Assignment Task
A. 1. Identify and briefly explain the purpose and importance of each of the following financial statements:
Income Statement (Profit and Loss Statement)Balance Sheet (Statement of Financial Position)Cash Flow Statement
2. Calculate 2 ratios of each of the following types using the income statements and balance sheets of two years given below:
ProfitabilityLiquidity
3. Analyse the calculated ratios year on year with possible reasons for the changes and identify the strengths and weaknesses of the financial performance of the company.
B. 1. Financial Accounting and Management accounting are two different types of accounting information that any organization can prepare to make decisions.
Identify the differences between management accounting and financial accounting with examples.Using an example, explain the various types of costs and the differences between them.Using the below information, calculate the total production cost.
Job XYZ was manufactures solely in one cost centre. A direct labour hour rate is to be used to absorb this cost centre’s overhead costs. Data relating to Jon XYZ is as follows:
Direct material cost Rs. 3,670
Direct labour cost Rs. 4,050
Direct labout hours 90
Cost centre overheads are budgeted to be Rs. 23,000 with a budgeted labour hour of 1,000.
Based on your calculations, make suggestion for improvements that can improve organizational strategy related to sales & marketing.
2. A company manufactures a single product which incurs fixed costs of Rs. 300,000 per annum. Annual sales are budgeted to be 70,000 units at a sales price of Rs. 300 per unit. Variable costs are Rs. 285 per unit.
Draw a profit-volume chart and use it to determine the break-even point.The company is now considering improving the quality of the product and increasing the selling price to Rs. 350 per unit. Sales volume will be unaffected, but fixed costs will increase to Rs. 450,000 per annum and variable costs to Rs. 330 per unit.Draw, on the same graph as for part (a), a second profit-volume chart and comment on the results.
3. Explain what is budgeting and the importance of budgeting for an organization.
C. 1. What is investment appraisal or capital budgeting and list the importance of capital budgeting for an organization when they plan for an investment decision.
2. Consider the following projects A and B which yield the following cash flows over their five year lives. The cost of capital for both projects is 10%
Year
Project A
Project B
Cash Flow
(Rs Mn.)
Cash Flow
(Rs Mn.)
0
-1000
-1000
1
500
100
2
400
200
3
200
200
4
200
400
5
100
700
Calculate the payback period, NPV and IRR of the project and provide your recommendations to the organization about the feasibility of the project.
3. The above calculations provide the organizations only about the financial feasibility of the projects. But there can be other factors that can affect the projects even though they are financially feasible. Analyse them.
D. 1 .Describe the fundamentals of risk management and financial planning and explain how they relate to corporate strategy.
2. Assume that you are financial controller in an organization and develop a financial strategy considering internal and external factors that can affect the organization which would minimize the risks.
3. Analyse what factors that can bring opportunities and/or risks to an organization and provide a management plan which would provide the organization with reasonable solutions to unforeseen threats.
Assessment Criteria of the Assignment
Recognize financial reports and statements
Calculate significant ratios and trends from financial statements with accuracy.Analyze financial statements to find the financial performance of a company’s strengths and weaknesses and make suggestions for improvement.Examine financial statements from several angles (e.g., shareholder vs. creditor) and use them to guide your conclusions about the financial stability of a company.
Examine financial data and information in order to make decisions.
Budgets and variance analysis reports should be prepared using fundamental cost accounting principles.Utilize cost accounting data to find areas where costs can be cut or revenue can be increased, then suggest steps to boost financial performanceTo accomplish strategic goals, analyze complex cost structures and make suggestions for adjustments in pricing, product mix, or operational procedures
Plan financial resources using cost accounting and budgeting strategies .
Identify fundamental financial indicators, such as payback period and net present value, and then explain how they relate to investment choices.Select a course of action based on financial analysis and risk assessment after evaluating investment opportunities.Analyze investment prospects critically in light of shifting market dynamics or outside influences and offer original suggestions for risk management.
Identify financial opportunities and hazards.
Describe the fundamentals of risk management and financial planning and explain how they relate to corporate strategy.Create a financial strategy for a fictitious company, taking into account internal and external variables, and evaluate the viability and sustainability of the strategy.Analyze financial opportunities and hazards in a real-world business setting and provide a thorough management plan.
