Assessment Task
You are required to produce a budget report, complete with analysis and commentary, on a given scenario. The report consists of THREE compulsory parts.
HAMBLE LTD
Assessment Scenario
Hamble Ltd is an established food packaging and distribution business operating across London and the south east of England. The Directors of Hamble Ltd are considering expanding the business over the next 12 months by purchasing an existing established business which operates in the east of England and the midlands.
PART A (35% weighting)
The directors of Hamble Ltd have asked you, as a recently employed assistant management accountant, to prepare and review their cash budget. The bookkeeper started the cash budget but was unable to complete it due to ill health.

In addition, Hamble Ltd requires you to evaluate the different funding options for its expansion plans.

Estimated sales and purchases for each of the nine months to September are given below:
Jan
£,000 Feb
£,000 Mar
£,000 April
£,000 May
£,000 June
£,000 July
£,000 Aug
£,000 Sept
£,000
Credit sales 9,500 8,000 6,000 11,000 12,350 14,000 13,250 4,500 12,500
Cash sales 250 350 800 600 620 900 500 350 800
Credit purchases 6,000 5,200 5,800 8,000 8,700 6,300 5,200 5,000 5,100

Trade Receivables: Credit sales are to be collected two months after the date they have been sold.

Trade Payables: Credit purchases are to be paid one month after the date they have been purchased.

Borrowings: The terms of a 5-year loan are coming to an end and Hamble Ltd are due to repay the capital of £1,000,000 on 31st July.

Current Liabilities: Corporation tax of £100,000 is due to be paid to HMRC in the month of May.

Delivery vehicles: Hamble Ltd has a policy of replacing delivery vehicles every 2 years. A number of delivery vehicles are due to be replaced under this policy in June at a cost of £1,250,000, but existing delivery vehicles will be traded in for £310,000 as part of the deal.

Other overheads: Other overheads will be £2,200,000 per month settled on a monthly basis in the month incurred.

Cash: Hamble Ltd expects to have £90,000 in cash at the beginning of April.

You are required to:

1. Using Excel, prepare a cash budget for the business for the 6-month period from April to September.

NOTE: To achieve full marks you MUST show your working out, i.e. by using Excel cell referencing and formula.

2. Examine the cash budget you have prepared and advise the directors of Hamble Ltd of any possible solutions to cash flow problems that might be evident. Marks will be awarded depending on the depth of discussion.
3. Identify five sources of finance available to Hamble Ltd and evaluate the advantages and disadvantages of each. You should then make a recommendation to the directors of Hamble Ltd of the most appropriate source of finance for the proposed expansion plans. Marks will be awarded depending on the depth of discussion.

4. Within the next 3-5 years Hamble Ltd intend to expand their business throughout the UK following which their aim is to list the business on the London Stock Exchange. The Directors of Hamble Ltd have asked you to briefly explain the advantages and disadvantages of raising finance through the issue of shares.

PART B (40% weighting)

The Directors of Hamble Ltd have identified two existing established businesses that may be suitable to purchase to fulfil their expansion plans and have asked you to calculate and compare ratios for both companies before making a recommendation on which company to purchase.

Income Statements for the Year Ended 31st Dec 2020

Norwich Ltd Salford Ltd
£’000 £’000
Sales revenue 8,320 11,250
Cost of sales (6,020) (9,030)
Gross profit 2,300 2,220
Operating expenses (1,048) (1,535)
Operating profit 1,252 685
Finance charges (20) (70)
Profit before tax 1,232 615
Taxation (62) (30)
Profit for the year 1,170 585

SOFP (Balance Sheet) as at 31st Dec 2020
Norwich Ltd Salford Ltd
£’000 £’000 £’000 £’000
Non-current assets 502 198

Current assets
Inventory 1,290 2,437
Trade receivables 730 1,990
2,020 4,427
Total assets 2,522 4,625

Equity
Share capital 1,350 800
Reserves 580 1,145
1,930 1,945

Current liabilities
Trade payables 430 850
Taxation 62 30
Bank overdraft 35 350
527 1,230

Non-current liabilities
Loans 65 1,450
Total equity and liabilities 2,522 4,625
You are required to:

1. Use your Excel skills to calculate the following ratios for both companies.
You should then present your calculated ratios within your report in a simple table format for ease of comparison.

NOTE: To achieve full marks you MUST show your working out, i.e. by using Excel cell referencing and formula.

a. Gross profit margin
b. Operating profit margin
c. Return on capital employed
d. Asset turnover
e. Current ratio
f. Acid test
g. Inventory days
h. Trade receivable days
i. Trade payable days
j. Working capital cycle/operating cycle
k. Gearing
l. Interest cover

2. Compare the performance of the two companies in the 4 key areas of profitability, efficiency, liquidity and gearing using the ratios calculated in part 1 and make a recommendation as to which of the two companies Hamble Ltd should consider purchasing. Marks will be awarded depending on the depth of discussion.

