6BUS1195-0105 Advanced Financial Decision Making - Main Assignment

Advanced Financial Decision

Module Title: Module Code: 6BUS1272
Making
Assignment Format & Assignment
Report: 1,500 words +/- 10% 40%
Maximum Word count weighting
Time: 10:00 am Coursework return Within 4 weeks
Coursework Submission: Date: Friday 1st- March-2024 Date returned to of submission
Method: Canvas students: date

Module Leader Mona Mortazian First marker Student tutor

Approved ✘
Internal Moderator Module Board name UG AFE
Date:18 Jan 2024
Approved ✘
External Examiner Module Board date
Date: 07/02/2024
Module eligible for an
extension on submission YES
date (subject to UPRs)

Assessment Criteria
Learning Outcomes: Knowledge and Understanding assessed in this assignment:
 Explore the theoretical underpinning of corporate finance
 Compare and contrast approaches to finance relevant in different sectors and cultures
Learning Outcomes: Skills and Attributes assessed in this assignment:
 Evaluate advanced financing and investment decisions
Feedback /Marking criteria for this Assignment
 Performance will be assessed using HBS Grading Criteria (Rubric)
 Feedback for improvement will be given in writing via your Canvas module site within 4 weeks of
submission
 Lateness Penalty: For each day or part day up to five days after the published deadline, coursework
relating to modules submitted late will have the numeric grade reduced by 10 grade points until or
unless the numeric grade reaches the minimum pass mark (UG 40%). Where the numeric grade
awarded for the assessment is less than the minimum pass mark, no lateness penalty will be
applied. If the coursework is submitted more than 5 days after the published deadline, it will not be
marked and a grade of zero will be awarded.
 Extensions: Students do not have an automatic right to an extension. If you require an extension,
this must be requested from the module leader in advance of the submission deadline. You must
provide the module leader with the reason(s) for needing an extension.
 6BUS1195-0105 Advanced Financial Decision Making - Main Assignment

Detailed Brief for Individual Assignment

Assignment Title: The effect of capital structure on shareholder wealth

Description of the assignment, task, content and structure:

The traditional view of capital structure is that a firm’s financing decision has a direct effect on its
Weighted Average Cost of Capital (WACC). Therefore, as shareholder wealth maximization is the
primary financial objective of a listed company, managers must find an optimal capital structure that
minimizes WACC while maximising shareholder wealth.
You are required to write a 1,500-word report that discusses and critically evaluates some of the main
theories of capital structure and their application to a non-financial FTSE company, making clear links
with shareholder wealth.

You are advised to use the following sectioning for the structure of your report:
 Introduction (5 marks):
Define capital structure. Highlight the main purpose and structure of your report. And summarise
your key findings.

 Capital structure theories (30 marks):

Embark on an exploration of capital structure theories to understand their impact on corporate
financing decisions. Compare and contrast the Trade-off Theory, the Pecking Order Theory, and
the Market Timing Theory in the context of optimising capital structure. Conduct a critical
evaluation of the assumptions and limitations inherent in each theory. Ensure to integrate
literature into your work, supporting your discussions with quality sources.

 Business application (35 marks):

For the non-financial FTSE company that you have been allocated for this report, design a table
to present the results of the following ratios for a period of 5 years: gearing, interest cover, EPS,
PE, market capitalisation.
Create a graph presenting a monthly share price movement for your company for the 5-year
period.
Using the evidence presented in your table and graph, analyse the capital structure of your
company, and assess its effect on shareholders’ wealth over the sample period.
Finally, reflect on which capital structure theory you think your company subscribes to, with clear
justifications.
Relevant instructions for this section:
o You cannot use the company Next for your analysis as we have used it on our class
example. You must only use the company that you have been allocated for this report. If
you wish to change your allocated company, you must get the change approved by the
Module Leader.
o Use the Group Financial Statements for your company for the 5 years to the latest
 6BUS1195-0105 Advanced Financial Decision Making - Main Assignment
published financial statements.
o Your table and graph must only show the final results, your detailed workings must be
presented in the appendix.
o The gearing ratio should be calculated on long-term borrowings (not long-term liabilities).
The interest cover ratio should be calculated using only interest paid or payable on long-
term borrowings.

