Foundation Degree in Business and Management (Year 2)

Business Finance (BMS512)

School of Business, Management and Professional

Semester: 1 (Tutor: S. A. Palan)

TITLE: Business Report

Completion of this work will satisfy the following learning outcomes from module BMS512:

LO1 Analyse a range of financial strategies including budgets, financial management and accounting
LO2 Evaluate approaches to procurement and contracting within an organisation
LO3 Assess the commercial context that an organisation operates within

CASE STUDY
S plc is to add a new line of computer games to its highly successful product range. You are required to
provide an evaluation of the new investment with a five-year expected live. The following budgeted
projections relate to the new investment proposal for this new line.

Initial cash investment: (£000)

Production equipment 1,000
Staff training provision 100
Advertising & promotion costs 20
Incremental working capital 180

Year 1 2 3 4 5
Projected sales revenues in 600 1000 1200 1000 800
£000s

Cost of sales: 30% of sales revenues

Incremental operation costs £100,000 per annum
Depreciation of production equipment: 20% on straight line with no salvage value.
S plc is a listed company. Its cost of capital is set at 20%.

TASK
Write a report to address the following
A)

1) Why is capital investment appraisal process so important to S plc?

2) Prepare a cashflow analysis statement for the above new investment.

3) What is the payback period for the new investment? If S plc imposes a three-year maximum
 payback should the project be accepted?

4) Determine the net present value for the new investment? Should the investment proposal be accepted?
Explain why?

5) Describe the logic behind the net present value approach. What is the relationship between net present
value and cost of capital.

7) Calculate the internal rate of return for the investment proposal. Should the proposal be accepted?
Would a change in the cost of capital affect the internal rate of return?

8) Discuss why the net present value method is often regarded to be superior to internal rate of return.

[LO1]

B)

S plc finds that the cheapest source of long-term finance available to it is through a bank loan.
Critically contrast this with an equity issue for all its long-term finance requirements.

[LO3]

C)

An existing computer game is to be introduced into a new market segment by S plc.

The following details relate to this product:
Selling price per game: £100.
Variable costs per game: £60.
Fixed costs per annum specific to this game: £300,000.

Required:

1) Calculate the breakeven sales revenue, the sales revenue to achieve a target profit of £120,000
and the margin of safety.

2) What are the consequences of a price increase or decrease of 10%.

3) Cost-volume-profit analysis provides important information for management decisions. The analysis
illustrates relationships that prevail under a particular set of assumptions. Critically comment on these
assumptions.

[LO3]

D)

1) Distinguish between three categories of suppliers: strategic suppliers, preferred suppliers and
transactional suppliers.

2) Compare the advantages of single sourcing and multiple sourcing in the context of procurement.

3) Explain what cross-sourcing is using an example and how it benefits the buyer.

[LO2]
Other relevant assessment information:

 You will need to include and reference at least 8 different sources including 4 academic textbooks
and 2 academic journals to help provide supporting evidence for any assertions that you make within
your report.
 Your report should outline your research, judgements as well as the conclusions drawn. 3,000 words
(+ or - 10%). All written work should be submitted online, through Turnitin. You must include both
a reference list and bibliography.
 The completion of your work will satisfy 75% of the assessment for this module

Issue Date: 15.07.2021

Feedback Date: 26.11.2021

SKILLS DEVELOPMENT
The skills development opportunities identified in this report are:

 Written communication, teamwork and research skills in the completion of assessments and during
the formative assessment and interaction within the classroom.
 Application of theory to organisational practice

MARKING CRITERIA

Task - Business Report on Indicative Content Marks

the following: allocation
(%)

Question A: Investment Critically discuss the importance of the capital investment 40%
decisions. appraisal process to S plc.
Cashflow statement for an investment proposal.
Calculation of payback, NPV and IRR for the investment
proposal and related comments on these measures.
Discuss why the net present value method is often regarded
to be superior to internal rate of return.

