Managerial Finance

UNDERGRADUATE/POSTGRADUATE DEGREES

COURSEWORK FRONT SHEET

Learning outcomes and pass attainment level:

Enable students to understand and critically evaluate the financial and narrative accounting information of business organisations.

Provide students with the knowledge and skills to apply appropriate techniques to make short-term business decisions.

Equip students with the skills to explore and apply alternative theories and concepts upon which a firm’s long-term investment and financing decisions are founded

The assessment for this unit is this one coursework assignment. The required mark has been set at 50%.

This is an individual assessment requirement. There is no objection discussing the content and approaches to be adopted in the final submission you must make 100% your own work. Plagiarism and copying will not be tolerated and may lead to subsequent penalties being imposed.

There are three separate questions. All three questions should be attempted and submitted together on numbered pages. Your answers should be prepared and submitted in Word format. Excel spreadsheets may be used but must be pasted into the Word document and not submitted separately. This should be carefully checked before submission for the use of appropriate and acceptable grammar. The correct use English spelling is to be employed throughout and no other. All submissions must be page numbered and contain your student ID number.

When determining the amount of effort and words for each section of the assignment it will be advisable to examine the weighting of the marks allocated to each question. If any part of the assignment is ignored then this reduces the maximum marks that could be potentially earned.

The word limit to any potential narrative question in the third section will be a maximum of 1,500 words excluding the bibliography.

The assignment will require a considerable personal investment of time and effort. This is an individual assignment and all calculations, analysis and narrative submitted must be your own work.

The following matrix has been included to help guide you.

	Section A (50%)	Section B (30%)	Section C (20%)
	1i. Financial Analysis	2.i Marginal Cost Statement	Budgeting research academic essay
Fail	Lack of breadth and depth of financial analysis techniques Accompanied by incorrect formulae, calculation without explanation and failure to follow the layout taught on the course	Failure to presenting the financial information in the multi-product and total marginal cost statement format required and not identifying contribution achieved, profit per procedure, contribution per procedure and contribution per hour.	Failure to identify the antecedence, definition and purpose and objective budgets that is underpinned by a range of credible professional and academic citations. Absence of major criticisms and alternatives to traditional budgets underpinned by professional citations. Absence of 21^st century references.
Bare Pass	Evidence of some financial analysis techniques but with errors of formulae and calculation with insufficient explanation and adequate presentation	Unclear financial information presented in an inadequate multi-product and total marginal cost statement and inaccurately identifying contribution achieved profit per procedure, contribution per procedure and contribution per hour.	Some budget contextualisation offered with partial explanation of purposes and objectives with some limited citations with dubious origins. Partial explanation of credible criticisms of traditional budgets though underpinned by dubious sources. Partial reference to credible contemporary sources
Above Average Pass	Wide range of financial analysis techniques evident supported by full disclosure of formulae and accurate calculation in clear format as taught on the course.	Presenting the financial information in accordance with the method and the multi-product and total marginal cost statement taught on the course and accurately identifying contribution achieved, profit per procedure, contribution per procedure and contribution per hour	Identification of budget contextualisation offered with full explanation of purposes and objectives with a range of credible citations. Identification and explanation of criticisms of traditional budgets underpinned by credible sources. Full reference to credible contemporary sources
	1ii. Narrative Analysis (12%)	2 ii Revised Marginal Cost Statement
Fail	Not presented in business report format with no supporting appendices. Descriptive rather than analytical. Poor narrative structure and inadequate grammar lacking an overall knowledgeable synthesis	Failure to present the financial information in the multi-product and total marginal cost statement format required and inaccurately re-apportioning the fixed overheads to derive inaccurate product performance and total profits. Failing to make to rational financial decision based on the calculated management accounting data.
Bare Pass	Attempt at a business report format with some supportive appendices. Mainly descriptive with some attempt at synthesis. Grammar and structure being adequate.	Some inaccurate and partial attempt to present the financial information in the multi-product and total marginal cost statement format required and partially accurately re-apportioning the fixed overheads to derive inaccurate product performance and total profits. Some attempt to make the rational financial decision based on flawed calculated management accounting data and incorrect methods.
Above Average Pass	In business report format and coherently structured and supported by referenced appendices. Effectively synthesises the calculative narrative into an informed narrative	Accurate multi-product and total marginal cost statement with accurate reapportionment of the fixed overheads. And making the correct decision based on marginal cost accounting principles.
		2iii Proposed Contract
Fail		Inaccurate evaluation of the proposal by failing to employ marginal cost accounting to the decision-making process and drawing the wrong conclusion
Bare Pass		Partial but inaccurate evaluation based on marginal cost accounting leading to misleading conclusions.
Above Average Pass		Accurate evaluation based on marginal cost accounting techniques to derive the financially rationale decision.

