Finance Management Assignment: Calculation of Ratios & Break Even Point

Learning Outcomes:

After completing the module, you should be able to:

1. Contrast the appropriateness of the different sources of finance to a business.
2. Explain the implications of finance as a resource within a business.
3. Produce simple financial statements in accordance with accepted principles.
4. Use financial information for decision making purposes.
5. Demonstrate a confident use of the financial terminology and conventions in communicating results.

Your assignment should include: a title page containing your student number, the module name, the submission deadline and a word count; the appendices if relevant; and a reference list in Arden University (AU) Harvard format. You should address all the elements of the assignment task listed below. Please note that tutors will use the assessment criteria set out below in assessing your work.

Question 1

Required

a) Calculate for the financial year ended 31 March 2019 and, where possible, for 31 March 2018, the following ratios:
i) Gross profit margin
ii) Assets usage
iii) Current ratio
iv) Acid test
v) Inventories holding period
vi) Debt to Equity ratio

b) Critically explain the importance of considering the audience for financial statement analysis

Question 2

Required:

(a) Prepare an opening statement of financial position at the start of July 20X5. (5 marks)

(b) Prepare a monthly cash flow forecast, showing the bank balance at the end of each of the 6 months and indicating what level of overdraft facilities the friends need to negotiate with their bank manager.(18 marks)

(c) Explain what additional expense they should take into account as a result of needing the financial assistance (overdraft) referred to in (b).

Question 3

Required:

(a) Calculate the breakeven point in units and sales revenue for the year ended 31 March 2019 and the year ended 31 March 2020.(9 marks)

(b) Calculate the margin of safety in units and sales revenue for the year ended 31 March 2019 and the year ended 31 March 2020. (6 marks)

(c) Critically discuss the new strategy developed by Jessica. Use the results of your calculations in parts (a) and (b) to develop your response.

Question 4

Required:

(a) Calculate the payback period, accounting rate of return and net present value of each of the potential projects. (15 marks)

(b) Explain which of the three potential investment projects should be undertaken. Your explanation should be based on the results of your calculations in part (a). (3 marks)

(c) Critically discuss the approaches to investment appraisal used in part (a). As part of your critical evaluation, identify what additional information might be used to improve the approach to investment appraisal.