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INSERT CODE
Introduction to Business Finance
Time Constrained Assessment:
marking scheme
Date for Submission: Please refer to the timetable on iLearn
(The submission portal on ilearn will close at 14:00 UK time
on the date of submission)
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materials or this publication may be reproduced, shared (including in private social media groups), stored in a retrieval system or transmitted in any form or means,
including without limitation electronic, mechanical, photocopying, recording or otherwise, without the prior written consent of Arden University. To find out more about
the use and distribution of programme materials please see the Arden Student Terms and Conditions.
Assignment Brief
As part of the formal assessment for the programme you are required to submit a
Business Finance assignment. Please refer to your Student Handbook for full details
of the programme assessment scheme and general information on preparing and
submitting assignments.
Learning Outcomes:
After completing the module, you should be able to:
On successful completion of this module students will be able to:
1. Explain different sources of business finance available to organisations
2. Apply basic management accounting techniques including budgeting, investment
appraisal and cost volume profit analysis
3. Interpret financial accounting information, perform and evaluate basic accounting
transactions and perform basic financial ratio analyses
4. Identify and assess the role of various FinTech applications.
Professional Skills: Perform effectively within the professional environment. Work
within a team, demonstrating interpersonal skills such as effective listening,
negotiating, persuading and presentation. Be flexible and adaptable to changes
within the professional environment
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materials or this publication may be reproduced, shared (including in private social media groups), stored in a retrieval system or transmitted in any form or means,
including without limitation electronic, mechanical, photocopying, recording or otherwise, without the prior written consent of Arden University. To find out more about
the use and distribution of programme materials please see the Arden Student Terms and Conditions.
Guidance
Your assignment should include: a title page containing your student number, the
module name, the submission deadline and the exact word count of your submitted
document; the appendices if relevant; and a reference list in AU Harvard system(s).
You should address all the elements of the assignment task listed below. Please
note that tutors will use the assessment criteria set out below in assessing your work.
You must not include your name in your submission because Arden University
operates anonymous marking, which means that markers should not be aware of the
identity of the student. However, please do not forget to include your STU number.
Maximum word count: it is expected that your submission should not exceed 3,000
words
Please refer to the full word count policy which can be found in the Student Policies
section here: Arden University | Regulatory Framework
Please note the following:
Students are required to indicate the exact word count on the title page of the
assessment.
The word count includes everything in the main body of the assessment (including in
text citations and references). The word count excludes numerical data in tables,
figures, diagrams, footnotes, reference list and appendices. ALL other printed
words ARE included in the word count.
Please note that exceeding the word count by over 10% will result in a 10-percentage
point deduction.
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materials or this publication may be reproduced, shared (including in private social media groups), stored in a retrieval system or transmitted in any form or means,
including without limitation electronic, mechanical, photocopying, recording or otherwise, without the prior written consent of Arden University. To find out more about
the use and distribution of programme materials please see the Arden Student Terms and Conditions.
Assignment Instructions
Instructions:
This assessment should take you no longer than 3-4 hours and can be
completed at any point during 24-hour window. Please ensure you give
yourself adequate time to upload your completed paper to Turnitin.
For further guidance on the TCA assessment please click on this link:
https://vimeo.com/398870288/2283356462
No formulae sheet is provided, you are expected to access these from appropriate
library sources.
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materials or this publication may be reproduced, shared (including in private social media groups), stored in a retrieval system or transmitted in any form or means,
including without limitation electronic, mechanical, photocopying, recording or otherwise, without the prior written consent of Arden University. To find out more about
the use and distribution of programme materials please see the Arden Student Terms and Conditions.
Questions
All questions are compulsory and relate to the following case study.
AAA Ltd.
AAA is a large privately owned supermarket retail group based in the UK. It has a
total of 30 stores throughout the UK. The business is family owned and was
founded by Gene Cooper who has recently stepped down as chairperson. From
20X3, the business has been run by one of Gene’s children, Lindsay.
The company has always been debt averse but there is evidence that the business
is being held back by a lack of capital investment, especially in the key areas of
online sales and store layouts. As a result, Lindsay is considering borrowing £200m
to fund the cost of developing an online sales division (AAA has no online sales
activity at present). The finance director also wants to invest in a new double entry
bookkeeping system as the current one has led to misstatements and errors in the
financial statements. Lindsay is not convinced this is an important or beneficial
investment, however.
AAA are notorious for centralising services and functions and the company has the
highest operating gearing ratio in the sector. Gene wants to continue with this policy
and has plans to centralise more retail store functions which will require relocating
staff to the head office. Many of these relocated staff will be required to work on the
new online sales project.
As part of the year X4 audit, AAA’s auditors noticed that the organisation’s
incremental budgeting system required managers to provide very little justifications
for their budget requests. They also identified significant budgetary slack in AAA.
The following accounting and financial information is available:
Statement of Financial Position: 20X3 and X4

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materials or this publication may be reproduced, shared (including in private social media groups), stored in a retrieval system or transmitted in any form or means,
including without limitation electronic, mechanical, photocopying, recording or otherwise, without the prior written consent of Arden University. To find out more about
the use and distribution of programme materials please see the Arden Student Terms and Conditions.

