Module:                          Strategic Financial Management                        

 


Tutor:                                                          


 


Assignment Title:               Financial Ratios and International Accounting Standards                 


Assignment Length:        2,500 Words Maximum


 


Issue Date:                     As Per Schedule


 


Submission Deadline:     As Per Schedule


 


Learning Outcomes

This assessment satisfies the following learning outcomes as specified in your Module Guide.


 


Learning Outcomes


Assessment Criteria


Demonstrate a knowledge and understanding of financial analysis and international accounting standards and their contribution to financial management.


 


Critically evaluate relevant accounting statements for management and investment decisions.


Demonstrate a knowledge and understanding of the theories and technical applications relating to accounting theories.


 


Identify and analyse problems relating to accounting decisions.


 


It is the candidate’s responsibility to familiarise themselves with LSC’s policies on plagiarism and use of unfair means contained within the Student Handbook.


 


This also requires familiarising yourself with the Harvard Author Date system of citing and acknowledging secondary sources.


 


 


The Assignment contains two Parts A and B.


 


Ensure you answer BOTH Parts thoroughly.
 


 


ASSIGNMENT QUESTIONS


 


Upholland Plc is thinking of investing in a limited liability company called Orrell. The management team are embarking on an analysis of Orrell to decide whether or not to invest.


The summarised financial statements of Orrell are shown below


 


Orrell Income statement for the year ended 31st October 2007


0


Sales revenue                                                                              23,420


Cost of sales                                                                     (8,245)


––––––––


Gross profit                                                                       15,175


Expenses                                                                          (2,460)


––––––––


Profit from operations                                                         12,715


Finance cost                                                                           (50)


––––––––


Profit before tax                                                                 12,665


Income tax expense                                                            (1,515)


––––––––


Net profit for the period                                                       11,150


           ––––––––


Orrell Balance sheet as at 31st October 2007


0             0


Assets


Non-current assets                                                             31,000


Current assets


Inventory                                                      1,450


Trade receivables                                            2,500


Cash                                                                  50             4,000


––––––          –––––––


Total assets                                                                       35,000


––––––––


Equity and liabilities


Capital and Reserves


·50 Ordinary Shares                                                         25,000


Reserves                                                                            7,520


–––––––


32,520


Current liabilities


Trade payables                                                860


Tax                                                               620               1,480


––––––


Loan notes                                                                         1,000


–––––––


Total equity and liabilities                                                      35,000


          ––––––––



 


 


 


 


Additional information


(i) During the year Orrell paid dividends of million.


(ii) The market share price for Orrell is .50.


(iii) Orrell’s main competitor is a company called Pemberton which has the following ratios:


Dividend per share 10 cents


Dividend cover 5 times


Earnings per share (EPS) 20 cents


Price earnings ratio 13·4


Debt/equity ratio 15%


Interest cover 100 times


 


Part A (60%)


 


(a) Calculate the following ratios for Orrell.


(i) Dividend per share


(ii) Dividend cover


(iii) Earnings per share (EPS)


(iv) Price earnings ratio (PE ratio)


(v) Debt/equity ratio


(vi) Interest cover


 


(b) Prepare notes for Upholland Plc that comment on the ratios you have calculated. Use the


     ratios for Pemberton as a comparator.


 


 


PART B (40%)


 


(a)  Explain the main purposes of the International Accounting Standards Board’s ‘Framework for the Preparation and Presentation of Financial Statements’.


 


(b) Identify any four user groups of financial statements and explain what information


they are likely to want from them.


 


Penalties for late Submission

Please consult your Student Handbook for the rules concerning late submission of your Coursework.


Coursework not submitted will be recorded as Fail. Extensions without penalties may be granted, but only in exceptional circumstances e.g. illness, and should be accompanied by written evidence.


 


                Grade Description                                                              Mark Classification


 


          Work of Exceptional Quality                       High                        80+                                         I


Middle                    75-79                                       I


Low                         70-74                                       I


 


          Work of Very Good Quality                        High                        67-69                                       II.i


Middle                    64-66                                       II.i


Low                         60-63                                       II.i


 


          Work of Good Quality                                 High                        57-59                                       II.ii


Middle                    54-56                                       II.ii


Low                         50-53                                       II.ii


 


          Work of Satisfactory Quality                     High                         47-49                                       III


Middle                    44-46                                       III


Low                         40-43                                       III


 


          Unsatisfactory Performance                         Borderline            35-39                                       BF


                                                                                Clear Fail                                below 35                                 F


 


The definitions of the above criteria are:


 


Work of Exceptional Quality


First Class

Virtually all of the relevant information/skills accurately deployed. Excellent grasp and effective integration of theoretical knowledge and technical application in relation to the Learning Outcomes. Calculations performed to a high level of accuracy. Evidence of originality and creativity as appropriate to the subject.


Evidence of thorough research through inclusion of a Bibliography and Harvard Referencing correctly applied.


Work of Very Good Quality


Upper Second Class

Most of the relevant information/skills accurately deployed. Good grasp and effective integration of theoretical knowledge and technical application in relation to the Learning Outcomes. Calculations performed accurately. Some evidence of originality and creativity as appropriate to the subject.


Evidence of research through inclusion of a Bibliography and Harvard Referencing correctly applied.


Work of Good Quality


Lower Second Class

Some of the relevant information/skills accurately deployed. Adequate grasp and limited effective integration of theoretical knowledge and technical application in relation to the Learning Outcomes. Limited evidence of originality and creativity as appropriate to the subject.


Evidence of research through inclusion of a Bibliography and Harvard Referencing correctly applied in the majority occurrences.


Work of Satisfactory Quality


Third Class

Some omissions in the deployment of information/skills. Limited grasp and very little integration of theoretical knowledge and technical application in relation to the Learning Outcomes. Virtually no evidence of originality and creativity as appropriate to the subject.


Evidence of limited research through inclusion of a Bibliography and Harvard Referencing correctly applied in some occurrences.


Unsatisfactory Performance


Borderline Fail

Deficiencies or omissions in information/skills. Limited knowledge and understanding of the Learning Outcomes. Marginal evidence of skills, knowledge or creativity which could, in the light of overall performance, constitute the basis for a pass grade.


Evidence of very limited research through inclusion of a Bibliography and Harvard Referencing correctly applied.


Clear Fail

Little evidence of the information/skills, theoretical and technical elements relevant to the assignment. Mainly irrelevant and/or incorrect information provided. Poor presentation and incorrect calculations.


Evidence of very limited research through inclusion or non inclusion of a Bibliography and Harvard Referencing incorrectly applied in the majority of occurrences.



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