Assessment Coursework Assessment code: 010 Academic Year: 2019/2020 Trimester: 2 Module Title: Business Finance Module Code: MOD003319 Level: 4 Module Leader: Tim Price Weighting: 50% Word Limit: 2500 This excludes bibliography and other items listed in rule 6.75 of the Academic Regulations: http://web.anglia.ac.uk/anet/academic/public/academic_regs.pdf
Assessed Learning Outcomes
1-3
Submission Deadline :
This assignment must be received by no later than 14:00 on Friday, 27 March 2020
WRITING YOUR ASSIGNMENT:
• This assignment must be completed individually. • You must use the Harvard referencing system. • Your work must indicate the number of words you have used. Written assignments must not exceed the specified maximum number of words. When a written assignment is marked, the excessive use of words beyond the word limit is reflected in the academic judgement of the piece of work which results in a lower mark being awarded for the piece of work (regulation 6.74). • Assignment submissions are to be made anonymously. Do not write your name anywhere on your work. • Write your student ID number at the top of every page. • Where the assignment comprises more than one task, all tasks must be submitted in a single document. • You must number all pages.
SUBMITTING YOUR ASSIGNMENT:
In order to achieve full marks, you must submit your work before the deadline. Work that is submitted late – up to five working days after the published submission deadline – will be accepted and marked. However, the element of the module’s assessment to which the work contributes will be capped with a maximum mark of 40%.
Work cannot be submitted if the period of 5 working days after the deadline has passed (unless there is an approved extension). Failure to submit within the relevant period will mean that you have failed the assessment.
Requests for short-term extensions will only be considered in the case of illness or other cause considered valid by the iCentre Adviser. Please contact iCentre@lca.anglia.ac.uk. A request must normally be received and agreed by the iCentre Adviser in writing at least 24 hours prior to the
deadline. See rules 6.56-6.65: http://web.anglia.ac.uk/anet/academic/public/academic_regs.pdf
Mitigation: The deadline for submission of mitigation in relation to this assignment is no later than five working days after the submission date of this work. Please contact iCentre@lca.anglia.ac.uk See rules 6.103 – 6.132: http://web.anglia.ac.uk/anet/academic/public/academic_regs.pdf
ASSIGNMENT QUESTION
Part 1
Mediterranean Delights Ltd (“MDL”) owns and operates 30 delicatessens throughout the South of England. It also supplies several chains of restaurants with its own range of imported products. The company last year had turnover in excess of £50 million. Two key corporate customers are Delios Ltd and San Pedro Ltd.
The company is managed by Wade, who owns 25% of the shares in the company, while the remaining 75% is split between three other family members.
The other shareholders are concerned about the business. Although there seems to be plenty of business coming in and the last year has been reasonably profitable (Operating profit was £5 million last year before interest and tax), the company’s debt has increased to £18 million from £16 million the year before. Wade has started talking about the need for the other shareholders to invest more money to reduce the debt.
Towards the end of last year MDL acquired a 40% stake in an Italian company which produces a range of premium pasta. MDL invested £10 million in the company to acquire the shares and has agreed to pay an £8 million advance fee for exclusive supply of the products.
The company is owed £1.5 million pounds for a series of large orders placed by Delios last year. There is also an outstanding dispute about a £2 million delivery to San Pedro completed in 2017. This has led to payment being withheld while negotiations continue between lawyers and industry consultants.
There is a further problem that Wade believes the San Pedro issue arose due to the supply of sub-standard materials by a Maltese agricultural group, Valetta Ltd in 2017. He has refused to pay Valetta which is now threatening legal action. In the meantime, a large stock of materials and supplies has built up at the company’s London warehouse. Wade insists that the company needs to have this level of stock for when the dispute is sorted out. He is also reluctant to press his key customers too hard for payment.
The other shareholders have approached MDL’s accountants to review the situation.

Requirements:
Prepare a report of up to 1,250 words for the shareholders addressing the following issues.
i. Using the reading list provided on the VLE, explain:
a. what is meant by Profit and Cashflow and how they are different
b. what is meant by Working Capital and, the meanings of Receivables, Inventory and Payables
c. how changes in Working Capital affect Cashflow (25 marks)
ii. Apply the concepts in (i) above to this company to show how the way the company is being managed might affect its financial results. (10 marks)
iii. Analyse and recommend what steps should now be taken to improve this company’s cashflow through better Working Capital management. (15 marks)
Part 2
Second Sight Plc is an international company which produces prescription glasses and sunglasses for a number of leading international brands.
