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BIRMINGHAM CITY BUSINESS SCHOOL
COURSEWORK FRONT SHEET
MODULE TITLE : Managerial Finance
MODULE CODE: ACC7032
LECTURER: Amerdeep Jakhu (ML)
ISSUE DATE: 25 th January 2021
HAND IN DATE: 5th May 2021 at 12.00pm (midday)
HAND BACK DATE: 8th June 2021
Learning outcomes and pass attainment level:
? Evaluate the different competing financial objectives of the firm and the agency
problem between shareholders and managers in publicly listed companies.
? Demonstrate the ability to analyse financial data, conduct cost-benefit analysis and
financial planning for effective business decisions using spreadsheet software
? Critically evaluate investment projects using appropriate investment appraisal
techniques to assess suitability and viability of the projects consistent with the
overall strategy and business model(s) of the firm.
? Critically appraise the major issues of capital management, relative advantages
and disadvantages from the various perspectives of the stakeholders of the firm.
The assessment for this unit is one coursework assignment. The required mark has been set
at 50%. Ifyou are attempting afirst or second re-sit attempt your pass mark will be capped
This is an individual assessment. Whilst there is no objection to you discussing the content
of this assignment with your peers, your final submission must be completely your own work.
Plagiarism and copying will not be tolerated and may lead to subsequent penalties
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being imposed. This is an individual assignment and all calculations, analysis and narrative
submitted must be your own work.
The assignment will require aconsiderable personal investment of time and effort.
Structure of the assignment
There are three separate questions included within the assignment and you should attempt
all three questions. There is no word limit to questions. If any part of the assignment is
ignored this reduces the maximum marks which could potentially be awarded. The
assignment answer should be carefully checked before submission for the use of
appropriate and acceptable grammar. The correct use of English spelling is to be employed
All the numbers should be reported in 2decimal points.
Submission of the assignment
All three questions must be attempted and submitted in one document. You are advised to
prepare your assignment in Word format and copy and paste contents from Excel where
spreadsheets have been used to support your work. Only Microsoft Word file will be
allowed for submission.
Your student ID number should be shown on each page of your assignment.
Your assignment should be submitted electronically via Moodle and you are advised to do
this well in advance of the submission deadline to avoid any system related issues.
Feedback on your assignment will also be provided via Moodle once the marking has been
Marking of the assignment
The matrix on the following page has been provided to assist you in completing your
assignment and is an indicative guide only, not aformal marking scheme.
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Indicative marking guide
Question 1: LO1 (40%)
A lack of breadth and depth of
financial analysis techniques
accompanied by incorrect formulae
or calculation without appropriate
Poor layout or presentation in
anything other than business report
style. Inadequate grammar and
lacking in overall knowledgeable
Evidence of some financial analysis
techniques but with errors of
formulae and calculation with
insufficient explanation and
Attempt at abusiness report format
with some supportive appendices.
Mainly descriptive with some attempt
at synthesis. Grammar and structure
Wide range of financial analysis
techniques evident and supported by
full disclosure of formulae and
accurate calculation in aclear format.
Presented in business report format
and coherently structured. Supported
by referenced appendices. Effective
and well-reasoned narrative
An excellent range of financial analysis
techniques which are supported by full
disclosure of formulae and accurate
calculation in aclear format.
Excellent business report format and
well structured. Supported by fully
referenced appendices. Excellent
analytical and justified explanations
showing synthesis and application.
Question 2and 3LO2, LO3 and LO4 (60%)
A lack of understanding of
management accounting and
decision making. Unable to produce
the correct format and calculations.
Limited or no narrative discussion or
recommendations and conclusions.
Poor academic writing and
Ability to apply some management
accounting decision making
techniques. Demonstrates an
adequate understanding of the
principles and techniques involved.
Reasonable attempt at analysis and
discussion of findings, though of
A good application of management
accounting for decision making.
Demonstrates agood understanding
of the principles and techniques
involved. Good analysis and
discussion of findings, with good use
of academic references which support
clear and well explained conclusions.
Excellent application and understanding
of management accounting for decision
making. Thorough and detailed critical
discussion with excellent use of arange
of academic references which support
clear, practical, and well explained
recommendations and conclusions.
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Unity Holdings Plc has aportfolio of investments in subsidiary companies and is seeking another
acquisition that complements the others.
The subsidiary companies already in the group include: machinery and commercial vehicle
dealership; finance company; equipment leasing company; haulage company with afleet of 150
heavy goods vehicles (HGV), and achain of value hotels across the UK, one of which is making a
Two possible acquisition targets have been identified:
VANTAGE Ltd is based in leased converted hotels and provides care services for young people
unable to be cared for in the foster system. Unity Holdings Plc are looking into the possibility of
converting their failing hotel into aprovider of care services and VANTAGE is looking for another
property to continue expanding around the UK;
DUNHOP Ltd has alarge yard and caters for the storage and repair of up to 50 commercial vehicles
at one time, and has the potential for more space as itis based in alarge empty industrial area.
DUNHOP is looking for acontract with afleet operator to stabilise their income and growth.
Extracts from the financial statements of both target companies are shown below:
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The ratio analysis below is in 4 categories (Profitability, Management Efficiency, Liquidity and
Gearing), and needs completing:
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1.1 Prepare abusiness report, maximum 2pages lon g(approximately 400 words) with an
appendix for your ratio analysis.
