Financial Management

ABS – MBA
Assignment – 2023
STUDENT ID

UNIT TITLE: ___________________________________________________

NAME (in Full): ___________________________________________________

GENERAL INSTRUCTIONS

• All assignments are to be submitted on 03rd November 2023 on

https://lms.atmsstudentgateway.com/
• Any Assignment submission extension request must come to Azra Fatima (Head:
Examination | Academic) afatima@atmsedu.org 5 days before the date of submission
with a valid reason and supported documentary evidence.
• APA 7th edition referencing guidelines needs to be followed.
• Similarity between student’s work is strictly not accepted, any student found with
similar work will be graded Zero and fail for the course. However, Plagiarism is an
academic offence and will not be tolerated.
• Any reevaluation request should come in 5 days of grade release. Any late request
will not be obliged. (Form and other details shall be shared based on request)
• Reevaluation cannot be requested for plagiarized assignments as the assignment
stands as an academic misconduct.
• If a program participant submits the assignment late, but within 1 week after the
submission date a 20% penalty will be applied
• Re-evaluation request is NOT applicable for any failed courses provided the mark
range from 59 to 69. Any grade which is below the range is however not applicable
for this request.
• Any rescheduling request can be fulfilled within one week after the actual date of the
assessment. Any late request will not be obliged.
• Assignment once submitted to exam board is final for marking.
• Second extension cannot be provided without supporting documentary evidence.
• Program participants are strongly advised to keep a copy of their work in case the
 submitted copy should go astray.
• Total 90 marks. 10 Marks for Class Attendance. Final marks will be converted to 90
marks.
PS. Kindly note to adhere to all the above instructions. Failing to read this, ATMS will not be
responsible for any actions taken.

GUIDELINES FOR ASSIGNMENT

a) If assignment is Question & Answer based then
. • Introduction is needed for each question.
• Question has to be answered based on the mark allotted for each question with references
if any idea or information is taken from other source.

b) If assignment is case based then,

• Executive summary
• Table of content
• Introduction
• Body of assignment (questions related to case need to be answered)
• Conclusion / Recommendation if any
• References (in-text + citation) to be used.

Total Marks / 90

PLAGIARISM

Plagiarism is defined as providing material from an uncredited source, or without the

acknowledgement of the original author. For longer submissions and reports, students are
required to provide an Assignment Cover Sheet, which states that submission is their original
work, and has not been submitted for another assignment, either in that course, or another

Plagiarism may have many forms including but not limited to:

o Outright copying another author’s work without acknowledgement

o Cut and paste without the correct citation and acknowledgement
o Copying key words but changing the sentence structure without
crediting the original source
o Copying the sentence structure but changing some words without
crediting the original source
o Following the structure or organization of another author’s work, or
order of presentation of ideas
o Submitting work that was created by an unacknowledged third party
(i.e., writing service, or another student)
 o Copying from published authorities without acknowledgement
o Failure to correctly use quotation marks when expressing another author’s
idea
o Incorrect or improper use of in-text citation and referencing
o Missing or incorrectly presented bibliography or reference list
o Pretending ownership of another author’s ideas
o Making work available to another person for copying
o Falsifying results

The plagiarism tolerance for MBA is 8 %.

In cases where the plagiarism percentage exceeds the tolerance, students are given
a second chance to rework on their assignments and submit. However, if the
percentage continues to exceed the tolerance percentage the student will be awarded
one grade lower than the original grade achieved.
Answer all the Questions. (Word Limit-3000 words)
Q1) The managers of a firm wish to expand the firm's operations and are trying to determine
the amount of debt financing the firm should obtain versus the amount of equity financing that
should be raised. The managers have asked you to explain the effects that both of these forms
of financing would have on the cash flows of the firm. Write a short response to this
request. (10Marks)(CLO1)

