Accounting and Finance for Managers- ACC3015
Objective of the Case: This case study aims at helping students to reflect on what they learnt throughout the module.
Instructions: The case study consists of three sections- Section A consists of 70 marks, Section B consist of 20 marks and Section C consists of 10 marks. Students are expected to read the case study thoroughly and to answer all the required questions in a structured and organised manner with reference to published work. This is an individual assignment and it is worth 60% of the total module mark.
Academic Honesty: Plagiarism will not be tolerated and could lead to your failure, so please make sure to use your own words in answering the case.
Submission deadline: Your answers should be submitted through Turnitin on NILE no later than Friday the 22nd May 2015, at 11:59PM. Please keep in mind that late submissions will not be allowed. If you have any mitigating circumstances that hinder your ability to submit on due date, please inform your module leader before the submission date. To learn more about the University’s mitigating circumstances policy please see the link below:
Please note that you are entitled to submit your assignment only once and the Turnitin originality report will only be available on the due date. There will be no draft submission.
Feedback: There will be a written feedback four- six weeks after the deadline for submission. You will be informed through NILE when the feedback is ready.
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Question 1: (70 Marks)
You are employed by AG Finance Plc. In your capacity of financial advisor you have been chosen to advice the Managing Director on the following financial matters.
Summarized below are the annual ratios for Apple Company. Apple is world leading company which designs and manufactures mobiles, tablets and personal computers. In addition it sells a variety of related software, applications and other services.
2014 2013 2012 2011 2010 Financial Strength
Current Ratio 1.08 1.68 1.50 1.61 2.01
Quick/Acid Test Ratio 0.82 1.40 1.24 1.35 1.72
Working Capital1 3,118.0 18,498.4 11,780.6 11,023.4 13,251.5
Long Term Debt/Equity 0.26 0.14 0.00 0.00 0.00
Total Debt/Equity 0.32 0.14 0.00 0.00 0.00
Long Term Debt/Total Capital 0.20 0.12 0.00 0.00 0.00
Total Debt/Total Capital 0.24 0.12 0.00 0.00 0.00
Payout Ratio 28.03% 28.48% 5.94% 0.00% 0.00%
Effective Tax Rate 26.13% 26.15% 25.16% 24.22% 24.42%
Total Capital 90,075.0 87,727.7 72,868.4 49,627.5 30,220.7 Efficiency
Asset Turnover 0.83 0.89 1.07 1.13 1.06
Inventory Turnover 57.94 83.45 112.12 70.53 52.51
Days In Inventory 6.30 4.37 3.26 5.18 6.95
Receivables Turnover 7.64 8.69 10.29 10.00 8.71
Days Receivables Outstanding 47.78 42.00 35.46 36.49 41.92
Revenue/Employee2 1,210,897 1,328,876 1,325,226 1,160,903 885,088
Operating Income/Employee2 347,798 380,982 467,751 362,377 249,480
EBITDA/Employee2 400,793 433,543 495,499 381,831 261,476 Profitability SECTION A -70 marks
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Gross Margin 38.59% 37.62% 43.87% 40.48% 39.38%
Operating Margin 28.72% 28.67% 35.30% 31.22% 28.19%
EBITDA Margin 33.10% 32.62% 37.39% 32.89% 29.54%
EBIT Margin 28.72% 28.67% 35.30% 31.22% 28.19%
Pretax Margin 29.26% 29.35% 35.63% 31.60% 28.42%
Net Profit Margin 21.61% 21.67% 26.67% 23.95% 21.48%
R&D Expense/Revenue 3.30% 2.62% 2.16% 2.24% 2.73%
COGS/Revenue 61.41% 62.38% 56.13% 59.52% 60.62%
SG&A Expense/Revenue 6.56% 6.34% 6.42% 7.02% 8.46% Management Effectiveness
Return on Assets 18.01% 19.34% 28.54% 27.07% 22.84%
Return on Equity 33.61% 30.64% 42.84% 41.67% 35.28% Valuation
Free Cash Flow/Share2 5.22 4.42 3.89 3.00 1.62
Operating Cash Flow/Share 2 6.24 5.32 4.77 3.74 1.83
A client approached your firm with the intention to invest in Apple and he needs guidance with regards to the following
a) Identify 8 financial ratios and calculate 2 non-financial ratios that are worth considering for management decision making. You are required to explain the rationale of choosing these ratios. Your answer must be supported with evidence from published work including books and journals. (20 Marks)
b) Write a Report to the Managing Director interpreting and critically analysing the performance of Apple over the past five years. The analysis must include an overview of the performance and financial position of the company. The analysis must be supported with evidence from the audited financial statement and independent research. (45 Marks)
c) Discuss the limitations of relying on financial ratios to interpret firm performance? (5 Marks)
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Question 2: (20 Marks)
Foxgloves Ltd is currently evaluating a proposal to invest in a new inshore rowing boat. Two possible types, A and B, have now been identified, each of which have a five-year life and zero scrap value. Their costs and anticipated cash flows are:
Year Type A Type B
0 (100,000) (100,000)
1 35,000 64,000
2 25,300 32,500
3 24,000 3,000
4 28,000 15,000
5 5,000 15,000
The appropriate discount rate is 10% per annum.