Vodafone Group Plc is a British multinational which is one of the world’s largest mobile telecommunications companies with over 404 million subscribers. Vodafone owns and operates networks in over 30 countries and has partner networks in over 40 additional countries. Vodafone also owns 45% of Verizon Wireless, the largest mobile telecommunications operator in the USA. Vodafone has a primary listing on the London Stock Exchange and is a constituent of the FTSE 100 Index. It had a market capitalisation of £89.323 billion as of 5^th April 2013 when its share price stood at 182.6p

(2012-07-06)^[update]Presented below are its financial statements for the period 2008-2012.

Vodafone Group Plc		Year ended	Year ended	Year ended	Year ended	Year ended
Statement of Comprehensive		31st March	31st March	31st March	31st March	31st March
Income	2012	2011	2010	2009	2008
£m	£m	£m	£m	£m
Revenue	46,417	45,884	44,472	41,017	35,478
Cost of sales		-31,546	-30,814	-29,439	-25,842	-21,890
Gross profit		14,871	15,070	15,033	15,175	13,588
Selling & Distribution Costs		-3,227	-3,067	-2,981	-2,738	-2,511
Administration Expenses		-5,075	-5,300	-5,328	-4,771	-3,878
Share of result in associates		4,963	5,059	4,742	4,091	2,876
Impairment losses		-4,050	-6,150	-2,100	-5,900	0
Other income and expense		3,705	-16	114	0	-28
Operating profit		11,187	5,596	9,480	5,857	10,047
Finance income		456	4331	716	795	968
Finance costs		-2,094	-429	-1,522	-2,463	-2,014
Profit on ordinary activities before taxation		9,549	9,498	8,674	4,189	9,001
Income tax charge		-2,546	-1,628	-56	-1,109	-2,245
Profit for the year		7,003	7,870	8,618	3,080	6,756

Vodafone Group Plc	31st March	31st March	31st March	31st March	31st March
Comprehensive Statement of Position	2012	2011	2010	2009	2008
£m	£m	£m	£m	£m
Assets
Non-current assets
Goodwill	38,350	45,236	51,838	53,958	51,336
Intangible assets	21,164	23,322	22,420	20,980	18,995
Property, plant and equipment	18,655	20,181	20,642	19,250	16,735
Investments in associates	35,108	38,105	36,377	34,715	22,545
Other investments	791	1,381	7,591	7,060	7,367
Deferred tax assets	1,970	2,018	1,033	630	436
Post Employment Benefits	31	97	34	8	65
Trade and other receivables	3,482	3,877	2,831	3,069	1,067
Total Non Current Assets	119,551	134,217	142,766	139,670	118,546
Current assets
Inventory	486	537	433	412	417
Taxation recoverable	334	281	191	77	57
Trade and other receivables	10,744	9,259	8,784	7,662	6,551
Other investments	1,323	674	388	0	0
Cash and cash equivalents	7,138	6,252	4,423	4,878	1,699
Total Current Assets	20,025	17,003	14,219	13,029	8,724
Total Assets	139,576	151,220	156,985	152,699	127,270
Equity
Share capital	3,866	4,082	4,153	4,153	4,182
Share premium account	154,123	153,760	153,509	43,008	42,934
Treasury Shares	-7,841	-8,171	-7,810	-8,036	-7,856
Retained profits/losses	-84,184	-77,661	-79,655	-83,820	-81,980
Other Reserves	10,971	15,545	20,184	130,857	120,763
Total equity shareholders funds	76,935	87,555	90,381	86,162	78,043
Non-controlling interests	1,267	6	429	-1,385	-1,572
Total Equity	78,202	87,561	90,810	84,777	76,471
Liabilities
Non-current liabilities
Long-term borrowings	28,362	28,375	28,632	31,749	22,662
Taxation liabilities	250	350	0	0	0
Deferred tax liabilities	6,597	6,486	7,377	6,642	5,109
Post employment benefits	337	87	237	240	104
Provisions	479	482	497	533	306
Trade and other payables	1,324	804	816	811	645
Total Non Current Liabilities	37,349	36,584	37,559	39,975	28,826
Current liabilities
Short-term borrowings	6,258	9,906	11,163	9,624	4,532
Taxation liabilities	1,898	1,912	2,874	4,552	5,123
Provisions	633	559	497	373	356
Trade and other payables	15,236	14,698	14,082	13,398	11,962
Total Current Liabilities	24,025	27,075	28,616	27,947	21,973
Total liabilities	61,374	63,659	66,175	67,922	50,799
Total equity and liabilities	139,576	151,220	156,985	152,699	127,270

