FINANCE and ACCOUNTING 

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Lincoln International Business School  

  

Time Constrained Assessment  

  

Department   Accounting, Finance and Economics     
Module Title   FINANCE and ACCOUNTING    
Module Code   ACC9011M MAIN TCA   
Module Coordinator   Geeta Lakshmi     
Duration of Assessment     NORMAL EXAM-1 hour 45 minutes; TCA-2 hours 40 minutes
Date     JAN 2021
Release Time     ?   
Submission Time   ?
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.     

  

  

  

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.  

  

  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 A (Compulsory) Each question in this section carries 15 marks. Total marks: 60.

Question 1.

  1. During the Covid-19 pandemic, many airlines had to cancel flights due to lockdown measures being imposed. In lieu of cash refunds, they gave out vouchers to their customers who had booked to fly.

Required:

i) Critically assess the impact of giving vouchers (instead of cash) on the short-term finances of an airline company.

(7.5 marks)

ii) How would businesses normally measure their short-term financial health?

(7.5 marks)

(Word requirements – less than 300 words in total for both parts)

  1. The UK High Street has been suffering from falling sales due to Brexit uncertainty and changing shopping habits, amongst other factors.

Required: Evaluate the impact of low revenue on the income statement of a company. Explain how loss in revenue would impact any three items typically found on an income statement.

(15 marks)

(Word requirements – less than 300 words)

  1. To control the spread of the coronavirus, the number of people allowed at any given time in institutions, such as cinemas and restaurants, was reduced. This may be in place for a few more years.

Required: Explain the impact of reduction of bookings on the contribution, fixed costs, and break-even point of a company. Illustrate your argument with the use of appropriate equations or graphs in this context.

(15 marks)

(Word requirements – less than 300 words)

  1. Customers have recently shunned going to the cinema and concentrated on accessing streaming services such as Netflix. This has been particularly true during lockdown. In a similar trend, the demand for masks has soared.

Required: Explain the role of price elasticity of demand in the case of streaming services and masks.

i) Would you agree that these are price elastic in nature?

(7.5 marks)

ii) Which one is likely to be elastic? Justify your argument.

(7.5 marks)

(Word requirements – less than 300 words in total for both parts)

SECTION B Attempt two questions out of three. Total marks: 40.

Question 2.

Smart Photos, a wedding photography business, has decided to relocate its premises. Initially, it used to operate in the High Street and had to pay a business lease of 32,000 per annum. It also incurred staff salaries to the tune of 50,000, in addition to the utilities bill of 15,000 and an annual insurance of 5,000.

Each photo shoot had a price of 400 per wedding shoot. Travel to the shoot and hire of an assistant cost the business 100 for the day.

With the relocation to cheaper and smaller premises, costs will decrease substantially. The business will operate from a home studio and will employ only one employee, paying them 22,000. Insurance will cost 1,000 and utilities will be 8,000. The business will charge the same price to the customer (400 per shoot) and will still need to employ an assistant, but with no travelling required, it should half the cost of each shoot.

Required:

  1. Advise the business of the change in the break-even point (sales and number) before and after the relocation.

(5 marks)

  1. If the company expects its annual sales to be unchanged at 200,000, what is the margin of safety () in both cases?

(5 marks)

  1. Discuss the concept of step costs [this is not to the above scenario. Word limit- less than 150 words].

(5 marks)

  1. Give an exle of economic risk. [This may or may not be to the above scenario. Word limit- less than 150 words]

(5 marks)

TOTAL: 20 marks

Question 3.

A cycle scheme launched by the Council is intended to encourage the public to use less car journeys. The initial startup costs are 500 pounds each to buy 200 cycles.

These will be rented out at 20 per day and it is expected that, on average,180 cycles will be used 200 days a year (a typical season) as a conservative minimum.

Insurance and other running costs are 1,000 per annum. Cycles will need to be scrapped after 5 years and are expected to have a value of 10 per cycle in value. The Council will adopt the scheme only if it is expected to have a Net Present Value (NPV) of 2 million.

Required:

  1. Evaluate the project using NPV, assuming a 6% cost of capital.

(10 marks)

  1. Analyse the sensitivity of this project to a good year, when all cycles are employed.

(5 marks)

  1. Discuss two major flaws of the payback method.

[Word limit- less than 100 words]

(5 marks)

TOTAL: 20 marks

Question 4.

  Microsoft Inc. Apple Inc.
Price-Book 13.14 27.32
PE 35.1 34.97
Quick ratio 2.33 1.31
Current ratio 2.52 1.47
Interest coverage 21.47 23.41
Debt-equity 0.6 1.56
ROA% 15.07 18.27
ROE% 40.14 69.25
ROCE% 25.11 29.51
Net margin% 30.96 21.33

The table above shows ratios of two leading software companies from Morning star Inc. (September 2020).

Required:

  1. Compare and contrast the ratios with suitable interpretation of the above ratios.

(10 marks)

  1. Discuss the factors which are not adequately reflected in the above ratios.

(10 marks)

(Word limit- less than 800 words in total for both parts)

TOTAL: 20 marks

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