2013级财务管理与决策assignment 2

BTEC CentreGuangdong AIB Polytechnic CollegeUnit Unit 2: Managing Financial Resources and Decisions Class 2012 HND Finance, 2013 HND Business, Finance Assignment Two Making Financial Decision and Evaluate Financial Performance Date issued June 11, 2014Date deadline June 25, 2014Tutor KONG TAO & Hong YupingIV HUANG GuanDeclaration:I am aware that cheating and plagiarism will not be tolerated in any assignment andthat this work complies with the requirements.Student’s Signature：(In Pinyin)(In Chinese)Class: Student No.:Learning OutcomesAssessmentGrading：Purpose：This assignment is set to test students’ capacity and ability to assess different sources of finance to a business and make decisions for the business by using numerous techniques. Also, problems designed in this assignment are for the purposes thatstudents should be put into the situation of reality to show their ability to solve problems with knowledge, ideas and confidence.Scenario one:On your first morning in early January 2013, you are given two sales budget covering the twelve month period from July 2013 to December 2013 combined with the first six months actual sales figures and variances between budgeted and actual sales prepared by the regional financial account of Guangzhou and Foshan branch. The directors are concerned that they are very unlikely to meet their budgeted sales targets for July to December 2013.Sales budget –Nanfang Components (Guangzhou) Ltd.– July 2013-December 2013Sales budget –Nanfang Components (Foshan) Ltd.– July 2013-December 2013Task one: Analyse budgets and make appropriate decisions (outcome 3.1)(1)Scrutinize at the sales budget and identify that the main problems that NanfangComponents Ltd is faced with.(2)Identify the likely causes of the problems and how they might be remedied andavoid in the future.(3)Make recommendations for resolving the issues highlighted in the sales budgetand decide what approach should be taken in relation to the Nanfang Components Ltd’s Budget.Scenario twoThe directors of Nanfang Components Ltd are very concerned about the company’s current costing and pricing policies. They are also anxious to find out which products are going to be profitable or otherwise in the future. With this in mind the directors ask you to carry out a full costing and pricing review across the company’s product and an assessment of break-even figures for each item currently manufactured by Nanfang Comments Ltd.One of the most popular products is a multi-purpose component-the ACE Converter. You ascertain that the following costs are incurred in the production of each unit: Material costs: ￥525Labour costs: ￥357.5Variable overheads: ￥102The fixed costs of running the factory where the ACE Converter is produced amount to ￥1,200,000 per annual. The current selling price of the converter is ￥1,200. The unit sales for 2013 are expected to be 7,500.Two customers have recently placed large orders for ACE Converter at substantially discounted price. The business would push the sales levels well above the anticipated demand of 7,500:●Southwood Electricals - an order for 500 units at a discount of 15% on the currentselling price.●Wstbrook Engineering –an order for 1000 units at a discount of 25% on thecurrent selling price.Task two: Explain the calculation of unit costs and make pricing decisions using relevant information(Outcome 3.2)You are required to calculate the following items under different pricing policies(1) the contribution per unit and the break-even point in unit.(2) the profit of 2013 at the sales level of 7500.(3) the impact on the profit of each new order over the anticipated demand of 7500. All the above information regarding the ACE Converter should be presented in the form of a brief report showing the relevant financial material in tabular by relevant text and making recommendations as to whether they should accept or reject either of the ordersScenario three:Dongfang Engineering Company are considering two alternative business project each of which involve an initial investment of ￥450,000Project “A” involves the introduction of modern, hi-tech machine into the company’s main production unit. This will result in significant increase in output and substantial savings in production and maintenance costs. This in turn will result in a net increase in turnover to the company of:Year 1 – RMB 180,000Year 2 – RMB 230,000Year 3 – RMB 280,000Year 4 – RMB 120,000Project “B” involves an increase in the company’s marketing activities. The directors would employ one of the region’s most prestigious marketing companies to manage a massive regional campaign. They feel that business could be increased without, necessarily, updating production process. It is anticipated that the net effect of their campaign would bring in additional turnovers of:Year 1 – RMB 60,000Year 2 – RMB 120,000Year 3 – RMB 250,000Year 4 – RMB 250,000For calculation purposes, you can assume that the cost of capital is 8% per annualover the four year period.Task three:Assess the viability of a project using investment appraisal techniques (Outcome 3.3 )(1)Calculate the accounting rate of return for the two investment proposals.(2)Calculate the payback for the two investment proposals.(3)Calculate the net present value for the two investment proposals. Assume that notax implication will arise as a result of salvaging either of the proposed investments at the end of their useful lives.(4)By trial and error find the internal rate of return for the two investment proposals. Evaluate the effectiveness of each techniques of financial appraisal by giving comment on which, if either, of the investment alternatives should be taken based on your calculationsScenario four:Mr. Zhang is considering investing in a share market. When he takes a close look into the company’s financial statements, the entity format of the business puzzles him as he is not sure the purposes and implications of financial statements of different businesses may indicate and serve. He comes to you with two companies’ financial statements. He would like to get help from you, a very experienced accountant in this field.HUANENG Power Int'l Inc. is the public company in the electric power generation sector. The current shares of HUANENG Power Int'l Inc. traded for around ￥7.87 while shares in 2013 traded for ￥5.57. The figures shown below were extracted from the financial reports of the company at 31 December 2013 and 2012.HUANENG Power Int'l Inc.Profit and loss statementHUANENG Power Int'l Inc.Task Four:Discuss the main financial statements(Outcome 4.1)(1)Explain the reasons for preparing the financial statements.Explain the main accounts in the financial statements.Task Five: Compare appropriate formats of financial statements for differenttypes of business(Outcome 4.2)(1)Describe the formats of company financial statements.(2)Describe the formats of partnership financial statements.(3)Describe the formats of sole trader financial statements.Task Six: Interpret financial statements using appropriate ratios and comparisons, both internal and external (Outcome 4.3 )(1) Calculate the following ratios:∙returns on capital employed by two companies∙gross profit percentages of two companies∙net profit percentages of two companies∙current ratios of two companies∙Debt to assets ratio of two companies∙Debt to equity ratio of two companies∙acid tests of two companies∙debtors collection periods of two companies∙stock turnovers of two companies∙Earning per shares (EPS) of two companies∙P/E ratio of two companies(2) Analyze and interpret the figures calculated by comparison of each ratio between 2012 and 2013 for HUANENG Power Int'l Inc.(3) State whether Mr. Zhang should invest HUANENG Power Int'l Inc. with possible reasons.Suggestion：1.To solve the above problems, you are encouraged to put the knowledge and theoryyou learnt in class and textbook into the case provided and to offer your in-depth analysis and problem solving methods.2.It is encouraged to use graphs, tables or curves where is necessary to offer a betterlooking and dynamitic effects of the assignment.3.The capacity of problem solving and analysis should be detailed as much aspossible so that performance of you can be judged from.4.This is an individual assignment; you must write it by yourself in English and typeup into a professional looking. (It must have an introduction and conclusion, 1.5 spaced, 12 point Arial or Time New Roman)。