Developing Contracts V2, March 2015 © CIPS 2014, Page 1 of 2.docx

Developing Contracts V2, March 2015 © CIPS 2014, Page 1 of
2
Practitioner Corporate Award
Assessment 3
Module 4: Sourcing Essentials
Question 1: 100% of the total marks
Using the following financial information:
(a) Evaluate the finances of this organisation highlighting the
strengths and weaknesses of their position.
(b) Provide a justified recommendation as to whether you would
consider this organisation for a sourcing
exercise for Facilities Management Services emphasising any
limit that should be placed on the
financial exposure (maximum contract value).
Financial Profit and Loss Statement
12 month period ended 31 March
2014 £ or $ (delete) '000
12 month period ended 31 March
2013 £ or $ (delete) '000
Turnover 161,438 138,276

Cost of sales (124,677) (112,654)
Gross Profit 36,761 25,622
Other operating expenses (32,561) (26,984)
Operating profit 4,200 (1,362)
Interest receivable 17 18
Profit/ (loss) before taxation 4,217 (1,344)
Tax on profit/ (loss) on ordinary activities (1,545) (8)
Profit/ (loss) for the financial year 2,672 (1,352)
Balance Sheet at 31 March 2014 (continued overleaf)
Notes 12 month period ended 31
March 2014 £ or $ (delete)
'000
12 month period ended 31
March 2013 £ or $ (delete)
'000
Fixed Assets
Intangible assets 1,202 1,352
Tangible Assets 1 1,726 1,786
2,928 3,138
Current Assets
Stocks 2 726 1,446
Debtors 35,975 30,457
Cash 12,253 5,483
Total Assets 51,882, 40,524
Creditors, amounts falling within one year (43,524) (33,842)
Creditors, amounts falling due after more than
one year
3 (73) (111)
Provisions for liabilities 4 (4,079) (2,340)

Net assets 4,206 4,231
Sourcing Essentials V3, Mar 2015 © CIPS 2014, Page 2 of 2
Balance Sheet at 31 March 2014 (continued)
Capital and Reserves
Share capital 1,135 1,135
Profit and loss account 3,071 3,096
Total shareholders' funds 4,206 4,231
Notes to the Accounts
(1) Tangible fixed assets consists of plant and machinery,
computer equipment and other equipment
(2) Stocks consists of 31 Mar 2013 31 Mar
2012
Raw materials and consumables 576 724
Finished goods 150 722
726 1,446
(3) Creditors due after more than one year consists of hire
purchase agreements for equipments
(4) Provisions for liabilities consists of tax liabilities, pension
liabilities and the liability for the lease of
properties
Guidance
The answer to this task should consist of approximately 3,000
words and should be supported by a title, your
candidate number, contents page, executive summary,
references and a bibliography. Any source materials
such as web sites, reports, articles, market data, journals or
texts should be referred to in your work.

Syllabus Coverage
The following content from the Practitioner syllabus can be
used to answer this assessment:
• The use of pre-qualification criteria or processes for supplier
appraisal in the sourcing process
• Sources of information on suppliers such as financial reports,
credit rating agencies or other
appropriate publications and sources
• The assessment of financial statements to evaluate the
financial, commercial and technical
capabilities of potential suppliers in the sourcing process
• The use of ratio analysis to evaluate potential suppliers
This assessment helps you achieve the following capabilities:
• Evaluate the use and choice of pre-qualification criteria or
processes for supplier appraisal in the
sourcing process taking into account stakeholder requirements
• Research information on suppliers using appropriate sources
of information to select appropriate
suppliers
• Evaluate the financial, commercial and technical capabilities
of potential suppliers and make
recommendations on their selection
• Analyse key ratios that indicate profitability, liquidity,

gearing and investment in order to evaluate the
suitability of potential suppliers
Corporate Award Programme
Candidate Assignment Guidance
Version 7.0 July 2016
Leading global excellence in procurement and supply
CAP_Candidate_Assignment Guidance_V7 July2016 2/16
© copyright CIPS
Contents
1. Overview

