Analyse budgets and make appropriate
Decisions
Explain the calculation of unit costs and
make pricing decisions using relevant
information

Task Evidence
no. (Page no)

2
3

3.3

Assess the viability of a project using

investment appraisal techniques

4.1

Discuss the main financial statements

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4.2

4.3

Compare appropriate formats of financial

statements for different types of business
Interpret financial statements using
appropriate ratios and comparisons, both
internal and external

Learner declaration
I certify that the work submitted for this assignment is my own and that research sources are fully
acknowledged.
Student signature:

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Date:

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In addition to the PASS criteria mentioned above, this assignment gives you the opportunity to submit evidence in order to achieve the
following MERIT and DISTINCTION grades
Grade Descriptor

Indicative characteristic/s

Contextualisation

M1 Identify and apply strategies to find

appropriate solutions/information

Effective judgements have been made.

An effective approach to study and
research has been applied.

To achieve grade M1, you must be able to critically

evaluate the competing sources of finance, selecting the
best option in context, and assessing the implications of
your choice.

M2 Select / design and apply appropriate

research methods / techniques

The design of methods/techniques has

been applied and justified.
Uses a range of sources of information.
Appropriate and effective design of any
questionnaire for data collection as per the
organizations requirements

To achieve M2 you will have used suitable techniques to

evaluate the impact on your financial projections of your
choices. (Task 1 and 2)

Communication is appropriate for familiar

and unfamiliar audiences and appropriate
media have been used.
M3 Present and communicate appropriate A range of methods of calculations and
presentation have been used and technical
findings
language has been accurately used.
The appropriate structure and approach
has been used

D1 Use critical reflection to evaluate own

work and justify valid conclusions

Conclusions have been arrived at through

synthesis of ideas and have been justified.
Realistic improvements are proposed
against defined characteristics for success.
The validity of results has been evaluated
using defined criteria

To achieve M3, you will have used suitable techniques to

evaluate the impact on your financial projections of your
choices.
In addition, you must present the analysis in an
appropriate business format, and provide appropriate
information to help the user draw meaningful conclusions
from the data in making decisions. (Task 2 and 3)
To achieve D1, you will have to represent the work in an
appropriate business format, and provide structured
additional (researched) information to help the user draw
meaningful conclusions from the data in making
decisions. (Task 2 and 3)
To achieve D2 you will have demonstrated an effective
and efficient approach to your work. This will be evident
in your selection of suitable business formats, research
and originality is structuring your answers. You will have
met all deadlines in submitting the tasks and achieving
the unit assessment criteria. (Task 3 and 4)

D2 Take responsibility for managing and

organising activities

Substantial activities, projects or

investigations have been planned,
managed and organised
Activities have been managed.

D3 Demonstrate convergent /lateral /

creative thinking

This will be awarded based upon the overall performance, including logical thinking, structure, presentation,
neatness, format, creativity and style of writing. Your work will be focused, formatted for the user group
needs, and demonstrate research and originality in its content and structure.

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Assignment brief
Unit number and title

Unit 2: Managing Financial Resources and Decisions

Qualification

Edexcel/BTEC Level 4 HND Diploma in Business

Start date

01/03/2015

Deadline/hand-in

22/05/2015

Assessor

Assignment title

CarmenJosh Ltd: New Business Opportunities in Europe and Africa

Purpose of this assignment

Financial Management concerns efficient and effective management of organisations financial resources
(capital, labour, materials, and overheads) in such a way to maximise and increase the value of the
organisation in terms of profitability, market and share value and growth. It also concerns raising capital or
funds, and allocating scarce resources in order to increase or maximise shareholders value. Managing
financial resources is also about short-term budgeting and long-term investment decisions, and how to
allocate resources relating to capital and revenue expenditure.
Knowledge of all these areas will be examined or tested.

The purpose of this assignment is to ensure a learner can:

Understand the sources of finance available to a business

Understand the implications of finance as a resource within a business
Be able to make financial decisions based on financial information
Be able to evaluate the financial performance of a business.

