{"id":13585,"date":"2020-11-24T09:06:22","date_gmt":"2020-11-24T09:06:22","guid":{"rendered":"http:\/\/onlineclassesguru.com\/index.php\/2020\/11\/24\/financial-management-control\/"},"modified":"2020-11-24T09:06:22","modified_gmt":"2020-11-24T09:06:22","slug":"financial-management-control","status":"publish","type":"post","link":"https:\/\/onlineclassesguru.com\/index.php\/2020\/11\/24\/financial-management-control\/","title":{"rendered":"Financial management&#038; control"},"content":{"rendered":"<style type=\"text\/css\"><\/style><p>&nbsp;<\/p>\n<p><u><strong>Part A\u2013 GP ElectricalsPlc2<\/strong><\/u><\/p>\n<p>You are a financial analyst at GP Electricals Plc; a public limited company specialising in manufacturing and distributing electrical generators. The Board of Directors have looked into the financial statements of the company for the last two years and have raised concernsregarding both the company\u2019s profitability and liquidity. The financial statements of GP Electricals for the last two years are given below:<\/p>\n<p><strong>Statement of Comprehensive Income for the year ended 31 December<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p><strong>2020<\/strong><\/p>\n<p><strong>2019<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p><strong>\u00a3000<\/strong><\/p>\n<p><strong>\u00a3000<\/strong><\/p>\n<p><strong>\u00a3000<\/strong><\/p>\n<p><strong>\u00a3000<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p>Revenue<\/p>\n<p>38,550<\/p>\n<p>29,950<\/p>\n<p>&nbsp;<\/p>\n<p><em>Less:<\/em>\u00a0Cost of sales:<\/p>\n<p>&nbsp;<\/p>\n<p>Opening Inventory<\/p>\n<p>3,875<\/p>\n<p>4,535<\/p>\n<p>&nbsp;<\/p>\n<p>Manufacturing costs<\/p>\n<p>22,140<\/p>\n<p>13,250<\/p>\n<p>&nbsp;<\/p>\n<p>26,015<\/p>\n<p>17,785<\/p>\n<p>&nbsp;<\/p>\n<p><em>Less:<\/em>\u00a0Closing Inventory<\/p>\n<p>(6,225)<\/p>\n<p>(3,875)<\/p>\n<p>&nbsp;<\/p>\n<p>(19,790)<\/p>\n<p>(13,910)<\/p>\n<p>&nbsp;<\/p>\n<p>Gross profit<\/p>\n<p>18,760<\/p>\n<p>16,040<\/p>\n<p>&nbsp;<\/p>\n<p><em>Less:<\/em>\u00a0Expenses<\/p>\n<p>&nbsp;<\/p>\n<p>Selling &amp; \u00a0\u00a0distribution expenses<\/p>\n<p>8,135<\/p>\n<p>4,380<\/p>\n<p>&nbsp;<\/p>\n<p>Administrative \u00a0\u00a0expenses<\/p>\n<p>2,100<\/p>\n<p>990<\/p>\n<p>&nbsp;<\/p>\n<p>Bad debts written off<\/p>\n<p>1,040<\/p>\n<p>565<\/p>\n<p>&nbsp;<\/p>\n<p>(11,275)<\/p>\n<p>(5,935)<\/p>\n<p>&nbsp;<\/p>\n<p>Operating profit<\/p>\n<p>7,485<\/p>\n<p>10,105<\/p>\n<p>&nbsp;<\/p>\n<p><em>Less:<\/em>\u00a0Interest payable<\/p>\n<p>(1,690)<\/p>\n<p>(380)<\/p>\n<p>&nbsp;<\/p>\n<p>Profit before tax<\/p>\n<p>5,795<\/p>\n<p>9,725<\/p>\n<p>&nbsp;<\/p>\n<p><em>Less:<\/em>\u00a0Income tax<\/p>\n<p>(900)<\/p>\n<p>(1,920)<\/p>\n<p>&nbsp;<\/p>\n<p>Profit after tax<\/p>\n<p>4,895<\/p>\n<p>7,805<\/p>\n<p>&nbsp;<\/p>\n<p><em>Less:<\/em>\u00a0Dividends paid<\/p>\n<p>(2,100)<\/p>\n<p>(2,100)<\/p>\n<p>&nbsp;<\/p>\n<p>Retained profit for \u00a0\u00a0the year<\/p>\n<p>2,795<\/p>\n<p>5,705<\/p>\n<p><strong>Statement of Financial Position as at 31 December<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p><strong>2020<\/strong><\/p>\n<p><strong>2019<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p><strong>\u00a3000<\/strong><\/p>\n<p><strong>\u00a3000<\/strong><\/p>\n<p><strong>\u00a3000<\/strong><\/p>\n<p><strong>\u00a3000<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p><strong>Non-current assets \u00a0\u00a0(net)<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p>Land and