Note total trade creditors are 40 for 20X4 and 42 for 20X3
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materials or this publication may be reproduced, shared (including in private social media groups), stored in a retrieval system or transmitted in any form or means,
including without limitation electronic, mechanical, photocopying, recording or otherwise, without the prior written consent of Arden University. To find out more about
the use and distribution of programme materials please see the Arden Student Terms and Conditions.
Profit and Loss: 20X3 and X4

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materials or this publication may be reproduced, shared (including in private social media groups), stored in a retrieval system or transmitted in any form or means,
including without limitation electronic, mechanical, photocopying, recording or otherwise, without the prior written consent of Arden University. To find out more about
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Question 1
Required:
a) Calculate appropriate financial ratios covering AAA’s profitability, .liquidity, gearing and
efficiency for the years’ X3 and X4.
(20 marks)
Profitability
Up to 2 marks per relevant ratio correctly calculated to a max. of 6 marks
GPM
= 43 / 200 = 21.5/ (15.8)
NPM
= 22 / 200 = 11% (5.3%)
(Using EBIT)
Could also compute OPM
ROCE
= 22 / 138 = 15.8% (10.6%) Note: It is 15.9% instead of 15.8%
(Using EBIT) ( Give credit for other ROCE variations)
Liquidity
Up to 2 marks per relevant ratio correctly calculated to a max. of 4 marks
CR
=66 / 60 = 1.1 (0.9)
Quick
=66-25 / 60 = 0.7 ((0.5)
Gearing
Up to 2 marks per relevant ratio correctly calculated to a max. of 4 marks
Debt/ Debt + Equity
= 60 / 138 = 43.5% (24.5%)
Debt/Equity
= 60 / 78 = 77% (32%)
Could mention operating gearing here
Efficiency
Up to 2 marks per relevant ratio correctly calculated to a max. of 6 marks
Asset turnover
= 200 / 138 = 1.45 (2)
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Debtor days
=29 / 200 x 365 = 53 days (48)
Credit days
= 40 / 157 x 365 = 93 days (96)
Stock period
25 / 157 x 365 = 58 days (54)
Give credit for other relevant ratios. Max 2 marks/ratio.
b) Comment upon the results of your ratio analysis and AAA’s operating gearing ratio.
(10 marks)
Up to 2 marks per relevant comment which could include:
• Sales growth led to improving margins and ROCE but poor asset utilisation
• Major capital spending held this back
• Poorer working capital payables v debtors: stock periods, longer to collect
debts, paying suppliers quicker
• Low CA/Quick
• Long supplier credit periods is unrealistic
• Gearing up because of the loan – increased risk, interest payments
• May need equity injection
• Could also mention importance of competitor benchmarking, sector
benchmarks
• OG may promote financial risk, esp.. if AAA take out the loan
–
c) Identify some of the key advantages for AAA should they choose to invest in an
effective bookkeeping system.
(10 marks)
(Total: 40 marks)
[LOs: 3,4]
Up to 1 mark per relevant point. Possible points:
• Less error and misstatements
• Less likely to witness fraud
• Better audit trails
• Clearer
• Easier to trace transactions
• Makes audit easier and smoother
• Increased accuracy of FSs
• Speed
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materials or this publication may be reproduced, shared (including in private social media groups), stored in a retrieval system or transmitted in any form or means,
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• Less labour intensity and human error (if automated)
• Cheap to purchase off the shelf systems
• Proprietary systems have good back up
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including without limitation electronic, mechanical, photocopying, recording or otherwise, without the prior written consent of Arden University. To find out more about
the use and distribution of programme materials please see the Arden Student Terms and Conditions.
Question 2
As part of the planned expansion into online sales, AAA is considering investment in
several items of IT hard and software. One such item is a centralised route planning
piece of software (for the delivery vans). Lindsay believes these will lead to increased
profitability. There are two possible choices of software that could be selected; the
investment information and estimated cashflows for each software package is shown
below:

AAA has a cost of capital of 14%.
Each piece of software has a useful life of 4 years. The scrap value will be zero for
both.
Required:
a) Calculate the accounting rate of return (average method) for each software
package.
(5 marks)
Students need to deduct the dep.
X = 10, 000 per period; Y = 12,500 per period.
Profits are:
X: T1 – 6,000, T2 – 6,000, T3 – 6,000, T4 – 2,000 (1) average is 5,000
Y: T1 – T4 – 4,500 (1) average is 4,500
ARR
X = 5,000 / 20,000 = 25% (1) note no scrap so just / investment by 2
Y = 4,500 / 25,000 = 18% (1) + 1 mark for layout
No marks for initial method as not asked for
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materials or this publication may be reproduced, shared (including in private social media groups), stored in a retrieval system or transmitted in any form or means,
including without limitation electronic, mechanical, photocopying, recording or otherwise, without the prior written consent of Arden University. To find out more about
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b) Calculate the payback for each software package.
(5 marks)

