Part 2 – Financial Ratio Analysis

I certify that the work submitted for this unit is my own and the research sources are fully acknowledged.

Learner Name:                                                                          Date:

·         The assignment should be submitted in a MS Word^© format, or equivalent and your ratio calculations and budgets should be submitted in Excel.

·         The assignment has TWO parts. Please read both parts carefully.

·         Ideally, you should start writing your assignment as soon as you receive the assignment brief. You should submit and take formative feedback on part 1 in Week 8 & 9 and you should submit and obtain formative feedback on part 2 in week 13 & 14.

·         There will be only one submission link in Turnitin via Canvas.

·         Please access HN Global for additional resources to support and reading for this unit. For further guidance and support on report writing please refer to the Study Skills Unit on HN Global www.highernationals.com

A report that should make use of headings, sub-sections, columns and appropriate business-related images and illustrations. This format offers the opportunity to present academic

and theoretical information in a practical, contextualised and creatively written way. The

recommended word limit for the case study is 1,500–2,000 words, although you will not be

penalised for going under or exceeding the total word limit. All work must be supported

with research and referenced correctly using the Harvard referencing system (or

alternative referencing system). You will need to provide a reference list using the Harvard

referencing system. Inaccurate use of referencing may lead to issues of plagiarism if not applied correctly.

You will also submit a memorandum with an accompanying Excel spreadsheet (raw data will be supplied by your tutor). You will insert sections of your spreadsheet into the memorandum. The recommended word limit for the memorandum is 1,000–1,500 words, although you will not be penalised for going under or exceeding the total word limit. Referencing for both submissions should use the Harvard system.

LO4 Prepare budgets for planning, control and decision-making using spreadsheets.

You have recently joined the firm as a Graduate Trainee attached to their UK SME (Small and Medium Enterprises) Unit, offering accountancy and financial services to businesses that typically have a turnover ranging from £0.5 m to £15 m. As part of your ongoing training, you have been asked to undertake some activities.

Your supervisor, one of the firm’s Key Account Managers, has asked you to prepare a report and memorandum with an accompanying Excel spreadsheet explaining ‘The role of accounting in an organisation’. The report must be written using an academic style covering relevant academic theory, making use of, for example, headings, images and illustrations. Your report should include the following, but is not limited to:

·         the purpose and scope of accounting in complex operating environments

·         a critical evaluation of the accounting function in informing decision making and meeting stakeholder and societal needs and expectations

·         the main branches of accounting and job skillsets and competencies

·         accounting systems and the role of technology in modern-day accounting

·         issues of ethics, regulation and compliance and the extent to which they are constraints or threats to the organisation.

Having completed the report, you have now been asked to work with a hospitality and catering start-up business that your firm has just taken on as a client. The business is particularly in need of support and guidance with budgeting and how it can be used to inform efficient resource allocation and support effective control and decision making.

The founder of the business is investing £100,000 of their own capital and has also secured a business loan of £50,000.

(Note: students are to be provided with raw budget data in spreadsheet format, which

they will then manipulate and model)

You have been asked to prepare a memorandum that includes the following.

·         Production of a 12-month cash budget that makes use of variance analysis to show the impact of the different individual scenarios below:

1. discounting prices by 20 per cent, which in turn increases sales volume per month by 10 per cent

2. increasing the marketing budget by 10 per cent per month, which in turn generates an additional 20 per cent in sales revenue

3. offering suppliers one-month’s trade credit

4. reducing rental/property related costs by 15 per cent per month.

·         An evaluation of the role that budgets play in the effective planning and control of

resources in an organisation such as your client’s. This will include both benefits and any limitations of using budgets and the extent to which they can help identify problems and corrective actions.

·         An outline of a range of budgetary control solutions, with justification, to support

organisation decision making and ensure efficient and effective deployment of resources.

The word count is 2,000–2,500 words, although you will not be penalised for going under

or exceeding the total word limit. A bibliography should be provided using the Harvard referencing system (or an alternative system). Inaccurate use of referencing may lead to issues of plagiarism if not applied correctly.

LO3 Interpret financial statements.

You are initially working with a selection of these small businesses that have been trading for three years and which now need annual trading statements to be compiled and submitted in line with government requirements. You have been given:

·         an extended trial balance for each business, including accruals, prepayments and figures for bad debts and depreciation

·         a range of comparative key performance ratios from the previous year.

