PGBM01 Financial Management and Control Assessment Solutions

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Assignment Details:-

  • Subject: Finance
  • Number of Words: 3000
  • Citation/Referencing Style: Harvard
  • Academic Standard Level: Masters


Part A


Bitmap plc is well established manufacturer of furniture in London. The board of directors have looked into the financial statements of the last two years and have noticed significant changes in different elements of Income statements and balance sheets. You are working in the same company as Management Accountant and directors have asked you to prepare a report on results of the two year’s financial statements. The financial statement of the Bitmap plc are given below:


Statement of comprehensive income for the year ended 2018 and 2019.

2019 2018
£000 £000 £000 £000
Revenue 23,000 18,000
Less: Cost of sales
Opening Inventory 1,800 1,700
Manufacturing cost     12,000       9,000
Total cost of goods available to sell 13,800 10,700
Less: Closing inventory       3,000       1,800
Total cost of sales 10,800     8,900
Gross profit 12,200 9,100
Less: Expenses
Selling & distribution expenses 4,000 3,000
Administrative expenses       1,400       1,000
     5,40   4,000
Operating profit 6,800 5,100
Less: Interest payable    1,000     500
Profit before tax 5,800 4,600
Less: Income tax (30%)   1,740   1,380
Profit after tax 4,060 3,220
Less: Dividends paid      300     200
Retained profit for the year   3,760     3,020


Statement of financial position as at 31st of December 2018 and 2019.

2019 2018
£000 £000 £000 £000
Non-current assets (net)
Land and building 15,000 11,000
Equipment 1,400 1,250
Motor vehicles       1,800      1,100
18,200 13,350
Current assets
Inventory 2,360 1,800
Trade receivables 2,300 1,600
Cash                       500        750
5,160 4,150
Current liabilities
Trade payables                      1,100      1,500  
Net current assets       4,060      2,650
22,260 16,000
Non-current liabilities
Loan stock       3,500      2,000
Net assets      18,760    14,000
Ordinary shares of £1 each Share premium 10,000




Retained earning       5,760      2,000
     18,760    14,000




  1. Prepare a structured report for Board of Bitmap plc, which evaluates the performance of the company in relation to profitability, liquidity, gearing, asset utilisation and investors potential. Your report must be supported by the calculations of relevant ratios in the five areas mentioned (25%)


  1. Calculate working capital cycle in days for the Bitmap plc based on the information above, assuming 365 days, for the years 2019 and 2018 you are also required to evaluate results (5%)


All calculations should be clearly shown including all appropriate workings and should be made to the nearest £000 or two decimal places where required.


Part B


Toyland ltd, is well established London based company which manufactures toys for children. The directors are expecting that demand of toys in future will increase significantly and with current capacity company will not be able to meet the demand. Therefore, directors have decided to purchase a new machine to enhance the capacity to benefit from the expected increase in demand. Two versions of machines are available from different manufacturers at the same cost of £500,000. Both machines have six years useful life and will be sold at estimated price of £50,000 at the end of sixth year. Toyland will use straight line method for depreciation of these machines. Cost of capital for both machines is 10%.


Directors are to purchase one machine from the available two, same cost and net cash inflow from both machines is confusing them to take decision. You are Finance Manager of Toyland ltd and directors have asked to produce a report which should make things clear for them to take decision.


Further information regarding net cash inflow from both machines is provided below:


Machine A Machine B
Years Cash flow Cash flow
0 (500,000) (500,000)
1 300,000 20,000
2 250,000 50,000
3 200,000 150,000
4 150,000 200,000
5 50,000 250,000
6 20,000 300,000




  1. Calculate using    the    following    investment    appraisal    techniques,    and    provide recommendations as to the economic feasibility of acquiring the suitable machine:
    1. The Payback
    2. The Discounted Payback
    3. The Accounting Rate of
    4. The Net Present
    5. The Internal Rate of Return (to two decimal places)


  1. Critically evaluate the key benefits and limitations of each of the differing investment appraisal techniques, supporting the response with relevant academic research as to whether each of the differing techniques is applied in practice within a real-life business context.


  1. You are also required to critically evaluate three suitable sources of finance to fund this investment as compared to a listed company.


Part C Budgeting




  1. Critically evaluate the budgeting process and demonstrate how budgets, strategic objectives, and strategic plans are related.


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