Year DF 10%
a. Calculate for each type
i. The payback period. (2 marks)
ii. The net present value (2 marks)
iii. The accounting rate of return (2 marks)
b. In a report format to you manger:
i. State the relative merits of the methods of evaluation mentioned in a) above. (7 marks)
ii. Explain which project type you would recommend for acceptance.
(7 Marks) SECTION B -20 marks
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Question 3: 10 Marks
In report format write to your manager to advice on the following costumer query?
a) How is a budget different from a forecast? And what is the point in flexing the budgets in the context of variance analysis? (10 marks) SECTION C -10 Marks
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1. Attempt this as three separate sections.
2. Report or memo format would be ideal to ensure presentation is formal and professional
3. All calculations must be detailed and presented clearly.
4. Use of published work (citing references) within text is expected.
5. A full list of references should be presented at the end of the case study.
6. Please avoid the use of ‘I, We, Us’ in your case study. You are expected to write in third person.
7. Include the assignment front sheet (and marking scheme, available) which is attached to the assignment brief.
8. Good use of English, referencing, presentation will earn marks.
9. Submit online and on time, late submissions will not be accepted. http://www.northampton.ac.uk/staff/academic-and-curriculum-administration/umf-staff-handbook/part-1-the-framework-day-to-day/assessment
10.For extensions or deferral of assessment, please refer to the University policy on mitigating circumstances. http://tundra.northampton.ac.uk/results/searchresult.asp?Title=mitigating+circumstances&Description=&Author=&Department=&Date+Created=&Until+Date+Created=&Document+Type=&Perspectives=&submit=Search
Accounting and Finance Penalties
1. Missing References – penalty is three grade points minimum (see module guide for further details).
2. Front sheet missing-penalty one grade point.
NB* The grade point refers to one grade movement. E.G. a one point penalty when the assessment grade is B+ will be downgraded to B. A two point penalty would down grade the assessment to B-, three points to C+
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Accounting & Finance Front Sheet
NB. This sheet must be attached to any submission of Accounting & Finance field module coursework ONLINE.
No assignment will be accepted without it.
Title of Coursework: ACC3015 Resit Case Study
Marking Tutor: Tambudzai Mangezi
Hand in Date: 27 February 2015
Checklist before submission
1. Have you read, understood and acted in accordance with the referencing guidelines set out in the appropriate Accounting & Finance Module Guide.
2. Where you have quoted directly from or where you have paraphrased the work of others, have you acknowledged and appropriately referenced the source of your quotation in the body of the text?
3. Have you placed all direct quotations in inverted commas?
4. Have you listed and correctly cited all your sources in your bibliography?
Declaration by the candidate named above
1. I confirm that this is my own work (or, in the case of a group assignment, the work of my group) and that, although I may have consulted others in the course of assembling material for the work, the finished article has been completed without help or participation of any other person (other than, in group assignments, other members of the same group).
2. The work contains no material drawn from unattributed sources.