Learning Outcomes that should be met:

1. Compare and contrast the main principles of financial and management accounting.
2. Prepare and evaluate a Business Case
3. Interpret and critically analyze financial information.
4. Assess and demonstrate examples of good financial management.
5. Critically discuss, budgeting and costing, revenue and capital expenditure, and how they inform decision making in organizations.
6. Critique the necessity for good financial policy and practice.

Part A:

The scenario:

Vita Health WLL, a healthcare company run by the Hasan family, has recently been experiencing liquidity problems. The company has an overdraft of 50,000 BD on the 31st of May 2019 and the bank has been pressing for a reduction in this overdraft over the next six months. The Hassan family is unwilling to raise finance through long-term borrowing.
The following projections for the six months ended 30th November 2019 will be as follows:
Sales and purchases.

1. 70 percent of sales are on credit and 30 percent are cash sales. Credit sales are received in the following month. Credit sales in May were 140,000 BD. All purchases are bought on one month’s credit. On the 31st May 2019, the company has Creditors of 150,000 BD.
2. Wages are 20,000 BD for each of the first 2 months. However, this will increase by twenty percent from the beginning of August 2019. All wages are paid in the month they are owed.
3. Administration expenses are expected to be 6,000 BD in each of the first 3 months and 8,000 BD in the following months. These figures include a monthly charge of 1,000 BD in respect of the depreciation of fixed assets. Administration expenses are paid in the month they are incurred.
4. Selling expenses are expected to be 3,000 BD per month except for August 2019 when an advertising campaign costing 6,000 BD will also have to be paid for. The advertising campaign will start at the beginning of September 2019. Selling expenses are paid for in the month they are incurred.
5. An outstanding dividend of 50,000 BD will be paid out by the company in June 2019.
6. The company intends to purchase, and pay for, new fixtures and fittings in the last week of August 2019 for 57,000 BD. These will be delivered in September 2019.
7. Stock as of the 31st May 2019 is 250,000 BD.

A cash flow projection was prepared based on the above information for Vita Health WLL. for each of the six months to 30th November 2019.

Required:

1. Critically explain ways in which the company might reduce the bank overdraft, over the next 6 months, as required by the bank. Explain in an evaluative way any advantages or disadvantages of pursuing these courses of action. Support with reference to the literature.
2. Critically explain the benefits associated with cash flow forecasting. Explain in an evaluative way why businesses can experience cash flow problems and what happens if a business runs out of cash. Support with reference to the literature.

Part B:

Critically evaluate a service area in your organization and identify an area for improvement. Once you have identified the area for improvement work through the Budget Impact Analysis steps for that improvement. Draft a costed Business Plan (Budget Impact Analysis) for submission to your Board providing suggested solutions to the issues outlined. Provide supporting backup for your proposal with relevant data and assumptions including the consideration of associated risks/benefits (both tangible and intangible). The Business Plan must be clearly tied to your organisation’s corporate strategy.
The following should be covered:

1. Introduction that includes background information, context, and the case for change (500 words).
2. Clearly state the project scope and objectives (250 words)
3. Evaluate the risks and constraints associated with the change (250 words)
4. Provide a critical financial/budget impact analysis (250 Words)
5. Evaluate the impact analysis on the service area (500 Words)
6. Critically reflect on how the change will meet your organization’s Strategy (250 words)

Part C:

Budgeting & Costing: How they are used to inform decision making
Prepare a paper for the executive board of your organisation on budgeting and its importance in setting good financial policy. Review your organisation’s approach to the budgeting process and financial control and critically evaluate the organisation’s approach to budgeting. In your answer you will need to:

• Describe your organisations current approach to the process of budget (e.g. bottom-up) with reference to the literature.
• Critically analyse the budgets used (e.g. zero based, flexible).
• Evaluate the method of budgetary control used (e.g. variance analysis, frequency of analysis).
• Outline at least two areas for improvement and justify these changes to your executive board with reference to the literature.

Following should be covered:

• Introduction – introduce your organisation and the contents of the paper. Provide a critical evaluation of the importance of budgeting (200 Words).
• Critically evaluate your organisation’s approach to budgeting (200 Words).
• Critically analyse the budgets used (200 Words).
• Critically evaluate the method of budgetary control used (200 Words).
• Outline two areas for improvement and justify these changes to your executive board with reference to the literature (400 Words).