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FIN4001 Introduction to Finance Assignment

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Date for Submission: Please refer to the timetable on ilearn
(The submission portal on ilearn will close at 14.00 UK time on the date of submission)

Assignment Brief

As part of the formal assessment for the programme you are required to submit an Introduction to Finance assignment. Please refer to your Student Handbook for full details of the programme assessment scheme and general information on preparing and submitting assignments.
Learning Outcomes:
After completing the module, you should be able to:

  1. Contrast the appropriateness of the different sources of finance to a business.
  2. Explain the implications of finance as a resource within a business.
  3. Produce simple financial statements in accordance with accepted principles.
  4. Use financial information for decision making purposes.
  5. Demonstrate a confident use of the financial terminology and conventions in communicating results.
    Your assignment should include: a title page containing your student number, the module name, the submission deadline and a word count; the appendices if relevant; and a reference list in Arden University (AU) Harvard format. You should address all the elements of the assignment task listed below. Please note that tutors will use the assessment criteria set out below in assessing your work.
    You must not include your name in your submission because Arden University operates anonymous marking, which means that markers should not be aware of the identity of the student. However, please do not forget to include your STU number.
    Maximum word count: 3,000 words
    Please note that exceeding the word count by over 10% will result in a reduction in grade by the same percentage that the word count is exceeded.
    You must not include your name in your submission because Arden University operates anonymous marking, which means that markers should not be aware of the identity of the student. However, please do not forget to include your STU number.

Assignment Task


Question 1:

(a) Critically discuss the ‘comply or explain’ model of corporate governance.
(10 marks)
(b) Listed companies must send their financial statements to the authorities that oversee the stock exchange on which their shares are listed. Companies incorporated in the UK file their accounts with both Companies House and the London Stock Exchange.
Identify and explain the characteristics of the approach that is used to the filing of financial statements by plc’s that are incorporated in the UK.
(15 marks)
(Total marks: 25)
(LO: 4 and 5)

Question 2:

Flyers plc operates public transport services in major cities in the United Kingdom (UK). The company uses the accounting rate of return (ARR) and payback methods to support investment decision making. You are a Senior Finance Manager at Flyers plc.
The company intends to bid for new five-year contracts to operate bus services in either Edinburgh, UK, or Newcastle upon Tyne, UK. Both contracts require the successful bidder to pay a franchise fee to secure the contract and to invest in a new fleet of buses. Sufficient funding is available to finance only one of these options.
Edinburgh
Newcastle
£000
£000
Franchise fee (year 0)
8,700
7,950
New buses (year 0)
4,120
3,890
Scrap value (year 5)
110
95
Forecast net cash inflows
Year 1
3,780
3,500
Year 2
4,150
3,850
Year 3
4,550
4,200
Year 4
5,120
5,150
Year 5
4,900
4,950
Assume that all cash flows occur at the end of the respective year.
The company’s approach to investment appraisal was discussed at a recent meeting of Flyers plc’s senior executive team. Chang Ying Simmonds, Director of Marketing at Flyers plc, is keen to understand the nature of investment decisions. Chang Ying has commented:
These decisions appear to have particular characteristics. We need to understand why investment decisions are of importance to the business as this will help us to appreciate if our approach to investment appraisal is appropriate.
Travis van Riemsdyk, Chief Operating Officer at Flyers plc, has highlighted that the internal rate of return (IRR) method can be of use in investment appraisal. Travis has commented:
Like other investment appraisal methods, the IRR has both advantages and disadvantages. I would like to know more about the strengths and weaknesses of the IRR.

Required:
(a) Calculate the payback period for both the Edinburgh and Newcastle upon Tyne contracts.
(4 marks)
(b) Calculate the accounting rate of return (ARR) for both contracts. Assume that the only difference between cash flow and profit is the depreciation charge.
(6 marks)
(c) Critically evaluate the payback technique.
(8 marks)
(d) Advise Flyers plc’s senior executive team on the comments made by Chang Ying Simmonds and Travis van Riemsdyk. Your advice should include an explanation of the characteristics of investment appraisal decisions and the advantages and disadvantages of the IRR.
(7 marks)
(Total marks: 25)
(LO: 3, 4 and 5)

Question 3:

Marginal costing is a technique that distinguishes between variable costs and fixed costs. In this approach to costing, only the variable costs of production are charged to cost units. Marginal costing and the concept of contribution are fundamental to the breakeven analysis or ‘cost-volume-profit’ (CVP) technique.
Required:
(a) Explain the concept of contribution and its importance to the CVP technique.
(6 marks)
(b) Describe the nature of each of the ‘dropping a product or service’ and ‘special contract’ decisions for which the CVP technique can be useful.
(9 marks)
(c) Critically evaluate the CVP technique and explain the limitations of its use in the context of both the different interpretations offered by the economist’s model of CVP and other limitations.
(10 marks)
(Total marks: 25)
(LO: 4 and 5)

Question 4

A group of friends have formed a new business called Fashion Clothing, an online and mail order clothing business, in which they have invested £200,000 of their own capital. They intend to manufacture and sell quality clothes. They have set the business up and are selling direct to the final consumer, using a combination of aggressive marketing across a range of different media and also with the use of an automated web site that accepts online orders. To support this, they also have a department of telephone sales and support staff ready to help customers. The sales staff work in teams and receive a basic salary plus commission for each successful sale. By the start of July 20X5, they have spent £150,000 on tangible non-current assets, and they currently have the remaining £50,000 in their business bank account.
They provide you with the following forecasted figures for their first 6 months of trading:
£
Sales for the next 6 months
1,175,000
Cost of the materials used up in sales
460,000
Labour costs for the 6 months
480,000
Other expenses for the 6 months, including marketing costs and £15,000 depreciation of tangible non-current assets
345,000
Their projected cash receipts and payments are estimated to be as follows:
Month (20X5)
Sales receipts
Payments for materials
Labour and other expenses
£
£
£
July
150,000
120,000
These payments are divided equally over this six month period
August
120,000
100,000
September
150,000
60,000
October
210,000
60,000
November
260,000
60,000
December
285,000
60,000
In addition to the above, they expect to have to pay a tax bill of £20,000 in December 20X5. All transactions will go through their business bank account.

