Management Accounting Coursework: Financial Performance and Cash Forecast Analysis

Analysis 1: Financial Performance of a Competitor - Binn Group Ltd

Coursework brief

You are one of the management accountants working for a company based in the North-East of Scotland, renowned for efficient and clean waste management and recycling processes:  Recycl-able.   

The Board of Directors – although relatively happy with the current performance and positioning of the company – has requested a series of analysis work to be performed, to enable them to consider the future of the Company in what is a fast-moving and growing Industry.   

The Finance Director has asked you to perform four different pieces of analysis as follows:

1. Financial performance analysis of a competitor
2. Five-year cash flow forecast including sensitivity analysis
3. Decision making analysis to decide whether to outsource some work
4. Investment appraisal analysis to consider a new site in the West of Scotland.  

Although four distinct pieces of work, the Finance Director has asked you to submit one report as it is likely that it will be sent straight to the Board. You therefore need to ensure your report maintains some consistency and has one Executive Summary and one Conclusion.   

The four pieces of analysis should be approximately 875 words each and carry equal weighting for grading purposes.  The calculations and discussion responses required for each analysis also carry equal weighting.

Analysis 1

Financial performance of a competitor – Binn Group Ltd

Binn Group Limited are one of Recycl-able’s closest competitors and the business has made quite a few changes in the past years.  The Board is keen to understand a bit more about their financial performance.

Using the relevant extracts from the Group’s accounts (included in Appendix A) you should discuss the financial performance of Binn Group - using financial ratios - and compare to that of Recycl-able (ratios below).  You should base your discussion on a minimum of 8 financial ratios, making sure you include at least one from the following four ratio categories: Profitability, Efficiency, Liquidity and Gearing.   

In addition, the Board would like you to discuss the benefits and limitations of using financial ratios to analyse performance, ensuring you include reference to the two companies.

Recycl-able Ratio Analysis (2020): 

Analysis 2

Five-year cash forecast and sensitivity analysis

As noted previously, the Board of Directors for Recycl-able are comfortable with the current position of the company.  However, they are mindful of the dynamic nature of the industry and the likely growth in both business and competition in the next few years.  The Finance Director has asked you to produce a cashflow forecast for the next five years – based on the assumptions on the next page - and report the closing cash balance at the end of each of the five years.   

In addition, the Board would like to understand what happens to the cash balance if the following were to take place:

1. Estimated growth for Household Recycling and Industrial Recycling was 5% year on year  
2. Estimated growth for Household Recycling and Industrial Recycling was 7% year on year rather than the projections included in the assumptions.
3. One other scenario aspect that you might consider to be worthy of investigating.  

Finally, the Directors would like you to explain the advantages and limitations of the Incremental Budgeting approach used.  In addition, they would like to understand if there is a different technique that could be used and what the benefits and disadvantages of this might be to the business.