Accounting And Finance For Managers A Business Decision Making Approach 4th Edition Matt Bamber, Simon Parry - Solutions

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7 Give an example of a cost which may not be relevant in the short term, but could become relevant in a long-term decision.
6 Alpha Co has 200 units of material x in inventory. This originally cost $40 per unit.Alpha Co no longer needs the material x for its original use. It could sell the inventory for $10 per unit. However, the production manager wishes to use the material x in a new project. What is the relevant cost
5 Explain three potential weaknesses of CVP analysis as a decision tool.
4 If a company increases its operating gearing, will this make its profit more or less sensitive to changes in sales volume?
3 Explain what is meant by ‘operating gearing’.
2 If a business reduces its fixed costs whilst maintaining the same contribution margin, will this increase or decrease its break-even point?
1 Explain the concept of ‘margin of safety’ in CVP analysis.
Exercise 10.4 HomCo is financed partly by equity and partly by debt. The equity portion is always kept at three-quarters of the total. The cost of equity is 16% and that of debt 12%.What is the weighted average cost of capital (WACC)?
Exercise 10.3 PresCo pays $10,000 a year interest on irredeemable debenture stock with a nominal value of $100,000 and a current market price of $80,000.What is the cost of debt if the rate of corporation tax is:1 40%2 20%
Exercise 10.2 WendCo has in issue 10% debentures of a nominal value of $100. The market price is $90 ex-interest.Calculate the cost of debt if the debenture is:1 Irredeemable.2 Redeemable at par after 10 years.
Exercise 10.1 CanCo’s shares have a current market value of $0.80, and the last dividend was$0.10. If the expected annual growth rate of dividends is 4%, calculate the cost of equity capital.
7 What is meant by the ‘signalling effect’ of dividends? How might this impact on share price?
6 Why is the ‘dividend irrelevance’ proposition flawed in practice?
5 What are the practical limits to the level of gearing a company should operate?
4 What is the ‘tax shield’ and how does it benefit a company?
3 Explain the difference between financial risk and business risk.
2 Why does the cost of equity increase with the level of gearing?
1 The cost of capital can be said to consist of three elements. Explain what they are.
Exercise 9.3: Financial appraisal within context ANG Co is a manufacturer of high-performance processor chips for smart phones and other mobile devices. The company, based in Europe, has grown rapidly over the last five years. It has been able to compete with global competitors through developing a
Exercise 9.2: Understanding principles Freshfare Co is a food retailer with 25 stores in the south of the country in which it operates. The board of directors are currently considering expansion into the north of the country by opening a large new store in a major northern city.The investment in
Exercise 9.1: Basic computations A company is considering investing in a new production facility at a cost of $120 million. The new facility is expected to produce annual cost savings as set out in Table 9.21. The facility is expected to have a useful life of eight years, before becoming obsolete
8 Explain two ways in which risk assessment can be incorporated into investment appraisal.
7 In what ways can taxation impact upon cash flows from an investment?
6 What is an opportunity cost and why should it be included in an investment appraisal calculation?
5 What is the ‘discount rate’ used in NPV calculations and how is it arrived at?
4 Explain the concept of the time value of money.
3 What are the main drawbacks of the payback method of investment appraisal?
2 What are the three main factors that should be considered when appraising a potential investment?
1 Why is good investment appraisal important to organizations?
Exercise 8.3: Target pricing ACT Motors, a large vehicle manufacturer, is seeking to launch a new family saloon car. The market for such cars is already well established and highly competitive.Required:Explain the main steps ACT Motors should take in developing a target price for the new family
Exercise 8.2: Pricing strategy XTA Co is about to launch a new personal computer called the Eye which the user wears like a pair of glasses. Interaction with the computer is through eye movement and voice. No competitors are offering such an advanced product, but two competitors are expected to
Exercise 8.1: Marginal-cost-plus pricing Printit Co provides rapid printing and design services to the public and small businesses. The business, which has 12 employees, operates out of a high-street shop which includes office space. The company undertakes 400 to 500 jobs each month. It currently
7 Explain how customers’ expectations can impact upon the price they are willing to pay for a product.8 What is price skimming and under what circumstances is it an appropriate pricing strategy?
6 Publisher Co sells both paper books and e-books. If the company reduces the price of its e-books, should it expect demand for paper books to increase or decrease?
