BA 4008 Business Decision Making
Coursework
July 2020 Resit
Answer both Tasks
Submission Date and Time: 03 August 2020 and 15.00 Hours
This is the third and final Coursework
This Coursework contributes 40% to the overall assessment for BA4008
TASK ONE
Analyse and evaluate the performance, liquidity, and financial structure of Tesco plc over the three-year period 2017 – 2019.
You should use the accounting ratios shown below and any other information relevant to Tesco plc taken from the annual report and accounts for 2019 and any other source of evidence that you believe helps to explain the company’s performance and position.
You should also highlight any limitations in the use of accounting ratios that you found in your analysis and evaluation of the company over the three-year period. This may include reference to the movements in the company’s share price particularly in 2019.
TESCO PLC
| 2019 2018 2017 |
| Performance ratios |
| Gross profit margin (% ) 6.48 5.83 5.19 |
| Return on total assets ( % ) 3.41 2.89 0.32 |
| Return on capital employed ( % ) 5.90 5.07 0.55 |
| Liquidity ratios |
| Current ratio ( : 1 ) 0.61 0.71 0.79 |
| Liquidity ratio ( : 1 ) 0.49 0.61 0.68 |
| Efficiency ratios |
| Inventory days (days) 14.95 14.37 15.02 |
| Trade receivable (days) 3.42 2.96 3.20 |
| Trade payable (days) 32.84 34.39 32.08 |
| Gearing ratio |
| Gearing ( % ) 161.26 233.35 454.44 |
Source: FAME Financial Database
SOURCES AND HYPERLINKS
Tesco plc Annual Report and Accounts 2019
https://www.tescoplc.com/media/476422/tesco_ara2019_full_report_web.pdf
Understanding Tesco plc
https://www.tescoplc.com/investors/understanding-tesco/
FAME financial database
BBC website 2 March 2018 SFO seeks retrial of former Tesco bosses
http://www.bbc.co.uk/news/business-43253799
ASSESSMENT CRITERIA
15 MARKS for analysis and interpretation of accounting ratios for performance, liquidity and financial structure with some attempt to link this to business factors affecting Tesco over the three year period
5 MARKS for brief comments highlighting any limitations in the use of accounting ratios for Tesco
5 MARKS for the discussion of other factors affecting Tesco in 2019 e.g. significant news items affecting the company’s performance, movements in share price, current retail and market conditions
5 MARKS will be awarded for a high quality analysis and presentation
Total word count for Task 1 = 500 words
Total Marks (Task 1) = 30
TASK TWO
Senior management at Sunderland Plc have identified that there is a strategic need for a replacement machine to be acquired in one of its production departments. They have to make a choice between two models of the machine they have in mind. Model 1 is called Super and model 2 is called Deluxe. They are unsure as to which of the two models they should buy. They have given you the following profiles of the two models.
Super Deluxe
Cost £250,000 £400,000
Net Cash Inflow £ £
Year 1 125,000 75,000
2 50,000 100,000
3 50,000 125,000
4 25,000 50,000
5 75,000 50,000
6 50,000 125,000
Scrap value 10,000 40,000
Cost of Capital 8%
Required
- They want you to appraise the two prospective projects using the following investment appraisal techniques: [32 MARKS]
- Payback (4 marks)
- Accounting rate of Return (4 marks)
- Net Present Value (14 marks)
- Internal Rate of Return (10 marks)
You are told that funds are only available for only one model.
- Write a report (of 500 words) to the senior management of the company explaining how each of the techniques works. Your report should include the advantages and disadvantages of each technique.
[15 MARKS]
- Explain briefly (in 200 words) which machine you would recommend to senior management of Sunderland Plc under each technique and state your reason why you would recommend that machine.
[15 MARKS]
8 MARKS will be awarded for a high quality analysis and presentation
Total word count for Task 2 = 700 words
Total Marks (Task 2) = 70
Overall Marks (Task 1 & Task 2) = 100
PLEASE NOTE ALL WORKINGS SHOULD BE SHOWN CLEARLY