BUS201 Finance For Non-Finance Professionals

General requirements

You must complete both Parts A and B of this individual assessment.

Part A is to be completed in the format of a business report, where you are required to address all questions below. Part A of the assessment provides you with word limits for each questions to guide your answer attempt.

Please note the word limit is a guide only and should provide you with an idea concerning the scope, depth and detail of discussion required. Generally speaking, a good answer would be well researched, provide multiple perspectives on the question/ task, and be presented in a professional manner. Please refer to the marking guide provided for more detailed information concerning the tasks.

Part B is to be completed in the format of oral presentation to your tutor and class mates. You will apply the principles of effective and professional presentations discussed in class. The content of your presentation will be on one aspect of the research essay completed in Part A. You therefore can complete Part B of the assessment only after you have completed and handed in Part A.

The majority of the marks allocated for Part B, the presentation, therefore is on your presentation skills, i.e. the way you present, the organization of your presentation, the way you engage your audience, and your supporting documentation, and not the content of the presentation (since this will be marked in Part A of the assessment already).

Part A

As a finance manager, you are required to prepare a business report and a presentation to the Board of Directors on your selected public organisation.

1.You are required to choose a public organization based on below criteria:
a.To be listed on either New Zealand Stock Exchange, or Australian Stock Exchange
b.To have office/branch in New Zealand or New Zealand – based.
c.To have audited financial statements for either 2017 or 2016 and annual report
d. To have share price and trading activities on the market in either 2017 or 2016

2.You need to get the approval of your tutor for the name of organization in written.

3.Answering ALL of the following questions, present your findings in a business report that meets the standards of a business document with correct referencing and formatting:

Question 1

Calculate the following ratios for two continuous years based on recent audited annual financial statements of the chosen organization.  (Note: you have to show your calculations)

a)Profitability ratios: Gross Profit Margin, Net Profit Margin, Return on Assets, Return on Stockholder’s Equity
b)Liquidity ratios: Current ratio, Acid Test ratio, Cash ratio, Net Working Capital
c)Efficiency ratios: Accounts Receivable Turnover, Inventory Turnover, Accounts Payable Turnover, Total Asset Turnover
d)Leverage ratios: Debt ratio, Equity ratio, Debt-Equity Ratio
e)Valuation and Growth ratios: Earnings per share, Price/Earnings ratio

You must show the calculation and source of numbers used for calculation by showing extract income statement, and balance sheet.

Question 2

Analyze the organisation’s financial statements using ratio analysis and identify strengths, weaknesses, and recommendations for improvement in financial performance and financial position. The analysis should be in-depth analysis. The trend of these ratios over time is studied to check whether and why they are improving or deteriorating. Industry benchmark (average value for industry) could also be used for evaluation.

Question 3

Island Cruises must purchase some new tour boats and needs to evaluate two different models.  The first type of boat is the ‘Captain Cook’ boat, which costs $75,000 and is top-of-the-range equipment.  The boat has a life of 9 years.  Maintenance costs of $2,500 a year are expected for the first 4 years, followed by total maintenance and rebuilding costs of $20,000 in the ninth year. During the last 5 years maintenance costs are expected to be $3000 a year.  At the end of the 10 years the boat will have an estimated salvage value of $15,000.

The second type of boat that Island Cruises is evaluating is the ‘Marine Sailing” boat, which costs $60,000 and has a life of nine years. Maintenance costs will be higher. In the first year they are expected to be $2,000, and this amount is to increase by $500 a year until the fifth year and keep the same till the ninth year. In year 5, the hull will need to be rebuilt, and this will cost the company $18,000 in addition to maintenance costs in that year.  At the end of the 9 years, the ‘Marine Sailing’ boat will have an estimated salvage value of $11,000.

The company has recently completed a $300,000 two year marketing study on whether to introduce a new tour line to the market with new boats. Based on the results of the study, Island Cruises has estimated that revenue for new tour line will be $27,000 per year. The company is currently operating a tour line with annual net income $8,000. If new tour line is provided, the demand will shift from current tour line to new tour line. The current boat if replaced can be sold for $5,000 today even though it has a book value of $9,600 for tax purposes.

Both types of boats will be fully depreciated over their lives and a 30% tax rate, which of the two types of boats should Island Cruises purchase? The after-tax required rate of return is 10 percent.

a.Determine the NPV and IRR related to the proposed new boats Based on your evaluation, which alternative appears to be better?


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