Buy GBE806 Financing Enterprise assignment solution

Question - Nelson Marlborough Institute of Technology

POST GRADUATE DIPLOMA IN BUSINESS ENTERPRISE

Activity Title: GBE.806 – Financing Enterprise
Standard
Number and
Title:

GBE806
Assessed
Elements:

Conditions:




ASSIGNMENT 1

2

Task/Activity Instructions:

You work as a financial analyst for an investment bank. You have been asked to prepare
a report assessing the financial results and investment attractiveness of Golden Chip
Takeaways. This report is to be based on the attached set of annual financial statements
for the Golden Chip Takeaways shop.

Your report should cover your assessment of the following:
• The business’s profitability. Consider both how good or poor the profit performance ...Read More
is, and identify the reasons for any change in profitability.
• The business’s financial stability, both immediate and longer term.
• How well assets have been managed and utilised.
• Your conclusion as to whether the business represents a good investment or not.

Your report should be based on appropriate ratios and information provided and should be
from 4 to 8 pages or 1500 to 3000 words. Calculate and include the ratios as an appendix
to your report.

Please state any assumption/s, and the reasoning for the assumption/s, that you make
in your analysis.

3


CASE STUDY – GOLDEN CHIP TAKEAWAYS:
After looking at the financial statements prepared by his accountant, Graham Charr, the
owner of Golden Chip Takeaways is very pleased with the performance of the fish and chip
shop. The sales turnover for the year was $450,000 which is the best ever sales result of
the business, and there was a great profit shown.

Graham’s bank has reviewed the financial statements and has indicated its concern over the
cash position and in particular the buildup of stock. Graham cannot understand this and
tells his bank manager, “You can expect some stock as I have to be able to supply my
customers with fish and chips”. Concerned at the bank’s comments, Graham asks you to
investigate the financial statements further.

Golden Chip Takeaways
Income Statement
for the year ended 31 March 2014


2014
2013
Sales 450,000 300,000

Opening Stock

2,800
2,000
Plus Purchases 150,300 84,300
Less Closing Stock 15,000 2,800
Cost of goods sold 138,100 83,500
GROSS PROFIT 311,900 216,500

Operating Expenses
Accounting fees


2,000


1,500
Advertising & promotion 3,500 600
Bank Charges 450 300
Depreciation 12,000 6,400
Electricity 13,500 12,300
Insurance 4,000 3,800
Kitchen supplies 11,500 10,800
Maintenance 4,600 4,300
Packaging 4,000 2,300
Rent 26,000 26,000
Telephone 850 700
Vehicle expenses 4,500 3,200
86,900 72,200
NET PROFIT $225,000 $144,300




Golden Chip Takeawsy

4

Balance Sheet
as at 31 March 2014

Current Assets
2014 2013
Cash on hand 350 200
Bank 500 8,700
Accounts receivable 1,500 500
Inventory 15,000 2,800

Non-current Assets
17,350 12,200
Property, plant & equipment 65,000 40,000
Less accumulated depreciation 18,400 6,400
46,600 33,600
TOTAL ASSETS $63,950 $45,800

Current Liabilities

Accounts payable 5,950 5,300
Non-current Liabilities
Bank term loan 20,000 5,000
TOTAL LIABILITIES 25,950 10,300

Owner's Equity
Capital 28,000 28,000
Net profit 225,000 144,300
less drawings 215,000 136,800
TOTAL OWNER"S EQUITY 38,000 35,500
TOTAL LIABILITIES & OWNER'S EQUITY $63,950 $45,800


In addition, Graham has obtained the following financial ratios for comparison purposes.
Industry
Average
Gross profit margin 80%
Operating expenses ratio 17%
Working Capital ratio $2.10:$1
Liquidity ratio $1.00:$1
Equity ratio 65%

5

CRITERIA:
Possible
Marks
Your
Mark
75 – 100%  A clearly thought-out report is presented using
appropriate analysis of the information provided and is
suitable for presentation to senior management.
ï‚· In analysing the data, appropriate techniques of analysis
have been used that results in the generation, evaluation
and selection of soundly developed and consistent
assumptions
ï‚· Key sections of the report relating to profitability, financial
stability and asset management are logically linked,
explained and professionally presented.
ï‚· Overall the report is well structured, logical and
compelling

60 – 74%  A clearly thought-out report is presented using
appropriate analysis of the information provided and is
suitable for presentation to senior management, however
some modifications may be required.
ï‚· In analysing the data, appropriate techniques of analysis
have been used that results in the generation, evaluation
and selection of soundly developed and consistent
assumptions however there may be some inconsistencies
ï‚· Key sections of the report relating to profitability, financial
stability and asset management are linked, although there
may be some logical inconsistencies, assumptions
explained and professionally presented.
ï‚· Overall the report is well structured and coherent.

50 – 59%  A clearly thought-out report is presented using
appropriate analysis of the information provided and is
suitable for presentation to senior management, however
significant modifications may be required.
ï‚· In analysing the data, appropriate techniques of analysis
have been used, however in some cases the result is the
generation, evaluation and selection of assumptions that
may not be consistent with the data gathered.
ï‚· Key sections of the report relating to profitability, financial
stability and asset management have been completed but
may not be well linked and there are logical
inconsistencies. Assumptions are not well highlighted or
fully explained and the presentation may lack
professionalism in parts.
ï‚· Overall the report has some deficiencies regarding its
structure and logic.

6

40 – 49%  A report is presented using appropriate analysis of the
information provided but is not suitable for presentation to
senior management.
ï‚· In analysing the data, appropriate techniques of analysis
have not been consistently used. Moreover due to short-
comings and deficiencies, it results in the generation,
evaluation and selection of assumptions that are
inconsistent with the data gathered or are simply not
realistic.
ï‚· Key sections of the report relating to profitability, financial
stability and asset management have not been completed
and/or not well linked and there are significant logical
inconsistencies. Assumptions not highlighted and/or
explained and the presentation lacks professionalism.
 Overall the report has major deficiencies regarding it’s
structure and logic.

0 – 39%  Seriously deficient in all areas.

Comments:




Competent / Not Competent ...Read Less

Solution Preview - RPRISE DATE: 30/10/14 NAME: AMANDEEP KAUR GILL Contents TOC \o "1-3" \h \z \u Understanding Profitability PAGEREF _Toc402316731 \h 1Reasons for Computing Profitability PAGEREF _Toc402316732 \h 2Accounting Methods PAGEREF _Toc402316733 \h 2Cash Method of accounting PAGEREF _Toc402316734 \h 3Accrual Accounting Method PAGEREF _Toc402316735 \h

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