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A.C. 1.1 - Determine how to obtain financial data and assess its validity - UNIT 7003V1

UNIT 7003V1

Assignment Brief: Financial Management.


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INTRODUCTION

This unit is about understanding financial data and how it is used to support achievement of strategic objectives, managing budgets strategically, developing and making judgements on financial proposals against strategic objectives.


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SCENARIO

Learners may use their own employment context, or that of another organisation with which they are very familiar, to base their assignment. However, in the case that they are not able to do so, please use the below scenario:-

You are a senior manager in a business unit of a medium sized enterprise, with functional management and organisational leadership responsibilities. You have responsibility for the financial resources deployed in your area, including forecasting income and expenditure, reporting variances and planning to achieve target. You also sit alongside other senior managers in evaluating business cases for capital investment.

Please select and research an organisation of your choice to identify its strategic objectives and financial data. Provide brief details of your research in a summary of between 150 and 200 words which are in addition to the suggested word count and also include the financial data for your chosen organisation. Use the results of your research to answer the tasks below.


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TASK 1 - UNIT 7003V1

 

Write a summary to describe the main sources of financial data available within and outside the organisation, and provide examples of how the information would be used to review financial performance.

Examine the data and identify areas that you consider deserve further investigation/analysis, explaining how and why you consider this to be necessary.

Describe the types of data on other organisations that you may require from time to time - for instance if you were considering entering into a trading relationship or a financial investment - stating any limitations in availability. You will be expected to show an appreciation of different organisation structures.

For at least three of the examples described, explain how you would test the validity of the data. Guideline word count: 350 - 400 words

A.C. 1.1 - Determine how to obtain financial data and assess its validity

A.C. 1.4 - Review and question financial data

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TASK 2 - UNIT 7003V1

 

Using either your own organisation’s financial data, or that of an organisation of your choice, calculate at least six of the following accounting ratios on the last two available year-end accounts, selecting those that you consider to be the most appropriate measures of financial performance for your chosen organisation:

  • Gross profit as a percentage of sales
  • Net profit as a percentage of sales
  • Return on capital employed
  • Gearing
  • Asset turnover
  • Current ratio
  • Acid Test
  • Average age of debtors in days
  • Average age of creditors in days
  • Average age of stock (using closing stock) in days

What conclusions can you draw from the data? What are the strengths and weaknesses of the organisation based on this analysis? Make recommendations of ways in which any shortcomings could be addressed. State the limitations of the use of ratios in the measurement of financial performance.

Guideline word count for UNIT 7003V1: 650 - 750 words

A.C. 1.2 - Apply different types of analytical tools and techniques to a range of financial documents, formulating conclusions about performance levels and needs of stakeholders

A.C. 1.3 - Conduct comparative analysis of financial data

 

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TASK 3 - UNIT 7003V1

Identify possible approaches to the production of a budget with reference to any financial constraints, the achievement of organisational targets, legal requirements and accounting conventions. Where possible relate this information to an organisational context whether in your own organisation or one with which you are familiar.

Guideline word count: 550 - 600 words

A.C. 2.1 - Identify how a budget can be produced taking into account financial constraints and achievement of targets, legal requirements and accounting conventions

 

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TASK 4

Analyse the budget shown below, and discuss any issues raised regarding cash flow and legal requirements. Suggest at least three alternative courses of action the organisation could take to help overcome the issues identified. For the purpose of this exercise, please assume that the organisation has an agreed overdraft of

£750,000 with its bankers

Guideline word count: 550 - 600 words

A.C. 2.2 - Analyse the budget outcomes against organisational objectives identifying alternatives

 

Task 4 exercise:

 

Jan

 

Feb

 

March

 

April

 

May

 

June

Receipts:

£000

£000

£000

£000

£000

£000

 

Sales Receipts

 

2110

 

2156

 

2164

 

2219

 

2284

 

2444

 

Proceeds from Loan

 

4000

 

 

 

 

 

 

Total Receipts

 

6110

 

2156

 

2164

 

2219

 

2284

 

2444

 

 

 

 

 

 

 

Payments:

£000

£000

£000

£000

£000

£000

 

Material Purchases

 

718

 

733

 

757

 

777

 

822

 

880

 

Wages

 

600

 

600

 

550

 

550

 

550

 

450

 

Fixed Costs

 

700

 

700

 

710

 

710

 

715

 

715

 

Lease of New Building

 

 

200

 

200

 

200

 

200

 

200

 

Advertising Fees

 

 

120

 

120

 

120

 

130

 

 

Corporation Tax

 

 

 

 

 

 

650

 

Capital Expenditure

 

 

 

2750

 

 

 

 

Loan Repayment

 

 

 

 

450

 

450

 

450

 

Total Payments

 

2018

 

2353

 

5087

 

2807

 

2867

 

3345

 

 

 

 

 

 

 

 

Net Cash Flow

 

4092

 

(197)

 

(2923)

 

(588)

 

(583)

 

(901)

 

Opening Bank Balance

 

185

 

4277

 

4080

 

1157

 

569

 

(14)

 

Closing Bank Balance

 

4277

 

4080

 

1157

 

569

 

(14)

 

(915)

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TASK 5 - UNIT 7003V1

Identify at least two methods by which capital investment proposals are evaluated and explain the reasons why it is prudent for an organisation to develop specific policies regarding capital expenditure.

Using your own organisation or an organisation of your choice explain an area of capital investment. Research two proposals for capital investment. Analyse the viability of the two proposals using investment appraisal techniques and identify the strengths and weaknesses including the risks of each proposal.

Identify, with reasons which proposal the company should accept. Evaluate the impact of the proposal on the strategic objectives of the organisation.

Guideline word count: 1,050 - 1,100 words

A.C. 3.1 - Identify criteria by which proposals are judged

A.C. 3.2 - Analyse the viability of a proposal for expenditure

A.C. 3.3 - Identify the strengths and weaknesses and give feedback on the financial proposal

A.C. 3.4 - Evaluate the impact of the proposal on the strategic objectives of the organisation


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