Financial Management for SMEs and Corporate Decision-Making FMU202
- Subject Code :
FMU202
Unit 2 Financial Management Assignment
Assignment Scenario
You are employed in the corporate finance department of a large accountancy practice. You have been asked to provide advice to colleagues in the practice who are working with SMEs and SMPs with financial management.
Task 1
You are asked to produce a guide for colleagues working in the practice which will assist them in understanding the long-term capital requirements of organisations.
Your guide must:
- Determinethe long-term capital requirements of organisations
- Analysedifferent sources of long-term finance and their impacts on organisations
- Analysefactors affecting the granting of credit to organisations
- Applythe capital asset pricing model (CAPM) and know how to determine the weighted average cost of capital (WACC)
- Usethe dividend valuation model to determine share price and cost of capital
Extension activities
To achieve a Distinction , your guide must evaluate the usefulness of the capital asset pricing model (CAPM).
Learning outcomes and assessment criteria
LO1 AC 1.1, 1.2, 1.3, 1.4, 1.5, 1D1
Task 2
Prepare a presentation with an accompanying handout that will be used to demonstrate how investment appraisal techniques can be usefully applied in decision-making. For all calculations you should clearly show your workings to demonstrate your understanding.
Your presentation, with accompanying handout, must:
- Demonstrate with the use of practical examples how to apply appropriate investment appraisal techniques
- Evaluate investment decisions and make justified recommendations on capital and investment strategy
Extension activities
To achieve a Merit , your presentation, with accompanying handout, must discuss the benefits and limitations of different investment appraisal methods.
Learning outcomes and assessment criteria
LO2 AC 2.1, 2.2, 2M1
Task 3
Prepare a guide which focuses on the management of financial risk in organisations . For all calculations, you should show your workings and / or explain how you have prepared final figures.
The guide must:
- Analyse the financial risks faced by organisations
- Explain the use of hedging instruments to manage currency exchange rate risks
- Analyse the management of gearing in organisations
Extension activities
To achieve a Merit , your guide must make recommendations on the management of debt finance and equity using at least two different examples.
Learning outcomes and assessment criteria
LO3 AC 3.1, 3.2, 3.3, 3M1
Guidelines for assessors
Work submitted by learners must achieve the learning outcomes and meet the standards specified by the assessment criteria for the unit. To achieve a merit or distinction grade, the learners must demonstrate that they have achieved all the criteria set for these grades. Where work for the pass standard is marginal, assessors can take account of any extension work completed by the learners. The suggested evid ence listed below is how learners can demonstrate that they have met the required standards. The command verbs contained within the AC are highlighted in bold in the suggested evidence boxes.
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Task number |
LOs and AC |
Suggested evidence PASS |
Suggested additional evidence MERIT |
Suggested additional evidence DISTINCTION |
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1. |
LO1 AC 1.1, 1.2, 1.3, 1.4, 1.5, 1D1 |
Learners need to produce a guide for staff working with SMEs and SMPs about the long-term capital requirements of organisations. Learners should make substantial use of the indicative content and ensure their work includes relevant examples. Learners can use data acquired from business organisations within whom they have a working knowledge. Alternatively, if the learner is unable to gain the required data from business organisations, case studies or other relevant data could be provided by the tutor. AC1.1 The guide should determine the long-term capital requirements of organisations referencing any regulatory requirements. AC1.2 Learners need to analyse sources of long-term finance. Learners need to distinguish between debt, equity and retained |
1D1 Learners are required to include a detailed evaluation of the usefulness of the capital asset pricing model (CAPM). The evaluation should be fully justified and balanced throughout. |
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profits and analyse how these can be generated and the impacts of the organisation of using these as sources of finance. AC1.3 Learners need to analyse factors affecting borrowing by organisations looking at credit ratings, the use of credit reference agencies and issues that impact on these. AC1.4 & AC1.5 Learners need to apply CAPM, WACC and use the dividend valuation model. Examples of application for WACC, CAPM and dividend valuation models should be included with calculations and full explanations of their calculation and use. |
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2 |
LO2 AC 2.1, 2.2, 2M1 |
The learners need to prepare a presentation showing the use of investment appraisal techniques. Learners can use data acquired from business organisations within whom they have a working knowledge. Alternatively, if the learner is unable to gain the required data from business organisations, case studies or other relevant data could be provided by the tutor. AC2.1 Learners must demonstrate their ability to apply the following methods of investment appraisal: |
2M1 Learner must discuss the benefits and limitations of each of the methods included in the pass criteria. |
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accounting rate of return (ARR), payback period, net present value, discounted payback period, internal rate of return (IRR). Learners should include examples of each method. AC2.2 Learners must show with examples, how investment decisions can be evaluated and recommendations made based on the methods used. Recommendations must be justified. |
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3 |
LO3 AC 3.1, 3.2, 3.3, 3M1 |
The learners need to prepare a guide about managing financial risk in organisations. AC3.1 The guide must analyse the different types of financial risk faced by organisations e.g. translation, transaction and economic risks. AC 3.2 Learners must explain how hedging/forward exchange contracts can be used to manage currency exchange risks including an explanation of hedging illustrated with simple examples. AC3.3 Learners must analyse the concept of gearing and explain the implications for the organisation and how it can be managed, supported with examples. |
3M1 The guide must include examples of recommendations that might be made to management of an organisation about gearing based on examples of different organisations. At least two different examples should be used. |
