M06/3/BUSMT/SP2/ENG/TZ0/XX. 2. Teddybears Picnics Ltd. Teddybears Picnics Ltd produces teddy bears. Financial information includes:

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1 3 M06/3/BUSMT/SP2/ENG/TZ0/XX 2. Teddybears Picnics Ltd Teddybears Picnics Ltd produces teddy bears. Financial information includes: 2004 ($) 2005 ($) Fixed assets Sales revenue Cash Stock Debtors Cost of sales Creditors Retained profit Overheads Long term liabilities (a) Define the following terms: (i) fixed assets (ii) current assets (iii) current liabilities. Construct a profit and loss account for Teddybears Picnics Ltd for each of the years 2004 and [5 marks] (c) Produce a balance sheet for Teddybears Picnics Ltd for each of the years 2004 and (d) Identify three ways in which Teddybears Picnics Ltd can improve their net profit. [3 marks] Turn over

2 6 N06/3/BUSMT/SP2/ENG/TZ0/XX 5. Seifert Sawmill The Seifert Sawmill has operated in Sweden for 80 years. Daniel Seifert, the managing director, provided the following data on a proposal to set up a Sawmill in Latin America. Table 1 Fixed costs Variable costs Selling price Forecast sales $ per annum $1000 per batch $4000 per batch 500 batches per annum Table 2 The fixed costs per annum: $ The variable costs: $ Directors fees Direct labour 300 per batch Rent Machine hire 100 per batch Annual logging licence Electricity 100 per batch Depreciation Vehicle running costs 100 per batch Interest Materials 400 per batch Other expenses Seifert Sawmills has hired a management consultancy firm, Business Dynamics, to assess the business environment in Latin America. The following is a summary of their findings: the local and regional construction industry is showing strong signs of recovery from recession the recent national elections resulted in the PBP political party being re-elected with policies favouring the business community the local currency has been pegged to the US dollar in an attempt to improve business confidence and contain inflation the trade union movement in Latin America is getting stronger. There is a widespread belief among employees that trade unions offer the only real hope of improving living standards global and local environmental groups are gaining in popularity and political influence there is a growing use of synthetic materials in the construction industry rather than timber. (a) Use the data in Table 1 to prepare a break-even chart for Seifert Sawmill. Identify on your chart the margin of safety and profit if 500 batches are sold. [2 marks] (c) (d) Assuming 500 batches are sold, construct a forecast profit and loss account using the data provided in Table 2. Use a PEST/STEP framework to evaluate two external factors which might influence Seifert Sawmill s decision to set up a sawmill in Latin America

3 2 M00/370/S(2) 1. John Bite owner of a retail store has recorded the items below during the year ending December 31, Item Stock Vehicles Building Sales Owner s equity Accounts payable (creditors) Accounts receivable (debtors) Cost of goods sold Long term loan Bank money (money in a bank account) Expenses Value ($ 000s) The current assets ratio for 1998 was 1:1 and the asset test ratio was 0.5 :1. From the above figures: (a) (c) Produce the Balance Sheet for the year ending December 1999 and calculate the owner s equity. Identify the two possible elements that make up the owner s equity. Prepare an Income Statement (Trading and Profit and Loss Account). [2 marks] [3 marks] (d) Calculate the current assets ratio and acid ratio for [2 marks] (e) (f) Explain what these ratios measure and show why both are important to the firm. Compare the 1998 ratios to the 1999 ratios and write a comment on your findings. [3 marks]

4 3 M00/370/S(1) At an annual shareholders meeting Bill Adriano reported the following financial information Figure II Total sales Total cost of sales Administration costs Selling and distribution costs Other costs 1999 $ (projected) $ Vidler s appointed a market research consultant, to undertake a $10 million project to find out the perception consumers had of Vidler, compared to its rival, Vercher. Figure III Main Findings of the Project Vidler Dull grey and brown corporate identity Few special offers Slow checkout services Telephone order line Narrow aisles Staff discount Standard trolleys Small car parks Vercher Bright modern corporate identity Special offers to attract customers Fast scanning to speed up checkout Internet ordering Wide aisles Staff bonus scheme for suggestions Different trolleys Large car parks Vidler will use the recommendations made in the report produced by the market research consultant to decide changes that are needed to increase market share Turn over

5 4 M00/370/S(1) 1. What is meant by the following terms? (a) Market leader. Branding. (c) Tertiary sector. 2. Produce one pie chart showing market share for each company for Evaluate three consequences of removing a layer from the organisational structure at senior director level. 4. You are the market research consultant appointed by Vidler. Produce a report for the Chief Executive, Bill Adriano, discuss your findings and conclusions, and make at least three recommendations as to how Vidler could relaunch itself for Year Vidler need to improve communication between store managers and their staff. Explain three methods they could implement in order to make communication more effective. 6. If the total sales for Vercher, in December 1999 were $ , calculate the total sales Vercher had in January [2 marks] 7. Using the financial information given prepare a profit and loss account for Vidler for the year ending 1999 and the projected figures for Use two ratios to compare the accounts and comment on what is happening

