SOLUTION: Business Finance | My Assignment Tutor

ASSIGNMENT INSTRUCTIONS AssessmentCourseworkAssessment code:010Academic Year:2020/21Trimester:2Module Title:Business FinanceModule Code:MOD003319Level:4Module Leader:Nidhi GogiaWeighting:50%Word Limit:2500This excludes bibliography and other items listed in rule 6.75 of theAcademic Regulations:http://web.anglia.ac.uk/anet/academic/public/academic_regs.pdfAssessed LearningOutcomes1-3Submission Deadline:This assignment must be received by Monday 19th April 2021 at 14:00 WRITING YOUR ASSIGNMENT:• This assignment must be completed individually.• You must use the Harvard referencing system.• Your work must indicate the number of words you have used. Written assignments must notexceed the specified maximum number of words. When a written assignment is marked, theexcessive use of words beyond the word limit is reflected in the academic judgement of thepiece of work which results in a lower mark being awarded for the piece of work (regulation6.74).• Assignment submissions are to be made anonymously. Do not write your name anywhere onyour work.• Write your student ID number at the top of every page.• Where the assignment comprises more than one task, all tasks must be submitted in a singledocument.• You must number all pages.SUBMITTING YOUR ASSIGNMENT:In order to achieve full marks, you must submit your work before the deadline. Work that issubmitted late – up to five working days after the published submission deadline – will be acceptedand marked. However, the element of the module’s assessment to which the work contributes willbe capped with a maximum mark of 40%.Work cannot be submitted if the period of 5 working days after the deadline has passed (unlessthere is an approved extension). Failure to submit within the relevant period will mean that youhave failed the assessment.Requests for short-term extensions will only be considered in the case of illness or other causeconsidered valid by the iCentre Adviser. Please contact iCentre@lca.anglia.ac.uk. A request mustnormally be received and agreed by the iCentre Adviser in writing at least 24 hours prior to thedeadline. See rules 6.56-6.65: http://web.anglia.ac.uk/anet/academic/public/academic_regs.pdfMitigation: The deadline for submission of mitigation in relation to this assignment is no later thanfive working days after the submission date of this work. Please contact iCentre@lca.anglia.ac.ukSee rules 6.103 – 6.132: http://web.anglia.ac.uk/anet/academic/public/academic_regs.pdfASSESSMENT TASKSThere are two tasks to completePrepare a 2,500-word business report for your manager providing analysis and businessadvice. To prepare the report you will need to complete the two tasks described belowaddressing the questions asked and following the requirements.Presentation and format:Business report with a title page, contents page and clear structure. It must bewritten in an appropriate business tone with appropriate Harvard reference wherenecessary. Note no introduction is required. No marks will be awarded for anintroduction. 5 marksTASK 1 (60 marks)Trend Ltd (“TL”) manufactures gym clothing and footwear. It supplies severallarge design companies who then market the clothes and shoes under their ownbrands. The company last year had turnover in excess of £300 million. Two keycorporate customers are Tkechers Ltd and Sadidas Ltd.The company is managed by Arpha, who owns 30% of the shares in the company,while the remaining 70% is split between four other family members.The other shareholders are concerned about the business. Although there seemsto be plenty of business coming in and the last year has been reasonably profitable(Operating profit was £60 million last year before interest and tax), the company’sdebt has increased to £95 million from £60 million the year before. Arpha hasstarted talking about the need for the other shareholders to invest more money toreduce the debt.Towards the end of last year TL acquired a 30% stake in a company which producesa range of walking clothes and sandals. TL invested £20 million in the company toacquire the shares and has agreed to pay a £5 million advance fee for exclusivesupply of the products.The company is owed £10 million pounds for a series of large orders placed byTkechers last year. There is also an outstanding dispute about a £12.5 milliondelivery to Sadidas completed in 2019. This has led to payment being withheldwhile negotiations continue between lawyers and industry consultants.There is a further problem that Arpha believes the Sadidas issue arose due to thesupply of sub-standard materials by a supplier in 2018. He has refused to pay thesupplier which is now threatening legal action. In the meantime, a large stock ofmaterials and supplies has built up at the company’s London warehouse. Arphainsists that the company needs to have this level of stock for when the dispute issorted out. He is also reluctant to press his key customers too hard for payment.The other shareholders have approached TL’s accountants to review the situation.Requirements:Prepare a report of up to 1,250 words for the shareholders addressing the followingissues.i. Explain:a. what is meant by Profit and Cashflow and how they are differentb. what is meant by Working Capital and, the meanings ofReceivables, Inventory and Payablesc. how changes in Working Capital affect Cashflow(30 marks) ii.Apply the concepts in (i) above to this company to show how the waythe company is being managed might affect its financial results. (15 marks) iii.Analyse and recommend what steps should now be taken to improvethis company’s cash flow through better Working Capitalmanagement.