Objective of the Case study: This case study aims at helping students to reflect on what they learnt throughout the module.
Instructions: The case study consists of two sections- Section A consists of 70 marks and Section B consist of 30 marks. Students are expected to read the case study thoroughly and to answer all the required questions in a structured and organised manner with reference to published work. This is an individual assignment and it is worth 60% of the total module mark.
You are required to:
- Select and justify at least 10 financial ratios and calculate 2 non-financial ratios to analyse the performance and financial position of the two companies.
- You are expected to use charts to compare performance of the two companies. You will need to look at the audited financial statement and carry out further research to explain the performance of the company over the five years.For clarity, you are expected to rank the companies based on the individual benchmarks and overall (50 Marks)
- Write a memo to the managing director of the number two (poor performing) company with recommendations of how the financial performance of the business can be improved. (15 marks)
- Outline the limitations of relying on financial ratios to interpret firm performance? (5 Marks)(Total 70 Marks)You are expected to research for more information on the companies and cite the material correctly. You can use the Global Business Browser database to access analysts’ and SWOT reports.
Question 2: Advanced: Discussion of alternative investment appraisal techniques and the calculation of payback and Net Present value for two mutually exclusive projects.
Peer Ltd has the opportunity to become involved in one of two potential and mutually exclusive (but not both) projects. Each project will involve the purchase of machines.
The following data relates to the two projects:
|Initial Cost|| 205,000|| 150,000|
|Profits:||Year 1|| 35,000|| 30,000|
|Year 2|| 50,000|| 25,000|
|Year 3|| 10,000||– 50,000|
|Year 4|| 10,000|| 10,000|
|Year 5|| 50,000|| 3,000|
|Year 6|| 2,000|
- All cash flows take place at the end of the year apart from the original investment in the project which takes place at the beginning of the project.
- Project PE3 machinery is to be disposed of at the end of year 5 with a scrap value of £5,000.
- Project ER5 machinery is to be disposed of at the end of the year 3 with a nil scrap value and replace with new project machinery that will cost £100,000.
- The cost of this additional machinery has been deducted in arriving at the profit projections for ER5 for year 3. It is projected that it will last for three years and have a Nil scrap value.
- The company’s policy is to depreciate its assets on a straight line basis.
- The discount rate to be used by the company is 10%.
- Using appropriate investment appraisal techniques advise senior management whether they should opt for project PE3 or Project ER5.
- Discuss the limitations of using investment appraisal technique to aid long term decision making.
(Total 30 marks)
- All calculations must be detailed and presented clearly.
- Use of published work (citing references) within text is expected.
- A full list of references should be presented at the end of the case study.
- Please avoid the use of ‘I, We, Us’ in your case study. You are expected to write in third person.
- Include the assignment front sheet and marking scheme which is attached to the assignment brief.
- Your answer should not repeat the question as it will be included in your word count.
- Font Type: Arial.
- Font size 11/12.
- Line spacing 1.5 to 2.
- All pages must be numbered
- All graphs, charts and tables should have a number and a title.
- All text must be aligned to the left.
- Good use of English, referencing, presentation will earn marks.
- Submit online and on time, late submissions will not be accepted.
- For extensions or deferral of assessment, please refer to the University policy on mitigating circumstances.
Accounting and Finance Penalties
- Word Count*: All assessments have a word count with a tolerance of 10% only. Submissions that exceed the word count will be penalised as follows-one grade point* for every 150 words or part thereof.
- Missing References – penalty is three grade points minimum (see module guide for further details).
- Front sheet missing-penalty one grade point.
- Word count missing or inaccurate-penalty one grade point.
** Front sheet, contents page, references and any appendices do not count in the word count.