Assessment Title: Budget report
Assessment Number: AE1
Assessment Type: Individual report
Restrictions on Time/Word Count: 1000 words (+/- 10%) plus spreadsheet
Consequence of not meeting time/word count limit:There is no penalty for presenting below the word limit, but students should be aware that there is a risk they may not maximise their potential grade.Assignments should be presented appropriately in line with the restrictions stated above; if an assignment exceeds the word count, this will be taken in account
in the grades given using the assessment criteria shown.
Individual/Group: Individual
Assessment Weighting: 100%
QH0320 Understanding Finance Budget Report-Solent University UK.
Assessment Task:
You are required to produce a budget report, complete with analysis and
commentary, on a given scenario. The report consists of THREE compulsory parts.
Assessment Scenario:
Hamble Ltd is an established food packaging and distribution business operating across London and the south east of England. The Directors of Hamble Ltd are considering expanding the business over the next 12 months by purchasing an existing established business which operates in the east of England and the midlands.
PART A:
The directors of Hamble Ltd have asked you, as a recently employed assistant management accountant, to prepare and review their cash budget. The bookkeeper started the cash budget but was unable to complete it due to ill health.
In addition, Hamble Ltd requires you to evaluate the different funding options for its expansion plans.
Estimated sales and purchases for each of the nine months to September are given below:
Trade Receivables: Credit sales are to be collected two months after the date they have been sold.
Trade Payables: Credit purchases are to be paid one month after the date they have been purchased.
Borrowings: The terms of a 5-year loan are coming to an end and Hamble Ltd are due to repay the capital of £1,000,000 on 31 st July.
Current Liabilities: Corporation tax of £100,000 is due to be paid to HMRC in the month of May.
Delivery vehicles: Hamble Ltd has a policy of replacing delivery vehicles every 2 years. A number of delivery vehicles are due to be replaced under this policy in June at a cost of £1,250,000, but existing delivery vehicles will be traded in for £310,000 as part of the deal.
Other overheads: Other overheads will be £2,200,000 per month settled on a monthly basis in the month incurred.
Cash: Hamble Ltd expects to have £90,000 in cash at the beginning of April.
You are required to:
1.Using Excel, prepare a cash budget for the business for the 6-month period from April to September.
NOTE: To achieve full marks you MUST show your working out, i.e. by using Excel cell referencing and formula.
2.Examine the cash budget you have prepared and advise the directors of
Hamble Ltd of any possible solutions to cash flow problems that might be
evident. Marks will be awarded depending on the depth of discussion.
3.Identify five sources of finance available to Hamble Ltd and evaluate the
advantages and disadvantages of each. You should then make a recommendation to the directors of Hamble Ltd of the most appropriate
source of finance for the proposed expansion plans. Marks will be awarded
depending on the depth of discussion.
4.Within the next 3-5 years Hamble Ltd intend to expand their business
throughout the UK following which their aim is to list the business on the
London Stock Exchange. The Directors of Hamble Ltd have asked you to
briefly explain the advantages and disadvantages of raising finance through the issue of shares.
PART B:
The Directors of Hamble Ltd have identified two existing established businesses that may be suitable to purchase to fulfil their expansion plans and have asked you to calculate and compare ratios for both companies before making a recommendation on which company to purchase.
Income Statements for the Year Ended 31 st Dec 2020
SOFP (Balance Sheet) as at 31 st Dec 2020
You are required to:
1.Use your Excel skills to calculate the following ratios for both companies.
You should then present your calculated ratios within your report in a simple table format for ease of comparison.
NOTE: To achieve full marks you MUST show your working out, i.e. by using Excel cell referencing and formula.
a. Gross profit margin
b. Operating profit margin
c. Return on capital employed
d. Asset turnover
e. Current ratio
f. Acid test
g. Inventory days
h. Trade receivable days
i. Trade payable days
j. Working capital cycle/operating cycle
k. Gearing
l. Interest cover
2.Compare the performance of the two companies in the 4 key areas of
profitability, efficiency, liquidity and gearing using the ratios calculated in
part 1 and make a recommendation as to which of the two companies
Hamble Ltd should consider purchasing. Marks will be awarded depending on the depth of discussion.
PART C:
Hamble Ltd has a varied client base that includes schools, hospitals and the
hospitality sector and has experienced fluctuating consumer demands since the beginning of the Covid-19 pandemic.
One of their products is a fresh produce box, consisting of local seasonal produce, and which is ordered in units. The following information is available for the year ending 30 th September.
1.Due to these fluctuating demands, you have been asked to use Excel to
prepare a flexible sales budget for quantities of 200,000 units and 300,000
units. Sales revenue is fully variable.
NOTE: To achieve full marks you MUST show your working out, i.e. by using Excel cell referencing and formula.
2.Consider specific factors that may contribute to an increase or decrease in
Hamble Ltd’s consumer demand. You should identify a minimum of 2 factors that may contribute to an increased demand and a minimum of 2 factors that may contribute to a decreased demand. Marks will be awarded
depending on the depth of discussion.
Learning Outcomes:
This assessment will enable students to demonstrate in full or in part the learning outcomes identified in the Module descriptors.
Late Submissions:
i. If this assessment is submitted late i.e. within 5 working days of the submission deadline, the mark will be capped at 40% if a pass mark is achieved;
ii. If this assessment is submitted later than 5 working days after the submission deadline, the work will be regarded as a non-submission and will be awarded a zero;
iii. If this assessment is being submitted as a referred piece of work then it must be submitted by the deadline date; any Refer assessment submitted late will be regarded as a non-submission and will be awarded a zero.
Extenuating Circumstances
The University’s Extenuating Circumstances procedure is in place if there are genuine circumstances that may prevent a student submitting an assessment. If students are not’fit to study’, they can either request an extension to the submission deadline of 5 working days or they can request to submit the assessment at the next opportunity (Defer). In
both instances students must submit an EC application with relevant evidence. If accepted by the EC Panel there will be no academic penalty for late submission or non-submission dependent on what is requested. Students are reminded that EC covers only short term issues (20 working days) and that if they experience longer term matters that impact on learning then they must contact the Student Hub for advice.
QH0320 Understanding Finance Budget Report-Solent University UK.
Academic Misconduct
Any submission must be students’ own work and, where facts or ideas have been used from other sources, these sources must be appropriately referenced. The University’s Academic Handbook includes the definitions of all practices that will be deemed to constitute academic misconduct. Students should check this link before submitting their work.
Ethics Policy
The work being carried out by students must be in compliance with the Ethics Policy.Where there is an ethical issue, as specified within the Ethics Policy, then students will need an ethics release or an ethical approval prior to the start of the project.
QH0320 Understanding Finance Budget Report-Solent University UK.
Grade marking
The University uses a letter grade scale for the marking of assessments. Unless students have been specifically informed otherwise their marked assignment will be awarded a letter grade. More detailed information on grade marking and the grade scale can be found on the portal and in the Student Handbook.
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