(15 marks) TASK 2 (35 Marks)Thorne Estates Limited advertises and sells residential property on behalf of itscustomers. The company has been in business for only a short time and ispreparing a cash budget for first four months of 2021. Expected sales of residentialproperties are as follows: 20202021202120212021MonthDecJanFebMarAprUnits Sold1010152530 The average price of each property is £180,000 and Thorne Estates charges a fee of3% of the value of each property sold. Thorne Estates receives a 1% in the month ofsale and the remaining 2% in the month after sale.The company has nine employees who are paid on a monthly basis. The averagesalary per employee is £35,000 per year. If more than 20 properties are sold in agiven month, each employee is paid in that month a bonus of £140 for eachadditional property sold.Variable expenses are incurred at the rate of 0.5% of the value of each propertysold and these expenses are paid in the month of sale. Fixed overheads of £4,300per month are paid in the month in which they arise. Thorne Estates pays interestevery three months on a loan of £200,000 at a rate of 6% per year. The lastInterest payment in each year is paid in December. Rent of £42,000 will fall due atthe end of May.An outstanding tax liability of £95,800 is due to be paid in April. In the samemonth, Thorne Estates intends to dispose of surplus vehicles, with a net book valueof £15,000 for £20,000. The cash balance at the start of January 2021 is expectedto be a deficit of £40,000.Required:1. Prepare a monthly cash budget for the FOUR months from 1st Jan to 30 April2021. (30 Marks)2. Are there any observations or recommendations that you would make to themanagement of Thorne Estates arising from your analysis? (5 Marks)TASK 1ASSESSMENT GUIDANCEThis assignment requires you to demonstrate your knowledge and understanding ofa) the management of cash and b) budget techniques.Your discussion for part 1 of the assignment should explain the difference betweencashflow and profit.Your answer must identify and explain why the accounts of a business can report aprofit but a shortage of cash, and discuss the consequences to a business of beingshort of cash.The general causes of cash flow problems should be analysed using the case studypresented to you, particularly regarding the management of working capital.Methods for dealing with cash flow problems and managing cash for the businessdescribed should be proposed and evaluated.Your answer for Part 2 of the assignment is the preparation of cash budget and youcan use the blank formats provided in week 1 of Trimester.You are not expected to show any specialist knowledge of the sector in which thebusiness operates, but credit will be given for evidence that you have consideredwhat issues might be specific to this company.FORMATYour reports should begin with a concise and relevant Executive Summary of no morethan 100 words for each part. An additional Introduction is not needed. TheExecutive Summary and References do not count towards the word limit. Thecontents of tables are also excluded but the use of text in tables should be kept toa reasonable level and be properly explained in the body of the text.NOTESYour answer must not be solely descriptive in nature; it should provide clearevidence of understanding, application and analysis of the issues underconsideration. You should assume that your reader has some experience in financeand management but is uninformed on the particular topic; for instance, in i) youdo not need to explain what “accounts” are, but you do need to show what theirpurpose is for this business in this context.To achieve a pass mark you must ensure that you correctly identify and explain theunderlying concepts and theories relevant to the assignment. To achieve highermarks, in addition to the requirements to achieve a pass mark, you will need todisplay application and analytical skills.Your work should be expressed clearly and fluently using a style of writingappropriate to the subject area. Sentences and paragraphs need to be relevant,well-structured and incorporate the correct terminology. Ideally, there should beno errors of spelling, punctuation or grammar.