PART C (25% weighting)
Hamble Ltd has a varied client base that includes schools, hospitals and the hospitality sector and has experienced fluctuating consumer demands since the beginning of the Covid-19 pandemic.

One of their products is a fresh produce box, consisting of local seasonal produce, and which is ordered in units. The following information is available for the year ending 30th September.

1. Due to these fluctuating demands, you have been asked to use Excel to prepare a flexible sales budget for quantities of 200,000 units and 300,000 units. Sales revenue is fully variable.

NOTE: To achieve full marks you MUST show your working out, i.e. by using Excel cell referencing and formula.

Budget
Sales (units) 250,000

£/unit £000s
Sales revenue 3,250
Variable produce costs (875)
Variable production overheads (150)
Fixed production costs (700)
Fixed administration costs (1,160)
Profit 365

2. Consider specific factors that may contribute to an increase or decrease in Hamble Ltd’s consumer demand. You should identify a minimum of 2 factors that may contribute to an increased demand and a minimum of 2 factors that may contribute to a decreased demand. Marks will be awarded depending on the depth of discussion.

Assessment criteria (Parts A, B and C will be marked against the following criteria in accordance with the indicated weighting)
A1 – A2 A3 – A4 B1 – B3 C1 – C3 D1 – D3 F1 F2 – F3
Recounting of factual information – depth
Accurately recounts a wide range of factual information, with many indications of greater breadth and depth of knowledge, beyond expectations for this level; Accurately recounts a wide range of factual information with several indications of greater breadth and some depth of knowledge; • Accurately recounts a range of factual information, with occasional indications of greater breadth of knowledge;
Satisfactory range of factual information accurately recounted;
• Acceptable range of factual information largely accurately recounted;
• Recounts a limited range of factual information with some inaccuracies/omissions; • Substantial inaccuracies/omissions in factual information;

Relevance and range of sources
Information always relevant and drawn from a wide range of sources, many of them independently identified;
Information consistently relevant and drawn from a wide range of sources, some of which are independently identified;
aspects. Relevant information drawn from a wide range of sources
Relevant information drawn from appropriate range of sources
Mostly relevant information drawn from an adequate range of sources; Information not always relevant and drawn from a limited range of sources; Range of information inadequate, often irrelevant

Organisation of work
Organisation of information is exceptionally logical and convincing for work at this level; Organisation of information is consistently logical and convincing; Organisation of information is logical and clear; Organisation of information is clear; Organisation of information is generally clear; Some errors in organisation of information; Information is disorganised
Understanding of principles, terms, concepts, theories and practices
Demonstrates an understanding of the principles, terms, concepts, theories and practices within the subject/discipline that substantially exceeds expectations for the level in many aspects. Demonstrates an understanding of the principles, terms, concepts, theories and practices within the subject/discipline that exceeds expectations for the level in several Recognises and demonstrates clear understanding of the key principles, terms, concepts, theories and practices within the discipline/field.
Recognises and demonstrates basic understanding of the key principles, terms, concepts, theories and practices within the discipline/field. Recognises the basic principles, terms, concepts, theories and practices within the subject/field. Occasional errors/omissions/misrecognitions of the basic principles, terms, concepts, theories and practices within the subject/field. Fails to recognise the basic principles, terms, concepts, theories and practices within the subject/field.
Analysis of issues/problems
Analysis of issues/problems, including some that are unpredictable or loosely defined is exceptional for this level; Analysis of issues/problems, several of which are not closely defined;
Analysis of issues/problems, some of which are not closely defined;
Generates satisfactory analyses of defined problems/issues;

Analysis is adequate when dealing with well-defined issues/problems;
Analysis partial when dealing with well- defined issues/problems, and marginally inadequate for this level;
Analysis of defined problems/issues inadequate, inaccurate or absent, with reliance on description;

