Unit 2 Managing Financial Resources and Decisions - Level 5

Unit 2 Managing Financial Resources and Decisions - Level 5 (Diploma in Business)

Task 1 (Scenario part a)

1.1 Identify the sources of finance available to a business (at least 3 long-term and 2short-term).

1.2, 1.3 Compare and contrast a rights issue of shares and loan stocks.

1.3 Explain which source of finance in (b) above would be more beneficial for the buildings and noncurrent assets.

1.3 Advise the Board of Directors on a source of finance for working capital.

Task 2 (Scenario part b)

2.1,2.4,4.1 Advise the Board of Directors which of the three financial plans might best benefit the shareholders using Weighted Average Cost of Capital (WACC) and explain how these financial plans will impact on the financial statements.

2.3, 4.3 Given that the Profit before interest and tax (PBIT) of the proposed investment is estimated at £840,000; calculate the company's current earnings per share (EPS).

3.3 Explain the benefits of net present value (NPV) method of appraisal.

3.3 The net present value.

3.1,3.3 Using your answers to part (b) evaluate each investment opportunity and make your recommendation to the Board of Directors. (LO 3.1, 3.3)

3.2 Define the concept of unit cost and explain briefly how they can be calculated.

3.2 Discuss what factors should be taken into account by an organisation such as Telco when setting prices for their output.

Task 4 (scenario part d)

2.2, 2.3 Comment on the main trends and messages contained within the cash flow.

2.2 Explain why a company may be profitable but run into problems with its liquidity (financial planning).

2.3 The needs of different users of the financial statements are very specific. You are required to list 7 users of accounts and clearly assess their needs.

Task 5 (scenario part e)

4.1, 4.3 Using a maximum of four financial ratios analyse the profitability and liquidity performance 2014 /15 based upon the financial statements in scenario part e advising Telco whether the takeover for Dot should be considered on a preliminary level before engaging in a costlier appraisal.

4.2 Telco is a medium size company. What are the main differences in the financial statements of sole traders, partnerships and limited companies?

Unit 01: Investment Analysis - Unit Reference Number R/615/3236, Unit Level 7

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