 Conclusion (10 marks):

Summarise the key findings of the report, clearly reflecting on your thoughts of the relationship
between capital structure and shareholders’ wealth.

 Presentation and structure (10 marks):

Ensure that your report follows a clear structure, keeps to word limit, has numbered pages and a
clear list of contents. Your report must also follow a clear academic writing style, reflecting high-
level of communication.

 References (5 marks):
Support your report with evidence from quality sources and academic literature, covering (at
minimum) the recommended texts in the reading list. You must follow Harvard style for in-text
citation and reference list. (Please contact CASE for help if you are unsure about how to use
Harvard Referencing.)

 Appendix (5 marks):
In the report appendix, you must clearly show the workings of your ratios and graph with their
sources. This must be presented at the end of the report and not as a separate file.

Any specific instructions:

 Your report must include a cover page containing your report title, SRN and wordcount. Your
work will be marked anonymously.
 The report must not exceed the word limit as this may result in a penalty as a deduction from the
final grade. Your Word Count should not include the Table of Contents, References or
Appendices.
 Your report must be submitted via StudyNet as a Word document with text format in Arial font,
word size 11, and 1.5 line spacing.
 You must only submit one file (word file). Any calculations included in a separate Excel file will
not be marked. All relevant calculations must be included in the appendix of the report.
 You must carefully read the Grading Criteria (rubric) attached at the end of this brief for
details on how marks are awarded for individual parts of the report.
 6BUS1195-0105 Advanced Financial Decision Making - Main Assignment

Essential Reading list:

 ACCA Technical Articles. Lynch, P. Optimum capital structure | F9 Financial Management |
ACCA Qualification | Students | ACCA Global
 Huang, R. and Ritter, J.R., 2005. Testing the market timing theory of capital structure. Journal of
Financial and Quantitative Analysis, 1(2), pp.221-246.
 Ahmadimousaabad, A., Bajuri, N., Jahanzeb, A., Karami, M. and Rehman, S., 2013. Trade-off
theory, pecking order theory and market timing theory: a comprehensive review of capital
structure theories. International Journal of Management and Commerce Innovations, 1(1),
pp.11-18.
 Ardalan,K (2017) Capital structure theory: Reconsidered .Research in International Business
and Finance 39 (2017) 696–710

Recommended Reading List:

 Denis,D,J (2012) Persistent Puzzle of Corporate Capital Structure: Current Challenges and New
Direction sources of Financing, Management Research News, Volume 25 Number 12 2002
 Myers S., (2001) ‘Capital Structure’, The Journal of Economic Perspectives, Vol. 15, No. 2
(Spring, 2001), pp. 81- 102
 Barclay M. J. and Smith C. W., (2005) ‘The Capital Structure Puzzle: The Evidence Revisited’,
Journal of Applied Corporate Finance, Vol.17, No.1
 Graham J,R and Harvey C,R (2001) The theory and practice of corporate Finance: evidence
from the field. Journal of Financial Economics 60 (2001) pp.187-243 (read pp 23-37)
 Quan,V,D,H., (2002) A Rational Justification of the Pecking Order Hypothesis to the Choice of
Sources of Financing, Management Research News, Vol.25, No.12
 Huang, R. and Ritter, J.R., 2005. Testing the market timing theory of capital structure. Journal of
Financial and Quantitative Analysis, 1(2), pp.221-246.
 Ahmadimousaabad, A., Bajuri, N., Jahanzeb, A., Karami, M. and Rehman, S., 2013. Trade-off
theory, pecking order theory and market timing theory: a comprehensive review of capital
structure theories. International Journal of Management and Commerce Innovations, 1(1),
pp.11-18.
 Setyawan, I.R., 2015. An empirical study on market timing theory of capital structure. International
Research Journal of Business Studies, 4(2).

