Business Finance and Economics
Assignment task
Write a report that addresses key aspects in relation to Business Finance and Economics taught in the module, such as the economic factors that determine the competitive environment of an organisation, the role and importance of accounting and financial reporting in terms of planning, control and decision-making.
In addition, the report requires a numerical element that offers a solution to a set of key financial ratios and demonstrates an understanding of these in terms of organisational performance. The report must include relevant theories, concepts and formulas from which a solution will be offered.
Address the following five questions / elements within the specified word limit:
1) Outline the external and internal determinants of business performance and distinguish whether these are micro- or macroeconomic. (500 words)
2) Explain the role and importance of accounting with respect to decision-making within an organisation. (500 words)
3) Distinguish between the major financial statements and explain the layout and terms used within each Statement. (450 words)
4) Using the information from the statements of financial position (balance sheets) and income statements (profit & loss accounts) below, calculate and interpret the following ratios for XYZ Plc for the years ended March 31 2019 and 2020, respectively: (400 words)
a) Operating Profit Margin
b) Gross Profit margin
c) Current Ratio
d) Acid Test Ratio
e) EPS (Earnings Per Share)
XYZ Plc – Statements of financial position (Balance Sheets) as at 31 March
2019 2020
£m £m
ASSETS
Non-current assets
Property, plant & equipment (at cost less depreciation)
Land & buildings 386 430
Fixtures & fittings 134 170
520 600
Current assets
Inventories 350 410
Trade receivables 240 280
Cash at bank 5 –
595 690
Total assets 1115 1290
EQUITY & LIABILITIES
Equity
£0.50 ordinary shares 400 400
Retained earnings 275 245
675 645
Non-current liabilities
Borrowings – 9% loan notes (secured) 250 350
Current liabilities
Trade payables 165 200
Taxation 22 4
Short-term borrowings (all bank overdraft) 3 91
190 295
Total equity & liabilities 1115 1290
Income Statements (Profit & Loss Accounts) for the year ended 31 March
2019 2020
£m £m
Revenue 2500 2750
Cost of sales (1850) (2375)
Gross profit 650 375
Operating expenses (410) (340)
Operating profit 240 35
Interest Payable (18) (20)
Profit before taxation 222 15
Taxation (55) (3)
Profit for the year 167 12
5) Define management accounting and discuss how this is important for planning, control and decision-making within an organisation. (500 words)