6 3 N00/370/S(1) Safebuy Supermarkets Safebuy Supermarkets, established in 1988, grew rapidly on the back of aggressive pricing and marketing. The store s own brand products make up 60% of sales by value. Each store is run by a manager, who is given considerable independence. Most managers are recruited from competitors, tempted by high performance related bonuses. They are young: averaging 32 years old, and work to strict sales targets. Those who do not meet their targets are dismissed. The managers recruit their own staff, who are required to be flexible and work as a team. Staff turnover is relatively high. Team leaders run several departments and the organisation structure below team leaders is flat. Safebuy is facing increasing competition as the economy moves out of recession. Customers are looking for higher quality, good value branded products. In particular, Safebuy has lost market share to INCA Brands. INCA Brands offers clothes, household items, food, computers and even small motorbikes. It has recently been acquired by a large US clothing retailer and is able to charge low prices because of economies of scale in purchasing. INCA s recent advertising claims that prices in its stores will be cut by 5% over the next twelve months. They are also heavily promoting their new Internet shopping service and home delivery. Table I Hunter & Sons financial highlights $m $m $m sales revenue cost of sales overheads fixed assets current assets current liabilities long term liabilities shareholders funds Turn over

7 5 N00/370/S(1) 1. Using the information in the text and from Figures I and II, compare the organisation structures of Hunter & Sons and Safebuy Supermarket, and discuss how the different structures and management cultures will affect the operation and management of the two stores. 2. Prepare Profit and Loss Accounts and Balance Sheets for Hunter & Sons for the years 1998 and Comment on the performance of Hunter & Sons over the three years 1998 to 2000 and its present financial position. Assess the profitability, liquidity and efficiency of Hunter & Sons over the three years 1998 to 2000, using appropriate ratios to support your analysis. 4. (a) Explain two purposes of branding products. Why is Tom Spielberg planning to sell cheaper, more fashionable clothes under the Botticelli brand rather than use the existing Hunters brand name? [2 marks] 5. (a) Produce a SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis for Hunter & Sons. Using your SWOT analysis, write a report from Tom Spielberg to the Hunter brothers analysing possible advantages and potential problems of the proposed merger with Safebuy Supermarkets. The report must be in a format suitable for presentation to the board of directors. 6. Examine the benefits and limitations for both customers and retailers of on-line Internet shopping

8 6 M05/3/BUSMT/SP2/ENG/TZ0/XX 5. Brownlow Ltd The following financial information is given for Brownlow Ltd for 2003 and 2004: Sales revenue Fixed assets Stock Cost of sales Cash in bank Creditors Share capital Long term liabilities Debtors Overheads Reserves (a) Prepare a profit and loss account for 2003 and Prepare a balance sheet for 2003 and [5 marks] [5 marks] (c) Using four appropriate ratios analyse the liquidity and profitability of the company and comment on its performance. [10 marks]

9 3 N07/3/BUSMT/SP1/ENG/TZ0/XX 4. The finance manager, Colin Buckley, has drawn up draft accounts for the year ended 31 May The main figures from these accounts are given below. $000 Gross profit 525 Net profit 190 Interest 35 Tax 25 Dividends 100 Turnover 2750 Fixed assets 1250 Creditors 450 Debtors 350 Cash 50 Short-term borrowing 135 Net assets 1570 Share capital 350 Loan capital 550 (a) (i) Calculate the gross profit margin and the net profit margin for the years ended 31 May 2006 (see Appendix 1 in the case study) and 31 May (ii) Explain two possible reasons for the change in the net profit margin between 31 May 2006 and 31 May Use the figures above to construct a full profit and loss account and balance sheet for the year ended 31 May 2007 (N.B. Use the same layout for the accounts as in Appendix 1). [10 marks]

10 4 N04/3/BUSMT/HP1/ENG/TZ0/XX 6. The board of directors of Riveau Yachts are keen to know what the financial results are likely to be for 2004 and so have asked the financial director to prepare a forecast set of accounts. The financial director has started to collect forecasts of the financial information for the financial year He has so far managed to get the following information: Total sales revenue Gross profit Net profit Retained profit $ $ $ $ Stock Debtors Cash Current liabilities Net assets $ $ $ $ $ He is also using the following supplementary information and assumptions:! the number of shares is the same as in 2003! the board want to pay a dividend of $0.50 per share! the interest bill will be the same as in 2003! the tax bill will be $ ! share capital and loan capital figures will be the same as in (a) Construct the forecast balance sheet and profit and loss account for The firm is considering conversion to a public limited company in With reference to the figures you have calculated in part (a) and using four ratios, evaluate these forecast accounts from the point of view of a potential investor. [12 marks]

11 8 N04/3/BUSMT/HP2/ENG/TZ0/XX 6. Stock valuation Trend-Setter, established in January 2004, produces dresses for fashion conscious clients. The company buys a fixed amount of the silk material used for production from cheap, but very reliable overseas suppliers. In the first three months of its first trading year, Trend-Setter sold dresses per month at $20 each. However, in the next three months of operation the company experienced a 50 % drop in the number of dresses sold despite a 20 % price cut. Consequently, the amount of stock held increased. The manager, therefore, is thinking of introducing the JIT (just-in-time) method of production and stock control. Stock data for Trend-Setter for the first six months of 2004 is shown below Month / 2004 January February March April May June Purchases (sq meters and price) 5 $3 NIL 5 $4 NIL 5 $4 NIL Stock used (sq meters) (a) Using the FIFO (first in first out) method of stock valuation: (i) calculate the value of the closing stock at the end of June (Show all your working.) (ii) prepare a profit and loss account for the period January to June (Show all your working.) [5 marks] (c) Explain how the use of the alternative LIFO (last in first out) method of stock valuation will affect gross profit. (Calculations are not required.) Evaluate whether Trend-Setter should introduce a JIT (just-in-time) method of production and stock control. [3 marks]