ACC7032-Managerial Finance Analysis – Accounting & Finance Assignment Help

Assignment Task

Task 

Learning outcomes and pass attainment level:

• Critically appraise the major issues of capital management, relative advantagesand disadvantages from the various perspectives of the stakeholders of the firm. 
• Critically evaluate investment projects using appropriate investment appraisal techniques to assess suitability and viability of the projects consistent with theoverall strategy and business model(s) of the firm. 
• Analyse financial data, conduct cost-benefit analysis and financial planning for effective business decisions using spreadsheet software package. 
• Evaluate the different competing financial objectives of the firm and the agencyproblem between shareholders and managers in publicly listed companies. 

Question 1
The scenario
Jupiter Holdings Plc has a portfolio of investments in subsidiary companies and is seekinganotheracquisition that complements the others. The subsidiary companies already in the group include: machinery and commercial vehicledealership; finance company; equipment leasing company; haulage company with a fleet of 200heavy goods vehicles (HGV), and a chain of value hotels across the UK, one of which is makingaloss. Two possible acquisition targets have been identified:
Griffin Care Services Ltd is based in leased converted hotels and provides care services for youngpeople unable to be cared for in the foster system. Jupiter Holdings Plc are looking into thepossibility of converting their failing hotel into a provider of care services and Griffin CareServicesLtd is looking for another property to continue expanding around the UK;
Midlands Commercials Ltd has a large unit and caters for the storage and repair of up to70commercial vehicles at one time, and has the potential for more space as it is based in alargeempty industrial area. Midlands Commercials is looking for a contract with a fleet operator tostabilise their income and growth.

Requirements
1. Prepare a business report, maximum 2 pages long (approximately 800 words) with anappendixfor your ratio analysis.
It is to be addressed to the board of directors of Jupiter Holdings Plc. You must evaluate the financial statements, interpret the ratio analysis and make aconvincingargument for investment in one of the two target companies. Your report should be supported with academic references throughout, and your ratioanalysisshould be put in an appendix to the report. 

2. Critically evaluate the working capital management (WCM) of both companies using academicreferences and draw conclusions on which is stronger.

3. Create a table that lists the advantages and disadvantages of all the finance options availabletoJupiter Holdings Plc. Explain, with references, the source of finance you recommendasmost suitable way to finance the investment in either Griffin Care Services Ltd or Midlands Commercial Ltd.

Question 2 A

Requirements
You work for Alphabet Holdings Plc as a junior management accountant. The board of directors are considering ways to improve the suboptimal performance of aninvestment in a manufacturing company called AC products Ltd. As you can see from the table below the directors are considering closing products goldandplatinum in an effort to improve overall profitability. You spot that marginal costing would show the results differently and may affect the directors’ decision.

Requirements for Question 2
i. Use your knowledge of management accounting and marginal costing to calculatethecontribution of each product
ii. Use your findings from part (a) and appropriate academic references to explain whether thecompany should stop making product gold.
iii. Use your findings from part (a) and appropriate academic references to explain whether thecompany should stop making product Platinum.
iv. Discuss how and why marginal costing calculates contribution to pay overheads andwhythis is useful in evaluating product value to a firm?
v. Do you agree that profitability will improve by ceasing to make Products gold andplatinum?What do you suggest the company does to increase profitability?

Question 2 b (continued)
The board have approached you to get your opinion of their expansion plan, which includesachainof factory outlet stores. Below are the figures for the first one that is planned for a central Birmingham location next year. Company policy dictates that any decision should be based on the results of calculatingNet PresentValue (NPV) of 3 years cash flows using a cost of capital of 12%, Payback Period (PBP) must beless than 3 years, and the Internal Rate of Return (IRR) of the project should provide a 5%cushionin case of increases in inflation or interest rates. The investment consists of £105,000 for the land, building costs of £150,000 and £82,050for fittingsand equipment. The cash flows in year 1 are expected to be: total sales revenue £620,100; the cost of cement products sold £164,195; metal stock sold £113,614; staff costs £25,523; light & heat £36,252; otheroverheads £138,951. The cash flows for the following years are the same, but are expectedtoincrease by 2% inflation each year.

Requirements for Question 2 part (b)
Using the information above and in accord with the above stated company policyyouarerequired to calculate:
i. Net Present Value (NPV)
ii. Payback period (PBP) and Discounted Payback Period (DPBP) 
iii. Internal Rate of Return
iv. Based on your calculations do you recommend the investment is made andthenewoutlet store is built? 
v. Critically discuss the limitations of the above project appraisal techniques usedandany other recommendations to the board.

Question 3
Global Tyres Limited manufactures three types of tyres; Premium, Standard and Budget brands.The maximum market demand and resource requirements of each of these products areshownbelow:

The tyres are made from an advanced slip-resistant material that gives the firmacompetitiveadvantage. Global Tyres has established an export requirement in country B that will result inmassive growth. However, an email from the purchasing manager has informed youthat thesupplier expects that the year’s supply of this special material is limited to 251,000 mitres. Global Tyres Limited does not keep any inventory. Without the board of directors’ sanction, thesalesdirector has already accepted an order for 1,000 Standard Tyres that, if not fulfilled, wouldincurafinancial penalty of £30,000. This order is included in the Standard Tyres’ maximummarket demandfigure. Global Tyres Limited’s directors need to know whether they should first satisfy the contract andthenprioritise production in the normal way or whether it should consider breaching the contract andincurring the penalty.

Required:
1. Prepare the following workings, analysed by product, based ontheaboveinformation:
1.2. Calculate fixed and variable overheads using the high/low method. 
1.3. Marginal cost card showing selling price, variable costs, and contributionperunit for each product. 
1.4. Contribution per unit of scarce resource and your decision for rankingtheproduct to be produced first based on the highest contribution. 

2. Prepare a budgeted production schedule and a marginal cost incomestatement(analysed by product) for the year 2022 assuming that the Standard Tyrescontractis honoured. 
3. Prepare budgeted production schedule and a marginal cost incomestatement(analysed by product) for the full year of 2022 assuming that the StandardTyrescontract is not honoured. 
4. Advise Global Tyres Limited’s directors if they should honour or not honourtheStandard Tyres contract.

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