OPAL COLLEGE LONDON

Extended Diploma in Management & Leadership

Unit No: 13
Unit Title: Managing Financial Principles and Techniqes
!ssignment No: 1
!ssignment Title: Financial and "n#estment anal$sis
Date %et: 27
th
January 2014
De Date: 18
th
April 2014
Learning &tcomes 'o#ered:
1. Be able to apply cost concepts to the decision-making process
2. Be able to apply forecasting techniques to obtain information for decision
making
3. Be able to participate in the budgetary process of an organisation
4. Be able to recommend cost reduction and management processes for an
organisation
5. Be able to use financial appraisal techniques to make strategic investment
decisions for an organisation
. Be able to interpret financial statements for planning and decision-making.
()!D"N( &PP&)TUN"T"E% !*!"L!+LE
Outcomes/ Grade Descriptors P1,1 P1,- P1,3 P-1 P-,- P3,1 P3,- P3,3 P3,. P.,1

Outcomes/ Grade Descriptors P.,- P/,1 P/,- P/,3 P0,1 P0,- P0,3



OUTCOMES/GRADE DESCRITORS AC!IE"ED #pl$a%$ ti&'(
Outcomes/ Grade Descriptors P1,1 P1,- P1,3 P-1 P-,- P3,1 P3,- P3,3 P3,. P.,1
Outcomes/ Grade Descriptors P.,- P/,1 P/,- P/,3 P0,1 P0,- P0,3
'&MMENT%:
!ssessor: )*r%i+a ,in-%ay %ignatre: Date:
"* '&MMENT%:
"*: %ignatre: Date:
OPAL COLLEGE LONDON
Financial and "n#estment !nal$sis
!ssignment +rie1
Scenario 1
London Man1actring compan$ 2LM'3 is a pro1it ma4ing compan$, !t present5 it is prodcing
and selling a single prodct on a semi atomated machine on a mass scale and adopting 1ll cost
pls pro1it approach 6hile pricing its prodct, 7o6e#er5 it is planning to expand its 8siness and
ma4e the man1actring 1acilities as 1lexi8le man1actring 1acilities 6ith 1ll$ atomated
prodction en#ironment to meet the reqirements o1 #arios cstomers 8$ prodcing / impro#ed
prodcts o#er the existing one, Mr 9ohn :illiams5 the 'E& o1 the compan$ decides the targets and
commnicates the targets set 8$ him at the 8eginning o1 each $ear, 7is prime o8;ecti#e is pro1it
maximisation and he re#ie6s the per1ormance o1 organisation as 6ell as o1 managers at the end o1
each $ear,
2<o can choose $or o6n compan$3
+ased on the costs records5 the costs and re#enes 1or last 0 months are as 1ollo6s

