FINANCIAL
MANAGMENT
SBS – MBA
Assignment
STUDENT ID
UNIT TITLE:
NAME (in Full):
GENERAL INSTRUCTIONS
• All assignments are to be submitted on 17th October 2024 on
https://lms.atmsstudentgateway.com/
• Any Assignment submission extension request must come to Azra Fatima (Assistant Vice
President (AVP) of Academics) [email protected] 5 days before the date of submission with
a valid reason and supported documentary evidence.
• APA 7th edition referencing guidelines needs to be followed.
• Similarity between student’s work is strictly not accepted, any student found with similar
work will be graded Zero and fail for the course. However, Plagiarism is an academic offence
and will not be tolerated.
• Any revaluation request should come in 5 days of grade release. Any late request will not be
obliged. (Form and other details shall be shared based on request)
• Revaluation cannot be requested for plagiarized assignments as the assignment stands as an
academic misconduct.
• If a program participant submits the assignment late, but within 1 week after the submission date
a 20%penalty will be applied
• Re-evaluation request is NOT applicable for any failed courses provided the mark range from
59 to 69. Any grade which is below the range is however not applicable for this request.
2
• Any rescheduling request can be fulfilled within one week after the actual date of
the assessment. Any late request will not be obliged.
• Assignment once submitted to exam board is final for marking.
• Second extension cannot be provided without supporting documentary evidence.
• Program participants are strongly advised to keep a copy of their work in case the submitted
copy should go astray.
PS. Kindly note to adhere to all the above instructions. Failing to read this, ATMS will not be
responsible for any actions taken.
Total Marks __ / 90
PLAGIARISM
Plagiarism is defined as providing material from an uncredited source, or without the
acknowledgement of the original author. For longer submissions and reports, students are
required to provide an Assignment Cover Sheet, which states that submission is their original
work, and has not been submitted for another assignment, either in that course, or another
Plagiarism may have many forms including but not limited to:
o Outright copying another author’s work without acknowledgement
o Cut and paste without the correct citation and acknowledgement
o Copying key words but changing the sentence structure without crediting the
original source
o Copying the sentence structure but changing some words without crediting the
original source
o Following the structure or organization of another author’s work, or order of
presentation of ideas
o Submitting work that was created by an unacknowledged third party (i.e., writing
service, or another student)
o Copying from published authorities without acknowledgement
o Failure to correctly use quotation marks when expressing another author’s idea
o Incorrect or improper use of in-text citation and referencing
o Missing or incorrectly presented bibliography or reference list
o Pretending ownership of another author’s ideas
o Making work available to another person for copying
o Falsifying results
o The plagiarism tolerance for MBA is 8 %.
o In cases where the plagiarism percentage exceeds the tolerance, students are given a
second chance to rework on their assignments and submit. However, if the percentage
continues to exceed the tolerance percentage the student will be awarded one grade
lower than the original grade achieved.
3
Answer all the Questions. (Word Limit-2000-2500 words)
Shaybah Plc
All values in BD Millions
Income statement for the year ended 31st Dec 2023
2021 2022 2023
Turnover 786 841 1000
Cost of Sales 503 563 730
Gross Profit 283 278 270
Admin Costs 109 122 145
Net Profit 174 156 125
Dividends 50 80 80
Retained Earnings 124 76 45
Statement of Financial Position as at 31st Dec 20223
2021 2022 2023
Non-Current Assets 477 832 890
Current Assets
Inventory 100 120 150
Receivables 120 140 140
Cash/Bank 42 21 10
262 281 300
Total Assets 739 1,113 1,190
Current Liabilities 154 192 93
Non-Current Liabilities 100 412 412
Equity
Ordinary Shares 350 350 350
Retained Profits 135 259 335
739 1,113 1,190
*All current liabilities are trade payables
Sector average ratios:
Return on capital employed 19%
Net profit margin 20%
Current ratio 1.6 Times
Capital Gearing (book value basis) 55%
Return on equity 15%
4
Question 1
Required:
1.1 Calculate the following ratios for Madeira Plc:
Gross Profit Margin
Net Profit Margin
Current Ratio + Quick Ratio
Net Asset Turnover
Receivable Days
Payable Days
Return on Capital Employed
Capital Gearing
(12 marks)
1.2 Comment on the financial performance of Shaybah Plc between the years 2021 and 2023
using the ratios above and any other financial measure you feel appropriate.
(10 marks)
1.3 In 2021 the share price of Shaybah was 20 BD per share. Today the share price is 25 BD per
share. The finance director has attributed this success to the company maximising the sales.
Carefully consider if this is true and what other goals might the company consider?
(8 marks)
Question 1 Total 30 marks
Question 2
UAE Invest Co is currently planning to buy a new machine which will cost AED 200,000. It is
expected to generate new cash sales of AED 165,000 per year. The machine will be used for 5
years and at the end of this period it will be scrapped and not replaced. The scrap value of the
machine is expected to be AED 30,000. Annual material and operating costs are estimated to be
AED 105,000 per year.
PBP plc uses a discount rate of 10% in the investment appraisal process. The company has a
target Return on Capital Employed (ROCE) of 20% per year and a maximum payback period of
3 years. Ignore taxation.
Required:
(a) Calculate the following figures for the project that PBP is appraising:
(1) Payback period;
(2) Return on Capital Employed (accounting rate of return);
(3) Net Present Value.
(4) Internal Rate of Return
Comment on the acceptability of the investment based on your evaluations.
(18 marks)
(b) Evaluate the advantages and disadvantages of each method culminating in a critical
discussion of the reasons why Net Present Value is preferred by academics to other
methods of evaluating investment projects.
(12 marks)
5
Question 3
Required:
a. Consider the theoretical cost of Debt, Preference Shares and Ordinary Shares rank them from
most expensive to cheapest.
(5 marks)
b. Recently one of your company directors has attended a finance conference, on their return
the director has decided the company should fund all projects with internal sources of
financing as they are essentially ‘free’. Another director argues that these funds are the same
cost of equity.
Critically discuss these statements, which do you agree with and why?
(10 marks)
c. Discuss whether the company should raise finance (via any means) if it has a
project available with a net present value of BD 100 million
(8 marks)
d. Give an example of a type of business which might utilize high leverage (gearing)
fully explaining how this would benefit them from a financial management
perspective.
(7 marks)
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