Managing Financial Resources and Decisions. Assignment guidance.
Task 1
i)The i learn material contains quite a lot of material on sources of finance and further information is readily available on the internet and in introductory finance textbooks. For this question it would be appropriate to focus mainly if not entirely upon sources of long term finance, though a medium term source could also be added. I think I would recommend a table with three columns, headed cost, advantages and disadvantages respectively. Do not try and put numbers on the costs you identify, instead simply describe them e.g. dividends to shareholders are payable if you raise shares (equity finance). Obviously costs are likely to be referred to as well in the disadvantages column – and possible even the advantages column. Where you can try and say a bit more about costs when you identify them as advantages or disadvantages e.g. dividends do not have to be paid out every year.
ii)Your recommendation ought to make reference to points that appear in the table
at i) when you give the reasons for your recommendation. You can of course
recommend using more than one source. You may like to suggest any additional
information you would have liked that might have made your recommendation
easier.
Task 2
i)It should be quite straightforward to identify the immediate impact of this funding decision on the Statement of Financial Position and to put some numbers on those simple effects. I don’t expect you to identify more than one effect on the Statement of Comprehensive Income and you are not to put a number on that but to just describe it in words.
ii)The weighted average cost of capital (WACC) is covered in the i learn material and also on the internet and in good finance related textbooks. Remember that you need to include a formula – which you should explain – as well as explaining the concept of WACC more generally.
Overall do not be surprised if answers to this task are quite short.
Task 3
i)Payback and Net Present Value are dealt with in the i learn material and also in the course e book – Edexcel BTEC Business Study Guide. You can find relevant material on pages 160-162, 165-168, 200-203 and 204-213. These passages, particularly the later ones, will contain some repetition and more information than you need. However, if you feel you need it, more information is available on the internet and in other textbooks. I suggest that, as well as carrying out the required calculations, you briefly explain/introduce the techniques of Payback and Net Present Value.
ii)Clearly your recommendation should follow directly from the calculations you made in i) above.
iii)Unit costs are also known as average costs. One of the learningoutcomes is to be able to explain how unit costs are calculated. I suggest you use an example as part of your explanation. If you are unsure of the concept, putting the terms ‘unit cost’ or ‘average cost’ into a search engine should help.
iv)You may want to do a bit of research on this question. The section on pricing in the textbook ( starting on page 353 ) is quite brief; if you do not have access to other good textbooks you will find a lot of potentially useful material on the internet. Also I need to point out that on page 353 the textbook says that with elastic products the lower the price the more units are sold. This is unfortunately rather misleading; for all normal goods- whether elastic or inelastic- as price falls the amount bought increases. It is just that for a given price fall, an elastic good sees its amount bought rise by a bigger % than the % by which the price fell by, while an inelastic good will see the amount bought rise by smaller %. Thought I’d just point that out
Task 4
i)When answering this question try to go into quite a lot of detail e.g. describe how individual items, particularly important ones have behaved over time. Also try and communicate what messages such an analysis of trends justifies being given to managers.
ii)For this question remember that such groups may exist both inside and outside the organisation
iii)These issues are dealt with quite well in i learn and are very much connected to the effective management of working capital.
iv)Answers to this question will cover good practice in the management of working capital; it would be good to write something about each element of working capital.
Answers to this task overall may be relatively long.
Task 5
i)You can read about profitability ratios on pages 137-138 and pages 314-317 of the course textbook. Liquidity ratios are covered on pages 140-141 and 313-314. You are likely to find some repetition on each group of ratios. I suggest that you use 2 profitability and 2 liquidity ratios in your answer. You simply need to state the formula for each ratio you intend to use and briefly explain what it shows. You can then ‘plug’ the relevant numbers in from Petrula’s financial statements for each of the 2 years shown. You should then seek to explain what your ratios show, including how things have changed over the two year period.
ii)This is really asking you how the different financial statements – mainly Statements of Financial Position- get presented differently by sole traders, partnerships and limited companies. We have recently moved to a new textbook- the e book - which does not deal well with this issue to be honest. I will post some relevant materials for you onI learn.