Question B: Long-term S plc finds that the cheapest source of long-term finance 15%
sources of finance. available to it is through a bank loan.
Critically contrast this with an equity issue for all its long-
term finance requirements.

Question C: Cost-volume- Cost-volume-profit analysis for and existing product line 25%
profit analysis.

Question D: Approaches to Categories of suppliers; single sourcing and multiple 20%

procurement. sourcing; cross-sourcing.

Attribution of higher grades are associate with:

 good use of spelling, grammar and punctuation

throughout all written work
 effective use of the Harvard referencing format
 evidence of wide reading around topics to support
arguments and reflection
judgements made and conclusions drawn supported by
business theory evident within all written work.

100%
Undergraduate Generic Marking Criteria Foundation Degree Level 5
Level 5 (Foundation Degree/Diploma)
90%-100%
Exceptional work with presentation of the
highest standard. The work contains
coherent arguments and ideas. There is a
detailed understanding of subject matter
and critical analysis of issues/problems.
Points are made clearly and concisely,
always substantiated by appropriate use of
source material. There is evidence of a
sound ability to critically interrelate
theories with examples from practice
where appropriate.
60%-69%
Very good presentation. Sound knowledge
and understanding with an emerging
ability to critically engage with and apply
the concepts involved linking them to
practice where appropriate. Good use of
source material which supports most
points clearly. Content is wholly relevant
and is coherently structured.
Classification Level 5 (Foundation Degree/Diploma)
Distinction* 80%-89%
Outstanding work with presentation of a very
high standard. There is comprehensive
understanding of key concepts and
knowledge and evidence of critical analysis
and insight. Accurate interpretation of data
with arguments, ideas and solutions
presented effectively and based on strong
research and reading.
Distinction 50%-59%
Presentation is of a good standard but some
shortcomings. Evidence of a sound
knowledge base but limited critical and
practical application of concepts and ideas.
Content is largely relevant although points
may not always be clear and structure may
lack coherence. Contains some critical
reflection and some use of source material to
illustrate points.
Classification Level 5 (Foundation Degree/Diploma) Classification
Distinction* 70%-79% Distinction*
Extremely good work with presentation
of a high standard. Evidence of strong
knowledge and understanding together
with some critical analysis and insight.
Source material is used effectively to
support arguments, ideas and solutions.
Merit 40%-49% Pass
Adequate presentation. The work is
descriptive and/or lacks critical analysis
where required but is relevant with
limited though sufficient evidence of
knowledge and understanding. There is
some evidence of reading although
arguments/ proposals/solutions often lack
coherence and may be unsubstantiated by
relevant source material or partially
flawed. Links to practice are made where
appropriate.
 Level 5 (Foundation Degree/Diploma)
30%-39%
Poorly structured, incoherent and wholly
descriptive work. Evidence of a weak
knowledge base with some key aspects not
addressed and use of irrelevant material.
Flawed use of techniques. Limited
evidence of appropriate reading and no
evidence of critical thought. Little
reference to practice where appropriate.
Classification Level 5 (Foundation Degree/Diploma)
Fail 20-29%
Very poorly structured, incoherent and
wholly descriptive work. Evidence of a very
weak knowledge base with many key
omissions and much material irrelevant. Use
of inappropriate or incorrect techniques.
Very little evidence of appropriate reading
and no evidence of critical thought. No links
to practice where appropriate. To obtain a
mark of 20% the work must show evidence
of a genuine attempt to engage with the
assessment requirements and with the subject
matter.
Classification Level 5 (Foundation Degree/Diploma) Classification
Fail 0-19 % Fail
The work is extremely poorly structured
and presented. It demonstrates no real
knowledge or understanding of key
concepts and principles. Much material is
irrelevant, incorrect or omitted. No
evidence of critical thought. No effective
use of supporting material. No links to
practice where appropriate. Not a
genuine attempt to engage with the
assessment requirements and/or subject
matter.