The company has been operating for 25 years and had revenues last year of £250 million. It was listed on the London Stock Exchange 10 years ago and has a market capitalisation of £300 million with debt of £50 million. The founder, Nasser, is the CEO and owns 15% of the shares.
The company headquarters is located in Manchester which accommodates 40 staff including management, sales, finance, HR and administration. It has a production centre in the UK and another in France. In these centres it employs 250 staff.
The company is planning to open a new facility in the Netherlands and is considering a joint venture project with an Indian company. If the Indian venture goes ahead it would involve setting up a facility in Chennai which is expected to employ 800 staff.
The company has always used a traditional budgeting system. The Finance Director, Bridget, joined 3 years ago but is concerned that this approach might not be the most appropriate. However, if a change of budget approach is going to be made, she thinks it should happen in time for next year’s budget process. That way any “bugs” can be ironed out before the company goes through more significant changes in the following years.
Requirements:
Prepare a report of up to 1,250 words for the board addressing the following issues:
i. An understanding of the purposes of preparing a budget; an explanation of a) traditional budgeting approaches and b) the following alternative budget methods: rolling budgets, zero based budgets and activity-based budgets, explain their relative strengths and weaknesses (25 marks)
ii. Demonstrate the application of these methods showing how they might be used to plan future cost management for this specific business. Illustrate your answer with examples of how products and processes for this business would be budgeted for in a traditional approach and using the alternative methods (10 marks)
iii. Analysing whether a traditional or alternative budgetary system is appropriate to all or any parts of the business in its planned future form (15 marks)
(Total marks: 100)
ASSESSMENT CRITERIA
This assignment requires you to demonstrate your knowledge and understanding of a) the management of cash and b) budget techniques.
Your discussion for part 1 of the assignment should explain the difference between cashflow and profit. Your answer must identify and explain why the accounts of a business can report a profit but a shortage of cash, and discuss the consequences to a business of being short of cash. The general causes of cash flow problems should be analysed using the case study presented to you, particularly regarding the management of working capital. Methods for dealing with cash flow problems and managing cash for the business described should be proposed and evaluated.
Your answer for Part 2 of the assignment should focus on the role of budgets in the context of planning and control. Your answer must identify and explain traditional budgetary systems and on alternative systems such as ZBB, ABB and rolling budgets, and discuss how they work. Your answer should provide a breakdown of the advantages and disadvantages relating to each system identified.
You should ensure that your answers to both parts make specific reference to the business under discussion. You are not expected to show any specialist knowledge of the sector in which the business operates, but credit will be given for evidence that you have considered what issues might be specific to this company.

READING LIST
Your answers should be supported by the reading material provided on the VLE. It should be referenced using the Harvard guidelines. You should only use these texts for your work; it is not acceptable to ignore this reading list as it has been specifically chosen to provide suitable sources texts for the discussion. Do not conduct alternative research on the internet.
FORMAT
Your reports should begin with a concise and relevant Executive Summary of no more than 100 words for each part. An additional Introduction is not needed. The Executive Summary and References do not count towards the word limit. The contents of tables are also excluded but the use of text in tables should be kept to a reasonable level and be properly explained in the body of the text.
Answers should follow the order of the tasks set out above and the word count allocation to each section should broadly reflect the spread of marks. Avoid exceeding the word count.
NOTES
Your answer must not be solely descriptive in nature; it should provide clear evidence of understanding, application and analysis of the issues under consideration. You should assume that your reader has some experience in finance and management but is uninformed on the particular topic; for instance, in i) you do not need to explain what “accounts” are, but you do need to show what their purpose is for this business in this context.
To achieve a pass mark you must ensure that you correctly identify and explain the underlying concepts and theories relevant to the assignment. To achieve higher marks, in addition to the requirements to achieve a pass mark, you will need to display application and analytical skills.
Your work should be expressed clearly and fluently using a style of writing appropriate to the subject area. Sentences and paragraphs need to be relevant, well-structured and incorporate the correct terminology. Ideally, there should be no errors of spelling, punctuation or grammar.