College of Administrative & Financial Sciences

Salmabad, Kingdom of Bahrain

_1st Tri _ _2nd Tri _x_ 3rd Tri, SY 2021-22

Instructions:
1 Conduct a research based on the topic given to you. Submit your narrative report at
least one week before your presentation.
2 Prepare your presentation once the narrative report is approved. NO APPROVED
NARRATIVE REPORT, NO PRESENTATION, ZERO GRADE IN THE FINAL PROJECT.
3 Presentation is 15 minutes per group. Mastery of the topic is important. No reading of
the slides. Make a smooth transition of your report.
4 You will report on the scheduled date and time. No changes will be allowed. No
presentation, ZERO GRADE for the FINAL PROJECT.
5 Complete this cover sheet and attach it to your activity output.
Students’ Declaration:
I declare that:
I understand what is meant by plagiarism (illegal copying of one’s work)
The implication of plagiarism is tantamount to cheating
This project/activity is all my own work and I have acknowledged any use of the published and unpublished
works of other people.
Total number of pages including this cover page

Program Course Section Due Date Date Submitted

Time/Days
BSBI BSBI525 FD 5-6:30 PM 9-12-2021 4-12-2021
Course Title FINANCIAL MANAGEMENT
1-Fatema Bucheeri BH19500793
Students’ Full Name
2-Fatima Khalifa BH20500578
& Signatures
3-Ali lsa ALkhayyat BH19500585
Professor’s Name DR. Gulnar Mulla
FOR OFFICIAL USE ONLY
Marking Scheme Raw Scores Scores
Q1 10
Q2 7
Q3 3
Q4 5
Q5 5

Total Marks/ Marks Awarded 30

 College of Administrative & Financial Sciences
Salmabad, Kingdom of Bahrain
_1st Tri _ _2nd Tri _x_ 3rd Tri, SY 2021-22

Course Coordinator Programme. Head, BSBI Associate Dean, CAFS

Dean, CAFS
Date: : Date: : Date: : Date: :

FINAL PROJECT PRESENTATION

MARKING RUBRICS
10-9
 knowledge of issue is
exceptionally accurate
and is explained clearly
and effectively during
explanation using details
Analysis of the and little reliance on
Case notes
 exceptional critical
comments and analysis
of issue / interpretations
/ impact /  effect / using
details, insight, evidence
from comprehensive
thought
8-6 5-3 2-0
 issue is accurately  issue is explained  issue needs to use
explained and  uses with some accuracy more accurate
many details and but need more details information and
various sources in and more variety in details or
presentation with sources and less examples
some reliance on reliance on notes heavy reliance on
note  some critical notes during
 proficient critical comments given to presentation
comments and issue and effects  lack of critical or
analysis of issue  more details, insight analytical thought
/interpretations and and critical thought in comments and
impact using many needed little to no insight
details and evidence used
and some insight

Organization &   Report is exceptionally  Report is detailed,  Report  is somewhat  Report needs to
Writing detailed, organized, organized, logical organized and be more organized
logical and includes and includes images, includes some images and logical
images, clear and large clear and large font
font

10-9 8-6 5-3 2-0

Presentation of  exceptional delivery and  proficient delivery  -elivery and timing of  poor delivery and
Report timing of information and timing of information needs to timing of
(10 Marks)  exceptional discussion information be more smooth (too information
initiated and  proficient discussion much reading)  discussion needs
  maintained  to further started and  more active to be more
student learning maintained interaction and controlled and
discussion dynamic

COMMENTS:
 College of Administrative & Financial Sciences
Salmabad, Kingdom of Bahrain

IN-COURSE PROJECT

General Instructions:
1. Form a group with 4 members.
2. Conduct a Research on:

Case study
Learning Objectives
The purpose of this case is to help you:
 Students will possess knowledge of current theory and techniques of the major business
discipline.
 Students will exhibit the leadership capacity and teamwork skills for business decision
making.
 Students will understand the ethical implication of business decision making and
recognize ethical dilemmas.
 Students will demonstrate the ability to communicate effectively.
 Students will demonstrate critical thinking skills.

