1. Explain the principles of business and financial economics in an international context.
FELM4026
Financial and Economic Literacy for Managers
Word Limit: 2500
Learning outcomes assessed: FELM4026 Financial and Economic Literacy for Managers
At the end of a module students will be expected to be able to:
1. Explain the principles of business and financial economics in an international context.
2. Identify and explain the impact of governmental, monetary and economic policy on decision making in a business context.
3. Describe and apply macro and micro concepts and models to business decision making.
4. Interpret financial information (external and internal) and apply to decision making within a business context.
5. Discuss the rationale and impact of decisions for business strategies to users and stakeholders.
6. Examine and discuss the relationship between theory, application in business and financial economics in an international context.
Assignment Questions: FELM4026 Financial and Economic Literacy for Managers
- Write ONE report that addresses:
(a) Compare the environmental factors that apply in both the internal and external spheres of a business firm. Your report should explain the business economics concepts or theories and practice.
(Learning outcome 1 and 6)
(b) The retail Sector has seen rapid changes in consumer shopping in recent years. Choose a well-known retail company that trades globally and do a web search on how well it has performed in the past five years and how it has been influenced by various aspects of its business organisation. Your answer should include both the theory of business concepts and empirical evidences. (600 words) (25 marks).
(Learning outcome 3 and 6)
(c) Changes in demand or supply cause markets to adjust. Whenever such changes occur the resulting ‘disequilibrium’ (i.e. a balance of demand and supply) will bring an automatic change in prices. Discuss two or more businesses that supply goods and services to consumers. You may wish to include supermarkets such as Asda, or service sector firms like the London Underground and McDonalds. Your answer should include both the theory of these concepts and relevant hypothetical examples (600 words) (20 marks)
(Learning Outcomes 3 and 6)
Managers need to be aware of financial intermediaries because they create financial instruments, for example, bank deposits and bank loans, which help the transfer of funds between lenders and borrowers. Identify four UK financial intermediaries and discuss their usefulness to a business organisation within the retail industry. Your answer should include both the theory of these concepts and hypothetical examples. (600 words) (20 marks)
Learning outcomes 4 and 5)
3 (a)
Extract from the Zenobia Limited accounts for the year ended 31 March 2018
2017 2018
£m £m
Sales Turnover 7,653 6876
Operating costs (5,778) (5,342)
Operating profit 1,875 1,534
Current Assets
Stocks 250 208
Debtors 2,168 1,945
Investment 798 252
Cash at bank 61 55
A 3,277 2,460
Creditors
Loans and other borrowing 265 303
Other creditors 2,568 1,794
Net Current assets B 2,834 2,097
Net current assets A - B 444 363
Operating costs
Staff costs 2,807 2,715
Depreciation 933 907
Other 2,345 2,036
6,085 5,658
Less cost of own stock (307) (316)
5,778 5,342
Ratio Analysis 2017 2018
Current ratio = = 1.2 = 1.2
Quick ratio = x 365 = 1.2 = 1.1
Debtors payment period x 365 x 365 = 103 days x365 = 103 days
Stock turnover period x 365 x 365 = 16 days x 365 = 14 days
Required:
Zenobia plc is in a service industry, dealing in telecommunications. Interpret the above financial ratios and recommend how to improve the performance in year 2019 (10 Marks)
(b) Suppose that Zara has decided that she wants to pay herself £1550 each year for the next three years rather than deposit these amounts in her savings account. If she can invest a lump-sum amount in a savings account that pays 3 percent interest per year, how much money does Alice need to deposit today to accomplish her goal?
(6 marks) [Hint: Present Value].
(c) Tobe is proposing two mutually exclusive projects for a possible investment in the Greenford and Greenwich Boroughs of London. He has provided the following projected cash flows for your advice:
Year
|
Greenford Project
|
Greenwich Project
|
0
|
(£150,000)
|
(£175,000)
|
1
|
30,000
|
60,000
|
2
|
25,625
|
30,000
|
3
|
26,000
|
25,000
|
4
|
30,000
|
20,000
|
5
|
75,000
|
40,500
|
If the required rate of return on these projects is 6.75 percent, which would be chosen and why? Show your calculations/explanations. (10 marks) [Hint: Net Present Value]
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