Assignment Front Sheet

Qualification Unit number and title

Pearson BTEC Level 7 Diploma in Strategic Unit 13: Managing Financial Principles and Techniques
Management and Leadership (QCF) Unit Code: A/602/2334

Student name Assessor name

Amar Ali
Date issued Completion date Submitted on

September 06, 2016 December 05, 2016 December 05, 2016

Assignment title Managing Financial Principles and Techniques

Word Count

Hand-in Policy
You must complete this assignment on time. If you experience difficulties, you must inform your tutor accordingly.

Late Work Policy

Consideration will be given to students who have valid reasons for late submission (e.g. illness)

Plagiarism
In case of plagiarism, college regulations will be applied. You must declare that this work is your own by signing the
following statement:

Learner declaration

I certify that the work submitted for this assignment is my own and research sources are fully
acknowledged.

Student signature: Date:

 Assessment Criteria
In this assessment you
Assessm
Learning Learning will have the opportunity Task Evidence
ent
Outcome Outcome to present evidence that no. Page
Criteria
shows you are able to:
Explain the importance of costs in
1.1 the pricing strategy of an
Be able to apply organisation
cost concepts to Design a costing system for use
LO1 the decision
1.2 within an organisation
making process Propose improvements to the
1.3 costing and pricing systems used
by an organisation
Be able to apply Apply forecasting techniques to
forecasting 2.1 make cost and revenue decisions
techniques to in an organisation
LO2 obtain Assess the sources of funds
information for 2.2 available to an organisation for a
decision making specific project
Select appropriate budgetary
3.1 targets for an organisation
Be able to Participate in the creation of a
participate in the
3.2 master budget for an organisation
LO3 budgetary Compare actual expenditure and
process of an 3.3 income to the master budget of
organisation an organisation
Evaluate budgetary monitoring
3.4 processes in an organisation
Be able to Recommend processes that could
recommend cost 4.1 manage cost reduction in an
reduction organization
LO4 and
management Evaluate the potential for the use
processes for an
4.2 of activity-based costing
organisation
Apply financial appraisal methods
to analyse competing investment
Be able to use
5.1 projects in the public and private
financial sector
appraisal Make a justified strategic
techniques to investment decision for an
LO5 make strategic
5.2 organisation using relevant
investment financial information
decisions for an Report on the appropriateness of
organisation a strategic investment decision
5.3 using information from a post
audit appraisal
Analyse financial statements to
6.1 assess the financial viability of an
Be able to organization
interpret Apply financial ratios to improve
financial the quality of financial information
6.2
LO6 statements for in an organisation’s financial
planning and statements
decision Make recommendations on the
making strategic portfolio of an
6.3 organisation based on its financial
information
 Assignment brief
Unit 13: Managing Financial Principles and Techniques
Unit number and title
Unit Code: H/602/2330
Qualification Pearson BTEC Level 7 Diploma in Strategic Management and Leadership
Start date September 05, 2016
Deadline/hand-in September 06, 2016

Assessor Amar Ali

Assignment title Managing Financial Principles and Techniques

Specific Project Guidelines

This assignment consider learner as Management Consultant and require them to perform below task
on separate organisation (as a consultant). Note each task have its own hypothetical organisation and
required learners to demonstrate in depth understanding.

Task 1:
ARQ Ltd. is construction company and struggling to design a costing system. Previously company used
absorption costing system and due to that cost allocation was not appropriate. Company also had
difficulties in understanding pricing strategies and currently base their prices on competitors’ prices.
Company hired you as consultant to perform following tasks. (Note you are required to write a report
to the senior management of ARQ LTD.)

1.1 Explain the importance of costs in the pricing strategy of ARQ Ltd.
1.2 Design a costing system for use within an ARQ Ltd.
1.3 Propose improvements to the costing and pricing systems used by an ARQ Ltd.

