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You are a finance trainee for a company of Vests plc and have been asked by your marketing manager to review the business of your key competitor T-shirts plc and to assist her with helping the marketing team understand financial information.

BUSINESS FINANCE  (BUSINESS REPORT) 

1.1 Case Study – T shirts Ltd

You are a finance trainee for a company of Vests plc and have been asked by your marketing manager to review the business of your key competitor T-shirts plc and to assist her with helping the marketing team understand financial information.

You know that T-shirts plc is struggling in the current economic climate and that other expenses have risen as a result of an aggressive advertising campaign to stimulate sales.

Your sales manager has informed you that T-shirts plc increased the credit terms given to their customers from 30 days to 60 days in an attempt to attract more business.

The rate of interest on the bank overdraft in 2019 is significantly higher than the rate of interest on the loan.

1.2. Task

Prepare a 2,250 word business report for your manager providing analysis and business advice following the requirements below.

Presentation and format:

Business report with a title page, contents page and clear structure. It must be written in an appropriate business tone with appropriate Harvard reference. Note no introduction is required. No marks will be awarded for an introduction. 5 marks

Part 1: Business Performance Analysis: 40 marks total

To support your analysis for this part you will need to calculate and use appropriate ratios. You need to show all ratio calculations workings which should be placed in the appendices to your report.

Statement of Profit or Loss

Analyse and comment on the financial performance of T-shirts Ltd using the case study information and exhibit 1. Your analysis should critically evaluate all the lines of the Statement of Profit or Loss. 20 marks

Statement of Financial Position

Analyse and comment on the financial position of T-shirts Ltd using the case study information and exhibit 1. Your analysis should critically evaluate all the lines of the Statement of Financial Position. 20 marks

Part 2: Understanding Financial Information & Management of Cash: 25 marks

Explain the concept of accrual accounting versus cash accounting, including the benefits and any limitations of each, with examples from this case study where relevant. 15 marks

What is meant by Profit and Cash flow and how they are different. 10 marks

Part3: Budget techniques and Company Finance: 30 marks

Define Budget and explain purposes of preparing a budget. 15 marks

What might be the main benefits of forming a limited company and listing it on a stock exchange. 15 marks

The word limit of 2,250 words excludes numerical tables, bibliography and appendices. To assist you with this task you have been supplied with the following information:

  • Exhibit 1: Extracts from T-shirt Ltd’s Financial Statements for 2019, including the Statement of Profit or Loss, and the Statement of Financial Position.

1.3. Assessment Submission Structure Part 1: Business Performance Analysis

Statement of Profit or Loss

Statement of Financial Position

Part 2: Understanding Financial Information & Management of cash

Accruals vs cash accounting

Profit vs Cash flows

Part 3: Budget and Company Finance

Meaning and Purposes of Budget

Benefits of forming a limited company and getting it registered on a stock exchange

Appendices

  • Supporting calculations
  • Bibliography as required

Exhibit 1:             Extracts from T-shirt Ltd’s Financial Statements for 2019

Summary Statement of Profit & Loss for the years ended 31 December

 

2019

2018

 

£000

£000

Revenue

1,366

2,101

Cost of sales

(751)

(840)

Gross profit

615

1,261

Other expenses

(1,009)

(820)

Profit before interest and tax

(394)

441

Finance costs

(106)

( 69)

Profit / (loss) for the year

( 500 )

  372


Summary Statement of Financial Position as at 31 December

 

2019

2018

 

£000

£000

ASSETS

 

 

Non-current Assets

 

 

Property, Plant and Equipment

1,274

1,282

Current Assets

 

 

Inventories

121

89

Trade and other receivables

305

218

Cash and cash equivalents

          0          

         45         

 

        426       

        352       

Total Assets

      1,700      

      1,634      

EQUITY AND LIABILITIES

 

 

Equity

 

 

Share Capital

310

310

Retained Earnings

          0          

        500       

Total Equity

        310       

        810       

Non-current Liabilities

 

 

Long-term borrowings

        921       

        688       

 

        921       

        688       

Current Liabilities

 

 

Trade payables

151

136

Bank overdraft

        318       

          0          

 

        469       

        136       

Total Liabilities

      1,390      

        824       

Total Equity and Liabilities

1,700

1,634


End of case study


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