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AF4S31 Assessment 1 (V2) Brief This assignment will be marked out of 100% This assignment contributes to 50% of the total module marks. The assessments are bonded which means you need 40%+ over both assessments combined to pass the module. Learning Outcomes to be assessed As specified in the validated module descriptor available at: https://icis.southwales.ac.uk/studentmodules/10122/studentmodulespecifications Learning outcome 1 The ability of students to critically assess, apply and evaluate the issues and techniques of strategic financial management. Grading Criteria Please see School’s marking criteria for undergraduate/post graduate assessments on the module VLE. Any additional grading/marking guidance will be posted with assessment task below. Assignment You have recently attended a workshop aimed at improving your understanding of company Annual Reports using Tesco’s report as an example. During the workshop you looked at the following sections of Tesco’s annual report: The Strategic Report including the Environmental and Social Review, The Corporate Governance Report and, The Group Statements of: ‘Income’ (also sometimes referred to as the Statement of Profit and Loss) ‘Balance Sheet’ and ‘Cash-Flows’. You learned about how different ‘stakeholders’ may use the information contained in these reports and financial statements. You also learned about financial ratios and how these can be used to interpret and assess the performance of a business in terms of its profitability, liquidity, efficiency and return to investors. The timing of the workshop was very fortuitous. You are the Purchasing Manager for the business you work for. You are in the process of letting a contract for the supply of an important component used in your business’s production. You have been provided with the financial statements of Benedict Co. who are one of a few companies tendering for the contract. The income statement and statement of financial position have been reproduced below. As well as reviewing the financial statements of Benedict Co. from a potential customer perspective, you are interested in how the company may be viewed by potential investors, lenders and suppliers. You have also collected the following information about other companies operating in the same sector as Benedict Co.: Current ratio 1.6 Quick ratio 1.0 Trade receivable days 55 days Inventory days 60 days Trade payable days 90 days https://icis.southwales.ac.uk/studentmodules/10122/studentmodulespecifications Statement of income for Benedict Co. for the year to 31 January 20X1 20X0 $'000 $'000 Sales 30,800 24,900 Cost of sales 16,000 14,500 Gross profit 14,800 10,400 Admin expenses 1,700 400 Distribution costs 3,500 800 Finance costs 1,300 500 Profit before taxation 8,300 8,700 TAXATION 1,700 1,700 Profit after taxation 6,600 7,000 Statement of financial position for Benedict Co. as at 31 January 20X1 20X1 20X0 $'000 $'000 $'000 $'000 Non-current assets 38,000 32,600 Current assets Inventory 5,200 2,600 Trade receivables 7,600 3,800 12,800 6,400 Total assets 50,800 39,000 Capital and reserves Share capital 18,000 18,000 Reserves 10,000 7,900 28,000 25,900 Non-current liabilities 6% bonds 12,000 8,000 Current liabilities Trade payables 6,800 4,300 Overdraft 4,000 800 10,800 5,100 50,800 39,000 Dividends of $4.5 million were paid in 20X1 and $3.6 million in 20X0. Shares in Benedict Co. had a market value of $5.60 at 31 January 20X1 compared to $3.60 in 20X0. Benedict Co. has issued 18 million $1 shares. Required: Prepare a report for your manager which: 1) Using the Annual Report of Tesco available at the following link: https://www.tescoplc.com/media/264194/annual-report-2016.pdf a) Explains the term ‘stakeholder’ and identifies three types of stakeholder of Tesco. 15% b) Analyses how the Environmental and Social Review and the Corporate Governance Report help Tesco demonstrate its performance in terms of its corporate and social responsibilities to two of the stakeholders identified in a) above. 35% 2) Analyses and evaluates the financial position of Benedict Co. using a range of financial ratios to meet the requirements of potential customers, investors, lenders and suppliers. Your analysis should: a) Explain the purpose and relevance of the chosen ratios. b) Include the results for each chosen ratio and reasons for the movement between the two years. c) Highlight any aspects of the performance of Benedict Co. which would give cause for concern. d) Critically evaluate the application of financial ratios in interpreting and measuring the performance of a company. All calculations should be shown in full as an appendix to the report. 40% Marks are available for the presentation of your report including structure, style and the presentation of referencing. 10%