kC2 Corporate Finance With Trevin Hannibal (CIMA

Transcript:kC2 Corporate Finance With Trevin Hannibal (CIMA:
kC2 Corporate Finance With Trevin Hannibal (CIMA Passed Finalist ,Pg.Dip in BA, MBA Cardiff Metropolitan University) Scheme of Work Question based theory discussions Analysis of questions Advice on answer planning Discussion of model questions Question 1- Requirement – a) Discuss the role of the treasury department when determining financing or refinancing strategies in the context of the economic environment described in the scenario Explain how these might impact on the determination of corporate objectives. Answer plan Introduction sentence - economic environment Inflation zero, fall in interest rate On financing a re-financing options to the treasury department What is the current situation at CD Can they increase debt ?if so the implications Can they increase equity? if so the implications Implications to the corporate objectives Can we re-finance? if so implications What will happen to share holders wealth Question 1- Requirement – b) Evaluate the appropriateness of CD's current objective and of the two new objectives being considered. Discuss alternative objectives that might be appropriate for CD Conclude with a recommendation. Answer plan Evaluation of the current objective- increase divided Benefits of the current objective Drawbacks Proposed objectives Shareholder wealth max? implications Increasing PAT and ROI? Implications Recommendation Highlight the issues on the proposed objectives Suggest – balance score card Question 2 –Requirement Prepare a report to the Finance Director of MAT advising on whether the entity could be classified as “overtrading” Recommending financial strategies that could be used to address the situation. Points to consider Recommendations should be based on analysis of the forecast financial position making whatever assumptions that are necessary Should include brief reference to any additional information that would be useful to MAT at this time Relevant ratio to be calculated Increase in sales Increase in cost of goods sold Increase in profit margin Current ratio Quick ratio Sales to net current assets Inventory to revenue Debt Ratio : Debt Equity Gearing – Debt : Debt + Equity Days accounts receivable Days accounts payable Days inventory Capital turnover Revenue: Non-current assets Ratios Ratios Operating cycle Answer plan Report format Introduction Purpose Sections of the report Discussion of the calculations as symptoms of overtrading; Advice on financial strategies; Other information Symptoms of over-trading There is a fall in liquidity, as measured here by the current ratio=2⋅83 to 1⋅55. The sales to net-current assets ratio will rise from 5⋅5 to 10 indicating a potential overtrading situation. There is expected