Additional Information

Date	31st Mar 2012	31st Mar 2011	31st Mar 2010	31st Mar 2009	31st Mar 2008
Company share price	162.44p	157.83p	128.19p	97.10p	113.39p
FTSE100 Share Index	5,768.50	5,908.80	5,679.60	3,762.90	5,702.10

Required

Write a business report to the board of directors of the company analysing the company’s financial performance from 2008-2012.

50% Marks

The Harold Shipman Private Healthcare Clinic Ltd specialises in hip, knee and shoulder replacement operations that it carries out for private health insurance firms and for some NHS Trusts. As well as providing these surgical procedures it offers pre-operative and post-operative care in a fully equipped private hospital for patients undergoing these procedures. Surgeons are paid a fixed fee for each procedure they perform and an additional amount for each follow up consultation which are given if post operative complications arise. No extra fee is charged to patients for follow up consultations. All the other staff receives annual salaries.

The company’s overhead is currently apportioned on revenues to each surgical specialism. The following forecast data for 2014 is made available:

Medical Procedure	Hip	Knee	Shoulder
£ Income for 2014	4,800,000	8,000,000	2,400,000
£ Cost per procedure		8,000	10,000	6,000
Av time per procedure in hours			2	1.2	1.5
£ Surgeons fee per procedure		1,200	1,800	1,500
% of procedures with complications			8	5	10
£ surgeons fee consultation 2014			300	300	300
£ cost medical supplies per procedure 2014			400	200	300
Overheads	£
Theatre preparation		864,000
Operating theatre usage		144,9000
Nursing and ancillary services		5,428,000
Administration	1,216,000
Other overheads	923,000
Total overheads	9,880,000

Required

Prepare a Marginal Cost Analysed Income Statement for 2014 from the above data to identify total and individual medical procedure contributions and profits (apportion the overheads as indicated above to each procedure). Identify the profit and contribution per procedure

The senior surgeon has voiced the opinion that apportioning overheads on the basis of revenues is misleading and instead should be apportioned on the number of hours incurred on each procedure. Reconstruct the Marginal Cost Analysed Income Statement to reflect this proposed accounting treatment. Also identify the profit and contribution per procedure. Comment on your results.

The Scutari NHS Trust has approached the clinic to undertake some additional knee operations. This would involve operating on a further 50 patients which the clinic has capacity to handle. The trust is offering to pay £250,000 for fulfilling the contract. Advise the clinic what decision should be made regarding the proposed contract based on financial grounds.

30% Marks

Q3.

You have been appointed as a management intern in the Carbon Neutral Group Plc an international company manufacturing alternative green energy systems. This involves you obtaining a wide company experience by working in different divisions of the company. Currently you have been seconded to the production department.

At a production departmental meeting you hear Richard Head the production manager state that,

“Budgeting is a waste of time. I don’t see the point of it. It tells us what we can’t afford but it doesn’t keep us from buying it. It simply makes us invent new ways of manipulating figures. If all levels of management aren’t involved in the setting of the budget, they might as well not bother preparing one.”

Required:

In an academic essay identify and explain the objectives of a budgetary control system and discuss the concept of a participative style of budgeting in terms of the objectives you have identified supported by credible academic citations.

20% Marks

TOTAL 100%