...............................................................................................
......................................................3
2. Submission requirements – important
...............................................................................................
........3
3. Planning and conducting your research
...............................................................................................
......4
4. Structuring your assignment submission
...............................................................................................
....4
5. Assignment front sheet
...............................................................................................
...............................5
6. Contents Page
...............................................................................................
..............................................5
7. Executive Summary
...............................................................................................
.....................................5
8. Assignment – main body
...............................................................................................
.............................6
9. Conclusions and recommendations
...............................................................................................
............7
10. Referencing

...............................................................................................
..............................................7
11. Reference list
...............................................................................................
...........................................8
12. Bibliography
...............................................................................................
.............................................9
13. Appendices
...............................................................................................
..............................................9
14. Word Count
...............................................................................................
.......................................... 10
15. Policies
...............................................................................................
.................................................. 11
a. Plagiarism
...............................................................................................
................................................. 11
b. Reasonable adjustment and special consideration
................................................................................. 11
c. Extensions beyond submission deadlines
...............................................................................................
12
d. Assessment reviews and appeals
...............................................................................................

............. 12
16. Grading
...............................................................................................
................................................. 12
17. Marking and results
...............................................................................................
.............................. 12
18. And finally
...............................................................................................
............................................. 13
Appendix 1: Assignment Assessment Criteria
...............................................................................................
.. 14
Appendix 2: Command Words
...............................................................................................
.......................... 15
© copyright CIPS
1. Overview

The assignment brief is set by CIPS and all assignments are
validated to ensure a standard approach. The
purpose of each assignment is to enable you to demonstrate your
ability to research, analyse and problem
solve in different situations. You will be expected to approach
your assignment work from a procurement and
supply context, addressing the brief directly and undertaking the
tasks required. The assignment will relate
directly to the specified module content and is marked using the
assessment criteria provided as an appendix
to this guide.
Read carefully the assignment title and guidance for candidates.
The assignment will identify which modules it
is designed to assess. Use the relevant content from the stated
modules as the basis of your assignment. It
will help you structure your planning and research. Ensure you
plan your assignment to meet all of its
requirements.
2. Submission requirements – important
2.1 Include the assignment front sheet
2.2 The maximum number of documents you can submit for an
assessment is one

2.3 All of your work must be contained in one document
2.4 You must not submit appendices as separate documents
2.5 You must word process your assignment using MS word, or
equivalent, and convert it in to a pdf file
format
a. The file name should only consist of your full 9-digit
membership number and the assignment
number, e.g. “005429889 AS1.pdf”. Please note that this should
reflect the assignment
number, not the module number.
b. You may wish to make use of Adobe Acrobat’s Reduce File
Size… function
2.6 Every page should be numbered and contain your candidate
number at the top of the document in
the header.
The average number of pages for a 3,000 word assignment is 27
(including appendices). The maximum
number of pages allowed for a 3,000 word assignment is 50
pages in total. You should not exceed this
allowance. In the case of the integrative assignment, the
average number of pages for a 5,000 word
assignment is 45. The maximum number of pages allowed for a
5,000 word integrative assignment is 100

pages in total.
You must hand in your assignment no later than the submission
deadline stated in your timetable. There are
penalties if your submission is handed in late without prior
agreement from CIPS through the Reasonable
Adjustment, Special Consideration or Extension Policies (see
section 15, page 8 and 9). Submissions that do
not meet the submission requirements (for example Word .doc
rather than .pdf, multiple files, candidates
name present) will not be accepted and if the revised version is
not sent within the submission timeframe the
corrected version may be subject to penalty.
© copyright CIPS
3. Planning and conducting your research
It is important that you address the requirements of the
assignment brief. Some students fail to do this and
overlook one or more requirements of the assignment brief. The