Task 2:
You were approached by a local company ESCON Ltd. to perform below mentioned tasks. ESCON Ltd. is
media company which was established ten years back. Currently company is trying to forecast its
revenues and costs but finding difficulties in making reasonable estimates (Mainly due to lack of
understanding of techniques). ESCON Ltd. wants to finance an upcoming project “FM Radio” for which
they acquire licence for PKR 10 Million last year. Currently company does not have enough equity
finance to support infra-structure cost that is PKR 29 Million for layout in 3 Major cities of Pakistan.
Given below is the information’s you were required by the company to analyses with appropriate
discussion on findings and use of specific techniques,

Scenario 1: Sale Revenue and Cost Forecasting

ESCON Ltd. is selling documentaries over the seven years from 2008 till 2015 were as follows.
 Revenue Total
(PKR’00 Cost
Year Sales of Documentaries (units)
0) (PKR’00
0)
2009 22 5500 1600
2010 25 6250 1750
2011 24 6000 1700
2012 26 6500 1800
2013 29 7250 1950
2014 28 7000 1900
2015 30 7500 2000

As per management there is high correlation between time and the volume of sales. You were asked by
management to calculate and explain trend lines by calculating forecasted sales revenue and costs for
2016 and 2017.

2.1 Apply forecasting techniques to make cost and revenue decisions in an organization
2.2 Assess the sources of funds available to an organisation for an ESCON Ltd. radio project.

Task 3:
You receive an assignment to be performed for Halla Milk Pvt. Ltd. company. You were required by the
company to prepare budget that will be useful for management control purposes. Also perform each
task mentioned below.
Budget Related Information:
The Budgeted and actual results of Halla Milk Pvt. Ltd. for September 2015 were as follows. The
company uses a marginal costing system. There was no opening or closing stocks.

Fixed Budget Actual

10 Million Units 7 Million Units
PKR 'M PKR 'M PKR 'M PKR 'M
Sales and production 200 142
Variable Cost of Sales

Direct Material (80) (52)

Direct Labor (40) (31)

Variable Overheads (20) (15)

(140) (98)
Contribution 60 44
Fixed Costs (50) (54)
Profit/(Loss) 10 (10)

3.1 Select appropriate budgetary targets for Halla Milk Pvt. Ltd.
3.2 Participate in the creation of a master budget for Halla Milk Pvt. Ltd.
3.3 Compare actual expenditure and income to the master budget of Halla Milk Pvt. Ltd.
3.4 Evaluate budgetary monitoring processes in Halla Milk Pvt. Ltd.
Task 4:
All-in-one Sport Company (AIO) approaches you and need help on way to manage cost in their
organisation. Currently AIO is using marginal costing method and doesn’t allocated cost while decision
making. Due to problems in establishing actual cost of products company is charging less mark-up.
This issue has raised serious concerns and company need urgent support.
4.1 Recommend processes that could manage cost reduction in AIO.
4.2 Evaluate the potential for the use of activity-based costing

Task 5:
Telecon Ltd. is telecom company is currently trying evaluate two project A & B. Project A is the
investment in new towers and project B is the investment in telemetric system (M2M) project of Govt.
of Pakistan with help of International NGO. Below is the information on two projects. You are required
to evaluate financials and perform given tasks as below. (Report)
Project A
PKR
Years Millions
0 -3100
1 1000
2 900
3 800
4 500
5 500

Project B
PKR
Years Millions
0 -8500
1 500
2 450
3 600
4 450
5 300

There is an opportunity with project B that company can acquire further contracts on M2M and can
open a new stream of revenues.

5.1 Apply financial appraisal methods to analyse competing investment projects in the public and
private sector
5.2 Make a justified strategic investment decision for an organisation using relevant financial
information
5.3 Report on the appropriateness of a strategic investment decision using information from a post
audit appraisal

Task 6:
You were asked by the Alpha Shares Holdings (ASH) to analysis financial position of Pakistan State Oil
(PSO) for investment purposes. Below are the actual financial statements of PSO. (Report to ASH)

Pakistan State Oil (PSO)

Statement of Financial Position of Company

As at June 30,2014 2014 2013
Rupees in '000 Rupees in '000
NON CURRENT ASSETS
Property, plants and equipment 5,524,767 5,831,993
Intangibles 30,068 29,991
Long-term investments 48,253,164 1,968,073
Long-term loans, advances and receivable 380,213 385,497
Long-term deposits and prepayments 113,093 123,740
Deferred tax 2,650,805 1,292,316
56,952,110 9,631,610
Current assets
Stores, spare parts and loose tools 138,775 134,431
Stock in trade 106,089,048 88,523,794
Trade debts 76,596,194 218,022,292
Loans and advances 490,606 526,118
Deposits and short term payments 2,405,618 2,528,406
Mark-up/ interest receivables 2,251,290 -
Other receivables 26,570,948 21,122,166
Taxation-net 4,586,321 5,314,752
Cash and bank balance 5,227,328 1,624,025
224,356,128 337,795,984