Note: the actual figure 2 replaces the former figure 3 under Pbk
1 mark for layout
2 marks for cum + formula – XY
2 marks for right answers (npv) – XY
c) Calculate the net present value for each software package.
(10 marks)

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2 marks for layout and clarity
2 marks for CFs (XY)
2 marks for DFs (XY)
2 marks for PVs (XY)
2 marks for NPVs (XY)
d) Advise AAA as to which software package should be chosen.
(10 marks)
Up to 3 marks for any sensible point (1 – identification, 2 for discussion)
Possible points:
• NPV superior method
• Y has narrow neg. NPV – may need sensitivity analysis
• X strong pos. NPV
• If cash recovery important – X has shorter pbk, might be relevant for AAA
• Note weakness of ARR, eg, profits, but X is better
• Overall X would be the best choice therefore
• Note weakness of estimates, selecting discount rates, etc.
• Credit a triangulated approach
e) Explain how the use of FinTech could be beneficially incorporated into the online
retail sales project.
Up to 3 marks for any sensible point up to max. 10 (1 – identification, 2 for
discussion – give credit for research and use of sources).
Possible points:
• Blockchain
• Algorithms
• Bots
• Virtual assistants
• AI
• ML
• Regtech
• GPS – deliveries
• Analytics – Big Data
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materials or this publication may be reproduced, shared (including in private social media groups), stored in a retrieval system or transmitted in any form or means,
including without limitation electronic, mechanical, photocopying, recording or otherwise, without the prior written consent of Arden University. To find out more about
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(10 marks)
(Total 40 marks)
[LOs: 2, 4, 5]
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Question 3
Required:
Draft a briefing note to the chairperson Lindsay, which:
a) Discusses the advantages and disadvantages of the different approaches to budgeting
that could be used by AAA
(10 marks)
1 mark for briefing paper layout
Up to 2 marks for discussing any relevant advantages or disadvantage relating to a
recognised budgeting approach (max. 9 marks). Credit research and citing sources.-
• Incremental
• Rolling
• Period
• ZBB
• ABB
• BB
• Team budgets
b) Identifies and explains the problems that can be caused by organisational slack
(budgetary slack).
(5 marks)
Up to 2 marks for and acceptable problem (1 for identifying, 1 for explanation) to max. of 5
marks.
Possible points:
• Funding “agency” factors such as perks, excess staff
• Unnecessary costs
• Poor shareholder value
• Opportunity costs – money could be spent on better projects
• Indicative of poor management culture
• Impact on FSs
c)Identifies and briefly discusses some of the main sources of debt finance that AAA could
select to fund the new online retail sales project.
(5 marks)
(Total: 20 marks)
[LOs: 1, 2, 5]
Up to 1 mark for identifying a relevant debt instrument and providing evidence of
understanding. Note, no marks for equity funding methods.
End of questions
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AREAS OF OBSERVATIONS ARE:
1) Answer to Question 1 – ROCE calculation of 20X4, instead of
15.8%, it should be 15.9%.
2) Answer 2b under Pbk
3) Calculation of NPV of each software package

– Please note that the DF uses 3 decimal places for all calculations
– Also, the answer given in the sample for Software Y used a shorter approach
of annuity formular. i.e. (1/1 + r) ^n / r due to equal Cash Inflow of the years.
Where r = 14% or 0.14
^ = raised to the power
Application of the formular: (1/1.14) ^4 /0.14
A single figure of 2.91 shall be arrived at.
This will then be used to multiply the total Cash Inflows
e. g 2.914 ^ £17,000 = £49,538
Therefore, NPV £ (50,000) + £ 49,538 = £ (462)
Note: The NPV for Software Y is negative.
The NPV for Software X is positive.
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Referencing Guidelines
You MUST underpin your analysis and evaluation of the key issues with appropriate
and wide ranging academic research and ensure this is referenced using the Arden
University (AU) Harvard System.
Follow this link to find the referencing guides for your subject: Arden Library
Submission Guidance
Assignments submitted late will not be accepted and will be marked as a 0%
fail.
Your assessment should be submitted as a single Word (MS Word) or PDF file. For
more information please see the “Submitting an Assignment – Guide” document
available on the A-Z key information on iLearn.
You must ensure that the submitted assignment is all your own work and that all
sources used are correctly attributed. Penalties apply to assignments which show
evidence of academic unfair practice. (See the Student Handbook which is available
on the A-Z key information on iLearn.)
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Assessment Criteria (Learning objectives covered – all)
INSERT L 4