assignment title will include command
words. These are words such as “analyse”, “describe” etc. and
define what you are expected to do. A list of
common command words and their definitions is included as an
appendix to this document to help you plan
the depth of detail and type of information to research and
present within your assignment.
You should take care when reproducing company information
not already in the public domain within your
assignment. It is your responsibility to ensure you comply with
your own company expectations if the
information is considered confidential or sensitive.
CIPS is looking for evidence that a student understands a
concept and can apply it appropriately within a given
contexts defined by the assignment brief. In order to address the
assignment tasks, it is not necessary to
identify any real suppliers or products. Therefore, it is
acceptable to refer to a supplier as ‘Supplier A’ for
example, rather than identify real suppliers. Products can be
referred to as product ‘X’ or ‘Y’ for example,
rather than identify any sensitive procurements. It is best
practice to explain, within your introduction, the
naming conventions you will adopt e.g. “for the purposes of
confidentiality, suppliers or products will be

referred to as…”.
Research forms part of the assessment criteria, hence it is an
essential element of your assignment
preparation. Do not fail to realise the importance of collecting
information to support and underpin your
assignment work. It is vital that you demonstrate your ability to
establish information needs, obtain relevant
information and use it sensibly, in order to arrive at appropriate
conclusions, recommendations and/or
decisions. You should establish the nature of the information
required, follow up possible sources and ensure
you allow time to obtain the information. You may be
dependent on other colleagues or suppliers to obtain
relevant information – do not underestimate the time it may take
you to gather it. In order to conduct your
research effectively, you will need to conduct wider reading
associated with the topics covered in the module
content.
Useful sources of information include those freely available to
CIPS members such as our Knowledge site and
the Supply Management site. Additionally, websites such as
those of the National Audit Office and the
Financial Times are a great source of case studies and examples

of successes and failures which can support
your assignment preparation.
Your reference list and bibliography will provide an indication
of the level of research, information collection
and application within your assignment.
4. Structuring your assignment submission
Presentation: Your assignment submission should be word
processed with minimum font size 12pt and 1.5 or
double line spacing. You should adopt an appropriate layout and
structure for your assignment submission.
The structure and presentation of your assignment is considered
as part of the marking process so it is
important that you take the time to carefully plan your
assignment and use a logical layout and structure. This
guidance document outlines a suggested structure for your
assignment.
© copyright CIPS

For many of you this assignment will be dealing with issues that
are of importance to your employer and they
will, in all likelihood, be interested in seeing a copy of your
assignment. Spending some extra time making it as
professional as possible will pay dividends here.
Approach: The assignment title may include a number of
requirements. Read it carefully and identify what
these are. Plan your assignment and research to ensure that you
address all the requirements. As a guide,
you should aim to place approximately equal emphasis on each
requirement within the layout of your
assignment submission. This means you will usually produce
approximately the same volume of content for
each requirement within your assignment submission. Plan your
research and the structure of your
assignment submission accordingly. However, during your
planning or research, you may identify that it is not
appropriate to place equal emphasis on each requirement within
the assignment title.
For example, factors beyond your control, such as the nature of
your organisation or the external business
environment in which it operates, may mean that it is not
appropriate to place equal emphasis on each

requirement of the assignment title. In such circumstances,
acknowledge this within your assignment
submission to demonstrate to the assessor that you have
considered all the requirements of the assignment
title. Explain to the assessor why you have adopted a particular
approach to demonstrate your ability to
make judgements. Think carefully about the structure, style and
content of your assignment; the key is to
ensure you justify any deviation from the assignment
requirements in order to explain to the assessor why
you have adopted an unusual approach. Failure to do so could
mean you fail to gain marks in the knowledge
and approach section of the assessment criteria.
Remember also that the marking team will not be familiar with
your company, company-specific terminology
or acronyms. Take care to ensure you explain necessary
background information, or the meaning of company-
specific terminology, in order to provide the marking team with
an understanding of the nature of your
organisation and the business environment in which it operates.
5. Assignment front sheet
Please complete and attach the assignment front sheet to your
submission. Your name should not appear

anywhere within your assignment.
6. Contents page
The contents page helps the reader to navigate around the
document and highlights important sections and
sub-sections; this also helps you to ensure your work is
structured and flows in a logical order.
7. Executive summary
The aim of an executive summary is to prepare the reader, in
advance of reading a lengthy document, for
what to expect. It should briefly summarise the content and
conclusions/recommendations. This is good
academic and business practice and is recommended for all
assessments (assignments and project work). We
recommend you keep this to one page if possible.
© copyright CIPS
8. Assignment – main body
CIPS recommends a short introduction to the assignment to set

