Analyze and evaluates the financial position of Benedict Co. using a range of financial ratios
This paper will be marked out of 100% This assignment contributes to 50% of the total module marks. The assessments are bonded which means you need 40%+ over both assessments combined to pass the module.
Learning Outcomes to be assessed As specified in the validated module descriptor available at: https://icis.southwales.ac.uk/studentmodules/10122/studentmodulespecifications Learning outcome 1 The ability of students to critically assess, apply and evaluate the issues and techniques of strategic financial management. Grading Criteria Please see School’s marking criteria for undergraduate/post graduate assessments on the module VLE. Any additional grading/marking guidance will be posted with assessment task below. Assignment You have recently attended a workshop aimed at improving your understanding of company Annual Reports using Tesco’s report as an example. During the workshop you looked at the following sections of Tesco’s annual report:
The Strategic Report including the Environmental and Social Review, The Corporate Governance Report and, The Group Statements of: ‘Income’ (also sometimes referred to as the Statement
of Profit and Loss) ‘Balance Sheet’ and ‘Cash-Flows’. You learned about how different ‘stakeholders’ may use the information contained in these reports and financial statements. You also learned about financial ratios and how these can be used to interpret and assess the performance of a business in terms of its profitability, liquidity, efficiency and return to investors. The timing of the workshop was very fortuitous. You are the Purchasing Manager for the business you work for. You are in the process of letting a contract for the supply of an important component used in your business’s production. You have been provided with the financial statements of Benedict Co. who are one of a few companies tendering for the contract. The income statement and statement of financial position have been reproduced below. As well as reviewing the financial statements of Benedict Co. from a potential customer perspective, you are interested in how the company may be viewed by potential investors, lenders and suppliers. You have also collected the following information about other companies operating in the same sector as Benedict Co.: Current ratio 1.6 Quick ratio 1.0 Trade receivable days 55 days Inventory days 60 days Trade payable days 90 days
https://icis.southwales.ac.uk/studentmodules/10122/studentmodulespecifications
Statement of income for Benedict Co. for the year to 31 January
20X1
20X0
$’000
$’000
Sales
30,800
24,900
Cost of sales
16,000
14,500
Gross profit
14,800
10,400
Admin expenses
1,700
400
Distribution costs
3,500
800
Finance costs
1,300
500
Profit before taxation
8,300
8,700
TAXATION
1,700
1,700
Profit after taxation 6,600 7,000
Statement of financial position for Benedict Co. as at 31 January 20X1
20X1 20X0
$’000 $’000 $’000 $’000
Non-current assets
38,000
32,600
Current assets
Inventory 5,200
2,600
Trade receivables 7,600
3,800
12,800
6,400
Total assets
50,800
39,000
Capital and reserves
Share capital
18,000
18,000
Reserves
10,000
7,900
28,000
25,900
Non-current liabilities
6% bonds
12,000
8,000
Current liabilities
Trade payables 6,800
4,300
Overdraft 4,000
800
10,800
5,100
50,800 39,000
Dividends of $4.5 million were paid in 20X1 and $3.6 million in 20X0. Shares in Benedict Co. had a market value of $5.60 at 31 January 20X1 compared to $3.60 in 20X0. Benedict Co. has issued 18 million $1 shares.
Required: Prepare a report for your manager which: 1) Using the Annual Report of Tesco available at the following link: https://www.tescoplc.com/media/264194/annual-report-2016.pdf
a) Explains the term ‘stakeholder’ and identifies three types of stakeholder of Tesco. 15%
b) Analyses how the Environmental and Social Review and the Corporate
Governance Report help Tesco demonstrate its performance in terms of its corporate and social responsibilities to two of the stakeholders identified in a) above. 35%
2) Analyses and evaluates the financial position of Benedict Co. using a range of financial ratios to meet the requirements of potential customers, investors, lenders and suppliers. Your analysis should:
a) Explain the purpose and relevance of the chosen ratios. b) Include the results for each chosen ratio and reasons for the movement
between the two years. c) Highlight any aspects of the performance of Benedict Co. which would give
cause for concern. d) Critically evaluate the application of financial ratios in interpreting and measuring
the performance of a company. All calculations should be shown in full as an appendix to the report. 40%
Marks are available for the presentation of your report including structure, style and the presentation of referencing. 10%
Total 100%
https://www.tescoplc.com/media/264194/annual-report-2016.pdf
Grading Criteria Section Weighting Criteria
(1) Using the AR of Tesco: a) explain ‘Stakeholder’ and identify three of Tesco’s stakeholders b) analyse the ‘Environmental and Social Review and Corporate Governance Report how this demonstrates CSR to 2 stakeholders
15%
35%
Demonstrate:
Relevant practical, academic and subject specific skills
Knowledge understanding and appreciation of issues involved.
Ability to research and provide practical and relevant points
Clear communication, explanation evaluation and discussion of aspects being covered
(2) Financial analysis and interpretation
40%
Report Structure and presentation
10%
Clarity of layout, grammar, presentation and inclusion of all relevant matters
Tone and use of professional language i.e. suitable for addressee of report
Accuracy of referencing, and appropriate use of appendices
Assessment guidance Your report should be word processed, clearly laid out and concise and should be supported by appropriate workings for the numerical elements. The word limit for the report is 3,000 words. The text of this assignment must be in your own words (not even a sentence or phrase should be taken from another source unless this source is referenced and the phrase placed in quotes). It is dishonest not to acknowledge the work of other people and you open yourself up to the accusation of plagiarism. Referencing should in accordance with the Harvard System. A guide published by the Library lists the most common types of references with examples. The guide can be found on the module VLE
Hand-in requirements and dates:
Please see the VLE
