DIPLOMA IN ACCOUNTING (DAC)

FIN0008 MANAGING BUSINESS FINANCE

INDIVIDUAL ASSIGNMENT 1 (30 MARKS - 30%)

Instructions:

1)  Please read the instructions for the assignment carefully. Marks shall be deducted for failure to adhere to instructions.

2)  Students are to submit their assignments on or before the due date via Canvas. Submission after the due date shall be penalised by marks deduction.

3)  Write your FULL Name AND your Student number as in the register on the assignment cover page.

4)  This report must be typed written and submitted in MS WORD format with Times New Roman font size 12.

5)  Answer ALL questions.

6)  Show ALL workings.   No   marks   will   be   awarded   if   there   are   no   reasonable explanations/workings.

7)  Please  acknowledge  any  quotes  and/or  adaptions  with  adequate  references  to books, journals or websites used on the last page of your report. You may use APA referencing method.

8)  Please be reminded that plagiarism and collusion are serious offences, and all cases will be referred to the administration. Grades will be withheld if the submission is suspected of plagiarism or collusion till investigations are completed.

Submission deadline

The due date for submission of CA1 assignment is 24 April 2025, Thursday, 1159 am.

Penalty Marks for Late Submission of Assignment

By one day: 20% to be deducted from total marks

More than one day: submission will NOT be graded

CA Submission

CA must be submitted by the due date through Canvas.

Please save your file as: surname name

For example, your full name as stated in your SIM register, for example, Tan Chay Meng File name will be: Tan Chay Meng

Important Note:

Students caught for Plagiarism and/or Collusion will be subjected to heavy penalties.

Please be reminded that plagiarism and collusion are serious offences, and all cases will be referred to the administration. You may be penalised leading to failure and termination from the Diploma programme.

Plagiarism & Collusion

The institute considers plagiarism & collusion as serious offences that could lead to expulsion from the programme. Students should ensure that the assignments submitted are their own work. Students should check every page and verify that it is their own work.

What is Plagiarism: It is the use of someone else’s work in its entirety or some parts in exact form.  or  in  very  close  form.  to  your  own  without  acknowledging  the  original  author(s). Examples of plagiarism in assignments include the use of other authors: phrases, facts and illustrations, statistics, and assembled materials, without acknowledging them.

What is Collusion: It is the use of another person’s work or ideas with the consent of the other person(s) without formally acknowledging them in your own work. Although students can discuss their ideas and group projects freely with anyone, when it comes to writing the report, each student or each group must use their own words to produce their respective reports. Sharing the same phrases or paragraphs or sections of texts and illustrations (without any acknowledgements) in different group reports constitutes collusion.

Question 1

Mega Electronics Co. is a retail shop located in a shopping mall in Singapore. The shop  specialises in selling home appliances and electronics.  The owner, Sarah Lim, oversees the    overall strategy and expansion of the business. She employs Michael Han, a store manager, to   run the day-to-day operations at the store, including managing inventory, hiring staff, and  overseeing sales.

Michael receives a fixed basic salary per month.   Sarah notices that Michael often takes long   coffee breaks and is often not in the shop serving customers.

Using the ‘Principal-Agent ’ theory, explain how the owner reduces the agency problem in this case.

Your answer must include:

(i) Who represents the principal and agent in this case study?

(ii) What is the agency problem in this case study?

(iii) What is a possible consequence of the agency problem in this case study?

(iv) Provide one practical recommendation for the owner in this case study to reduce the agency problem.

You need to apply the keywords in the PPT slides/Canvas ebook to be awarded the full marks.   Ensure that your answer is original (your own work). [7 marks]

Question 2

Oscar Co.

Profit & Loss Statement for year ended 31 Dec 2024

                                                $

Sales Revenue                    2,080,976

Less: Cost of goods sold        (1,701,000)

Gross Profit                              379,976

Less: Operating expenses          (273,846)

Operating profit (EBIT)               106,130

Less: Interest expenses               (19,296)

Profit before tax (PBT)                  86,834

Tax expenses                           (34,734)

Profit after tax (PAT)                 52,100

Oscar Co.

Statement of Financial Position as at 31 Dec 2024

Assets

                                                 $

Cash                                    95,000

Accounts receivable                237,000

Inventories                           243,000

Total current assets                 575,000

Non-Current assets                 425,000

Total assets                            1,000,000

Liabilities & Shareholders' Equity

Accounts payable                   173,500

Accruals                               171,500

Total current liabilities             345,000

Long-term debt                     188,000

Total liabilities                       533,000

Share capital                         255,000

Retained earnings                  212,000

Total shareholders' equity         467,000

Total liabilities and shareholders' equity           1,000,000

a)   Compute the following ratios for Justin Co. Ltd for the current year:

(i)  Current ratio

(ii) Average Collection Period (in days)

(iii)Average Age of Inventory (in days)

(iv)Gross profit margin

(v) Net Profit margin (using Profit after tax)

(vi)Return on Total Assets (using Profit after tax)

(vii)Return on Total Equity (using Profit after tax)

(viii)Times Interest Earned

Full workings (including formulae) must be provided to be awarded the full marks.   (8 marks)

b)  Perform a cross-sectional analysis of the

(i) Profitability ratios and

(ii) Activity ratios of the company based on the ratios calculated in part (a) and the following information: (6 marks)

Ensure that your answer is original (your own work). [14 marks]

Question 3

Exclusive Trading Co., an Asian import company, has analysed a project and has prepared the following data:

Required payback period - 3.5 years Cost of capital - 20%

a)   Calculate the undiscounted payback period of the investment. Would you invest in this project based on the payback period? Explain your reason(s).    (3 marks)

b)  Given the cost of capital for the firm is 20%, calculate the net present value (NPV) for the investment. Should the company invest in this project based on NPV answers? Explain your reason(s).   (3 marks)

You need to provide the full set of workings that is shown in the PPT  slides to be awarded the full marks. Alternate workings may not warrant the full marks. [6 marks]

Question 4

Your company is looking into an investment. To fund the investment, the firm requires $150,000. The firm’s weighted average cost of capital (WACC) is 8%, and the investment is expected to generate net operating profit after tax (NOPAT) of $60,000.

Given the firm’s tax rate is 30%, calculate the economic value added (EVA) of the investment.

Should the firm accept or reject the investment? Give your reason(s). [3 marks]

You need to provide the full set of workings that is shown in the PPT slides to be awarded the full marks. Alternate workings may not warrant the full marks.