Net assets in Bangladesh - -

281,308,238 347,427,594
EQUITY AND LIABILITIES
Equity
Share capital 2,469,872 1,715,190
Reserves 59,417,732 48,244,718
61,887,604 49,959,908
NON CURRENT LIABILITIES
Long term loans 1,342,463 1,178,078
Retirement and other service benefits 2,385,137 2,518,502
3,727,600 3,696,580
CURRENT LIABILITIES
Trade and other payables 197,302,571 246,767,460
Provisions 688,512 688,512
Accrued interest/mark-up on short term borrowings 432,270 544,485
Short term borrowings 17,269,681 45,772,649
215,693,034 293,773,106
TOTAL EQUITY AND LIABILITIES 281,308,238 347,429,594

Pakistan State Oil (PSO)

Statement of Comprehensive Incomes
For the year ended June 30,2014 2014 2013
rupees in '000 rupees in '000
 sales-net of trade discounts and allowances accounting to

Rs. 1,279,813 thousand (2013: Rs. 1,237,662 thousand) 1,294,503,247 1,199,927,907

less:

sales tax (178,504,835) (163,861,410)

inland freight equalization margin (15,876,094) (11,642,892)

Net sales 1,100,122,318 1,024,423,605

cost of products sold (1,063,613,380) (990,101,083)

Gross Profits 36,508,938 34,322,522

Other Incomes 5,939,114 9,684,575

Operating Costs

Distribution and marketing expenses (8,461,834) (8,133,834)

Administrative expenses (1,865,657) (1,737,338)

Other operating expenses (6,011,835) (9,272,048)

Profit from operations 26,108,726 24,863,877

Finance costs (7,591,156) (11,658,928)

Profit after finance costs 18,517,570 13,204,949

Share of profit of associates 571,102 569,468

Profit before taxation 19,088,672 13,774,417

Taxation (6,530,727) (4,618,362)

Profit for the year 12,557,945 9,156,055

PKR PKR Restated

Earnings per share ( basic and diluted) 50.84 36.67

You are required to perform below task and must recommend on strategic portfolio of PSO.
6.1 Analyse financial statements to assess the financial viability of Pakistan State Oil (PSO).
6.2 Apply financial ratios to improve the quality of financial information in Pakistan State Oil (PSO)
financial statements
6.3 Make recommendations on the strategic portfolio of Pakistan State Oil (PSO) based on its
financial information.

Evidence Evidence
Summary of evidence required by student
checklist presented
1.1 Explain the importance of costs in the pricing strategy of an organisation

1.2 Design a costing system for use within an organisation

Propose improvements to the costing and pricing systems used by an

1.3 organization

Apply forecasting techniques to make cost and revenue decisions in an

2.1 organization
Assess the sources of funds available to an organisation for a specific
2.2 project

3.1 Select appropriate budgetary targets for an organisation

3.2 Participate in the creation of a master budget for an organisation

Compare actual expenditure and income to the master budget of an

3.3 organization

3.4 Evaluate budgetary monitoring processes in an organisation

4.1 Recommend processes that could manage cost reduction in an organization

4.2 Evaluate the potential for the use of activity-based costing

Apply financial appraisal methods to analyse competing investment projects

5.1 in the public and private sector
Make a justified strategic investment decision for an organisation using
5.2 relevant financial information
Report on the appropriateness of a strategic investment decision using
5.3 information from a post audit appraisal
Analyse financial statements to assess the financial viability of an
6.1 organization
Apply financial ratios to improve the quality of financial information in an
6.2 organisation’s financial statements
Make recommendations on the strategic portfolio of an organisation based
6.3 on its financial information
 Achievement Summary

Pearson BTEC Level 7 Diploma in Amar Ali

Qualification Strategic Management and Assessor name
Leadership
Unit 13: Managing Financial
Unit Number and Student name
Principles and Techniques
title