the scene. You may wish to take the
opportunity to introduce your company or the business
environment relevant to your assignment, define any
relevant terms, explain the scope of your assignment, the
approach you have taken, any exclusions and
assumptions.
Assignments should have a good balance of relevant
underpinning theory, tools or models and practical
application (use of examples from your organisation, or one
with which you are familiar). You must select
appropriate models to demonstrate knowledge and application.
It is suggested you consult and reflect upon
the programme content for the relevant module(s) in the first
instance and conduct an audit of the theories,
tools and models etc., in order to identify those which may be
appropriate for your assignment.
For any theories, tools or models that you include, your
assignment should contain a brief description and
justification of its selection in relation to your analysis.
You should ensure you include discussion on how it was used
and what information was generated from it –
interpret the findings of your analysis. Avoid citing models,
tools etc., without applying them within your

analysis as this will gain no marks. You may wish to use tables
or diagrams to demonstrate your application of
relevant tools or models.
When including information about the theories, tools and
models etc. within your assignment, narrative
should be integrated in to the content of your assignment.
Assignment submissions which simply skip from
one model or tool, for example, to the next, without linking
them in some way or consolidating them in
conclusions, will be unlikely to demonstrate the extent of your
comprehension of the module content and
your ability to apply it to practical business situations.
Providing a sound argument for selection and application of a
particular theory, model, tool or technique –
highlighting why it is appropriate, its strengths and
weaknesses/limitations (as well as your findings) – is likely
to be awarded higher marks.
The positioning of models/tools and techniques will depend on a
number of factors, but ideally you should
aim for a good balance of discussion and visual impact. It is a
matter of personal judgement and preference,
but, essentially they should be relevant and visually enhance the
work, enabling the reader to grasp the flow

of your discussion. You should also consider:
of the model for the
task
assignment
may be better placed in the Appendices
The application and insight section of the assessment criteria is
the most heavily weighted. It is important to
demonstrate your ability to apply relevant tools, theories,
models etc., according to the modules content and
the assignment title. The outcomes of your application will
generate evidence which you must present within
your assignment submission.
© copyright CIPS
9. Conclusions and recommendations

Again, the application and insight section of the assessment
criteria is the most heavily weighted. You must,
therefore, ensure you demonstrate your ability to interpret your
evidence and findings by providing
recommendations, proposals for change and/or conclusions, as
appropriate, which are consistent with the
evidence you have generated. This will exhibit the validity of
your insight. Thorough application of tools of
analysis will help to provide strong findings which will form
the foundation of your conclusions and
recommendations.
Your conclusions and recommendations must be consistent with
your analysis and findings and should act as
a summary. It is important that any conclusions or
recommendations are justified as part of your overall
assignment submission. When you have completed your
assignment, take time to re-read it a day or so later
and check that your conclusions really are consistent with the
evidence generated from your analysis.
10. Referencing
In order to avoid plagiarism, whenever you use someone’s
words directly, or make reference to the ideas or
work of others, you must reference this appropriately using a

recognised referencing system, such as the
Harvard system of referencing or as outlined in the CIPS
Reference Guidance document. The following points
will help you cite sources of information appropriately within
the body of your assignment.
document, the author (or editor, compiler or
translator) individual or organisation and year of publication are
inserted in brackets:
o e.g. Agriculture still employs half a million people in rural
Britain (Shucksmith, 2000).
only the
year of publication is given:
o e.g. … concept is discussed by Jones (1998)…
published in the same year, these are
distinguished by adding lower case letters (a, b, c) after the
year:
o e.g. (Watson, 1999a)
o e.g. (Lines and Walker, 1997)
followed by ‘et al.’:
o e.g. (Morgan et al., 1998)
: Direct quotations are used to show the work of
another party word-for-word; the exact