Itis to be addressed to the board of directors of Unity Holdings Plc.
You must evaluate the financial statements, interpret the ratio analysis and make aconvincing
argument for investment in one of the two target companies.
Your report should be supported with academic references throughout, and your ratio analysis
should be put in an appendix to the report.
(400 words, 30 marks)
1.2 Critically evaluate the working capital management (WCM) of both companies using academic
references and draw conclusions on which is stronger. (200 words, 5marks)
1.3 Create atable that lists the advantages and disadvantages of all the finance options available
to Unity Holdings Plc. Explain, with references, the source of finance you recommend as most
suitable way to finance the investment in either VANTAGE Ltd or DUNHOP Ltd.
(200 words, 5marks)
Question 1total 800 words, 40 marks
Carefully examine the marking guide below to ensure that you structure your answer to include
Mark allocation RATIO
INTERPRETATION OTHER TOTAL
Profitability 4 3 7
Management efficiency 4 3 7
Liquidity 2 3 5
Gearing 2 3 5
Conclusion & recommendation 2 2
Credible academic citations 2 2
Layout, structure and grammar 2 2
Q1.2 Working Capital Management 5 5
Q1.3 Sources of finance 5 5
Total 12 12 16 40
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The company manufactures three products code named: Alpha, Beta and Gamma. The maximum
market demand and resource requirements of each of these products are shown below:
The company's products are unique, exclusively made from arecently patented advanced material
that can only be sourced from one supplier.
The purchasing manager has informed you that the maximum supply of this special material is
limited to 65,000kg. There is no stock held in reserve because itimmediately uses all of the material
exclusively supplied by the patent holder.
Without sanction from the board, the sales director has accepted an order for 50,000 Gamma that, if
not fulfilled, would incur afinancial penalty of Â£25,000. This order is included in the maximum
market demand figure.
The directors need to know whether they should go ahead and satisfy the contract and then
prioritise production in the normal way or whether itshould consider breaching the contract and
incurring the penalty.
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2.1. Prepare amarginal cost card showing selling price, variable costs, and contribution
per unit for each product. (3 marks)
2.2. Calculate the break-even point (BEP) for each product (3 marks)
2.2.1. Using your calculations of the Break Even Point (BEP) for each product
create aCVP chart that shows the BEP graphically. (3 marks)
2.2.2. Using your calculations and graphs of the BEP for each product
comment on the Director's concern about the level of demand and
operational gearing levels for each product. (2 marks)
2.2.3. The fixed overheads are apportioned based on the floor space used by
each relevant product team, do you have any suggestions that will
reduce operational gearing and improve profitability? (2 marks)
2.2.4. Why is itimportant to tightly control overheads and work to keep
operational gearing as low as possible? (3 marks)
2.3. Calculate the contribution per kg of scarce resource and give a ranking to each
product (the first has the highest contribution per kg). (3 marks)
2.4. Prepare a budgeted production schedule and a marginal cost income statement
(analysed by product) for 2021 assuming that the Gamma contract is honoured.
2.5. Prepare budgeted production schedule and a marginal cost income statement
(analysed by product) for 2021 assuming that the Gamma contract is not honoured.
2.6. Advise the company, with brief justification, whether to honour the Gamma contract
or not based on your analysis. (1 mark)
Question 2 total 600 words/equivalent, 30 marks
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As aUnity Holdings Plc junior manager, you have been asked for your annotated calculations and
recommendation regarding adecision whether to lease or buy new premises.
The option to buy
The costs of buying include Â£1,950,000 for the freehold land, building costs of Â£2,612,500, and
Â£268,100 for fittings and equipment. At the end of the fifth year the property is expected to be worth
The option to lease
The building to be leased requires refurbishment that will cost Â£500,000 and fixtures and fittings will
cost Â£283,000. The terms of the 5year lease are Â£50,000 per month.
Comply with company policies
Any decision should be based on the results of calculating Net Present Value (NPV) of 5years of
cash flows using acost of capital of 10%, Payback Period (PBP) must be less than 3years, and the
Internal Rate of Return (IRR) of the project should provide asignificant cushion in case of increases
in inflation or interest rates that the directors are concerned are unpredictable.
The cash flows
Both options will use the same cash flows. Year 1sales revenue is expected to be Â£7,150,000; the
cost of core products are Â£2,370,000; ancillary stock purchases Â£1,250,860; staff costs Â£1,138,020;
light & heat Â£368,720; other overheads Â£604,240. The cash flows for years 2to 5are the same, but
are expected to increase by 2% inflation each year.
Requirements for Question 3
Using the information above and in accord with the above stated company policy you are
required to calculate the following for both options:
i. Net Present Value (NPV)
Property lease option 5marks
Property purchase option 5marks
ii. Payback period (PBP) and Discounted Payback Period (DPBP) 8marks
iii. Internal Rate of Return 2marks
iv. Based on your calculations for each of the above state which option you recommend?
v. Critically discuss the limitations of the above project appraisal techniques. 5marks
Question 3total 600 words/equivalent, 30 marks
COURSEWORK TOTAL MARKS: 100