5 If a product is known to have a low price elasticity of demand and a company reduces its price in order to stimulate demand, would you expect this to lead to increased or decreased overall sales revenues?
4 Explain the concept of life-cycle costing and how this relates to pricing.
3 Distinguish between full-cost and marginal-cost pricing.
2 What are the 3Cs of pricing and how does each impact upon price?
1 Distinguish between the three main perspectives on pricing and identify the main concerns of each perspective.
Exercise 7.4: Inventory management Rio Co currently employs an inventory management policy of reordering inventory when levels fall to 3,500 units. This reorder level allows for the lead time of two weeks and maintains a buffer stock.The company orders 10,000 units at a time. Forecast production
Exercise 7.3: Managing accounts receivable Andro Co makes all its sales on credit and allows its customers 30 days’ credit.However, analysis of the financial statements shows that the average accounts receivable period in the last financial year was 70 days. This has increased from 50 days in the
Exercise 7.1: Managing the cash account The management of Darum Co have set a minimum cash balance of $7,500. The average cost to the company of making deposits or selling investments is $24 per transaction. An analysis of cash flows over the last 12 months reveals a standard deviation of $2,000
7 Explain what you understand by the terms ‘buffer stock’ and ‘lead time’ and briefly consider any stock policy that would minimize or eliminate such costs.
6 Discuss the ways in which factoring and invoice discounting can assist in the management of accounts receivable.
5 Explain the difference between a finance lease and an operating lease as a means of financing the purchase of an asset.
4 Discuss the assumptions which underpin the Baumol–Tobin model of cash management and explain how they may limit the usefulness of the model for some businesses.
3 Explain how a business can benefit from a cash forecast, even if it already has an income and expenditure forecast and a balance sheet forecast.
2 Distinguish between the transaction motive and the speculative motive for holding cash. How do these two motives differ in terms of their impact upon the level of cash held?
1 Explain the business problems that may be associated with holding insufficient cash balances. What are the problems of holding too much cash?
Exercise 6.4: Negative behavioural consequences Tools4U Co operates a chain of tool hire stores across the country. Tool purchases and store staffing levels are managed centrally, so each store is treated as a revenue centre, with the store manager being responsible for the level of sales revenue
Exercise 6.3: Non-financial performance indicators Jake Designs is a small firm which specializes as a consultant in product packaging and marketing within the cosmetics industry. The company recently appointed a new finance director, Katie Williams. In her first meeting with the CEO of Jake
Exercise 6.2: Total quality management Coat Co manufactures men’s clothing. The company has for many years operated a traditional standard costing and variance analysis approach to performance management. The marketing director has recently been on a training course about quality improvement and
Exercise 6.1: Evaluating cost variances Walkon Co manufactures wooden flooring. The company buys timber which it cuts to standard-length boards, sands and polishes to sell on to builders. The variance analysis shown in Table 6.6 has been produced for the production department for the last
8 What is social capital and how can it be measured?
7 Explain how performance measures may have unintended behavioural consequences.
6 Explain how the concept of VFM can be used to measure performance in a public-sector organization.
5 What are the four perspectives of the balanced scorecard as originally recommended by Kaplan and Norton?
4 Compare the relative advantages of ROI and EVA as divisional performance measures.
3 What type of standard costing system would be most appropriate for a manufacturing business that uses budget targets as part of its employee motivation and reward package?
2 What are the advantages and disadvantages of using flexible budgets?
1 What are the four main ways of delegating responsibility for budget management?
Exercise 5.4: Budgetary style Chin Co, an architectural services firm, uses a top-down budgeting approach. The budget is prepared by Michael Chin, the CEO, and once finalized it is distributed to departmental managers for implementation. Michael Chin sees the budget as an important means of
Exercise 5.3: Budgetary information Khan Co is a publishing business. The budget committee is scheduled to meet very soon to discuss plans for next year’s budget-setting process. One item on the agenda is the sources of information that will be needed in order to set next year’s
Exercise 5.2: The objectives of budgeting Ingram Co is a small engineering company. The company does not have a computerized accounting or budgeting system, but rather the chief accountant manually produces a budget each year in conjunction with the senior management team.The managing director has
Exercise 5.1: Selecting a suitable budget-setting approach You have been elected onto the budget committee of a hospital and have been tasked with reviewing the approach taken by the hospital towards budget-setting.The hospital has a relatively stable level of income which comes from government