Month Nm8er o1 nits 'osts
2!mont in =
>???3
)e#ene
2!mont in =
@???
9l$ 1???? 1/?? -/??
!gst 1-/?? 1A/
?
-A/?
%eptem8er 1.-/? 1B-/ -B-/
&cto8er 1C??? -3?? 33??
No#em8er -1/?? -0/? 30/?
Decem8er -.3?? -B3? 3B3?
The 8dgeted per1ormance and actal per1ormance 1or the last $ear 8ased on 1inancial records are
as 1ollo6s
Details +dgets !ctal
%ales qantities 3????? -.????
%ales re#ene = 3,/ mill = 3,?? mill
Material cost = 1,- mill = 1,1? mill
La8or cost = ?,C? mill = ?,0? mill
&ther direct costs = ?,1? mill = ?,?C mill
Fixed prodction costs = ?,/? mill = ?,/? mill
Fixed on prodction costs = ?,-/ mill = ?,3? mill
&n condcting research it identi1ied t6o alternati#e in#estment a#enes as detailed 8elo6 1or its
expanded 8siness
OPAL COLLEGE LONDON
!lternati#e 1 !lternati#e -
"n#estment amont =1 million
Disposal proceeds =-?????
Demand 2in nits3 1
st
$r /????? -
nd
$r 0?????
3
rd
$r C?????
The initial in#estment 6ill 8e made on the 1irst
da$ o1 the ne6 acconting $ear
The selling price per nit is expected to 8e =3
and the #aria8le cost is =- per nit, +oth these
1igres are gi#en in toda$>s terms
Tax paid at 3?D one $ear a1ter the acconting
period concerned
Tax depreciation is at -/D on redcing
8alance
The real cost o1 capital is CD and the general
in1lation is /D, 7o6e#er5 the selling price is
expected to in1late at 3D and #aria8le costs 8$
/D P!
"n#estment amont = 1 million
Disposal proceeds = 1?????
Demand 2in nits 3 1
st
$r -????? -
nd
$r -/????
3
rd
$r 3?????
The initial in#estment 6ill 8e made on the 1irst
da$ o1 the ne6 acconting $ear
The selling price per nit is expected to 8e =/
and the #aria8le cost is =3 per nit, +oth these
1igres are gi#en in toda$>s terms,
Tax paid at 3?D one $ear a1ter the acconting
period concerned
Tax depreciation is at .?D on redcing
8alance
The real cost o1 capital is 1?D and the general
in1lation is /D, 7o6e#er5 the selling price is
expected to in1late at -D and #aria8le costs 8$
3D
Scenario 2
The smmarised 1inancial statements o1 three di11erent companies 1or the $ear 31
st
Decem8er -?13
is as 1ollo6s
%mmarised statement o1 1inancial positions as on 31
st
Decem8er -?13
Particlars London
Man1actring
co
31
st
Decem8er
-?13
= >???
Leeds Trading
co,
31
st
Decem8er
-?13
= >???
&x1ord Exports
Ltd,
31
st
Decem8er
-?13
= >???
NonEcrrent assets less depreciation
'rrent assets
"n#entor$
)ecei#a8les
'ash
Total assets
Eqit$ and lia8ilities
.??
/??
1??
--??
1???
3-??
3/?
.??
/?
1C??
C??
-0??
1???
1/??
/??
/???
3???
C???
OPAL COLLEGE LONDON
%hare capital
&rdinar$ share capital 21= each3
Pre1erence shares 21?D3 21= each 3
)eser#es
NonEcrrent lia8ilities
Loan notes 1?D secred
'rrent lia8ilities
Pa$a8les
'orporate tax
Di#idends
Total eqit$ and lia8ilities
.??
1??
1??
1???
-??
C??
-???
0??
0??
3-??
/??
/?
/?
1???
-??
3??
1/??
/??
0??
-0??
C??
0??
1??
1???
3???
1???
/???
1/??
1/??
C???
%mmarised income statement 1or the $ear ended 31
st
Decem8er -?13
Particlars
London
Man1actring 'o,
31
st
Decem8er -?13
= >???
Leeds Trading 'o,
31
st
Decem8er
-?13
= @???
&x1ord Exports
Ltd,
31
st
Decem8er
-?13
= @???
)e#ene
'ost o1 sales
(ross pro1it
&perating expenses
&perating pro1it
"nterest
Pro1it 8e1ore tax
Taxation
Pro1it a1ter taxation
&rdinar$ di#idend proposed
and paid
Pre1erence di#idend
)etained pro1it 1or the $ear
Foted price o1 share
3???
2-???3
1???
20??3
.??
20?3
3.?
21C?3
10?
1-/

-?
1/
1,.?
-/??
21C??3
A??
2/??3
-??
2.?3
10?
21??3
0?
-?

-?
-?
1,--
C???
20/??3
1/??
21???3
/??
2 1??3
.??
2-??3
-??
-?