The assignment submission.

The assignment must be submitted using Word.

All tasks must be clearly numbered.
The assignment must use Ariel font size 11 throughout. 1.5 line spacing on all pages.
Accounting statements must use Excel.
Pages must be numbered.

Assignments that do not comply with these requirements will not be marked

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Scenario
CarmenJosh Ltd: New Business Opportunities in Europe and Africa
CarmenJosh Ltd is a medium-sized and innovative UK company formed in 2000 by two young
entrepreneurs, Mrs Carmen Emmanuel and her university classmate, Joshua Christopher. The companys
head office is located in the city of London and has two regional offices in Edinburgh and Cardiff. The
company main business activity is design, development and production of IT accessories for major IT
companies in the UK. CarmenJosh Ltd has four directors, Mrs Carmen Emmanuel, Joshua Christopher,
and their partners who are also the shareholders of the company. The directors have ambitious plans as
they have long term vision for the company to expand their operations in both Europe and Africa.
The enlargement of European Union and the economic growth in most African countries provides perfect
opportunity for CarmenJosh Ltd to expand its investment in some selected countries in Europe and Africa.
To achieve this vision of expansion, the directors must first overcome some challenges, hard choices and
decisions to make before their vision is translated into reality. Some of the challenges facing the company,
for example, include sources of finance for investment, the implications of different sources, which country
or countries to invest in, company strategies, product pricing, cost and information needs of the directors.
You have recently been appointed a Special Assistant for Business and Finance (Projects) after lengthy
recruitment process to provide business and financial advice and information to support decision making
within the company as all directors are financially illiterate. Mrs Carmen Emmanuel read law at the
university and Mr Joshua Christopher is mathematician
Your role would be invaluable to directors as they rely on you to help them make informed finance,
business and investment decisions in order to maximise the value of CarmelJosh Ltd. Your answers should
be structured with logical and focused manner. The answer for you task should be between 3,000-4,000
words excluding figures and workings. (Mark will NOT be awarded for the excess words)

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Tasks (LO1: 1.1, 1.2, 1.3 and Grades: M1, M2)

Task 1
On return on duty on 10 January 2015 at the company Head Office in London, the first task requested by the
two directors, Mrs Carmen Emmanuel and Joshua Christopher, is to write a formal business report to the
Board of Directors about the sources of finance for the company. The directors specifically asked you to
address the following key points in your report, and stressed that the report needs to be structured to meet
their information needs as outlined below:
1.1

Identify at least three short-term and three long-term sources of finance available to business, and
state reasons why or when short and long-term sources of finance may be the best options or
desirable.

1.2

Assess the implications of the different sources finance you have identify in (1.1) above, and
structure your answer to include, legal, financial and dilution of control and bankruptcy of a business.

1.3

Evaluate appropriate sources of finance for this specific business project the directors are planning to
Undertake.

You have been asked to make recommendations to the directors the main sources of finance available to
the company (CarmenJosh Ltd) as a private limited company for the European and African expansion, and
also consider the financial advantage (s) for CarmenJosh Ltd if the directors decided to seek plc (public
limited company) status.
To achieve M1 and M2, the learner must demonstrate an ability to critically evaluate the competing sources
of finance, selecting the best options for this business in context.

Tasks (LO2: 2.1, 2.2, 2.3, 2.4 and M2, M3, D1)
Task 2.1
The directors are exploring various sources of finance for the business however, they are confused about
the various types of costs associated with raising finance. You have been asked to explain and analyse
briefly the difference between interest, dividends, opportunity costs and retained earnings. You are also
been asked to briefly analyse which of these costs give tax incentives (if any).
Task 2.2
Mr Christopher is the director responsible for strategic planning for CarmenJosh Ltd. He is about to start the
development of 5-Year business plan for the company. However, his limited financial knowledge limits his
ability to prepare a robust and sustainable business plan for the company. Three weeks after your
appointment, the company sent you to attend a two-day seminar on the subject, the importance of financial
planning, within organisation. This course has enhanced your skills and knowledge to provide support to Mr
Christopher in the development of the 5-year business plan.
You have been required to produce formal business report to the directors about the importance of financial
planning.