Academic Integrity, Plagiarism and Essay Mills

 You are NOT allowed to copy any information into your assignment without using quotation
marks and a reference – this is ‘plagiarism’ (a type of academic misconduct).
 You are NOT allowed to copy from other students (or allow other students to copy from you) –
this is ‘collusion’.
 You are NOT allowed to copy from your own assignments on other modules – this is ‘self-
plagiarism’.
 You must NEVER buy assignments from websites (essay mills) – this is called ‘contract
 6BUS1195-0105 Advanced Financial Decision Making - Main Assignment
cheating’ and it is now illegal in the UK.
 If you commit academic misconduct, your mark will be reduced, and you will face disciplinary
action for repeat offences.
 Contact academic-skills@herts.ac.uk if you are unsure of the rules or how to avoid academic
misconduct, and you will receive help.

Student Support and Guidance

 For further help on module content and assignment details, contact your Module Leader in her
office hours or by email.
 Use the Learning Outcomes and Grading Criteria (Rubric) to help inform you of the expectations
of the assessment.
 Use CASE (Centre for Academic Skills Enhancement) website resources:
http://go.herts.ac.uk/CASE
Attend CASE workshops and drop-ins to develop academic skills to meet HBS expectations (see
timetable on CASE website homepage or drop-in to CASE in L064, in the LRC).
 Visit the Academic English for Business Programme Site for tips on developing your academic
English and contact hbsacademic-english@herts.ac.uk if you have any questions.
 For help with Turnitin, look for the “Check your work (Turnitin Originality Report)” practice
assignment in the Assignment section of all of your modules. For help with understanding
plagiarism and how to make changes to your assignment, contact hbsacademic-
english@herts.ac.uk.
 Use the Online Library to access quality business information resources:
o Library Search will help you find books, journal articles and more.
o Use the Subject Toolkit for Business to access to industry standard databases.
o Use Library SkillUP for guidance for searching and referencing.
o Get help: use SkilIUP module chat, visit the Study Success Hub, or book an 1:1 with a
librarian.

The relevant HBS Grading Criteria (Rubric) for your assignment is added below as a table.
 6BUS1195-0105 Advanced Financial Decision Making - Main Assignment
Grading criteria:

