7901AFE – Accounting for Managers
Assignment 2: Creation of a Financial Plan
Semester 2, 2013
* Please note: Students have the choice of working on their own, or in teams up to four people. If you choose to work in a group, one assignment is handed in per group. All group members are to work on all parts of the assignment.
Due date: refer to course profile
(This document was last updated: 12 September 2013)
Weighting 15% of final grade
This assignment has a management accounting orientation. It draws on management accounting topics that include budgeting, sensitivity analysis, cost volume profit analysis and decision-making. The assignment is designed to develop the student’s ability to develop a well-reasoned financial plan. The plan is to be written from the perspective of a small start-up business that is seeking to document its worthiness to a bank in order to secure a loan. Students have the choice of working on their own, or in teams of up to four people.
You have approached a bank and asked for a loan in connection with a small business you are planning to start. The bank has requested that you prepare a detailed financial plan in support of your loan application
• To simplify the analysis, this is a one product merchandising or retail business.
• Assume the following cash receipts pattern: 40% collected in month of sale; 55% in month after sale; 5% bad debts.
• Assume the following cash payments pattern for inventory purchases: 30% paid in month following the purchase, 70% paid two months after the purchase.
• Ignore GST and any other taxes.
• The loan you seek will result in a debt / equity ratio of 1.5.
Guidelines for submitting your work.
SECTION A: WORD DOCUMENT
Your work is to be submitted online and presented using 10 font Microsoft Word, single space formatting with standard margins. Your submitted assignment is to be a maximum of fifteen pages (including coversheet) and presented as follows:
Part 1) Written Report to bank:
The first part of the assignment is to be a one page written report to the bank. This page should include a description of the nature of the planned business activity, as well as a visionary statement that indicates the business owner’s longer-term aspirations for the firm and implications for capital expenditure. Include any additional assumptions made (beyond those specified in the assignment) and give an indication of the debt exposure.
Maximum length of part 1: one page
Part 2) A one year plan (individual budgets can be broken up by month or quarter) which includes:
One page dedicated to each of the following:
– Data Input sheet
– Sales budget
– Inventory purchases budget
– Other operational budgets
– Budgeted Income statement in contribution format
– Cash flow budget
– Budgeted Balance Sheet
– Capital expenditure budget
– Sensitivity analysis of profit and cash flows:
a. If sales volume increases / decreases 10% from that expected
b. If variable costs increase by 20%
Total length of part 2: nine pages
Part 3) A long term plan (5 years) which includes:
One page dedicated to each of the following:
– Sensitivity analysis of income statement (in contribution format)
– Sensitivity analysis of cash flow budget
– Capital expenditure plan.
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Sensitivity analysis is to document profitability and cash flow under three sales volume scenarios: best case, most likely, and worst case scenarios.
Total length of part 3: three pages
Part 4) Cost volume profit assessment
One page dedicated to:
Breakeven analysis and margin of safety analysis (in units and sales dollars). The margin of safety analysis should assess three sales volume scenarios: best case, most likely, and worst case scenarios.
Total length of part 4: one page
SECTION B: EXCEL REPORTS
Submit an Excel spreadsheet of the business’s financial plan (to enable verification of figures and formulae appearing in the Microsoft Word document)
SECTION C: GROUP REPORT
For students working in groups, each individual must complete a small summary outlining their contribution to the completed assignment. This summary is to be typewritten and is to be a maximum of 200 words per student. This summary is to be signed by each member of the group. This is to ensure that the information represents an accurate reflection of each individual’s input to the project.
Procedures for handing in your assignment
1. Ensure you have completed all parts of the assignment
2. Organise the assignment in the same order as detailed in the “Guidelines for submitting your work” section presented on pages 2 and 3 of this document.
3. The final page of this handout is a “marks sheet”. COMPLETE THIS FORM and attach a COMPLETED copy to the FRONT of your main report.
4. Refer to sections 5 and 6 of the course profile which covers a wide variety of important information on assessment and assignments.
5. Ensure you have stayed within the page limits for each section and for the overall report
6. Ensure each page of your report has
– a header that includes your surname(s) on the top right hand side, and
– a footer that include the file name on the bottom left and page numbers on the bottom right.
7. The main report must be in Microsoft Word, in order that the ‘tracking’ feature can be used to grade your report.
8. Ensure you have followed the guidelines outlined in the document entitled “Submission procedures for handing in assignment 2”
Please note that marks will be deducted for assignments that exceed the suggested page limits. Marks will also be deducted if other guidelines and procedures have not been followed.
The report is to be submitted online. Details of the submission instructions will be provided in a separate document in due course entitled “Submission procedures for handling in assignment 2”
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