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Task 2.3
There are various decision makers or stakeholders, internal and external, to every business organisations,
including shareholders, lenders (debenture holders and bankers), suppliers, employees, customers,
government and the general public).
You are required to identify decision makers in business organisation, and assess the information needs of
each of them.
Task 2.4 (a) As a Special Assistant for Business and Finance (Projects), part of your role occasionally is to
explain financial terminologies and issues to the directors. You have been asked by Mrs Carmen Emmanuel
to explain briefly the impact of finance on the financial statements.
Task 2.4 (b) A company financial statement consists of:
i.
Statement of Profit or Loss
ii.
Statement of Financial Position (Balance Sheet)

You have been asked by the directors to produce a pro-forma statement of profit or loss and statement
financial position (Balance sheet) for CarmenJosh Ltd, and showing clearly the information content under
the International Accounting Standards (IAS) requirements. (No financial figures are required!)
To achieve M2 and M3, you will have used suitable techniques to evaluate the varying impacts of
using different sources of finance. A detailed and structured critical analysis will win you D1,
provided it is presented in an appropriate format using business and accounting terminology.
Tasks (LO3: 3.1, 3.2, 3.3 and M3, D1, D2)

Task 3.1 (a)

In a financial or business context, what is budget and why is a cash budget is a critical to every business
organisations? State advantages and two disadvantages for preparation of cash budget.

Task 3. 1 (b)
You have been required to draft a monthly cash budget for CarmenJosh from November 2014 April 2015
(6 moths), and analysed the results.
You have been given the following information to assist you prepare a cash budget for Roman Ltd months
ended April 2015. (November 2014 April 2015):
.
A bank loan of 78,000 has been negotiated and this will be paid into the business bank account in
November 2014.
The principal (capital) element of the bank loan (78,000) is to be repaid in 24 equal monthly instalments
beginning in December 2014.
The loan attracts 8% interest per annum calculated on the amount of the loan principal advanced in

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November 2014. The annual interest charge is to be paid in equal monthly instalments beginning in
December.
CarmenJosh Ltd uses bank overdraft facility, which attract annual interest of 2% and interest payable
monthly and is estimated at 2% of the previous months overdraft balance (if any). The interest is to be
rounded to the nearest .
As at 1 November the balance of the banks current showed an overdraft of 10,000.
(Note: Cash inflows should be entered as positive figures and cash outflows as negative figures.)

Credit sales
Cash sales

November
2014

80,000
15,200

December
2014

125,000
34,00

January
2015

105,00
19.800

February
2015

96,500
17,900

March
2015

145,000
22,750

April
2015

155,00
26,500

Credit purchase
Cash purchases

105,000
20,000

88,500
14,500

145,000
13,000

100,000
20,200

55,000
9,500

185,000
5,000

i.

Staff monthly wages, 36,000 are paid each month from November December 2014, and increase
from January 2015 by 10% and are paid monthly

ii.

Capital Expenditure (Restaurant Equipment) purchase on credit in November 2014 for 48,000 and
payable on two equal instalments from January 2015.

iii.

Electricity and other energy bills are paid in monthly arrears and an equal amount of 4,850. The bill
for November 2014 is due for payment in December 2014. There was no outstanding bill brought
forward in November 2014

iv.
v.

An allowance of 950 is made for staff canteen, which is paid monthly.

Insurance is paid quarterly in advance starting from November 2014 and this figure is yet to be
determined.

vi.

The company credit policy is to allow a month credit. This allows customers to pay 60% of all credit
sales one month after sale, and 40% the following month.

vii.

Suppliers also allow one month credit term, and this gives credit customer to pay 20% of credit
purchase in the month of purchase and remainder 80% the following month.