Little or
Outstanding Excellent Very Good Good Clear Pass Marginal Pass Marginal Fail Clear Fail Nothing of
100-90 89-80 79-70 69-60 59-50 49-40 39-30 29-20 merit
19-0
An outstanding
An excellent
introduction that is A satisfactory
introduction A very good Nothing of
clearly highlights A good introduction A sound introduction introduction
addressing all introduction merit:
the report purpose addressing some addressing relevant addressing some A weak An inadequate
Introduction relevant points addressing most Unsatisfactory
and structure and relevant points and points and requirements but introduction that introduction that
(5 marks) and relevant points and introduction that
gives a thorough requirements but requirements but with does not meet all does not meet all
requirements. requirements but does not meet
definition of capital with minor with some errors/omissions the requirements the requirements
Excellent with few the
structure, and an errors/omissions in errors/omissions in in content. May for this section. for this section.
presentation and errors/omissions in requirements
outstanding content. content. benefit from
structure. content. for this section.
summary of main further research.
findings.
Satisfactory
analysis and
Very good analysis evaluation of
Excellent Good analysis of Weak analysis Nothing of
Outstanding of capital structure capital structure
analysis of capital structure Sound analysis and and evaluation of Inadequate merit:
analysis of capital theories and theories but
capital structure theories and evaluation of capital capital structure analysis and Unsatisfactory
structure theories evaluation of most some
theories and evaluation of some structure theories theories, evaluation of analysis and
Capital and evaluation of relevant aspects but irrelevant/superfi
evaluation of all relevant aspects but but with some reflecting limited capital structure evaluation of
structure all relevant with few cial points,
relevant aspects, with minor errors/omissions in content and theories, lacking capital structure
theories aspects, reflecting errors/omissions in reflecting
reflecting errors/omissions in content, reflecting knowledge of the in relevant theories,
(30 marks) outstanding content, reflecting satisfactory level
excellent content, reflecting sound grasp of the topic. Needs to content. unsatisfactory
knowledge of the very good of knowledge of
knowledge of the good knowledge of topic. Sound show better Inadequate level of
topic. Outstanding knowledge of the the topic but may
topic. Excellent the topic. Good integration of integration of integration of knowledge or
integration of topic. Very good benefit from
integration of integration of literature into the literature into the literature into the integration of
literature into the integration of further research.
literature into the literature into the discussion. discussion. discussion. literature into
discussion. literature into the Limited
discussion. discussion. the discussion.
discussion. integration of
literature into the
discussion.
 6BUS1195-0105 Advanced Financial Decision Making - Main Assignment
Little or
Outstanding Excellent Very Good Good Clear Pass Marginal Pass Marginal Fail Clear Fail Nothing of
100-90 89-80 79-70 69-60 59-50 49-40 39-30 29-20 merit
19-0
Satisfactory
content for the
Outstanding Nothing of
Excellent content table and graph Weak content for
content for the Very good content merit:
for the table and Good content for the Sound content for demonstrating the table and
table and graph for the table and Unsatisfactory
graph table and graph the table and graph satisfactory graph Inadequate
demonstrating graph content for the
demonstrating demonstrating good demonstrating clear knowledge and demonstrating content for the
impressive demonstrating very table and graph
excellent knowledge and knowledge and understanding of limited table and graph
knowledge and good knowledge demonstrating
knowledge and understanding. understanding of the topic. knowledge and lacking knowledge
understanding. and understanding. unsatisfactory
understanding. Good analysis and main issues. Sound Satisfactory basic understanding of and
Outstanding Very good analysis level of
Business Excellent reflection of your analysis and analysis and the topic. Weak understanding of
analysis and and reflection of knowledge and
application analysis and company. You have reflection of your reflection of your analysis and the topic.
reflection of your your company. You understanding
(35 marks) reflection of your covered some company. However, company. reflection of your Inadequate
company, have covered most of the topic.
company. You relevant points and you have covered However, some company. More analysis and
demonstrating relevant points and Unsatisfactory
have covered all requirements with some irrelevant points were development and reflection of your
highly developed requirements with analysis and
relevant points minor points with some irrelevant / comments company.
work with thorough few reflection of
and errors/omissions in errors/omissions in superficial. With needed. Inadequate
consideration of all errors/omissions in your company.
requirements. content. Good content. Sound errors/omissions Unsatisfactory business insight
aspects of the content. Very good No evidence of
Excellent business insight and business insight and in content. business insight lacking integration
topic. Outstanding business insight and appropriate
business insight integration of data integration of data Satisfactory and work needs of data into work.
business insight integration of data business insight
and integration of into work. into work. business insight to show better
and integration of into work. or integration of