words must be copied from the source document. When citing
quotations, include the page number of
where the quotation can be found in the source document.
Please note quotations used within your
assignment content are included within the total word count.
o Short quotations may be run into the text, using single
quotation marks.
o e.g. While they recommend that teams ‘...be encouraged to
improve collaboration within an
organisation autonomously’ (Driedonks, et al., 2010, p. 115),
they ...
Longer quotations should be separated from the rest of the text
by means of a new and indented paragraph
and optional size reduction. These do not need quotation marks,
however the author, date and page
reference must be included in brackets at the end of the
indented paragraph of quoted text. You are advised
to use long quotations sparingly as they are included as part of
the word count. Ask yourself whether they
© copyright CIPS
really add value to your assignment, or whether there is a better
way of representing the information you

wish to present to the reader of your assignment.
Referencing electronic resources can be confusing, it is difficult
to know which information to include or
where to find it. As a rule, provide as much information as
possible concerning authorship, location and
availability. Electronic citations require much of the same
information as print sources (author, year of
publication, title, publisher). However, some extra details are
required:
urate access date for online sources (that is,
identify when a source was viewed or
downloaded)
database or web address)
Unlike printed material, internet sources can easily be changed,
or disappear altogether, so full and accurate
citation information is essential.
Example – referencing web documents
British Lawnmower Museum (no date) Lawnmowers of the Rich
and Famous [online] Southport, British
Lawnmower Museum. Available:
http://www.lawnmowerworld.co.uk/Rich.htm [Accessed10
March 2004]
Example – referencing electronic journals
Hart, K. (1998) The place of the 1898 Cambridge
Anthropological Expedition to the Torres Straits (CAETS) in
the history of British social anthropology. Science as a culture.
[Online] 11 (1). Available: http://human-
nature.com/science-as-culture/hart.html [Accessed 9 November

2003]
Example – referencing journal articles from a web-based full-
text database
Mahoney, R. (2000) Leadership and learning organisations, The
Learning Organization. [Online] 7 (5), 241-244.
Available: http://www.emerald-library.com/brev/11907ec1.htm
[Accessed 23 October 2000]
The source materials you use should be included in a reference
list at the end of your assignment. See the
following sections relating to your reference list and
bibliography.
11. Reference list
A reference list is essential to ensure the works of others is
acknowledged and to avoid the risk of plagiarism
issues. You must use a recognised referencing system, such as
the Harvard system or as outlined in the CIPS
Reference Guidance document, as assessors will need to
identify sources you have accessed during your
research and used within your assignment. See the section
relating to referencing for information on how to
cite sources of information within the body of your assignment.
References are arranged alphabetically by author’s name (or
title, if no author) which has been used in the
body of the text and should be presented in the following way:

- include where possible, the following
information in the order listed here:
o Author(s)/Editor(s) - Surname first, followed by first name(s)
or initials (be consistent). Include
all names if there are two or three authors; if more than three,
use the first name and then et
al. For editors, compilers or translators (instead of author), give
the abbreviation ed/eds,
comp/comps or trans following the name(s): e.g. Peckham, T.
and Smith, G. (eds.)
o Year of publication – e.g. (1996)
http://www.lawnmowerworld.co.uk/Rich.htm
http://human-nature.com/science-as-culture/hart.html
http://human-nature.com/science-as-culture/hart.html
© copyright CIPS
o Title - capitalise the first letter of the first word and any
proper nouns; use bold, italics or
underline (be consistent); Include any sub-title, separating it
from the title by a colon

o Edition - only include if not the first edition
o Series - include if relevant.
Modern versions of MS Word have some helpful tools to assist
with referencing and citations. These allow
you to build a list of sources which you can access to cite in the
body of your assignment using the “insert
citation” tool under the references section of the toolbar. It
allows you to insert a list of “works cited” which
will automatically include all sources which you have cited
within your assignment.
12. Bibliography
When researching subject areas, you may read widely, but not
all will be relevant to the assignment you are
working on. However, this work should not go unrecognised and
more importantly, a bibliography records
earlier reading that may be useful later when researching for
future assessments or projects. If you have
documented your reading, this can be located again with ease.
13. Appendices
Core material – which is defined as text that the assessor would
need to read in order to understand and
appreciate your work fully – should NOT be placed in
appendices. An appendix is not a “catch-all”, or a

