Business Life Cycle
PART A -
Performance Limited is an online business selling sports apparel. Prepare a SWOT analysis of the market for Performance Limited. This should be presented as an internal memo addressed to the board of directors.
Part B -
(This should be based on the Trial Balance & Master Accounts which can be found in Background Information on studynet)
PART I - Prepare the financial statements for 2016 in a format suitable for filing at Companies House.
- Any workings to support the numbers may be included in an appendix headed "Appendix - workings do not part of the financial statements".
- You are not required to show your student number as a footer for this part of the assignment.
PART II - Complete sections A and G of the 2015-6 Annual Return for the company.
- The form should be signed anonymously using your student number.
- You are not required to show your student number as a footer for this part of the assignment.
PART III - Draft a memo to the board to explain the performance of the company for the year. Include relevant ratios that help to identify any "issues" that you believe should be brought to the attention of the board. Include a brief section that sets out the statutory filing and audit requirements applicable to the company.
- Maximum word count: 400 words (Part III only)
- This should be prepared in a memo format.
- Any workings showing ratio workings may be included in an appendix.
PART C - (This should be based on the REFDEF Investment Appraisal Information which can be found in Background Information on studynet)
You should evaluate the investment opportunity using a net present value calculation which considers the costs and benefits of the opportunity. You should also consider the impact on the cash flows if the opportunity achieves only the minimum number of participants, and the impact if the maximum number of participants take part.
You are required to prepare a memo to the Board of Directors advising on whether or not Performance Limited should invest in this opportunity. You are required to explain the calculations you have done and recommend whether the company should proceed with the project. You are expected to comment on the financial risk, the assumptions made and any relevant non-financial issues you have identified.
- Maximum 400 words
- The work should be in the format of a memo addressed to the board
- You are required to attach, and reference, the calculations you have performed, which should be attached as an appendix.
Part D -
One of the directors (Cosmo) is seeking to exit the business and the other two directors are considering buying his shareholding.
In order to support them in this matter you have been asked to prepare a report to the board considering the current valuation of the Company.
You should prepare a valuation of Performance Limited based on the three methods indicated and discuss the validity of each method as a means of valuing the business, with regard to the purpose of the valuation exercise. You should also consider other financial andnon-financial issues, relevant to the value of the business, relating to the exit of a shareholder.
- Net Asset Value (also known as net book value)
- Income multiple (Enterprise Value to EBITDA)
- Discounted Cash flow model (also known Net present value or multi-period income model)
You should take in to account the following information in your calculations and analysis.
The up-to-date fair value of the Non Current Assets is shown below. All other assets and liabilities, as shown in the 2016 accounts, are assessed at being at fair value.
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£
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Property
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250,000
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Fixtures and Fittings
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20,500
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Motor Vehicles
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12,000
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The investment project (part C) has gone ahead and has been considered to be highly successful. Due to the funding required the Company took out a bank loan of £36,000 as well as the £100,000 equity investment by Anil. This is not included in the 2016 Statement of Financial Position.
The forecasted growth for Performance Limited (including the impact of the investment) is shown below.
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2017
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2018
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2019
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2020
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2021
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10%
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10%
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8.5%
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6.5%
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5%
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It is considered that £7,420 of costs included in administrative and distributions costs for 2016 should be treated as one-off costs as they related to a specific project which is not ongoing.
Valuation data provided by market experts
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Market growth predicted
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1.5%
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Cost of capital
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28%
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Market based multiples
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Between 3.5x to 4x EBITDA
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Assignment Files -
https://www.dropbox.com/s/6z9vhonc2j6biqr/Assignment%20Files.rar?dl=0