data into work. but limited links with data.
data into work. data.
integration of
data into work.
Outstanding
summary of Nothing of
Excellent Satisfactory
findings covering merit: The
summary of Very good summary Good summary of Sound summary of summary of Inadequate
an impressive Weak summary summary and
findings covering of findings covering findings covering findings but some findings but summary of
Conclusion choice of of findings with reflection
all key relevant most relevant some relevant omission in relevant omission in findings lacking in
(10 marks) appropriate limited content. demonstrated
points. Excellent points. Very good points. Good content. Sound relevant content. relevant content.
content. Weak reflection nothing of merit:
reflection with reflection but would reflection but more reflection but more Satisfactory basic Inadequate and
Outstanding that needs more You did not
clearly developed benefit from further ideas could be ideas could be reflection but with descriptive
reflection with development. provide a
and relevant development. addressed. addressed. irrelevant/superfi reflection.
thorough satisfactory
points. cial points.
consideration of all conclusion.
relevant aspects.
 6BUS1195-0105 Advanced Financial Decision Making - Main Assignment
Little or
Outstanding Excellent Very Good Good Clear Pass Marginal Pass Marginal Fail Clear Fail Nothing of
100-90 89-80 79-70 69-60 59-50 49-40 39-30 29-20 merit
19-0
Nothing of
Outstanding Excellent Satisfactory basic Inadequate report merit: Poorly
Very good
presentation & presentation & Good presentation report structure. Weak report format and poor written work,
presentation & Clear presentation &
report structure, report structure, & report structure. Not always format. Limited or paragraphing / lacking
report structure, list report structure.
Presentation with list of with list of Writing is mainly written clearly & poor structure. signposting. structure,
of contents/figures, Writing is mainly
and structure contents/figures & contents/figures, good with some flow has Muddled work Inappropriate paragraphing /
& appendices. clear but some
(10 marks) appendices. & appendices. and some grammatical/spell with many writing style. signposting.
Fluent academic grammatical/spelling
Articulate & fluent Articulate & fluent grammatical/spelling ing errors which grammatical/spell Poorly written, Many
writing style. Very errors that may
academic writing academic writing errors that seldom impede ing errors. poor inaccuracies in
few slightly impede
style. No style. Only minor impede understanding. Must see CASE grammar/spelling. grammar/spellin
grammatical/spelling understanding.
grammatical/spellin grammatical/spell understanding. See CASE with with feedback. Must see CASE g.
errors.
g errors. ing errors. feedback. with feedback. Must see CASE
with feedback.
Nothing of
Weak: Limited
merit: No
Outstanding Excellent evidence of
Some quality Inadequate: Little evidence of
selection of quality selection of Very good selection Good selection of appropriate
sources used to Satisfactory: evidence of research. No
sources, well quality sources. of quality sources mostly quality research. The
clear effect, but Some quality appropriate use made of
beyond core & Evidence of but with few sources but some majority of
some may be sources used. research. recommended
recommended independent irrelevant/poor irrelevant/poor sources are
inappropriate. Satisfactory Irrelevant/poor reading.
resources. research beyond quality sources quality sources irrelevant/poor
Limited attempt to referencing within sources used. Sources are
Outstanding recommended used. used. quality.
References go beyond text, and some Inadequate use of irrelevant/poor
standard of resources. Very good standard Good standard of Weak use of
(5 marks) recommended inconsistent use Harvard quality. No or
referencing within Excellent of referencing within referencing within Harvard
reading. Harvard of Harvard referencing with little attempt to
text & consistent standard of text, and consistent text, and mostly referencing
referencing system referencing many use the Harvard
use of Harvard referencing within use of Harvard consistent use of system with
is mostly system. errors/inconsisten referencing
referencing text and referencing system Harvard referencing errors &
consistently used, See CASE/ cies. system.
system. consistent use of shown in Reference system in Reference inconsistently
though there may Information Must see CASE/ Must see
Accuracy of in-text Harvard list, with minor list, with applied.
be major Managers (LRC) Information CASE/
references & full referencing omissions/inaccurac omissions/inaccurac Must see CASE/
omissions/inaccurac with feedback. Managers (LRC) Information
details shown in system shown in ies. ies. Information
ies. with feedback. Managers
Reference list. Reference list. Managers (LRC)
(LRC) with
with feedback.
feedback.
Nothing of
Satisfactory Inadequate
Very good appendix Good appendix Sound appendix Weak appendix merit:
Outstanding Excellent appendix appendix showing
Appendix showing most showing showing showing muddled Unsatisfactory
appendix clearly appendix clearly showing some lacking in relevant
(5 marks) calculations and calculations and calculations / work. Does not content that
showing all showing most calculations / content. Does not
sources of data but sources of data but sources of data but meet all the does not meet
calculations and calculations and sources of data meet all the
with few with minor with requirements for the
sources of data. sources of data. but with requirements for
errors/omissions. errors/omissions. errors/omissions. this section. requirements
errors/omissions. this section.
for this section.