substitute for effective writing and editing of your assignment
to meet the word count. You do not have to
use appendices – indeed; it is considered best practice that
assignments only include appendices in
exceptional circumstances. For example, information that is not
essential to your assignment, but validates
the content of it, provides confirmatory evidence or provides
information or material that the assessor would
not otherwise be able to access, should be placed in an
appendix. Documents that are available in the public
domain should be referenced, in accordance with a recognised
referencing system, rather than including
them as appendices.
Examples of things which could be useful as appendices to an
assignment include:
• Supporting evidence – feedback, testimonials, stakeholder
interview outcomes etc.
• Technical information presented in tables and graphs –
organisational charts, statistics etc.
• Supplementary data which adds useful information or insight,
but is not essential to the
understanding of the personal statement – including
organisation-specific material (ensure

appropriate permissions have been sought for use outside your
organisation).
Appendices should be presented in the order they are mentioned
in your assignment, and it is essential to
refer to each appendix within the text of your assignment. You
should NOT include something as an appendix
if it is not discussed within the assignment, nor should you
include any material which is readily available in
the public domain – it should be referenced in the text of the
assignment using a recognised system of
referencing.
Appendices do not form part of the word count for your
assignment.
© copyright CIPS
14. Word Count
The expected word count for your assignment will be
highlighted on your assignment task. Your assignment

can be up to 10% below the stated word count, or up to 10%
higher than the stated word count. If your
assignment exceeds (or falls short of) the stated word count by
more than 10%, you may fail to gain marks
under the structure and presentation section of the assessment
criteria.
The following are excluded from the word count:
endices
You must state your assignment word count on the assignment
front sheet.

© copyright CIPS
15. Policies
a. Plagiarism
Plagiarism is submitting someone else’s work as your own when
you are not the author. The attempt to pass-
off the ideas, research, theories, or words of others as one's own
is considered to be a serious academic
offence. Most students know when they are intentionally
plagiarising, for example, copying an entire essay
out of a book or buying a paper off the Internet. However, many
students are tripped up by unintentional
plagiarism – not giving proper credit for others' quotes, facts,
ideas, or data. A good rule-of-thumb for
students is to always give credit for any ideas that are not their
own by citing their sources.
The most common forms of plagiarism are:
past or present)

publication
You must take care when writing your assignment that the work
you submit is your own. You are permitted
to reproduce short extracts, diagrams, tables and illustrations
from other publications. But, these must be
clearly referenced and the …
Running Head: SOURCING ESSENTIALS
1
SOURCING ESSENTIALS
2
Table of Contents
2Executive Summary
2Introduction
(a)4Evaluate the finances of this organization highlighting the
strengths and weaknesses of their position
6(b) Provide a justified recommendation as to whether you
would consider this organization for a sourcing exercise for
Facilities Management Services emphasizing any limit that
should be placed on the financial exposure (maximum contract
value).
8Conclusion
10Recommendations
12References
Executive Summary
Effective decision making is key to the success of any
organization and this is enhanced by adequate and accurate
information. For financial decision making, information
concerning the various aspects of a company is obtained from
the financial statements of the company in question and

analyzed using techniques such as ratio analysis. This paper has
analyzed a company whose statement of financial position and
those of comprehensive income. The techniques used in this
analysis were ratio analysis and trend analysis. The financial
period considered was 2014 and 2013.This was as per the
financial year ended 31st March. Ratios analyzed were
profitability ratios for which both the net profit and gross profit
margins were analyzed. The set benchmark for this is 15 to 20
percent. For these periods, there was poor profitability
performance.
The efficiency ratios represented by the asset and creditor
turnovers showed satisfactory performance for the company in
question. The ratios exceeded the acceptable 1.20 criteria. The
company in question should be considered for a sourcing
exercise for Facilities Management Services. Its efficiency in
meeting its obligations relating to creditors gives a good
indication of the company’s commitment. The company will
most likely be effective in facilities management services and
therefore should be considered for a sourcing exercise. The
company’s ability to manage bankruptcy implies a good
resilience culture. This is imperative in sustaining a contractual
relationship. Considering the company for a sourcing exercise
will tap on this benefit and this should not be bypassed. For the
consideration for a sourcing exercise, the financial analysis was
expanded to include comparison with other supplies companies.
In this context, the Ulai Enterprise PVT Limited was used. Both
ratio and trend analysis were utilized for this analysis. The
Altman Z-score was computed and the results showed that the
company was not bankrupt. The computed value was in the
range not considered bankrupt.
Recommendations to better performance in the company in
question involve profitability measures. The company should
consider alternatives to the operating expenses so as to keep the
expenses as low as possible. Clarity and more
comprehensiveness should be adopted in financial statements.
This will help ensure adequate decision making as information

