Description
University of Northampton
Examination Period 2nd: 2019/20
| FINM037202nd |
| Module Title
Level Time Allowed |
Managing Finance and Information
Seven Three hours plus fifteen minutes reading time |
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| Instructions to students:
· Enter your student number not your name on all answer books. · Students are encouraged to use the first fifteen minutes of the exam to read the questions carefully and to plan answers.
· Section A – Answer the compulsory question in this section. This question is worth 50% of the overall marks. · Section B – Answer two out of four questions in this section. All questions are equally weighted. This section is worth 50% of the overall marks. · Only the work written in the answer books will be marked. · Begin each question on a separate answer page; label each answer page clearly with the number of the question you are answering.
· The use of a calculator is permitted. · Students are not permitted to remove this examination paper from the examination room. For all purposes the examination paper remains the property of the University of Northampton. |
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| No. of Pages | 6 | ||
| No. of Questions | 5 | ||
Section A
This section contains one compulsory question.
(hereinafter “the company”) Pets at home Group Plc
Question 1
- Using eight appropriate ratios and key figures comment fully on the financial progress made by the company in the last three years.
(25 marks)
- Given the state of the economy, describe the financial risks that the company is vulnerable to and how they attempt to manage this.
(10 marks)
- Explain the key features of the company’s approach to the application of corporate governance. (10 marks)
- What evidence is there that the company is committed to social responsibility? (5 marks)
Total: 50 marks
Section B
Answer two out of four questions from this section.
Question 2
Havana Ltd is the market leader producing bamboo plates fast-food restaurants.
The following data is available:
- A designed of 1 bamboo plate sells for £8 each.
- Variable production costs are £2.
- Annual fixed costs are estimated at £30,000.
- The amount of capital employed is £80,000.
- There are variable selling and distribution costs of £1 per unit.
Required:
- Find the contribution of the bamboo plates. (2 marks)
- Find the number of bamboo plates that need to be sold to break-even.
(2 marks)
- Determine the sales value at breakeven point. (2 marks)
- Find the contribution to sales. (2 marks)
- How many packs of bamboo plates must be sold to earn a return of 20% on capital employed? (2 marks)
- If the owners wish to recover all expenses and the capital employed over two years, how many designed toys must be sold over that period?
(4 marks)
- What will be the margin of safety in units and expressed as a percentage if the company sells?
- 40,000 units
- 45,000 units (6 marks)
- Explain the assumptions and limitations of cost volume profit analysis.
(5 marks)
Total: 25 marks
Question 3
Autumn Ltd has provided the following forecast information for the six months ending 30 June 2020.
| £ | £ | £ | £ | £ | £ | |
| January | February | March | April | May | June | |
| Sales | 30,000 | 35,000 | 40,000 | 30,000 | 30,000 | 40,000 |
- HSBS bank will grant a loan of £40,000 on 31st December 2019
- The company will spend £30,000 on non-current assets on 1st January 2020
- 50% of the sales shown above will be cash sales and the balance will be on one-month credit
- Total sales in January were £30,000
- Purchases of materials are estimated to be 20% of sales. The suppliers have agreed to payment terms of one-month credit
- Wages will be £10,000 per month. Payable in the month in which they are earned
- Rent will be £10,000 per annum payable in advance on the first day of each quarter
- Insurance will be £6,000 per annum payable in advance on the first day of March
- Other operating expenses will be £8,000 per month payable in the month in which they are incurred
- The loan is repayable in monthly repayments of £400 per month including interest, these start one month after the loan is received
- Depreciation is estimated to be £5,000
- A dividend of £20,000 will be paid to the shareholders in July 2020
- The bank balance on 30th December expected to be £20,000
Required:
- You are required to prepare a cash budget for the six months January to June 2020 (15 marks)
- State why a cash budget is needed for a business. (10 marks)
Total: 25 marks
Question 4
Succwie Ltd is trying to decide which of two investment projects it should choose. The accountant has used investment appraisal techniques to help the management decide. The following information is provided:
| Project A | Project B | |
| Capital expenditure | £200,000 | £150,000 |
| Payback Period | 1 year 6 months | 2 years 0 months |
| Net Present Value | £45,000 | £50,000 |
| Accounting rate of return | 25% | 30% |
Required:
- Discuss and state the relative merits of the methods of investment appraisal mentioned above. (15 marks)
- Explain with reasons which project you would recommend for acceptance based on the methods used above. (5 marks)
- What other factors should be taken into consideration when deciding on investment projects? (5 marks)
Total: 25 marks
Question 5
A firm makes three products from a common raw material. The costs are as follows:
|
Fixed costs are: £200,000 per year
The maximum forecast sales were as follows:
| Units | Selling price | |
| A | 22000 | £160 |
| B | 38000 | £150 |
| C | 30000 | £130 |
The company is unable to make all the sales forecast because there is a shortage of 20% on the amount of labour hours available.
Required:
- Why should the production plan be, to optimise the profits? (20 marks)
- Calculate the profit based on this production plan. (5 marks)
Total: 25 marks
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