Diploma in Business: Managing Financial Resources & Decision- Report Writing Assignment

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Internal Code: MAS1847
Report Writing Assignment:
Task:
Financial Management means the efficient and effective management of money (funds) in such a manner as to accomplish the objectives of the organization. It is the specialized functions directly associated with the top management. The significance of this function is not only seen in the “Line” but also in the capacity of “Staff” in overall administration of a company. It has been defined differently by different experts in the field.
It includes how to raise the capital, how to allocate it i.e. capital budgeting. Not only about long term budgeting but also how to allocate the short term resources like current assets. It also deals with the dividend policies of the shareholders. The purpose of this assignment is to make a learner to:
1. Identify what financial resources are available now and required in the future
2. Prioritise these resources against objectives and goals
3. Implement evaluation procedures to ensure resources are maximised
4. Plan for potential changes that may lay ahead; e.g. access to funding, organisational growth etc.
Scenario
A friend of yours, Tan Ah Meng, wants to start a shop selling small gifts in the Paragon shopping complex in Penang. He has collected all the information he thinks he needs and is very comfortable with all the other aspects. However, he needs some advice relating to the financial resources and planning.
The seed capital is calculated at around RM200,000. He has RM90,000 with him for immediate investment. He will need to borrow the balance of RM110,000.
Ah Meng will need to spend RM60,000 on renovation and furniture. The rest of the capital shall be used for working capital.
The residual value of the shop’s furniture is valued at RM10,000 after 6 years. Ah Meng’s shop will be opened 365 days a year. The following table shows his forecast sales numbers only.
diploma
Ah Meng intends to buy his inventory from a reputable large importer who would source from China and India. Ah Meng calculates that his variable cost of goods sold will be 40% of his revenue.
Ah Meng expects his fixed expenses (excluding depreciation) to be RM120,000 a year.
Ah Meng expects his new venture to earn him 16% (the required rate of return) a year.
You are the financial advisor to Tan Ah Meng. Prepare a report answering the following queries.
Task 3 (LO3: 3.1, 3.2, 3.3, 3.4 and M3, D1, D2)
You are to confirm the financial viability of Task 2’s Budgeted Income Statement by coming out with a Cash Budget for the next 12 months. State all assumptions made when creating this cash budget.
The next task is to calculate the average sales a day, a week and a month necessary to attain the 1 st year targeted sales. Confirm the feasibility of achieving such sales by listing out a typical bill stating the item and its selling price. A simple calculation with accompanying assumptions is all that is required for this.
Finally, confirm the viability of the project to Ah Meng by using investment appraisal techniques. You should comment on the need to incorporate present value in your concluding comments. This would demonstrate your understanding of long term decisions.
To achieve M3 and D1, you will have to present your work in suitable business formats and provide proper information to help Ah Meng draw meaningful conclusions of the results. Also, you will use accounting and financial terminology accurately.
Task 4 (LO4: 4.1, 4.2, 4.3 and D2, D3)
To evaluate and draw appropriate meanings out of the report, you will need to explain the purpose of the main financial statements and how the results can be interpreted.
Explain the basic purposes of the formats of main financial reports (e.g. balance sheet, profit and loss account, and cash flow statement) by describing the differences between the formats of financial statements for different types of business i.e. a limited company, a partnership company, or a sole trader or a franchise business. To achieve D2 and D3, you will produce your work in suitable business formats. Your valid and technical representation of above task would also win you D3.
Task 3: A report that helps in financial decision making based on financial information available to owners or management.
Task 4: A briefing which helps in evaluating the financial performance of a business for better corporate financial decisions making tactically and strategically.

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