(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.

FELM4026 Financial and Economic Literacy for Managers

Learning outcomes assessed:

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

1. 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.  

(600 words) (15marks).

FELM4026 Financial and Economic Literacy for Managers

(Learning outcome 1 and 6) (TESCO PLC should be used here as a well-known retail company

(b) The retail Sector has seen rapid changes in consumer shopping in recent years. Choose a well-known retail company (TESCO PLC) 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)

FELM4026 Financial and Economic Literacy for Managers

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) Explain the principles of business and financial economics in an international context.

(Learning outcomes 4 and 5) 

5 (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: FELM4026 Financial and Economic Literacy for Managers

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? Explain the principles of business and financial economics in an international context.

(6 marks) [Hint: Present Value].

(c)

FELM4026 Financial and Economic Literacy for Managers

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]

(100 words) (20 marks total) (Learning outcomes 4 and 5) 

FELM4026 Financial and Economic Literacy for Managers