Required:


(a) Prepare an opening statement of financial position at the start of July 20X5.
(5 marks)
(b) Prepare a monthly cash flow forecast, showing the bank balance at the end of each of the 6 months and indicating what level of overdraft facilities the friends need to negotiate with their bank manager.
(18 marks)
(c) Explain what additional expense they should take into account as a result of needing the financial assistance (overdraft) referred to in (b).
(2 marks)
(Total marks: 25)
(LO: 1, 2, 3, 4 and 5)

Formative Feedback


You have the opportunity to submit a draft response to question one to receive formative feedback.
The feedback is designed to help you develop areas of your work and it helps you develop your skills as an independent learner.
If you are a distance learning student, you should submit your work, by email, to your tutor, no later than 2 weeks before the actual submission deadline. If you are a blended learning student, your tutor will give you a deadline for formative feedback and further details.
Formative feedback will not be given to work submitted after the above date or the date specified by your tutor – if a blended learning student.
Guidelines:
You MUST underpin your analysis and evaluation of the key issues with appropriate and wide ranging academic research and ensure this is referenced using the AU Harvard system.
The My Study Skills Area on iLearn contains useful resources relating to referencing
You must use the AU Harvard Referencing method in your assignment.
Additional notes:
Students are required to indicate the exact word count on the title page of the assessment.
The word count excludes the title page, tables, figures, diagrams, footnotes, reference list and appendices. Where assessment questions have been reprinted from the assessment brief these will also be excluded from the word count. ALL other printed words ARE included in the word count See ‘Word Count Policy’ on the homepage of this module for more information.

Submission Guidance


Assignments submitted late will not be accepted and will be marked as a 0% fail.
Your assessment should be submitted as a single Word (MS Word) or PDF file. For more information please see the “Guide to Submitting an Assignment” document available on the module page on iLearn.
You must ensure that the submitted assignment is all your own work and that all sources used are correctly attributed. Penalties apply to assignments which show evidence of academic unfair practice. (See the Student Handbook which is on the homepage of your module and also in the Induction Area).

Assessment Criteria

(Learning objectives covered – all) Level 4 is the first stage on the student journey into undergraduate study. At Level 4 students will be developing their knowledge and understanding of the discipline and will be expected to demonstrate some of those skills and competences. Student are expected to express their ideas clearly and to structure and develop academic arguments in their work. Students will begin to apply the theory which underpins the subject and will start to explore how this relates to other areas of their learning and any ethical considerations as appropriate. Students will begin to develop self-awareness of their own academic and professional development. Grade Mark Bands Generic Assessment Criteria First (1)
80%+
Outstanding performance which demonstrates the ability to analyse the subject area and to confidently apply theory whilst showing awareness of any relevant ethical considerations. The work shows an excellent level of competence and confidence in managing appropriate sources and materials, initiative and excellent academic writing skills and professional skills (where appropriate). The work shows originality of thought.
70-79%
Excellent performance which demonstrates the ability to analyse the subject and apply theory whilst showing some awareness of any relevant ethical considerations.
The work shows a high level of competence in managing sources and materials, initiative and very good academic writing skills and professional skills (where appropriate). The work shows originality of thought. Upper second (2:1)
60-69%
Very good performance which demonstrates the ability to analyse the subject and apply some theory. The work shows a good level of competence in managing sources and materials and some initiative. Academic writing skills are good and expression remains accurate overall. Good professional skills (where appropriate). The work shows some original thought. Lower second (2:2)
50-59%
A satisfactory to good performance which begins to analyse the subject and apply some underpinning theory. The work shows a sound level of competence in managing basic sources and materials. Academic writing skills are satisfactory and expression remains accurate overall although the piece may lack structure. Satisfactory professional skills (where appropriate). The work lacks some original thought. Third (3)
40-49%
Basic level of performance in which there are some omissions in understanding the subject, its underpinning theory and ethical considerations. The work shows a basic use of sources and materials. Academic writing skills are limited and there are some errors in expression and the work may lack structure overall. There are some difficulties in developing professional skills (where appropriate). The work lacks original thought and is largely imitative. Marginal fail
30-39%
Limited performance in which there are omissions in understanding the subject, its underpinning theory and ethical considerations. The work shows a limited use of sources and materials. Academic writing skills are weak and there are errors in expression and the work may lack structure overall. There are difficulties in developing professional skills (where appropriate). The work lacks original thought and is largely imitative.
29% and below
A poor performance in which there are substantial gaps in knowledge and understanding, underpinning theory and ethical considerations.
The work shows little evidence in the use of appropriate sources and materials. Academic writing skills are very weak and there are numerous errors in expression. The work lacks structure overall. Professional skills (where appropriate) are not developed. The work is imitative.

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