Part I

Frank Wright runs a small bakery. He is concerned with the liquidity position of his firm as he
has heard that liquidity problems are one of the most frequent explanations for business failure.
The following data is available:

Particulars Amount
Inventory 1,50,000
Cash 50,000
Sundry Debtors 300,000
Creditors 350,000
Bills Receivable 30000
Bank Overdraft 30000

Prepared by : Reviewed / Checked: Verified by: Approved by:

Course Coordinator Dept. Head, BSIB DR. VINODH NATARAJAN DR. MARLUNA URUBIO
Associate Dean, CAFS Dean, CAFS
Date: : Date: : Date: : Date: :
 College of Administrative & Financial Sciences
Salmabad, Kingdom of Bahrain
Required

Q1. Calculate the current ratio and liquidity (acid test) ratio based on the above data.(8 marks) 4
marks on each ratio calculation
Q2. Give a brief evaluation of the liquidity position of Frank Wright's bakery(2marks)

Part II

DT consultancy is considering an investment of $100,000. The useful life of the project is 10

years. The cutoff period is three (3) years. The board of directors has identified two alternatives
A and B. The expected annual cash flows are as follows:
Cost or Cash Flow Alternative A Alternative B
Initial cost ($100,000) ($100,000)
Cash flow year 1 35,000 35,000
Cash flow year 2 28,000 35,000
Cash flow year 3 32,000 35,000
Cash flow year 4 40,000 35,000

Q2. Suggest DT Consultancy which project is feasible to choose?(7 marks)

Q3. Mentions any three valid reasons for choosing the particular project (3 Marks)

Part III
Finance is the supply of funds, which regulates the activities and operations of the industry.
Adequate finance is required besides the requirement of fixed and working capital for
undertaking the program of extension, reorganization or expansion. Finance regulates the
activities and operations of the industry. Adequate finance is required besides the requirement
of fixed and working capital for undertaking the program of extension, reorganization or
expansion. There are various source of raising funds. Since, now-a-days market is open, so both
domestic and international market are available for procuring the funds. Finance is being raised
through issue of shares, debenture, bond and retained earnings (internal source) from domestic
as well as international capital market in the form of Global Deposit Receipts, American
Prepared by : Reviewed / Checked: Verified by: Approved by:

Course Coordinator Dept. Head, BSIB DR. VINODH NATARAJAN DR. MARLUNA URUBIO
Associate Dean, CAFS Dean, CAFS
Date: : Date: : Date: : Date: :
 College of Administrative & Financial Sciences
Salmabad, Kingdom of Bahrain
Deposit Receipts and Foreign Currency Convertible Bonds and from the wide range of financial
institutions. However, the finance is not free of cost. The charge on each source capital is
known as cost of capital. The cost of capital of any investment is the rate of return the suppliers
of capital would expect to receive if the capital were invested elsewhere in an investment of
comparable risk.

Q4. Why is important for firms to consider the cost of capital when making decisions to invest
in long term projects?(5 marks)

Q5. Explain what sources of funds should be considered in computing the weighted average
cost of capital.(5 marks)

 Write proper citation and referencing in your report.

 Write your report in A4 paper
 Side left margin is 1.25 and the right side margin is 1.0
 Upload your narrative report to the Moodle.
 Present your research output within 10-15 minutes.
 Your Final Project marks will be based on the given rubrics.
 The group has to write their own project.
 Maximum similarity index is 20% (Plagiarism Report)
COPIED PROJECT will be mark ZERO for all the groups.

Prepared by : Reviewed / Checked: Verified by: Approved by:

Course Coordinator Dept. Head, BSIB DR. VINODH NATARAJAN DR. MARLUNA URUBIO
Associate Dean, CAFS Dean, CAFS
Date: : Date: : Date: : Date: :
 College of Administrative & Financial Sciences
Salmabad, Kingdom of Bahrain

Answers:

Part1:
Calculation of current asset and current liability:
Current Asset:
Inventory 1,50,000

Cash 50,000

Sundry Debtors 3,00,000

Bill Receivable 30,000

Total 5,30,000
Current Liability:
Creditors 3,50,000

Bank Overdraft 30,000

Total 3,80,000
Q1: Calculation of current ratio:
Current ratio = current asset/ current liability
=5,30,000/ 3,80,000
=1.39
Calculation of liquidity ratio (acid taste ratio):
Acid taste ratio = [current asset - inventory]/ current liability
=[5,30,000 - 1,50,000]/ 3,80,000
=1.00

Prepared by : Reviewed / Checked: Verified by: Approved by:

Course Coordinator Dept. Head, BSIB DR. VINODH NATARAJAN DR. MARLUNA URUBIO
Associate Dean, CAFS Dean, CAFS
Date: : Date: : Date: : Date: :
 College of Administrative & Financial Sciences
Salmabad, Kingdom of Bahrain

Q2: Evaluation of the liquidity position:

As we found the current ratio is higher than 1 we conclude that it has a comfortable liquidity
position, but as the acid taste ratio) is significantly lower than the current ratio we conclude that
the company has significantly invested in inventory which reduces the liquidity position.

