Assessment Criteria

Learning Outcomes: Knowledge and Understanding tested in this assignment:

1. Evaluate the role and limitations of published financial statements and identify and use the information produced;

3. Interpret key financial performance indicators and be able to use financial information to formulate future plans;

4. Analyse the role of sound financial management in the organisation;

5. Evaluate the financial requirements of a business or project;

Learning Outcomes: Skills and Attributes tested in this assignment:

6. Communicate effectively with financial and non-financial managers;

7. Present their ideas confidently and effectively on financial issues.

Feedback /Marking criteria for this Assignment

Performance will be assessed using HBS Grading Criteria. The Marking Scheme is shown in the assessment task. Guidance for improvement will be given in writing on the assessment feedback form within 4 weeks. For further help, contact Rob Fletcher in his drop-in hour (Monday 10.15-11.15) or by email (r.fletcher5@herts.ac.uk). Late work and plagiarism will receive standard penalties. Turnitin is used to highlight student collusion or consider similarities to other work.

Detailed Brief for Individual Assessment

BORAKA ENGINEERING PLC

You are advising Boraka Engineering (UK) plc, a large company who are considering acquiring the whole share capital of Younger Machinery plc. Using the information given in the scenario below, you are required to write a report recommending whether or not your client should continue with the acquisition.

Background information:

Younger Machinery plc has been trading for over 75 years. Their main engineering plant is in South Wales but it has three other plants in the UK with the smallest one in Yorkshire, England…The company had been trading successfully but has been badly affected by the recession. As a response to increased competition and falling margins, the directors decided to restructure the business. They sold their smallest engineering plant in Yorkshire in July 2018.. In October 2018, they spent £750,000 on ‘retooling’ their Welsh plant and invested £600,000 on staff training. This change has resulted in 45 semi skilled workers being made redundant. The company now employs 333 staff of whom 12%come from European Union countries outwith the United Kingdom.

.

The sales director is pleased that they almost managed to achieve their sales targets for the year ended 31 December 2018, although they did have to offer some customers special discounts and extended credit terms as inducements.

You are given the following information for Younger Machinery plc and its competitor Jones plc, who are also an engineering company. You are also given figures for the industry averages for key indicators.

Younger Machinery plc

Income Statement for the year ended

31 Dec 2018

31 Dec 2017

£’000

£’000

Revenue – Welsh plants

64,600

65,300

Other UK plants

6,800

7,200

70,400

72,500

Cost of sales

(64,608)

(65,418)

Gross profit

5,792

7,082

Selling and distribution costs

(1,080)

(900)

Administrative expenses

(1,272)

(1,092)

3,440

5,090

Exceptional items (advertising and training)

–

(2,700)

Profit on sale of Yorkshire plant

6,132

–

Profit from operations

9,572

2,390

Finance cost

(2,000)

(2,000)

Profit before tax

7,572

390

Taxation

(1,350)

(60)

Profit for the year

6,222

330

Statement of Financial Position as at

31 Dec 2018

31 Dec 2017

£’000

£’000

Assets

Non-current assets

38,601

35,906

Current assets

Inventory

951

950

Trade receivables

5,460

1,734

Bank

5,800

10

12,211

2,694

Total assets

50,812

38,600

Equity and Liabilities

Equity

Ordinary shares of £1 each

13,200

13,200

Retained earnings

13,941

7,715

27,141

20,915

Non-current liabilities

5% Loan notes – repayable 2019

15,000

15,000

42,141

35,915

Current liabilities

Payables

8,671

2,685

Total Equity and Liabilities

50,812

38,600

Limited Ratios for Younger Machinery PLC from previous years

Key ratios

Younger Machinery plc

2016

2014

2013

ROCE

7%

7.5%

7.6%

Op. profit margin

6.0%

6.4%

6.3%

Gross profit margin

10%

11%

12%

Major Competitor JONES PLC

Key figures

Jones plc

2018

2017

£’000

£’000

Revenue

11,200

10,700

Operating profit

800

780

Capital employed

18,500

17,800

Key ratios

Jones plc

Industry Average

2018

2017

2017

ROCE

4.3%

4.4%

5.5%

Op. profit margin

6.8%

7.1%

8.2%

Gross profit margin

15%

13%

14.6%

Inventory days

10 days

9 days

15 days

Trade receivables days

14 days

13 days

22 days

Trade payable days

29 days

27 days

25 days

Current ratio

0.7:1

0.6:1

0.8:1

Acid test ratio

0.5:1

0.6:1

0.65:1

REQUIRED

The first Question will be completed in class.

Calculate a range of ratios relating to profitability, liquidity and working capital for Younger for years ending 2017 and 2018 (50%)

The correct solutions for the Ratios will be given to the students and they will complete sections 2 at home.

Interpret the ratios and the information given in the scenario and advise Boraka Engineering plc as to whether or not they should invest in Younger Machinery plc (50%, about 1,200 words)

This should be completed as an informal report format.

The title of the assignment. Assignment 2

Purpose of the assessment

To demonstrate an understanding of the role and limitations of published financial reports. To demonstrate an understanding of working capital management and gearing.

Introduction to the work: This assignment is based on the material taught in weeks 5 and 7 to 11

Approach/steps to follow:

You should study the data in the case study and think about how which ratios are relevant. Calculate the ratios showing your method. You are strongly recommend to present these in tables for clarity. You should then interpret the ratios, applying the information about the business and its competitor. You should advise management on the significance and limitations of your findings and possible actions they could take. You do not need to research for sections 1 and 2 – you need to think.

You should show an understanding of the importance and methods of working capital management. You will need to read around the topic in academic and professional journals. Your textbook will give a basic introduction only. You may use the figures in the case study for illustration.

It is essential:

That you include your student number, but NOT your name, on your work. You must attach the cover page which is at the end of this document.

That each of the sections is covered (if not, there will be zero for that section)

That you show an understanding of the topics as well as an ability to perform calculations accurately.

Tips:

Think about the data before you start calculating – refer back to your class notes for similar examples

Read and use a range of recent academic and professional resources, e.g. books, journals, professional or business websites

Start in good time and ask if you need help. Your tutors will help you understand the concepts but will not deal directly with questions about the assignment.

Do NOT reference Wikipedia or tutorial websites. If you use them for background information you MUST follow up the points in good quality sources.

Paraphrasing others’ views and giving the relevant source, is generally better than using direct quotes

Check grammar, use vocabulary you understand, use UK spelling and try to use PEEEL (Point, Evidence, Explanation, Example, Link) to structure your main paragraphs (refer to CASE Essay writing tips)

Pay attention to presentation – your work should look professional. You should use double spacing between paragraphs and number your pages.

This task is worth 50% of your module, your study of these topics and your work on the assignment should reflect 75 hours work.

1. Calculations

/50

2. interpretation/Report

/50

Total mark

/100