Assignment front sheet Brit College
Qualification Unit number and title
Edexcel/BTEC Level 4 Higher National Diploma in
Unit 2: Managing Financial Resources and Decision
Student name Assessor name
Date issued Completion date Submitted on
Assignment title CarmenJosh Ltd: New Business Opportunities in Europe and Africa
1 | P a g e B r i t C o l l e g e C o p y r i g h t
4.2 Compare appropriate formats of financial statements for different types of business 4
4.3 Interpret financial statements using appropriate ratios and comparisons, both internal and external
I certify that the work submitted for this assignment is my own and that research sources are fully acknowledged.
Student signature: Date:
In addition to the PASS criteria mentioned above, this assignment gives you the opportunity to submit evidence i n 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 organization’s 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)
M3 Present and communicate appropriate findings ? Communication is appropriate for familiar and unfamiliar audiences and appropriate media have been used.
? A range of methods of calculations and presentation have been used and technical language has been accurately used.
? The appropriate structure and approach has been used 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)
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 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)
D2 Take responsibility for managing and organising activities ? Substantial activities, projects or investigations have been planned, managed and organised
? Activities have been managed. 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)
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.
3 | P a g e B r i t C o l l e g e C o p y r i g h t
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
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
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 company’s 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)
Tasks (LO1: 1.1, 1.2, 1.3 and Grades: M1, M2)
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)
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).
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.
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
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 month’s overdraft balance (if any). The interest is to be rounded to the nearest £.
¦ As at 1 November the balance of the bank’s current showed an overdraft of £10,000.
(Note: Cash inflows should be entered as positive figures and cash outflows as negative figures.)
November 2014 December 2014 January 2015 February 2015 March 2015 April
£ £ £ £ £ £
Credit sales 80,000 125,000 105,00 96,500 145,000 155,00
Cash sales 15,200 34,00 19.800 17,900 22,750 26,500
Credit purchase 105,000 88,500 145,000 100,000 55,000 185,000
Cash purchases 20,000 14,500 13,000 20,200 9,500 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. An allowance of £950 is made for staff canteen, which is paid monthly.
v. 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.
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 company’s popular products, USB 2.
Product USB 2
Direct Costs per USB2 : £
Direct Material 25.00
Direct Labour 15.00
Direct Expenses 5.00
Total Variable costs 45.00
Fixed overheads 10.00
The company’s 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%?
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
Initial cost or investment) (cash outflow) at the 2016* 80 100 beginning year
Cash inflows 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 company’s 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.
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)
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.
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.
The following financial statement relates to CarmenJosh financial year ending 31 December 2011 and 2012
Statement of Profit or Loss for the year ended 31 December
£m £m £m £m
Turnover 2,660 2,200
Opening Inventory 400 277
Less: Costing Inventory 350 400
Cost of Sales 1,995 1,600
Gross Profit 665 600
Selling and Distribution costs 120 105
Administration costs 240 360 210 315
Operating Profit 305 285
Interest Charges 25 20
Profit before taxation 280 265
Taxation 84 62
Profit after taxation
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)
To achieve D2 and D3, you will produce your work in suitable business formats. Your logical and technical analysis would also win you D3.
Evidence checklist Summary of evidence required by student Evidence presented
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.
Qualification Pearson BTEC Level 4 HND Diploma in Business
Assessor name Emmanuel Adjaho
Unit Number and title Unit 2: Managing Financial Resources and Decisions
Criteria Ref. To achieve the criteria the evidence must show that the student is able to: Achieved?
LO 1 Explore the sources of finance available to the 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
LO 2 Analyse the implications of finance as a resource within the business
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
2.4 Explain the impact of finance on the financial statements
LO 3 Make financial decisions based on financial information
3.1 Analyse budgets and make appropriate decisions
3.2 Explain the calculation of unit costs and make pricing decisions using relevant information
3.3 Assess the viability of a project using investment appraisal techniques
LO 4 Analyse & advice how to evaluate the financial performance of a business
4.1 Discuss the main financial statements
4.2 Compare appropriate formats of financial statements for different types of business
4.3 Interpret financial statements using appropriate ratios and comparisons, both internal and external
Higher Grade achievements (where applicable)
M1: Identify and apply strategies to find appropriate solutions
D1: Use critical reflection to evaluate own work and justify valid conclusions
M2: Select/design and apply appropriate methods/techniques
D2: Take responsibility for
managing and organising activities
M3: Present and communicate appropriate findings
convergent/lateral /creative thinking
Formative Feedback: Assessor to Student
Feedback: Student to Assessor