Part2:
Below is the table showing calculation of Payback Period for Alternative A :
Year Cash Flows Cumulative Cash Flows

1 35000 35000

2 28000 63000

3 32000 95000

4 40000 135000

Payback Period = Complete Years + Remaining Cash flow / Cashflow for the year to be
recovered
= 3 years + (100000 - 95000) / 40000
= 3.125 years
Payback Period of Alternative B = Initial Investment / Annual Cash Flows
= 100000 / 35000
= 2.86 years
2.) Alternative B should be chosen. The project has a three-year deadline, and under Alternative
B, the cash flow will be recovered within three years.
3.) The payback period is the amount of time it takes to recoup the initial investment through
project cash flows. It is also known as the break even phase.
Payback Period Restrictions:
(a.) It has the constraint of disregarding the time worth of money, which is the most significant
drawback.
(b.) It does not take into account cash flows received beyond the payback period.
Prepared by : Reviewed / Checked: Verified by: Approved by:

Course Coordinator Dept. Head, BSIB DR. VINODH NATARAJAN DR. MARLUNA URUBIO
Associate Dean, CAFS Dean, CAFS
Date: : Date: : Date: : Date: :
 College of Administrative & Financial Sciences
Salmabad, Kingdom of Bahrain
(c.) A project with a short payback time will be chosen. However, this is not always the case. In
certain instances, project cashflows cease upon repayment or are decreased, indicating that the
project was not a worthwhile investment. As a result, it may sometimes lead to poor decision
making..

Part3
What Exactly Is WACC?
In terms of investment, WACC is the average rate that businesses pay to fund their entire
operations. WACC is determined by combining equity investments from stock sales as well as any
operational debt incurred (in relation to the firm's enterprise value).

WACC calculates how much a business needs earn on its current assets in order to satisfy the
interests of both its investors and its creditors. Understanding this statistic may help you evaluate
if a company's stock has space to expand or whether its advancement is restricted by how the firm
is funded.

WACC is often abbreviated as the "cost of capital" and is sometimes referred to as "right side
finances." The combined funding sources that a business utilizes are always listed on the right side
of the budget page in ledgers (including financing and debt). As a result, the main variables
required to compute WACC are on the balance sheet's right side.  

Prepared by : Reviewed / Checked: Verified by: Approved by:

Course Coordinator Dept. Head, BSIB DR. VINODH NATARAJAN DR. MARLUNA URUBIO
Associate Dean, CAFS Dean, CAFS
Date: : Date: : Date: : Date: :
 College of Administrative & Financial Sciences
Salmabad, Kingdom of Bahrain

Prepared by : Reviewed / Checked: Verified by: Approved by:

Course Coordinator Dept. Head, BSIB DR. VINODH NATARAJAN DR. MARLUNA URUBIO
Associate Dean, CAFS Dean, CAFS
Date: : Date: : Date: : Date: :
 College of Administrative & Financial Sciences
Salmabad, Kingdom of Bahrain

Part3:

(1)Choosing an Investment

In calculating net present value, the cost of capital is utilized as a discount factor. It assists
companies and investors in assessing all investment possibilities. It does this by converting future
cash flows into present value while keeping them discounted. Similarly, the actual rate of return on a
project is compared to the firm's cost of capital. As a result, the cost of capital plays a major influence
in investment choices.

(2) Capital Structure Design

Capital structure refers to the ratio of debt to equity. An optimum capital structure is the percentage
that may reduce the cost of capital while increasing the firm's value. It may also help with important
business budget decisions that include the utilization of company financial resources as capital. The
cost of capital aids in the design of the capital structure by taking into account the cost of each
source of financing, investor expectations, the impact of taxation, and the potential for growth. It is
useful in capital budgeting choices about the company's sources of financing.

(3) Performance Evaluation

The cost of capital is used to evaluate the performance of several divisions. It may be used to assess
the progress of ongoing initiatives and investments by comparing their progress against the cost of
capital. The department is regarded as the finest in terms of providing the business with the greatest
positive net present value. It aids in the evaluation of investment choices by turning future cash flows
of investment routes into current value via discounting. The operations of several departments are
extended or reduced based on their performance.

(4) Creating a Dividend Policy

Dividends are given to shareholders as a percentage of the firm's overall earnings. The idea of capital
may be usefully used as a tool in making other critical financial choices. However, if the company has
the chance to engage in such initiatives that offer a greater rate of return in contrast to the cost of
capital, it may keep all of the profits in the business. Decisions on dividend policy, profit
capitalization, and working capital sources may be made on this basis. If the company does not have
the option of investing the earnings, all of them may be given as dividends. As a result, the dividend
policy is heavily influenced by the cost of capital.

Prepared by : Reviewed / Checked: Verified by: Approved by:

Course Coordinator Dept. Head, BSIB DR. VINODH NATARAJAN DR. MARLUNA URUBIO
Associate Dean, CAFS Dean, CAFS
Date: : Date: : Date: : Date: :