Q2) From the following information, ascertain the Payback under simple and discounted cash
flow approach as well as discounted
• Project cost AED 250,000
• Cash flows for 5 years (project life) are AED 50,000 , AED 70,000, AED 100,000
AED 80,000 and AED 60,000
Appropriate discount rate for the project is 10 % ( 10 Marks ) (CLO3)

Q3) Forward planning Limited is considering whether to invest in a project which would
entail immediate expenditure on capital equipment of AED 40 000. Expected from sales from
the projects are as follows.
Probability Sales volume

0.10 2000
0.25 6000
0.40 8000
0.15 10000
0.10 14000

Once sales are established at a certain volume in the first year, they will continue at the same
volume in subsequent years.
The unit selling price will be AED 10, the unit variable cost AED 6 and the additional fixed
cost will be AED 20000 (all cash items) the project would have a life of 6 years after which
the equipment would be sold as scrap which would fetch AED 3000.
You are required to find – (1) expected value of NPV of the project (2) minimum volume of
sales per annum required to justify the project.
Cost of capital of the company is 10%. Discount factor of AED 1 per annum for 6 years at
10% is 4.355 and the discount factor of AED 1 at the end of 6th year at 10% is 0.5645 ( 15
Marks ) (CLO4,CLO5)

Q4 Determine the risk adjusted net present value of the following Projects-

Particulars X Y Z
Net Cash Outlays (AED .) 2,10,000 1,20,000 1,00,000
Project Life 5 years 5 years 5 years
Annual Cash Inflow (AED .) 70,000 42,000 30,000
Coefficient of Variation 1.2 0.8 0.4
The Company selects the risk adjusted rate of discount on the basis of the coefficient of
variation-
Coefficient of variation Risk-Adjusted rate of return P.V. Factor 1 to 5 years at
risk adjusted rate of discount
0.0 10% 3.791
0.4 12% 3.605
0.8 14% 3.433
1.2 16% 3.274
1.6 18% 3.127
2.0 22% 2.854
More than 2.0 26% 2.689
( 15 Marks ) (CLO4)

Q5.Following financial information is related to Glow Corporation and Blue Corporation:

Glow Corporation Blue Corporation
2022 2023 2022 2023
Current ratios 1.16 .95 2.25 2.17
Working capital $11 ($2) $30 $28
A/R turnover 31.7 times 45 times 30 times 30 times
Inventory Turnover 16.6 times 22.5 times 15 times 15 times
Asset turnover 2.4 times 3.2 times 3.6 times 3.8 times
Total debt to total assets 86.9% 81.7% 14.2% 15.4%
Sh. Equity to total assets 13.1% 18.3% 85.8% 84.6%
Gross margin ratio 30% 33% 25% 25%
Return on sales 10% 11.9% 10% 10%
Return on assets 24.5% 38.5% 35.5% 38.5%
Return on equity 186.3% 210.5% 41.4$ 45.5%
Required: Conduct financial analyses of the two companies on the basis of above data and
deduct which is performing better and why? ( 20 Marks ) (CLO5)

Exercise 6
Using the following information, answer the questions listed below:
Dana Dairy Products Key Ratios

Industry Average Actual 2022 Actual 2023

Current Ratio 1.3 1
Quick Ratio 0.8 0.75
Average Collection Period 23 days 30 days
Inventory turnover 21.7 19
Debt ratio 64.70% 50%
Times interest earned 4.8 5.5
Gross Profit Margin 13.60% 12.00%
Net Profit Margin 1.00% 0.50%
Return on total assets 2.90% 2.00%
Return on equity 8.20% 4.00%
Income Statement Dana Dairy Products For the Year Ended December 31, 2023

Balance Sheet Dana Dairy Products December 31, 2023

Required:
i. Calculate the following ratios for 2023
a. Current ratio.
b. Net working capital
c. Inventory turnover
d. Average collection period
e. Gross profit margin
f. Net profit margin
g. Return on assets
h. Return on equity
ii. Based on the calculations in part (i) above, comment on the performance of the
company as compared to its industry and its own last year results. ( 20 Marks )
(CLO6,CLO7)