• September 7, 2016
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Unit 2 Managing Financial Resources and Decisions Assignment

This is a solution of Unit 2 Managing Financial Resources and Decisions Assignment  that describes about Developing business

# Unit 2 Managing Financial Resources and Decisions Assignment

(LO2: AC 2.1, 2.2, 2.3, 2.4) Understand the implications of finance as a resource within a business.

2.1 Analyse the costs of different sources of finance to a business like Freddy Patel.  [AC2.1]

2.2 Explain the importance of financial planning to a business like Freddy Patel.  [AC2.2]

2.3 Assess the information needs of different decision makers like Freddy Patel. [AC2.1]

2.4 Explain the impact of finance on the financial statements to a business like Freddy Patel. [AC2.1]

LO3    Be able to make financial decisions based on financial information [AC 3.2]

3.2 Explain the calculation of unit costs and make pricing decisions using relevant information [A3.2]

Using the data in the scenario, complete the following tasks:

1. Prepare the following monthly budgets on behalf of Freddy, for the first 12 months; a sales budget, a production budget and a detailed cash budget, which shows each month’s net flow. These budgets must be prepared and presented using a spreadsheet. [A1.2, A2.2]  Read more : Newcastle University Assignment Help

2. Prepare revised independent cash flow budgets in the light of the following eventualities:

[a]        Worst case scenario –  Overdraft interest rates rise to 4% per month

[b]        Best case scenario –     Overdraft interest rates fall to 1% per month.

3.  Produce a computer generated line graph for each of your budgets above which shows the cash balance at the end of each month. Write a brief interpretation of each graph. [A1.2, A2.2]

4. Based on Freddy’s original budget, prepare a spreadsheet showing a budgeted Profit and loss account and a balance sheet. N.B. closing stock is to be valued on the basis of the cost of the materials. [AC2.1, A2.4]

5. Freddy is confused about pricing and requires a cost calculation showing the minimum price he could charge per jacket. Say why this information is important. [AC3.1].

6. On the basis of the original cash flow [as in task 1] and profit and loss account and balance sheet budgets [as in task 4] you have prepared, assess the strengths and weaknesses of Freddy’s business plans. Explain any problems that may lay ahead and make recommendations about how these problems might be tackled.

You must also explain the advantages of preparing such budgets on a spreadsheet. Explain further why a potential lender may require the preparation of such budgets. [AC2.3, AC3.1].

7.  Explain the difference between profit and cash flow. [AC2.4].

Task 3: (LO3: AC 3.1, 3.2. 3.3): Be able to make financial decisions making  based on financial information

Freddy is considering investing in a labour saving machine. The associated costs and savings associated with this machine is given below. You are required to use 2 investment appraisal techniques and to assess the viability of the machine. You are to explain the significance of your findings.

Data :

Machine 1 – This machine will have an immediate cost of £10,000, it will last 4 years and result in a labour saving cost of £3,000 per annum. The cost of capital is assumed to be 10%.

3.1 Analyse budgets and make appropriate decisions [AC3.1]

3.3 Assess the viability of a project using investment appraisal techniques [AC3.3]

Task 4: (LO4: AC 4.1, 4.2, 4.3): Be able to evaluate the financial performance of a business

Assignment – Part B

Scenario for part B:

You are required to carry out  research by using supportive materials like books, websites, annual reports, etc., to interpret the financial statements of WM Morrison Supermarkets PLC using appropriate ratios and other data such as is  given below and to compare its financial personal performance with that of J Sainsbury PLC for year 2014 and 2015. Furthermore, provide a summary of how their performance compares with the budgeted performance of Freddy Patel.
Turnover (£mil)
Profit (Loss) before Taxation Return on Shareholders’ Funds %
Gross margin
Profit Margin
Berry ratio
Return on Capital Employed

Asset Turnover
Current ratio Acid test Ratio
Stock Turnover
Debtor Collection Days
Creditors Payment Days

Gearing Ratio
Interest Cover
Earnings per share
Dividends per share
Market capitalisation (£mil)

PE Ratio
Total Assets
Working Capital
Shareholders Funds

Task 1   Based on the annual reports and the ratios above assess the comparative performance of WM Morrison Supermarkets PLC and J Sainsbury PLC for year 2014 and 2015. Briefly, state how the budgeted performance of Freddy Patel compares with these two companies. [AC4.1, AC4.3]

Task 2 – Compare the final accounts format for the PLC’s above with that of Freddy Patel Sole Trader. Explain the differences and explain why the formats differ.

[AC4.2].

4.1 Discuss the main financial statements [AC4.1]

4.2 Compare appropriate formats of financial statements for different types of business. [AC 4.2]

4.3 Interpret financial statements using appropriate ratios and comparisons, both internal and external. [AC 4.3]

Merit Descriptors:

M1: Identify and apply appropriate strategies to generate solution. Your answers for the tasks should reflect an effective approach to examine and research project by using variety of sources. For example, you explain, analyse and apply various investment appraisal techniques to assess the viability of a project.

M2: You will have used appropriate techniques and methods to analyse the information collected and presented in all assignment tasks. For example, you presented a number of budgets and analysed them to justify your observations

M3: You will have used appropriate communication, structure and approach, concepts and findings are presented in a logical and professional way for all tasks.

## Distinction Descriptors

D1: You will have arrived at justified conclusion through synthesis of information gathered from diverse but relevant sources. Critical reflection has been demonstrated while presenting your arguments in the context of given organisation for all answers.

D2: While responding your answers you have planned and organised substantial activities well, good research/investigation undertaken for the all tasks.

E.g. The differences in accounting formats are evaluated well.

D3:  You have demonstrated critical evaluation skills as well as innovative and creative thoughts are applied while responding different tasks.

E.g. different financial statements are analysed and explained via the use of accounting ratios.

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