Financial Objectives of the Firm Report Writing – Management Assignment Help

Assignment Task

Task

Learning outcomes:

• Evaluate the different competing financial objectives of the firm and the agency problem between shareholders and managers in publicly listed companies.
• Analyse financial data, conduct cost-benefit analysis and financial planning for effective business decisions using spreadsheet software package.
• Critically evaluate investment projects using appropriate investment appraisal techniques to assess suitability and viability of the projects consistent with the overall strategy and business model(s) of the firm.
• Critically appraise the major issues of capital management, relative advantages and disadvantages from the various perspectives of the stakeholders of the firm.

Question 1:

The scenario:

Mars Holdings Plc has a portfolio of investments in subsidiary companies and is seeking another acquisition that complements the others.

The subsidiary companies already in the group include: machinery and commercial vehicle dealership; finance company; equipment leasing company; haulage company with a fleet of 200 heavy goods vehicles (HGV), and a chain of value hotels across the UK, one of which is making a loss. 

Two possible acquisition targets have been identified: 

Wyre Child Ltd is based in leased converted hotels and provides care services for young people unable to be cared for in the foster system. Mars Holdings Plc are looking into the possibility of converting their failing hotel into a provider of care services and Wyre Child Ltd is looking for another property to continue expanding around the UK; 

Border Commercials Ltd has a large unit and caters for the storage and repair of up to 60 commercial vehicles at one time, and has the potential for more space as it is based in a large empty industrial area. Border Commercials is looking for a contract with a fleet operator to stabilise their income and growth. 

Requirements:

1. Prepare a business report, maximum 2 pages long (approximately 800 words) with an appendix for your ratio analysis. 

It is to be addressed to the board of directors of Mars Holdings Plc. 

You must evaluate the financial statements, interpret the ratio analysis and make a convincing argument for investment in one of the two target companies. 

Your report should be supported with academic references throughout, and your ratio analysis should be put in an appendix to the report.
  
2. Critically evaluate the working capital management (WCM) of both companies using academic references and draw conclusions on which is stronger.            

3. Create a table that lists the advantages and disadvantages of all the finance options available to Mars Holdings Plc. Explain, with references, the source of finance you recommend as most suitable way to finance the investment in either Wyre Chid services Ltd or Border Commercial Ltd.

Question 2:

You work for a consulting firm that has been approached by a client who is concerned about the future of their business. The board of directors of AJ Supplies Ltd are considering halting the production of 2 of their products that appear to be making no profit. 

As you can see from the table below the directors are considering closing products Bass and Clarinet in an effort to improve overall profitability.

You spot that management accounting would show the results differently and may affect the directors’ decision.

Requirements for Question 2 part:

i. Use your knowledge of management accounting to calculate the contribution of each product.

ii. Use your findings from part (a) and appropriate academic references to explain whether the company should stop making product Bass.

iii. Use your findings from part (a) and appropriate academic references to explain whether the company should stop making product Clarinet.

iv. Discuss how and why marginal costing calculates contribution to pay overheads and why this is useful in evaluating product value to a firm?    

v. Do you agree that profitability will improve by ceasing to make Products Bass and Clarinet? What do you suggest the company does to increase profitability?      

Required:

1. Prepare a revised budgeted statement of comprehensive income and a statement of net assets employed incorporating the results of the proposal i.e. Revised Sales Budget, Raw Material, Direct Labour, Variable Costs and workings.
    
2. Calculate the effect on profit of the changes resulting from the proposal. Specifically calculate the Per Unit and Total Contribution for the old budget and the new budget.
    
3. Advise management on the suitability of the proposal making any further calculations you consider necessary and adding any comments or reservations you think relevant