Task 3.2
CarmenJosh Ltd directors are concerned about changing technological, economic and competition
environment within the IT industry. At this backdrop, they wanted to make sure costs and pricing policy
decisions are accurate for the business survival. Joshua Christopher, who is mathematician, would like to
ensure sensitivity analysis is carried out on unit costs information by taking into account changes in market
and operational conditions.
The following product cost per unit (USB 2) is provided on one of the companys popular products, USB 2.
Product
Direct Costs per USB2 :

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USB 2

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Direct Material
Direct Labour
Direct Expenses
Total Variable costs

25.00
15.00
5.00
45.00

Fixed overheads
10.00
The companys pricing policy is to add 20% mark-up to total production cost to arrive at the selling price.
You are required to carry out the following tasks to enable the directors make informed decision about the
selling price of Product USB 2, which depends on the following operational and market conditions:
(a) Calculate the total production cost per USB 2, and selling price if current operational condition is
unchanged, and explain the importance of costing to business organisation.

(b) It is forecasted, due to increase in inflation, that the direct material cost per unit will increase next
year by 10%, labour cost 5% variable cost by 2% and fixed overheads unchanged. Calculate new
total production cost and selling price per USV 2;

(c) What would be the production cost and selling price if direct material cost decrease by 5%, direct
labour cost increase by 15%, variable costs decrease by 2% and fixed overheads increased by
10%?

Task 3.3
Joshua Christopher and Mrs Carmen Emmanuel are considering two major capital investment projects in the
UK and Ghana from 2016 as part of the CarmenJosh Ltd.s expansion and long-term investment in Europe
and African counties. Only one investment can be chosen and you are provided the following information:

Country of investment

The UK

Ghana

000

000

Initial cost or investment) (cash outflow) at the

beginning year
Cash inflows

2016*

80

100

2016

40

20

Cash inflows

2017

40

30

Cash inflows

2018

20

50

Cash inflows

2019

10

50

Cash inflows

2020

10

40

* The initial cost or investment occurs at the beginning of the project and you may assume that the net cash
inflows will arise at the end of each year. The cost of bowing the initial investment (interest rate) is 8%.
The companys depreciation policy is to write off 20%, on straight line basis, on all initial investment. Neither
project will have any residual value at the end of five years.

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Your are required to use investment appraisal techniques to calculate:

(a) Accounting Rate of Return (ARR)
(b) Payback Methods
(c) The Net Present Value (NPV)

(d) If the cost of capital (interest rate) is increased by the bank to 14%, calculate the Internal Rate of
Return (IRR) and recommend to the board, which country investment should be undertaken.
(e) Write a report to the directors the relative merits (three advantages) and two demerits
(disadvantages) of using discounted cash flows methods of project appraisal. You are also required
to advice or recommend to the directors, on financial grounds alone, which country should the
company investment in undertaken under each investment methods.

To achieve M3 and D1, you will have to represent the work in suitable formats, show all workings
and draw meaningful conclusions based on the decision criteria provided in task. (Use the
appropriate accounting and financial terminology accurately).
To achieve D2, you will show effective approach to calculations, assessments and preparation of
report.

Task 4 (LO4: 4.1, 4.2, 4.3 and D2, D3)

Task 4.1
Discuss the main objectives of financial statements (Statement of Profit or Loss and Statement of Financial
Position (Balance Sheet) and outline or show the formant, in a logical form, the information contents as set
out by the International Accounting Standards (IAS), the international accounting reporting standard setting
body.

4.2
There are different types of business organisations, for example a sole trader, partnership, private limited
company and public limited company. Each of this organisation is required to prepare financial statements
however, the contents and requirements are different.
You are required to discuss briefly the reporting requirements, and compare the main differences between
each.