building<\/p>\n<p>24,590<\/p>\n<p>19,280<\/p>\n<p>&nbsp;<\/p>\n<p>Equipment<\/p>\n<p>4,380<\/p>\n<p>3,200<\/p>\n<p>&nbsp;<\/p>\n<p>Motor vehicles<\/p>\n<p>1,900<\/p>\n<p>1,650<\/p>\n<p>&nbsp;<\/p>\n<p>30,870<\/p>\n<p>24,130<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Current assets<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p>Inventory<\/p>\n<p>6,225<\/p>\n<p>3,875<\/p>\n<p>&nbsp;<\/p>\n<p>Trade Receivables<\/p>\n<p>5,900<\/p>\n<p>4,500<\/p>\n<p>&nbsp;<\/p>\n<p>Cash<\/p>\n<p>0<\/p>\n<p>560<\/p>\n<p>&nbsp;<\/p>\n<p>12,125<\/p>\n<p>8,935<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Current \u00a0\u00a0liabilities<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p>Trade Payables<\/p>\n<p>(5,100)<\/p>\n<p>(4,885)<\/p>\n<p>&nbsp;<\/p>\n<p>Taxation<\/p>\n<p>(1200)<\/p>\n<p>(1,490)<\/p>\n<p>&nbsp;<\/p>\n<p>Bank overdraft<\/p>\n<p>(2,180)<\/p>\n<p>0<\/p>\n<p>&nbsp;<\/p>\n<p>Net current assets<\/p>\n<p>3,645<\/p>\n<p>2,560<\/p>\n<p>&nbsp;<\/p>\n<p>34,515<\/p>\n<p>26,690<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Non-current \u00a0\u00a0liabilities<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p>Loan stock<\/p>\n<p>(4,575)<\/p>\n<p>(1,250)<\/p>\n<p>&nbsp;<\/p>\n<p>29,940<\/p>\n<p>25,440<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Equity\u00a0<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p>Ordinary shares of \u00a31 \u00a0\u00a0each<\/p>\n<p>26,035<\/p>\n<p>24,330<\/p>\n<p>&nbsp;<\/p>\n<p>Accumulated profit<\/p>\n<p>3,905<\/p>\n<p>1,110<\/p>\n<p>&nbsp;<\/p>\n<p>29,940<\/p>\n<p>25,440<\/p>\n<p><strong>Required:<\/strong><\/p>\n<p>1. Prepare a report for the Board of GP Electrical Plc. that evaluates the performance of GP Electrical in relation to profitability, liquidity, gearing, asset utilisation, and investor potential. Your report must be supported by the calculation of relevant ratios in the five evaluation areas mentioned above. \u00a0<strong>(25%)<\/strong><\/p>\n<p>2. Calculate the Working Capital Cycle in days for GP ElectricalPlc based on the information above, assuming 365 days, for the years 2020 and 2019<u>AND<\/u>\u00a0briefly comment on the company\u2019s liquidity position in 2020 compared to 2019. (round to the nearest day) \u00a0<strong>(5%)<\/strong><\/p>\n<p>3. Critically evaluate the limitations of using ratio analysis for both cross-sectional and time-series comparisons. \u00a0\u00a0<strong>(10%)<\/strong><\/p>\n<p><strong>All calculations should be clearly shown including all appropriate workings, and should be made to the nearest \u00a3000 or two decimal places where required.<\/strong><\/p>\n<p><strong>Total for Part A: 40%<\/strong><\/p>\n<p><u><strong>Part B \u2013 VenmacLtd<\/strong><\/u><\/p>\n<p>Vnemac Ltd is specialized in producing and selling ventilator machines. In 2019, the manufacturing cost per unit included:<\/p>\n<p>&nbsp;<\/p>\n<p>\u00a3<\/p>\n<p>&nbsp;<\/p>\n<p>Direct material<\/p>\n<p>125<\/p>\n<p>&nbsp;<\/p>\n<p>Direct labor (20 minutes per unit)<\/p>\n<p>15\/hour<\/p>\n<p>&nbsp;<\/p>\n<p>Variable manufacturing overhead<\/p>\n<p>20<\/p>\n<p>&nbsp;<\/p>\n<p>Variable selling expenses<\/p>\n<p>15<\/p>\n<p>&nbsp;<\/p>\n<p>Variable administrative expenses<\/p>\n<p>10<\/p>\n<p>Fixed costs for the year ended 31 December 2019 were:<\/p>\n<p>&nbsp;<\/p>\n<p>\u00a3000<\/p>\n<p>&nbsp;<\/p>\n<p>Fixed manufacturing<\/p>\n<p>1,650<\/p>\n<p>&nbsp;<\/p>\n<p>Fixed selling and distribution<\/p>\n<p>2,850<\/p>\n<p>&nbsp;<\/p>\n<p>Fixed administrative<\/p>\n<p>930<\/p>\n<p>The company produced and sold 45,000 units at \u00a3300 per unit.