Time Constrained Assessment  

Time Constrained Assessment   

   

Department    Accounting, Finance and Economics       
Module Title    FINANCE and ACCOUNTING      
Module Code    ACC9011MMOCK TCA    
Module Coordinator    Geeta Lakshmi       
Duration of Assessment      2 Hours 40 minutes
Date        12/1/21
Release Time     9 am    
Submission Time    11.40 am
Word limit for each answer    Specified for each question 
       
         
General Instructions to Candidates.        You must submit your answers as a MS Word Document to Turnitin on Blackboard before the submission time: failure to do so will be classified as misconduct in examinations.     We strongly recommend you submit 15 minutes prior to the deadline.        You must also send a copy of your work to the ACC9011[email protected] at the same time. You must place the Module Code and your Student Id in the Subject Field of the Mail.      Hand-written notes, expressions, symbols, Excel workings, or diagrams, must be inserted into the Word Document.        This assessment is an open resource format: you may use online resources, lecture and seminar notes, text books and journals.         All work will be subject to plagiarism and academic integrity checks.  In submitting your assessment you are claiming that it is your own original work; if standard checks suggest otherwise, Academic Misconduct Regulations will be applied.        The duration of the Time Constrained Assessment will vary for those students with LSPs.  Extensions do not apply, but Extenuating Circumstances can be applied for in the normal way.        A reference list is not required.       

   

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Module Specific Instructions to Candidates     

   

  1. All students are required to uphold the highest ethical and professional standards in line with professional bodies. Any identified cases of unethical behaviour during the assessment may be reported to a relevant professional body and may impact on your ability to claim exemptions. Students are also welcomed to report any detected cases of integrity breach (anonymous reporting of a breach holds no weight).   

   

  1. To ensure academic integrity of our assessments in line with professional body accreditations, students can randomly be called to a viva, which is an academic interview where you will be asked questions to check your understanding of the subject to help confirm the originality of your work.    

   

  1. Remember that due to the extended time limit, students may be tempted to write overly long answers.  Please note, lengthy answers will not necessarily get you extra marks for discursive questions.  Be guided by the marks available for each question and focus on the content and requirements.   
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  1.   Section A is compulsory. Attempt ANY Two questions from Section B. 
  1. Section A is worth 60 marks. Section B is worth 40 marks.             
  1. Show all workings.   

   

SECTION ACompulsory

Question 1 (Less than 300 words per part)

  1. Companies have suffered during the pandemic with declining sales. Explain the importance and definition of Gross and Net profit margin in the context of declining sales.

(15 marks)

  1. Many firms have taken on a great deal of debt in line with Pecking Order Hypothesis. Discuss the role of debt and its impact on the profits of the business.

(15 marks)

  1. During the lockdown in 2020, Netflix attained popularity. What is the role of Elasticity of demand to a company selling luxury rather than essential brand goods? Give examples to support your answer.

(15 marks)

  1. While deciding on the investment in critical sectors such as rail networks, investors typically look at the cost of capital. Critically discuss the role of capital structure and its link with cost of capital.

(15 marks)

TOTAL 60 marks

SECTION B – Answer any Two out of the Three questions

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Question 2

Hunterbirds plc. is a toy company retailing children’s toys depicting popular characters from TV shows, their total budget to do this is £5 million. The selling price for one of the toys is £17. Of the fixed expenses, manufacturing and administrative expenses are £130,000.

The cost of goods sold is £4 and its selling commission it has to pay is £3.

The company would like to generate a profit of £42,000.

Required:

  1. What is the contribution margin ratio?

(3 marks)

  1. Calculate and interpret the break-even point.

(2 marks)

  1. If Hunterbirds plc wants to generate a profit of £42,000, how many units must Hunterbirds plc sell?

(5 marks)

  1. If the company requires a margin of safety of 20%, what should be the BEP and expected sales?

(5 marks)

  1. Explainany three uses of break-even analysis.

(5 marks)

Total 20 marks

Question 3

Lotus plc is restricting its operations. The project demands a total investment of £140,000 and requires that £10,000 is paid immediately for severing the existing contact with an old supplier. Every year, the company expects to make savings of £50,000 per annum for first two years and £30,000 every year for the next five years. Should the company go ahead with the project if its cost of capital is 10%?

  1. Recommend to the company whether it should proceed with the project.

(5 marks)

  1. What is the payback period of the project?

(5 marks)

  1. Critically evaluate the weaknesses and advantages of accounting rate of return.

(10 marks)

Total 20 marks

Question 4

Here is the financial data from ABC plc in pound sterling (£):

STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2017
2017
£
Non-current assets
Property plant and equipment 900,000
Current assets
Inventories 800,000
Trade receivables 700,000
Cash & cash equivalents 60,000
Total assets 2,460,000
Non-current liabilities
3% Notes payable 200,000
Current liabilities
Trade payables 850,000
Equity and Reserves
Share capital (£1 per share) 1,000,000
Retained earnings 410,000
Total Equity and Liabilities 2,460,000

Required:

  1. Calculate and comment on liquidity ratios, fixed asset ratio and gearing (or capital structure) ratios.

(10 marks)

  1. Assume declared dividends are £500,000 for 2017. What is the earnings per share assuming there are 1,000,000 shares and earnings are £2 million for the year? What is the dividend per share? If the market price is £12 per share, what is the PE ratio? (5 marks)
  2. If net profit after tax is £25,000 and sales are £100,000 what is the net profit margin?

(5 marks)

Total 20 marks

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