Word Count                                         : 3,500 – 4,000 words (maximum)

 

 

 

 

 

 

Question:  

Triton Corporation is a manufacturing company located in a country that has experienced rapid economic growth from the late 1990s to the early 2000s and then went into an economic recession in the following decade. It has now emerged from the recession to earn a profit before interest and tax of $15.2 million last year (2014). The company has six operating divisions, and the results for last year were as follows.

 

  Division    
  Electrical Products Floor Boards Car

Accessories

Industrial Services Bathroom Accessories Pipes
  $m $m $m $m $m $m
Sale (S) 40.0 25.4 17.1 33.7 7.0 6.0
Cost of sales            
Materials (M) 34.5 20.3 8.0 14.7 4.5 1.5
Salaries & Wages 1.2 1.8 2.1 3.0 1.0 2.4
Other Costs 2.1 1.9 4.0 8.0 1.0 2.0
  37.8 24.0 14.1 25.7 6.5 5.9
             
Profit Before            
Interest and Tax 2.2 1.4 3.0 8.0 0.5 0.1
Market Share 40% 27% 30% 25% 8% 3%
             
The company’s summarised balance sheet as at the end of last year was:    
  $m $m        
Net Fixed Assets   65.0        
Current Assets 35.0          
Current Liabilities 20.0          
Net Current Assets   15.0        
    80.0        
Loan Capital   48.0        
    32.0        
             
Share Capital   10.0        
Reserves   22.0        
    32.0        

The assignment requires knowledge and the application of capital investment decisions (capital budgeting), gearing, financial ratios and budgetary controls.

Required 

You are asked to prepare a report to address the following matters/concerns that have been raised by the Managing Director of the company.

a)    As a going concern, he wishes to evaluate the six divisions in light of growing competition as the economy continues to grow. He has asked you to identify and assess:

•       the product divisions that are producing low value-added items and require huge  working capital investments, and

•       the implications of low value-added items for financial returns and profitability.

 

b)    He wishes to make a strategic decision about the long-term viability of both the bathroom accessories division and the pipes division due to the very competitive environment both divisions are competing in. As both divisions would require considerable capital expenditure to improve efficiency and to make them more competitive, he has decided to sell them.

 

  Critically evaluate the arguments for selling the two divisions, even though both are profitable.

c)     The company needs to reduce its financial gearing, which is too high. However, the company also needs to spend large sums of capital for equipment replacement and modernisation programmes, investments in new projects and new product developments. All capital investment projects should have a target payback period.

(i)     Identify and analyse the factors which should influence how long the payback period should be for equipment replacement programmes and new development projects.

(ii)    Critically analyse the relative importance of the strategic aim of reducing gearing and the aim to continue to invest in modernisation programmes.

d)    The company is about to introduce a decentralisation programme in which decision making is pushed down the line and head office staff is cut from 48 in number to just 20. The Managing Director believes that control can be exercised from head office by having a regular reporting system using financial ratios and budgets.

(i)     Advise the managing director on the reliance of using financial ratios analysis and budgetary controls for co-ordination and control of the group and the possible risks that Triton may face.

(ii)    Critically analyse how you would expect the management accounting function and ethical issues to be re-organised if the company expands its operations to a number of different lowcost countries.

All relevant assumptions and calculations should be included in the report (or as an appendix to it)

Presentation: Instructions for the Presentation:

Your work should be word processed in accordance with the following:

•       Font style, Gill Sans MT, font size 12

•       1.5 line spacing.

•       The page orientation should be ‘portrait’

•       Margins on both sides of the page should be no less than 2.5 cm

•       Pages should be numbered

•       Your student name and number should be included on every page.

•       You should provide your word count at the end of your report.

 

Criteria for the Presentation: 

N/A

REPORT: Instruction for the REPORT: 
 

As the assignment requires several tasks to be completed, the required report format of 3,500 to 4,000 words (maximum) should be organised as follows:

1.     Executive Summary (200-300 words, not to be included in the word count)

2.     Table of contents (not to be included in the word count)

3.     Introduction 

4.     Main body 

The main body should address the requirements as stated in parts (a), (b), (c) and (d) of the question.

5.     Conclusion 

6.     References 

You are required to reference / research books and journals, apart from online sites, using the Harvard Referencing Style.

1. 2. 3.

4.

a)

Criteria for the REPORT:  

Executive Summary [5%] 

Table of contents [3%]  Introduction [7%] 

Main body [70%] is broken down into parts (a), (b), (c), (d) and overall presentation:

[Maximum: 16%]:

 

•       Product divisions producing low value-added items and require huge working capital investments

•       Implications of low value-added items for financial returns and profitability.

 

  b) [Maximum: 12%]:

 

•      Critical evaluation for selling the two divisions

 

  c) [Maximum: 15%]

 

•       Identification and analysis of factors that influence payback period for equipment replacement programmes and new development projects

•       Critical analysis of reducing gearing and investment in modernisation programmes.

 

  d) [Maximum: 22%]

 

•       Advice on the reliance of financial ratios analysis and budgetary controls for coordination and control of the group.

•       Critical analysis of the company’s management accounting function and ethical issues if it expands overseas.

 

  Overall presentation [5%]:

 

•       Clearly laid out and presented?

•       Accurate in spelling and grammar?

5.     Conclusion [10%] 

6.     References [5%] 

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