is a key component in this undertaking. Generally, the company
in question has a great improvement capability and this should
be maximized so that effective financial decision making is
realized.Introduction
The main aim of the financial statement is to offer all the
stakeholders with the relevant information on the financial
position of the organization, performances of the organization,
and the changes in the financial position of the organization.
Such information is very important for various stakeholders in
relation to making better business related decisions. A financial
statement is expected to be comparable, understandable, and
remain relevant according to the day to day operations of the
organization. The assets, profits, liabilities, loss and equity
relate directly to the financial position and operations of an
organization. The stakeholders are expected to comprehend to
these financial statements as well as those who have a
reasonable knowledge and understanding of economic and
organization activities in addition to accounting and are
prepared to diligently go through and use such information
(Beaver, Correia, and McNichols, 2011).
The financial statement should offer relevant financial
information for an organization in a way that is well structured
and in a manner that can be easily understood by any
stakeholder interested in the financial progress of the
organization. There are several types of financial statements and
these include the statement of the financial position, statement
of comprehensive income, statement of net changes in equity,
and cash flow statements. In the organization in question, the
financial statements that are provided are the income statement
and the balance sheet. Financial analysis will be based on ratio
analysis and benchmark across the other companies within the
kingdom of Saudi Arabia. Computations of different ratios and
the Altman Z-score will be included as an essential element of
this analysis.
To sum up the whole analysis, trends in the figures and what

they imply will be considered. Interpretation will be made on
the basis of financial accounting and procurement principles.
The company that was included in this was in the services
industry and with an aim to evaluate the sourcing requirements
option, the Ulai Enterprises PVT Limited company, a supplier
to the Saudi Basic Corporation was also analyzed.(a) Evaluate
the finances of this organization highlighting the strengths and
weaknesses of their position
The financial statements provided are the statement of financial
position and the comprehensive income statement for the
financial years ended 31st March 2013 and 31st March 2014.In
the evaluation of the finances of this organization, the statement
of comprehensive income will be the used. For the periods
ended 31st March 2013 and 31st March 2014, the organization’s
income was from the company’s turnover. This was 138,276,000
dollars in 2014 and 161,438,000 dollars in 2013.On a trend
basis, this was an increase. The reported figure for 2013 was
1,352,000 but this rose to a profit of 2,672,000 dollars.
Increased profits imply better performance.
Ratios relevant to evaluation of finances in this organization are
the profitability ratios. These normally assess the levels of net
income reported by the organization. For the profitability ratios,
the higher the magnitude the better it is.Ratio types under this
classification are the gross profit margin, net profit margin,
return on investments and the return on assets. The gross profit
margin in 2013 was 0 and 2014 had 0.016551.The gross profit
margin was computed by dividing the profit before tax amount
by the sales reported in that period. The set benchmark for this
ratio in the services industry is 0.15.Through the analysis
period; this was not the case as the 0.016 was less than the set
0.15.The profitability of this organization is therefore not ideal.
The zero performance was due to the absence of the gross profit
amount during the concerned period.
This situation was also portrayed by the net profit margin. This
was computed by dividing the net income and the level of sales
attained during the specific period. The net profit margin value