1??
C?
?,C?
Ttor Notes
.*ur a%%i/n+$nt %h*ul- 0$ han-$- in 0y th$ -$a-lin$1
Thi% a%%i/n+$nt +u%t 0$ y*ur *2n 2*r' an- *ri/inal1
!ll sorces o1 re1erence mst 8e inclded 1
OPAL COLLEGE LONDON
.*u 2ill 0$ $3p$&t$- t* &h$&' %p$llin/ +i%ta'$% an- /ra++ar1
.*ur na+$4 %tu-$nt n* an- unit n* %h*ul- 0$ in th$ 5**t$r *5 $6$ry pa/$1
.*ur an%2$r +u%t 0$ in r$p*rt 5*r+at
All r$l$6ant 2*r'in/ +u%t 0$ %h*2n &l$arly
Tas4s
Suppose that you, as a finance manager in a business organisation called London
Manufacturing co,. Your tasks are, therefore, going to be as follow.
Task 1
!n this first task" you need to apply cost concepts to the decision-making process based on
scenario 1. #o do that" you need to$
1.1 %&plain the importance of costs in the pricing strategy of an organisation 'not more
than (( )ords*
1.2 +esign a costing system for use )ithin an organisation
1.3 ,ropose improvements to the costing and pricing systems used by an organisation
'not more than 4(( )ords*
Tas4 1 co#ers assessment criteria 1,15 1,-5 1,3
Task 2
!n this second task" you need to apply forecasting techniques to obtain information for
decision-making based on scenario 1. #o do that" you need to$
2.1 -pply forecasting techniques to make cost and revenue decisions in an organisation
2.2 -ssess the sources of funds available to an organisation for a specific pro.ect 'not
e&ceeding 1((( )ords*
Tas4 - co#ers assessment criteria -,15 -,-
Tas4 3
!n this third task" you need to participate in the budgetary process of an organisation
based on scenario 1. #o do that" you need to
3.1 /elect appropriate budgetary targets for an organisation
3.2 ,articipate in the creation of a master budget for an organisation
3.3 0ompare actual e&penditure and income to the master budget of an organisation
3.4 %valuate budgetary monitoring processes in an organisation
Tas4 3 co#ers assessment criteria 3,15 3,-5 3,35 3,.
OPAL COLLEGE LONDON
Tas4 .
!n this fourth task" you need to recommend cost reduction and management processes for
an organisation based on scenario 1. #o do that" you need to
4.1 1ecommend processes that could manage cost reduction in an organisation 'not more
than 5(( )ords*
4.2 %valuate the potential for the use of activity-based costing
Tas4 . co#ers assessment criteria .,15 .,-
Tas4 /
In this fifth task, you need to be able to use financial appraisal techniques to make strategic
investment decisions for an organisation based on scenario 1. To do that, you need to:
5.1-pply financial appraisal methods to analyse competing investment pro.ects in the
public and private sector
5.22ake a .ustified strategic investment decision for an organisation using relevant
financial information
5.31eport on the appropriateness of a strategic investment decision using information
from a post audit appraisal 'not more than 5(( )ords*
Tas4 / co#ers assessment criteria /,15 /,-5 /,3
Tas4 0
In the sixth task, you need to be able to interpret financial statements for planning and
decision making based on scenario 2 . To do that, you need to:
.1 -nalyse financial statements to assess the financial viability of an organisation
.2 -pply financial ratios to improve the quality of financial information in an
organisation3s financial statements
.3 2ake recommendations on the strategic portfolio of an organisation based on its
financial information (not more than 300 words)
Tas4 co#ers assessment criteria 0,15 0,- and 0,3
'riteria 1or P!%%
Learning outcomes Assessment criteria
1 Be able to apply cost concepts to the
decision-making process
1.1 e&plain the importance of costs in the
pricing strategy of an organisation
1.2 design a costing system for use )ithin an
organisation
1.3 propose improvements to the costing and
pricing systems used by an organisation
2. Be able to apply forecasting
techniques to obtain information for
decision making
2.1 apply forecasting techniques to make cost
and revenue decisions in an organisation
2.2 assess the sources of funds available to an
organisation for a specific pro.ect
3 Be able to participate in the 3.1 select appropriate budgetary targets for an
OPAL COLLEGE LONDON
budgetary process of an organisation organisation
3.2 participate in the creation of a master
budget for an organisation
3.3 compare actual e&penditure and income to
the master budget of an organisation
3.4 evaluate budgetary monitoring processes in
an organisation
4 Be able to recommend cost reduction
and management processes for an
organisation
4.1 recommend processes that could manage
cost reduction in an organisation
4.2 evaluate the potential for the use of
activity-based costing
5 Be able to use financial appraisal
techniques to make strategic
investment decisions for an
organisation
5.1 apply financial appraisal methods to
analyse competing investment pro.ects in the
public and private sector
5.2 make a .ustified strategic investment
decision for an organisation using relevant
financial information
5.3 report on the appropriateness of a strategic
investment decision using information from a
post audit appraisal
Be able to interpret financial
statements for planning and decision
making
.1 analyse financial statements to assess the
financial viability of an organisation
.2 apply financial ratios to improve the quality
of financial information in an organisation3s
financial statements
.3 make recommendations on the strategic
portfolio of an organisation based on its
financial information