9 Identify and comment on three behavioural problems that might be experienced in a system of budgetary control.
8 Discuss the potential conflict between using a budget as a motivational device and as a means of control.
7 How would the budget-setting philosophy of a service provider differ from that of a manufacturing business?
6 What are the advantages and disadvantages of a ‘bottom-up’ approach to budgeting?
5 Explain the difference between incremental budgeting and zero-based budgeting.
4 What are the elements of a master budget?
3 What benefits may an organization derive from a formal budgeting process?
2 How can budgeting contribute to strategic planning?
1 What is the difference between strategic planning and business planning?
6 Describe one occasion where you have been influenced to buy a product or engage in an activity as a direct result of an item of corporate communication, eg social media update; and explain what that was, how it happened and outline why you think it happened this way.
5 Can you explain why the annual report continues to be a useful document?
4 Can you explain why analysts might view conference calls/investor presentations as more important than the annual report?
3 Can you explain why analysts might view meetings with management as more important than the annual report?
2 In terms of the accounting standard-setting process, provide examples of who might be classified into each of the following categories and explain why you believe this to be the case:a. dormant stakeholders;b. demanding stakeholders;c. definitive stakeholders.
1 Discuss what is meant by the term ‘stakeholder salience’ and why it might be important to incorporate this theory into a business’s communication strategy.
Exercise 3.2 Extracts from the (summarized) financial statements of Barksdale plc, a retail group, for the year ended 31 December 2023 are shown in Table 3.7 together with an extract from the chief executive’s report that accompanied their issue.Table 3.7 Statement of comprehensive income 2023
Exercise 3.1 Hawk Limited (Hawk) manufacture and distribute washing machines. The board of directors (BoD) have been concerned for some time that their share of the market has been in decline, mainly as a result of industry-wide competition. They are also aware that to a certain extent the industry
5 What are the limitations of ratio analysis as a form of financial analysis?
4 Show how you might appraise the solvency of an entity and state what you feel might be some red-flag issues.
3 What is meant by ‘liquidity’ and why might a supplier want to assess the liquidity position of one of their customer companies?
2 Discuss THREE possible reasons why an entity’s gross profit margin might increase from one year to the next.
1 List THREE profitability ratios and show how they should be calculated.
Exercise 2.6: Climb On! (continued)Based upon your solution to Exercise 2.5, prepare a statement of cash flows for Climb On! for the period ended 31 December 2019.
Exercise 2.5: Climb On! (continued)Trading continues apace for your new business Climb On! The products have proved to be popular and, seeing this as your opportunity to seize the day, you decide to expand and grow the business.Here follows a summary of your cash book, ie all cash transactions
Exercise 2.4: Goblin Combe plc State which of the following items could appear as an asset on the statement of financial position of Goblin Combe plc, a leading premium drinks business:●● $150,000 of product sold during the year to Troillus Direct Inc under 40-day credit terms. The amount
Exercise 2.3: Climb On!Worked Example 1.1 in Chapter 1 provided the following information:For a long time, you have been wondering how to convert your passion for rock climbing into a business opportunity. During a recent climbing trip you met Chris, a climbing-gear designer. He agreed to give you
Exercise 2.2 can be found on page 58
Exercise 2.1: The components of financial statementsa. The income statement shows:Income – Expenditure = Profit Can you provide examples for each of these categories?Examples of income Examples of expenditureb. The statement of financial position shows:Assets – Liabilities = Shareholders’
6 List and describe two methods of depreciation. For each, provide an example of an asset where it might be appropriate to use that method.
5 If an entity’s accounts are prepared on a break-up basis, what does this mean?
4 What is the accruals concept? Provide one example to show you understand this.
3 Outline the content and purpose of the statement of cash flows.
2 Outline the content and purpose of the statement of comprehensive income.
1 Outline the content and purpose of the statement of financial position.
Exercise 1.6 The IASB acknowledges within the Conceptual Framework that general-purpose financial reports cannot provide all the information that users may need to make economic decisions. They suggest that users will need to consider pertinent information from other sources as well.a. Briefly

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Accounting And Finance For Managers A Business Decision Making Approach 4th Edition Matt Bamber, Simon Parry - Solutions

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