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FINANCIAL DECISION
MAKING – PRE-ISSUED CASE STUDY & GUIDELINES
Instructions to candidates (please read
carefully):
a) The following case
study provides some basic information that can be used in your analysis during
the examination
b) A copy of this material will be available in the examination
and, therefore, you should NOT take this case study into the examination room
c) You are allowed to prepare notes for this examination. Your
notes should be a maximum of two pages (four sides) of A4. These notes can
be taken into the examination and should be attached to your answer script on
completion of the examination
d) As part of your
prepared notes, you are advised to calculate (and tabulate) a full range of
performance indicators/financial ratios, and be prepared to take a view on the
recent performance of FBC Foods plc
e) The three hour
examination will consist of FOUR compulsory questions
f) Non-programmable calculators
are permitted in this exam
Scenario:
FBC Foods plc is a diversified international
food, ingredients and retail group. It operates in many countries across
Europe, southern Africa, the Americas, Asia and Australia. The company
originated in the UK (where it is still headquartered), and has grown both
organically and by strategic acquisitions. FBC Foods plc currently have three
principal divisions – Grocery, Agriculture and Retail.
The grocery division has a number of
international brands, and a variety of continental brands. The agriculture division
supplies products and services to farmers, feed and food manufactures,
processors and retailers. It also buys grain from farmers. Its breadth of
experience enables it to add value all along the food, drink, and biofuel
industry supply chains. The retail section is made up of just one major retail
chain, currently operating in Great Britain, Ireland, France, Portugal and
Spain. It solely focuses on short-term, inexpensive fashion items.
Continued overleaf
The summarised final
accounts are as follows:
Income statement for year to 28/29 February:
|
2015
|
2016
|
|
£m
|
£m
|
Turnover (all credit sales)
|
1,300
|
1,250
|
Cost of sales
|
(720)
|
(710)
|
Expenses
|
(470)
|
(440)
|
|
-------
|
-------
|
Operating profit
|
110
|
100
|
Interest paid
|
(40)
|
(45)
|
|
-------
|
-------
|
Profit before tax
|
70
|
55
|
Provision for tax
|
(15)
|
(12)
|
|
-------
|
-------
|
Profit after tax
|
55
|
43
|
Proposed dividend
|
(15)
|
(15)
|
|
-------
|
-------
|
Retained profit
|
40
|
28
|
|
====
|
====
|
Summarised balance sheet (position statement) as
at 28/29 February:
|
2015
|
2016
|
Non-current assets
|
6,100
|
5,500
|
Cumulative depreciation
|
(2,500)
|
(2,300)
|
|
--------
|
--------
|
|
3,600
|
3,200
|
Current assets
|
--------
|
--------
|
|
|
Inventory
|
1,400
|
1,490
|
Accounts receivable
|
530
|
500
|
Bank
|
10
|
40
|
|
-------
|
--------
|
|
1,940
|
2,030
|
|
-------
|
--------
|
Total assets
|
5,540
|
5,230
|
Current liabilities
|
====
|
====
|
|
|
Accounts payable
|
630
|
233
|
Bank overdraft
|
-
|
20
|
Tax owing
|
15
|
12
|
Dividends
|
15
|
15
|
|
------
|
------
|
|
660
|
280
|
|
------
|
------
|
Long-term loans
|
780
|
890
|
Equity and reserves
|
------
|
------
|
|
|
Ordinary share capital (£1)
|
3,000
|
3,000
|
Retained profit
|
1,100
|
1,060
|
|
-------
|
--------
|
|
4,100
|
4,060
|
|
-------
|
--------
|
Total liabilities
|
5,540
|
5,230
|
|
====
|
==== |