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The following financial statement relates to CarmenJosh financial year ending 31 December 2011 and 2012

CarmenJosh Ltd
Statement of Profit or Loss for the year ended 31 December

2012

Purchases
Less: Costing Inventory

2,660

Turnover

Opening Inventory

2011

400

m
2,200

277

1,945
350

400
1,995

Cost of Sales

1,600

665

Gross Profit
Selling and Distribution costs

120

Administration costs

240

600
105

360

210

315

Operating Profit

305

285

Interest Charges

25

20

280

265

84

62

196

203

Profit before taxation

Taxation
Profit after taxation

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CarmenJosh Ltd
Statement of Financial Position as at 31 December

2011
m
Non-current Assets at Costs
Provision for Depreciation

2010
m

1,370
770

763
600

500

263

Current Assets:
Inventory

350

400

Accounts Receivable

200

21

26

97

576

707

Trade Payables

236

224

Short-term loans

84

62

Cash in hand/Bank

Current Liabilities:

Net Current Assets

256

421

Net Assets

856

684

Ordinary Shares issued and fully paid

500

500

Retained Profits (Reserves)

356

184

856

684

Finance by:

Required:
You are required to carry out financial performance appraisal or ratio analysis, and briefly comments on the
key performance indicators (KPIs) for 2012 and 2011 as outlined below:

PROFITABILITY RATIOS:
Gross Profit Margin (%)
Operating Profit %
Return of Capital Employed (ROCE)
LIQUIDITY RATIOS:
Current Ratio
Acid Test or (Quick) Ratio

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Working Capital Ratio

Accounts Receivable days (Accounts Collection Period)
Accounts Payable days (Accounts Payment Period)
Inventory Turnover (Average age of inventory)
Utilisation of Assets Ratio:
Selling and Distribution % (of Sales)
Administration
To achieve D2 and D3, you will produce your work in suitable business formats. Your logical and
technical analysis would also win you D3.

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Evidence
checklist

Summary of evidence required by student

Task 1

An informal report which identifies and discusses the sources of finance

available to the business, and which evaluates cost and other factors.

Task 2

An analytical report that briefs about analysing the implications of finance as a

resource within the business.

Task 3

A report that represents that helps in financial decision making based on

financial information available to owners or management.

Task 4

A briefing which helps in evaluating the financial performance of a business for

better corporate financial decisions making tactically and strategically.

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Evidence
presented

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Achievement Summary

Qualification
Unit Number and title

Criteria
Ref.
LO 1
1.1
1.2
1.3
LO 2
2.1
2.2
2.3
2.4
LO 3
3.1
3.2
3.3
LO 4
4.1
4.2
4.3

Pearson BTEC Level 4 HND

Diploma in Business
Unit 2: Managing Financial
Resources and Decisions

Assessor name

Emmanuel Adjaho

Student name

To achieve the criteria the evidence must show that the student is able to:

Achieved?
(tick)

Explore the sources of finance available to the a business:

Identify the sources of finance available to a business
Assess the implications of different sources
Evaluate appropriate sources of finance for a business project

Analyse the implications of finance as a resource within the business

Analyse the costs of different sources of finance
Explain the importance of financial planning
Assess the information needs of different decision makers
Explain the impact of finance on the financial statements
Make financial decisions based on financial information
Analyse budgets and make appropriate decisions
Explain the calculation of unit costs and make pricing decisions using relevant
information
Assess the viability of a project using investment appraisal techniques
Analyse & advice how to evaluate the financial performance of a business
Discuss the main financial statements
Compare appropriate formats of financial statements for different types of business
Interpret financial statements using appropriate ratios and comparisons, both
internal and external

Higher Grade achievements (where applicable)

Grade descriptor

M1: Identify and apply strategies to find

appropriate solutions

M2: Select/design and apply appropriate

methods/techniques

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Achieved?
(tick)

Grade descriptor

Achieved?
(tick)

D1: Use critical reflection to

evaluate own work and justify
valid conclusions
D2: Take responsibility for
managing and organising
activities

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M3: Present and communicate

appropriate findings

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D3: Demonstrate
convergent/lateral /creative
thinking

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Assignment Feedback
Formative Feedback: Assessor to Student

Action Plan

Summative feedback

Feedback: Student to Assessor

Assessor Signature

Date

Student Signature

Date

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