MGT104: Finance and Financial Decision Making for Managers L4 Assignment Brief | UOS

Guidance of MGT104

To obtain a high mark, you should

1. Putting calculations into your appendix will not count towards your word count.
2. Incorporate your knowledge and understanding of money, banking and finance issues into your answer.
3. Demonstrate critical understanding of banking and finance issues.
4. Show evidence of key text and background reading.
5. Synthesise information in a coherent and useful way.

Part A

Section 1

Scott Ridley is a sole trader who started trading on 1st January 2024. As a trainee financial manager, you have been presented with a summary of transactions that occurred during the first year of trading.

The business uses the straight-line method for depreciating non-current assets.

Required:

• Record the transactions using double-entry bookkeeping* and prepare a trial balance.
  Note: (*Double-entry (t-accounts) workings do not need to be submitted with your assignment.)
• Prepare a statement of performance and a statement of financial position for the year-end.

Section 2

“Financial statements are a vital communication tool for key stakeholders”. Discuss this statement considering the role of financial record keeping in the survival and growth of small businesses.

Part B

Section 1

The university wants to explore whether to offer a new one-year medical short-course to complement its existing suite of medical and pharmacy courses.
The course would start in August 2025 and run for 12 months. Employers, such as the Local Authorities, would sponsor students to undertake the course, so they would pay the fees. Market research and conversations with possible employers have shown that a fee above £4,000 would be unlikely to attract many students. A fee of £3,500 would be ideal, but employers may be willing to pay £4,000.

Estimated fixed costs are £150,000. These include lecture staff, the hire of the building, standard advertising costs, electricity, IT equipment and the use of an ambulance. A list of the variable costs is below:

Required

• Assuming the fee is £3,500, what is the number of students required for the course to breakeven (That is, the point at which there is neither a profit nor loss)?
• Assuming the fee is £4,000, what is the number of students required for the course to breakeven?
• How many students must enrol to earn £50,000 target profit? (assume a fee of £3,500)
• What profit would result if 100 students enrolled at a fee of £3,500 per student.
• If the university wants to earn a £50,000 profit, and student enrolments are 70, which price should it charge for the course?

Section 2

The module included a group formative assessment where you were a member of the management team of a new start-up business introducing a product to the market with the objective of increasing stakeholder value.

Using appendix A, please reflect and explain how this module has helped you:

• Improve your knowledge of the importance of finance for business longevity and growth.
• Understand the role of the financial manager regarding costing; pricing; the investment decision and keeping accurate financial records.
• Develop your employability skills.

Part C

Section 1

Sunderland film studios is considering a major investment project. The initial outlay of £-750,000 will, in subsequent years, be followed by positive cash flows, as shown below. (These occur on anniversary dates.)

After the end of the sixth year, this business activity will cease, and no more cash flows will be produced.

The initial £-750,000 investment in plant and machinery is to be depreciated over the six-year life of the project using the straight-line method. These assets will have no value after Year 6.

The management estimate that the cash inflows shown above are also an accurate estimation of the profit before depreciation for each of the years. They also believe that the appropriate discount rate to use for the firm’s projects is 15 per cent per annum.

The board of directors are used to evaluating project proposals on the basis of a payback rule which requires that all investments achieve payback in five years.

As the newly appointed executive responsible for project appraisal you have been asked to assess this project using a number of different methods.

Do this in the following sequence

1. Calculate the payback period.
2. Calculate an accounting rate of return
3. Calculate the internal rate of return
4. Calculate the net present value

Section 2

1. What do you understand by the term ‘opportunity cost’ and why it is important in business decisions?

Module Learning Outcomes

By the end of this module successful students will be able to do the following:

1. Evaluate a wide range of information to make informed judgements on the costing, pricing and investment decisions and how to communicate business performance to key stakeholders.
2. Articulate financial risks applicable to a range of business structures and analyse how financial managers manage these risks to maintain competitive advantage.
3. Identify and apply appropriate financial models and concepts to a range of decision-making scenarios.

The module syllabus includes the following main topics:

The learning outcomes will be developed within the module through an exploration of the role of the financial manager. A variety of different business and finance theories and activities will address the tools of the trade of finance:

The course syllabus includes the following main topics:

1. Accounting for business transactions. Accounting for business transactions is a very important means of communicating business performance to key stakeholders as well as a precursor for budgeting and ensuring strategic goals are achieved.
1.1 : Examine the important role of the financial manager in an organisation.
1.2 : Summarise the key financial statements of performance, position and cash flow.
1.3 : Convert business transactions into financial statements using the double-entry bookkeeping system.

2. The costing, pricing and investment decision. The costing and pricing decisions are influenced by numerous internal and external factors, whilst the investment decision involves allocating funds to assets that will generate value for the business.
2.1 : Review economic and business concepts informing the costing, pricing and investment decision making process.
2.2 : Introduce fixed and variable costs and how the contribution margin can improve financial decisions in various business scenarios.
2.3 : Explain the difference between discounted and non-discounted investment appraisal techniques, considering the opportunity cost of capital.

3. Employability and CV Impact:
3.1 : Provide students with foundation skills for a career in business and finance.
3.2 : Develop negotiation and communication skills underpinning HRM, marketing and management concepts from a finance perspective.