(Note: this data is to be given to students in spreadsheet format. Financial data must be realistic and in context to meet local needs)

These local businesses do not make use of contemporary software to support its bookkeeping

and accounting function. This is something which concerns you as you feel that it represents an opportunity for the business to save time and resource.

Your supervisor, one of the firm’s Key Account Managers, has asked you to compile the year-end financial statements ready for submission and provide, for each client, some detailed analysis of the figures produced, which will be presented in the form of an accompanying letter. Specifically, you will undertake the following:

1. From the data provided, you are required to prepare the year-end financial statements, taking into consideration accounting principles, conventions and standards. You will need to make and show appropriate adjustments to both the income statement and the balance sheet.

2. Write an accompanying letter to the client that will be sent with the completed financial statements. The letter needs to include:

·         calculation of relevant profitably, liquidity, asset usage and investment ratios

·         critical evaluation of the performance to the business year on year (making reference to data you have calculated, and data provided from the previous year), with reference to relevant benchmarks as well as any limitations of using financial ratios as performance measures

·         an outline of the benefits of contemporary accounting software packages, with examples of products on the market

·         justified conclusions and recommendations for your client.

P2 Assess the accounting function within the organisation in the context of regulatory and ethical constraints.

and purpose of the accounting function in

meeting organisational,

stakeholder and societal

needs and expectations.

operating environments.

trial balance for sole traders, partnerships and not-for-profit organisations, to meet accounting principles, conventions and standards.

trial balance, making

appropriate adjustments.

D2 Critically evaluate financial statements to assess organisational performance using a range of measures and

benchmarks to make justified conclusions.

final accounts.

P5 Compare the performance of an organisation over time

using financial ratios.

organisation over time,

using financial ratios with

reference to relevant

benchmarks.

organisation using a

spreadsheet.

P7 Discuss the benefits and

limitations of budgets and

budgetary planning, and control for an organisation.

revealed by budgetary

planning and control for

effective organisational

decision making.

solutions and their impact

on organisational decision

making to ensure efficient

and effective deployment of

resources.

Plagiarism is presenting someone else’s idea in your own name. Hence, it is important not to use information directly from any published sources such as books, journals or websites without paraphrasing and referencing the materials. It is also imperative for you not to copy anything from another student’s coursework and submit in your name (collusion). If similarity is found with another learner’s work or from other published sources, suspected work will be investigated in accordance with procedures set up by the college. Please read Academic Misconduct Student Guide in College website for further details: https://www.rcl.ac.uk/policy/academic-misconduct/academic-misconduct-student-guide.pdf

Accounting Coach courses. Available at:https://www.accountingcoach.com/accounting-basics/explanation

The Association of Chartered Certified Accountants ACCA). Available at: https://www.

accaglobal.com/gb/en.html

Chartered Institute of Management Accountants. Available at: https://www.cimaglobal.

com/

Indeed Career Guide to Memo Writing. Available at: https://www.indeed.com/career-advice/career-development/memo-writing-guide

HubSpot. How to write a memo: Templates & examples. Available at: https://blog.hubspot.

com/marketing/how-write-memo

HN Global

HN Global (2021) Reading Lists. Available at: https://hnglobal.highernationals.com/learningzone/reading-lists

HN Global (2021) Student Resource Library. Available at: https://hnglobal.highernationals.

com/subjects/resource-libraries

HN Global (2021) Textbooks. Available at: https://hnglobal.highernationals.com/textbooks

Textbooks

Atrill, P. and McLaney, E. (2018) Accounting and Finance for Non-Specialists. 11th Ed. Harlow: Pearson

Weetman, P. (2019). Financial and Management Accounting: An Introduction. Harlow: Pearson

The balance careers. Business letter format with examples. Available at:

https://www.thebalancecareers.com/how-to-format-a-business-letter-2062540

Xerox. Writing an effective business letter. Available at: https://www.xerox.com/en-us/small-business/tips/business-letter

HN Global

HN Global (2021) Reading Lists. Available at: https://hnglobal.highernationals.com/learningzone/reading-lists

HN Global (2021) Student Resource Library. Available at: https://hnglobal.highernationals.

com/subjects/resource-libraries

HN Global (2021) Textbooks. Available at: https://hnglobal.highernationals.com/textbooks