<\/p>\n<p>In 2020, management has decided to increase the selling price by 20% and to maintain the same contribution margin ratio as last year. This increase in price is to meet an increase of \u00a31,450,000 in fixed costs in 2020. The company has produced and sold the same quantity in 2020 as last year.<\/p>\n<p><strong>Required:<\/strong><\/p>\n<p>1) Calculate the break-even point and margin of safety in\u00a0<strong>both<\/strong>\u00a0units and revenue for the two years, 2019 and 2020, and briefly analyse the results. \u00a0\u00a0<strong>(10%)<\/strong><\/p>\n<p>2) Critically evaluate the key assumptions that underpin the break-even model, assessing and analysing whether the model can be applied within the context of today\u2019s global business environment. \u00a0\u00a0<strong>(15%)<\/strong><\/p>\n<p><strong>All calculations should be clearly shown including all appropriate workings, and should be made to the nearest \u00a3000 or two decimal places where required.<\/strong><\/p>\n<p><strong>Total for Part B: 25%<\/strong><\/p>\n<p><u><strong>Part C<\/strong><\/u><\/p>\n<p><strong>Required:<\/strong><\/p>\n<p>1. Financial managers can fund potential investments and expansion plans through accessing a range of differing sources of finance. Explain and critically evaluate a\u00a0<strong>single<\/strong>\u00a0source of\u00a0<strong>both<\/strong>internal and external finance that could be used by companies to finance further investment programmes. \u00a0<strong>(15%)<\/strong><\/p>\n<p>2. \u201cMost companies allocate the same resources to the same business units year after year. That makes it difficult to realize strategic goals and undermines performance\u201d.<\/p>\n<p>(Hall, Lovallo and Musters, 2012)<\/p>\n<p>Required:<\/p>\n<p>Critically evaluate the use of zero-based budgeting as a means of addressing the above problem in a challenging business environment. You are encouraged to use illustrative examples, to support your discussion.<\/p>\n<p><center><a href=\"http:\/\/onlineclassesguru.com\/orders\/ordernow\"><img decoding=\"async\" src=\"https:\/\/encrypted-tbn0.gstatic.com\/images?q=tbn:ANd9GcTyj99p60XCLyLk1htB7-1neRt8-2QdnenNlQ&usqp=CAU\"target=\"_http:\/\/onlineclassesguru.com\/orders\/ordernow\"\/><\/center><p>","protected":false},"excerpt":{"rendered":"<p>&nbsp; Part A\u2013 GP ElectricalsPlc2 You are a financial analyst at GP Electricals Plc; a public limited company specialising in manufacturing and distributing electrical generators. The Board of Directors have looked into the financial statements of the company for the last two years and have raised concernsregarding both the company\u2019s profitability and liquidity. The financial&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-13585","post","type-post","status-publish","format-standard","hentry"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v17.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Financial management&amp; control - onlineclassesguru<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"http:\/\/onlineclassesguru.com\/index.php\/2020\/11\/24\/financial-management-control\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Financial management&amp; control - onlineclassesguru\" \/>\n<meta property=\"og:description\" content=\"&nbsp; Part A\u2013 GP ElectricalsPlc2 You are a financial analyst at GP Electricals Plc; a public limited company specialising in manufacturing and distributing electrical generators. 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