Application of learning in less familiar contexts
Demonstrates outstanding ability to apply learning in less familiar contexts/situations. Ability to apply learning in less familiar contexts/situations exceeds expectations for this level in some aspects. Evidences ability to apply learning in less familiar contexts/situations Applies learning to produce a satisfactory response to a less familiar context/ situation. Tendency to description and reliance on familiar approaches;
Limited application of learning to address a less familiar context/situation. Marginally fails to apply learning when dealing with a less familiar context/situation.
Fails to apply learning in a less familiar context/situation.
Performance of set work
Performance of set creative, practical, technical, work-related or scholarly tasks is exemplary, in many instances Performance of set creative, practical, technical, work-related or scholarly tasks is excellent Performance of set creative, practical, technical, work-related or scholarly tasks is accurate Accurately performs set creative, creative, practical, technical, work-related or scholarly tasks, Performance of set creative, practical, technical, work-related or scholarly tasks generally accurate; Performance of set creative, practical, technical, work-related or scholarly tasks shows some inaccuracies and is marginally inadequate for this level; Performance of set creative, practical, technical, work-related or scholarly tasks inaccurate and inadequate for this level;
Independence and initiative
shows independence, capacity and initiative beyond expectations for this level. shows independence, capacity and initiative beyond expectations for this level in several instances. sometimes shows elements of independence and capacity beyond expectations for this level. Performs under appropriate levels of supervision and guidance. Some tendency to rely on support, supervision and guidelines with few indications of independence. Tendency to rely on support, supervision and guidelines with little indication of independence. Reliant on support, supervision and guidance; lacks independence.
Presentation and format
Presentation of information and data is outstanding in its clarity, accuracy, stylistic appropriateness with evidence of ability/creativity beyond expectations for this level; Clarity, style and format of presentation of information and data is excellent,

Presentation of information and data is consistently clear and appropriate in style and format

Presentation of information and data is clear, in a satisfactory format and style

Presentation of information and data mostly clear and in an acceptable format, with occasional inconsistencies/ minor errors in style, format
Presentation of information and data sometimes unclear and not in an appropriate format, with some inconsistencies/ errors in style, format Presentation of information and data disorganised, inappropriate in format and with significant errors in style, format

Referencing (Harvard Solent format)
Exemplary referencing/citation Consistently accurate referencing/citation. Accurate referencing/citation. Mostly accurate referencing/citation. Occasional inconsistencies / minor errors in referencing/citations. Omissions/errors in referencing/citation Significant errors in referencing or none

Learning Outcomes

This assessment will enable students to demonstrate in full or in part the learning outcomes identified in the Module descriptors.
Late Submissions

Students are reminded that:

i. If this assessment is submitted late i.e. within 5 working days of the submission deadline, the mark will be capped at 40% if a pass mark is achieved;
ii. If this assessment is submitted later than 5 working days after the submission deadline, the work will be regarded as a non-submission and will be awarded a zero;
iii. If this assessment is being submitted as a referred piece of work then it must be submitted by the deadline date; any Refer assessment submitted late will be regarded as a non-submission and will be awarded a zero.

https://students.solent.ac.uk/official-documents/quality-management/academic-handbook/2o-assessment-principles-regulations-temporary-amendments-for-covid-19-contingency-plans.pdf

Extenuating Circumstances
The University’s Extenuating Circumstances procedure is in place if there are genuine circumstances that may prevent a student submitting an assessment. If students are not ‘fit to study’, they can either request an extension to the submission deadline of 5 working days or they can request to submit the assessment at the next opportunity (Defer). In both instances students must submit an EC application with relevant evidence. If accepted by the EC Panel there will be no academic penalty for late submission or non-submission dependent on what is requested. Students are reminded that EC covers only short term issues (20 working days) and that if they experience longer term matters that impact on learning then they must contact the Student Hub for advice.

Please find a link to the EC policy below:

https://students.solent.ac.uk/official-documents/quality-management/academic-handbook/2p-extenuating-circumstances.pdf

Academic Misconduct
Any submission must be students’ own work and, where facts or ideas have been used from other sources, these sources must be appropriately referenced. The University’s Academic Handbook includes the definitions of all practices that will be deemed to constitute academic misconduct. Students should check this link before submitting their work.

Procedures relating to student academic misconduct are given below:

https://students.solent.ac.uk/official-documents/quality-management/academic-handbook/4l-student-academic-misconduct-procedure.pdf

Ethics Policy

The work being carried out by students must be in compliance with the Ethics Policy. Where there is an ethical issue, as specified within the Ethics Policy, then students will need an ethics release or an ethical approval prior to the start of the project.

The Ethics Policy is contained within Section 2S of the Academic Handbook:
https://staff.solent.ac.uk/official-documents/quality-management/academic-handbook/2s-solent-university-ethics-policy.pdf

Grade marking
The University uses a letter grade scale for the marking of assessments. Unless students have been specifically informed otherwise their marked assignment will be awarded a letter grade. More detailed information on grade marking and the grade scale can be found on the portal and in the Student Handbook.

https://students.solent.ac.uk/official-documents/quality-management/academic-handbook/2o-annex-3-assessment-regulations-grade-marking-scale.docx

Guidance for online submission through Solent Online Learning (SOL)

http://learn.solent.ac.uk/onlinesubmission