Task 1 -
In detail, discuss the process you would follow to analyse trends in the performance of a business. In your discussion, include instruction on how to identify past, current and future performance of the business through data analysis, how to research variations from targets and divergences from trends, and evaluate to determine margins of error and any repeating patterns and assessing trends in performance in terms of organisational short-term and long-term objectives.
Task 2 -
Formulate a detailed procedure for developing performance indicators that link organisational processes, resource use and organisational objectives to environmental factors using processes that are planned, inclusive and realistic within available timeframes and resources. In your procedure include a process for reviewing components of performance indicators for relevance against performance trends and organisational capacities.
Once you have formulated your procedure, follow the procedure to develop at least two performance indicators that would be relevant to your job role (or your preferred job role if you are not currently working in the financial services industry).
Task 3 -
For this task you are to use your workplace (or your preferred workplace if you are not currently working in the financial services industry), and discuss three options for improvement by identifying, minimizing or eliminating factors inhibiting performance, ensuring that value is added through use of standard financial management techniques such as capital budgeting.
Task 4 -
For this task you must research each of the following topics, and complete a basic report on your findings. The research topics are:
-Ethical considerations relating to conflict of interest, confidentiality and disclosure requirements
-Key principles and methods of valuation and capital budgeting analysis and investment analysis
-Cost -benefit analysis and use of performance ratios or comparison techniques
Task 5 -
A firm of solicitors is using budgetary control during 2010. The senior partner estimated the demand for the year for each of the firm's four divisions: Civil, Criminal, Corporate and Property. A separate partner is responsible for each division.
Each divisional partner then prepared a cost budget based on the senior partner's demand estimate for the division. These budgets were then submitted to the senior partner for his approval. He then amended them as he thought appropriate before issuing each divisional partner with the final budget for the division. He did not discuss these amendments with the respective divisional partners. Actual performance is then measured against the final budgets for each month and each divisional partner's performance is appraised by asking the divisional partner to explain the reasons for any variances that occur.
The Corporate partner has been asked to explain why her staff costs exceeded the budgeted costs for last month while the chargeable time was less than budgeted. Her reply is below:
"My own original estimate of staff costs was higher than the final budgeted costs shown on my divisional performance report. In my own cost budget I allowed for time to be spent developing new services for the firm's corporate clients and improving the clients' access to their own case files. This would improve the quality of our services to clients and therefore increase client satisfaction. The trouble with our present system is that it focuses on financial performance and ignores the other performance indicators found in modern performance management systems."
(a) Discuss the present budgeting system and its likely effect on divisional partner motivation.
(b) Explain two non-financial performance indicators (other than client satisfaction and service quality) that could be used by the firm.
Task 6 -
A Co is appraising the purchase of a new machine, costing $1.5 million, to replace an existing machine which is becoming out of date and which has no resale value. The forecast levels of production and sales for the goods produced by the new machine, which has a maximum capacity of 400,000 units per year, are as follows:
|
Year
|
1
|
2
|
3
|
4
|
|
Sales volume (units/year)
|
350,000
|
380,000
|
400,000
|
400,000
|
The new machine will incur fixed annual maintenance costs of $145,000 per year. Variable costs are expected to be $3.00 per unit and selling price is expected to be $5.65 per unit. These costs and selling price estimates are in current price terms and do not take account of general inflation, which is forecast to be 4.7% per year.
It is expected that the new machine will need replacing in four years' time due to advances in technology. The resale value of the new machine is expected to be $200,000 at that time, in future value terms.
The purchase price of the new machine is payable at the start of the first year of the four-year life of the machine. Working capital investment of $150,000 will already exist at the start of the four-year period, due to the operation of the existing machine. This investment in working capital is expected to increase in nominal terms in line with the general rate of inflation.
A Co pays company tax one year in arrears at an annual rate of 27% and can claim 25% reducing balance tax-allowable depreciation on the purchase price of the new machine. Cost of capital is 11%
(a) Using the net present value approach, evaluate whether purchasing the new machine is financially acceptable.
(b) Discuss the reasons why investment finance may be limited, even when a company has attractive investment opportunities available to it.
7. What can you do to analyse trends in performance?
8. What are the three alternatives that are valid when experiencing an unfavourable trend?
9. What are the six steps involved in a summative approach to developing performance measures?
10. What are the seven characteristics of KPI's that elevate their applicability across a range of organisations?
11. List four benefits of performance measurement.
12. Discuss three of the primary capital budgeting approaches.
13. What can you do to identify options for improvement?
14. E Ltd is considering an investment in a new process. The new process will require an increase in stocks of $30,000 during the first year. There will also be an increase in debtors outstanding of $40,000 and an increase of creditors outstanding of $35,000 during the first year. The new process will use machinery that was purchased immediately before the first year of operations at a cost of $300,000. The machinery is depreciated using the straight-line method and has an estimated life of five years and no residual value. During the first year, the net operating profit before depreciation from the new process is expected to be $180,000. The business uses the net present value method when evaluating investment proposals.