You are working for a business advisory service as an advisor to new and growing businesses. Your role is to support business managers to make decisions and to develop the skills they need to establish and expand their businesses.
Task 1
You have been asked to do a presentation to new business managers to introduce them to financial and management accounting systems and the recording of financial information that can be used in decision making. You should prepare detailed speaker notes and slides for a presentation. Your presentation must:
• Compare management and financial accounting systems, clearly explaining the difference between them.
• Analyse financial and management techniques used for recording financial information.
Extension activities
To achieve a Merit, your presentation and speaker notes must include an assessment of the needs of stakeholders in relation to management and financial accounting information using a specific business as an example.
To achieve a Distinction, your presentation and speaker notes must include an evaluation of the benefits of integrating financial and management accounting systems using a specific business organisation as an example.
Learning outcomes and assessment criteria
Task 2
You are supporting a business owner/manager who wants to know how to manage working capital and cash flow effectively. The manager has put together budgets and cash flow forecasts for the next six months and has asked you to help identify the implications of these. Looking at the budget and cash flow, you note the following:
• Sales and associated direct costs are forecast to increase month on month.
• There can be a 45-to-75-day delay on receiving payment for sales. These are invoiced at the end of the month for sales made in the first half of the month, and at the end of the following month for sales made in the second half of the month. Customers are given 30 days credit from the date of the invoice.
• The business pays for goods as soon as they receive an invoice although suppliers allow 30 days credit.
• The business holds stock equivalent to three months sales. The usual delivery time for stock is two weeks from the order date.
• The cash flow forecast shows a large cash deficit after the third month.
You are required to write a paper for a meeting with the manager. Your paper must:
• Analyse the components of working capital explaining how working capital can be effectively managed using the information provided to illustrate your answer.
Extension activity
To achieve a Distinction, your paper must also evaluate the benefits of management accounting techniques (such as budgeting and cash flow forecasts) in supporting financial decision making to ensure long term financial stability.
Learning outcomes and assessment criteria
One of the businesses you are advising is looking at two different options for possible expansion. The first involves expansion through developing the existing operations. The second involves the takeover of a similar established business. Both will require an initial investment of £100,000. The manager also wants to know how the performance of the potential takeover company compares with larger businesses in the same industry. You are required to carry out calculations on the information provided and prepare a report for the manager that will support his decision. You should make a recommendation in your report based on your appraisal of the two options.
• Use Net Present Value and two other capital appraisal techniques to assess the options and make a recommendation with justification for your decision.
You will need the following information to evaluate the two options:
| Year | Expansion project £ | Takeover project £ |
| 0 | (100,000) | (100,000) |
| 1 | 17,500 | 109,000 |
| 2 | 40,000 | 5,000 |
| 3 | 45,000 | 5,000 |
| 4 | 37,500 | 2,000 |
| 5 | 10,000 | 1,500 |
The cost of capital for the business is anticipated to be 10%.
Extension activity
To achieve a Merit, you should also evaluate the usefulness of ratio analysis when assessing organisational performance.
Learning outcomes and assessment criteria
Task 4
You are advising the owner of a local business that runs coach trips. The owner usually finds that an average of 60% of tickets are sold for any one trip and thinks it would be a good idea to offer remaining tickets at a discounted price to local hotels and community groups. The owner is not sure how to price the tickets and has asked for your help. The owner has provided the following information about a coach trip as an example.
Coaches seat 56 people. The fixed costs of running the trip amount to £750. This includes the cost of running the coach plus paying a driver and tour guide. The variable costs of running the trip are £8.00 per passenger. This includes entrance fee to the attraction and a light lunch and refreshments.
Tickets are sold full price at £40. You are required to identify the marginal cost of a seat and recommend how this could be used to set a suitable price for the discounted tickets which will ensure they can cover fixed
costs and make a profit. You must:
• Calculate the break-even point for the trip in terms of number of full price tickets sold.
• Calculate the profit made if 60% of tickets are sold (round down to nearest whole number of tickets).
• Identify the marginal cost of a ticket and explain how this can be used to set discount
prices.
• Calculate the profit made if a further 20% of seats on the trip (on top of 60% at full price) are sold to a local residential home for older people at a price of £25 each.
• Explain how marginal cost can be used to set discount prices.
Learning outcomes and assessment criteria