Criteria To achieve the criteria the evidence must show that the Achieved?
Reference student is able to: (tick)
LO 1
Explain the importance of costs in the pricing strategy of an
1.1 organization
1.2 Design a costing system for use within an organisation
Propose improvements to the costing and pricing systems used by
1.3 an organization
LO 2
Apply forecasting techniques to make cost and revenue decisions in
2.1 an organization
Assess the sources of funds available to an organisation for a
2.2 specific project
LO 3
3.1 Select appropriate budgetary targets for an organisation
3.2 Participate in the creation of a master budget for an organisation
Compare actual expenditure and income to the master budget of an
3.3 organization
3.4 Evaluate budgetary monitoring processes in an organisation
LO 4
Recommend processes that could manage cost reduction in an
4.1 organization
4.2 Evaluate the potential for the use of activity-based costing
LO 5
Apply financial appraisal methods to analyse competing investment
5.1 projects in the public and private sector
Make a justified strategic investment decision for an organisation
5.2 using relevant financial information
Report on the appropriateness of a strategic investment decision
5.3 using information from a post audit appraisal
LO 6
Analyse financial statements to assess the financial viability of an
6.1 organization
Apply financial ratios to improve the quality of financial information
6.2 in an organisation’s financial statements
Make recommendations on the strategic portfolio of an organisation
6.3 based on its financial information
Useful Links:

Textbooks

Atrill P and McLaney E – Management Accounting for Non-specialists, 3rd Edition (Financial
Times/Prentice Hall, 2002) ISBN 0273655914
Berry A and Jarvis R – Accounting in a Business Context, 4th Edition (Cengage Learning
EMEA, 2005) ISBN 1844802515
Brookson S – Managing Budgets (Dorling Kindersley, 2000) ISBN 0751307718 Cox D and Fardon M
– Management of Finance (Osborne Books, 1997) ISBN 872962238
Drury C – Management Accounting for Business, 4th Edition (Cengage Learning EMEA, 2009) ISBN
1408017717
Glynn J, Perrin J, Murphy M and Abraham A – Accounting for Managers, 3rd Edition(Thomson
Learning, 2003) ISBN 186152904X
Harris R and Sollis R – Applied Time Series Modelling and Forecasting (John Wiley and
Sons, 2003) ISBN 0470844434
Lumby S and Jones C – The Fundamentals of Investment Appraisal (Thomson Learning, 2000) ISBN
1861526075
Monden Y – Cost Reduction Systems: Target Costing and Kaizen Costing (Productivity Press,
1995) ISBN 1563270684
Makridakis S, Wheelwright S C and Hyndman R J – Forecasting, 3rd Edition (John Wiley and
Sons, 1998) ISBN 0471532339
Pettinger R – Investment Appraisal: A Managerial Approach (Palgrave Macmillan, 2000) ISBN
0333800591
Secrett M – Mastering Spreadsheets, Budgets and Forecasts, 3rd Edition (Financial Times/Prentice
Hall, 1999) ISBN 0273644912
White G I, Sondhi A C and Fried D – The Analysis and Use of Financial Statements, 3rd Edition (John
Wiley and Sons, 2003) ISBN 0471375942
Yoshikawa T, Innes J and Mitchell F – Strategic Value Analysis (Financial Times/Prentice
Hall, 2002) ISBN 0273654292

Journals/newspapers
Newspapers can be a useful source for financial issues in both the private and public sector.
Examples include The Financial Times, The Guardian, The Independent and The Times.
Specialist periodicals also provide current articles on developments in related topic areas. Examples
include:
Management Accounting Quarterly (Institute of Management Accountants)
Management Today (Haymarket Business Media)
Strategic Finance (Institute of Management Accountants)
Websites
There are many websites that provide useful information, case studies and examples of the
application of financial techniques in business situations. Company reports can be accessed
and ordered through the Financial Times ebsite or through the Registrar of Companies,
whose website contains useful information on the style of
reporting for company accounts and information on the content of company reports. Public
limited companies have websites which normally give access to their published accounts and
accompanying reports.
Most of the professional accounting bodies (CIMA, ICA, CIPFA, AAT) have their own websites with
access to library facilities (although if you are not a member, access may be restricted).
www.aat.co.uk Association of Accounting Technicians
www.bized.co.uk Learning materials and a wide range of company information
www.cimaglobal.com Chartered Institute of Management Accountants
www.cipfa.org.uk Chartered Institute of Public Finance and Accountancy
www.companies-house.gov.uk Companies House
http://corporate.marksandspencer.com Example of company website containing
information on its published accounts
www.guardian.co.uk Example broadsheet newspaper website
www.icaew.co.uk Institute of Chartered Accountants in England and Wales
www.icsa.org.uk Institute of Chartered Secretaries and
Administrators
www.thetimes100.co.uk Company case studies