Assessment Criteria
Learning Outcomes: Knowledge and Understanding tested in this assignment:
1. Evaluate the role and limitations of published financial statements and identify and use the information produced;
2. Interpret key financial performance indicators and be able to use financial information to formulate future plans;
3. Analyse the role of sound financial management in the organisation;
4. Evaluate the financial requirements of a business or project;
Learning Outcomes: Skills and Attributes tested in this assignment:
5. Communicate effectively with financial and non-financial managers;
6. Present their ideas confidently and effectively on financial issues.
Feedback /Marking criteria for this Assignment
Performance will be assessed using HBS Grading Criteria. The Marking Scheme is shown in the assessment task. Guidance for improvement will be given in writing on the assessment feedback form within 4 weeks. For further help, contact Rob Fletcher in his drop-in hour (Monday 10.15-11.15) or by email ([email protected]). Late work and plagiarism will receive standard penalties. Turnitin is used to highlight student collusion or consider similarities to other work.
Detailed Brief for Individual Assessment
BORAKA ENGINEERING PLC
You are advising Boraka Engineering (UK) plc, a large company who are considering acquiring the whole share capital of Younger Machinery plc. Using the information given in the scenario below, you are required to write a report recommending whether or not your client should continue with the acquisition.
Background information:
Younger Machinery plc has been trading for over 75 years. Their main engineering plant is in South Wales but it has three other plants in the UK with the smallest one in Yorkshire, England...The company had been trading successfully but has been badly affected by the recession. As a response to increased competition and falling margins, the directors decided to restructure the business. They sold their smallest engineering plant in Yorkshire in July 2018.. In October 2018, they spent £750,000 on ‘retooling' their Welsh plant and invested £600,000 on staff training. This change has resulted in 45 semi skilled workers being made redundant. The company now employs 333 staff of whom 12%come from European Union countries outwith the United Kingdom.
.
The sales director is pleased that they almost managed to achieve their sales targets for the year ended 31 December 2018, although they did have to offer some customers special discounts and extended credit terms as inducements.
You are given the following information for Younger Machinery plc and its competitor Jones plc, who are also an engineering company. You are also given figures for the industry averages for key indicators.
|
Income Statement for the year ended
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31 Dec 2018
|
31 Dec 2017
|
|
|
£'000
|
£'000
|
|
Revenue - Welsh plants
|
64,600
|
65,300
|
|
Other UK plants
|
6,800
|
7,200
|
|
|
70,400
|
72,500
|
|
Cost of sales
|
(64,608)
|
(65,418)
|
|
Gross profit
|
5,792
|
7,082
|
|
Selling and distribution costs
|
(1,080)
|
(900)
|
|
Administrative expenses
|
(1,272)
|
(1,092)
|
|
|
3,440
|
5,090
|
|
Exceptional items (advertising and training)
|
-
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(2,700)
|
|
Profit on sale of Yorkshire plant
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6,132
|
-
|
|
Profit from operations
|
9,572
|
2,390
|
|
Finance cost
|
(2,000)
|
(2,000)
|
|
Profit before tax
|
7,572
|
390
|
|
Taxation
|
(1,350)
|
(60)
|
|
Profit for the year
|
6,222
|
330
|
|
Statement of Financial Position as at
|
31 Dec 2018
|
31 Dec 2017
|
|
|
£'000
|
£'000
|
|
Assets
|
|
|
|
Non-current assets
|
38,601
|
35,906
|
|
|
|
|
|
Current assets
|
|
|
|
Inventory
|
951
|
950
|
|
Trade receivables
|
5,460
|
1,734
|
|
Bank
|
5,800
|
10
|
|
|
12,211
|
2,694
|
|
Total assets
|
50,812
|
38,600
|
|
|
|
|
|
Equity and Liabilities
Equity
|
|
|
|
Ordinary shares of £1 each
|
13,200
|
13,200
|
|
Retained earnings
|
13,941
|
7,715
|
|
|
27,141
|
20,915
|
|
Non-current liabilities
|
|
|
|
5% Loan notes - repayable 2019
|
15,000
|
15,000
|
|
|
42,141
|
35,915
|
|
Current liabilities
|
|
|
|
Payables
|
8,671
|
2,685
|
|
Total Equity and Liabilities
|
50,812
|
38,600
|
Limited Ratios for Younger Machinery PLC from previous years
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Key ratios
|
Younger Machinery plc
|
|
|
2016
|
2014
|
2013
|
|
ROCE
|
7%
|
7.5%
|
7.6%
|
|
Op. profit margin
|
6.0%
|
6.4%
|
6.3%
|
|
Gross profit margin
|
10%
|
11%
|
12%
|
Major Competitor JONES PLC
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Key figures
|
Jones plc
|
|
|
2018
|
2017
|
|
|
£'000
|
£'000
|
|
Revenue
|
11,200
|
10,700
|
|
Operating profit
|
800
|
780
|
|
Capital employed
|
18,500
|
17,800
|
|
Key ratios
|
Jones plc
|
Industry Average
|
|
|
2018
|
2017
|
2017
|
|
ROCE
|
4.3%
|
4.4%
|
5.5%
|
|
Op. profit margin
|
6.8%
|
7.1%
|
8.2%
|
|
Gross profit margin
|
15%
|
13%
|
14.6%
|
|
Inventory days
|
10 days
|
9 days
|
15 days
|
|
Trade receivables days
|
14 days
|
13 days
|
22 days
|
|
Trade payable days
|
29 days
|
27 days
|
25 days
|
|
Current ratio
|
0.7:1
|
0.6:1
|
0.8:1
|
|
Acid test ratio
|
0.5:1
|
0.6:1
|
0.65:1
|
Assignment-2
Purpose of the assessment
To demonstrate an understanding of the role and limitations of published financial reports. To demonstrate an understanding of working capital management and gearing.
Introduction to the work: This assignment is based on the material taught in weeks 5 and 7 to 11
Approach/steps to follow:
1. You should study the data in the case study and think about how which ratios are relevant. Calculate the ratios showing your method. You are strongly recommend to present these in tables for clarity. You should then interpret the ratios, applying the information about the business and its competitor. You should advise management on the significance and limitations of your findings and possible actions they could take. You do not need to research for sections 1 and 2 - you need to think.
2. You should show an understanding of the importance and methods of working capital management. You will need to read around the topic in academic and professional journals. Your textbook will give a basic introduction only. You may use the figures in the case study for illustration.
It is essential:
That you include your student number, but NOT your name, on your work. You must attach the cover page which is at the end of this document.
That each of the sections is covered (if not, there will be zero for that section)
That you show an understanding of the topics as well as an ability to perform calculations accurately.
Tips:
Think about the data before you start calculating - refer back to your class notes for similar examples
Read and use a range of recent academic and professional resources, e.g. books, journals, professional or business websites
Start in good time and ask if you need help. Your tutors will help you understand the concepts but will not deal directly with questions about the assignment.
Do NOT reference Wikipedia or tutorial websites. If you use them for background information you MUST follow up the points in good quality sources.
Paraphrasing others' views and giving the relevant source, is generally better than using direct quotes
Check grammar, use vocabulary you understand, use UK spelling and try to use PEEEL (Point, Evidence, Explanation, Example, Link) to structure your main paragraphs (refer to CASE Essay writing tips)
Pay attention to presentation - your work should look professional. You should use double spacing between paragraphs and number your pages.