in 2013 was 0 while that of 2014 was 0.026121. The zero
performance was due to the absence of the net profit amount
during the concerned period. With the agreed criteria in the
services industry to which the facilities management sector lies,
the company’s profitability based on these criteria was not
ideal. Another technique to be utilized is the trend analysis and
for this2014 was a better year than 2013 for both the gross and
net profit margins. The other measure of profitability that will
be incorporated in this analysis is the return on assets. For
computation purposes, this was a division of the net income by
the total assets value in both 2013 and 2014.The attached Excel
sheet shows the workings and from it, the organization reported
0 for 2013 and 8% for 2014.The facilities management sector
has an acceptable return on investment range of 0.14 and 0.20.
The 8 percent attained by this organization is not within this
range and therefore not ideal.
The finances of the organization in question can be assessed
with reference to the statement of financial position. For this,
trend analysis will be the most effective. Additionally, ratios
relating to efficiency and liquidity were also analyzed. The
attached Excel sheet shows the respective computations. The
efficiency ratio being addressed in this section is the assets
turnover. The asset turnover was calculated by dividing the net
sales and the average credit sales. In 2013, this gave 6.8 and for
2014, the ratio was 6.2.The acceptable asset turnover ratio for
the services industry is 1.20.Comparison with this means that
the organization in question has been performing well in both
2013 and 2014.The creditor’s turnover ratio gave 4.09 in 2013
and 3.71 in 2014.The acceptable creditor’s turnover ratio for
this company lies in the 0.15 to 0.20 range. For the company in
question, this was exceeded and thus implies good company’s
ability towards paying its creditors.
From the financial analysis using trend and ratio analysis, the
strengths of the organization lies in its liquidity in that it pays
off its creditors fast. Its efficiency is also high given the fact
that its turnover ratios are higher than the industrial averages.

The company’s statements highlighted the weaknesses to be less
profitability. The company’s returns are comparatively low as
shown by the profitability ratios. The reason behind this
performance is the high operating expenses that the
organization records in its financial statements.(b) Provide a
justified recommendation as to whether you would consider this
organization for a sourcing exercise for Facilities Management
Services emphasizing any limit that should be placed on the
financial exposure (maximum contract value).
Consideration of an organization for a sourcing exercise for
Facilities Management Services involves comprehensive
financial and non-financial analysis. Having done the financial
analysis while utilizing ratios as the technique, this section will
involve additional comparison to the Saudi Basic Industrial
Corporation suppliers. The supplier identified for this analysis
is the Ulai Enterprises PVT limited. This company supplies
materials to the SABIC and therefore lies in the facilities
management sector. In general, this is in the services industry.
There exist key elements of the facility management that the
organization needs to take into consideration before it decides
to source for the services. These key elements include; finance
and business, communication, operation and maintenance,
leadership and strategy, technology, quality, and environmental
sustainability and stewardship.
The financial performance of the organization compared to the
Ulai enterprises indicates less profitability in the margin ratios
and the return on investments. To be specific, the organization
in question recorded a 0 in 2013 and 0.01 in 2014 for the gross
profit margins. Ulai enterprises limited had 0.62 gross profit
margins in 2013 and a 0.60 in 2014.The net profit margin figure
was 0 and 0.026 in 2013 and 2014.Ulai had 0.17 and 0.09 for
net profit margin in 2013 and 2014. The values for the return on
investment were 0 and 8 percent for the company for 2013 and
2014.In the same periods Ulai had 17 and 10 percent

respectively. The company in question therefore had less
profitability than its competitors. For the financial exposure the
acceptable range is 25 to 30 percent. This company has
achieved this and therefore can be considered for sourcing
exercises.
The organization in question should be considered for a
sourcing exercise because its efficiency is relatively high
compared to that of its competitors and also the industry’s
benchmarks. The turnover ratios, whose main purpose is to
assess the level of activity in the organization, have been
comparatively bigger for this company. The asset turnover of
this company for instance was 6.88 and 6.22 for 2013 and 2014
respectively. Compared to the Ulai’s 1.95 and 2.07 during the
same period, the company’s performance was better. The
implication is that the company utilizes its assets relatively well
so as to generate sales. It is therefore a better choice for
sourcing.
To assess the organization’s bankruptcy, reference is made to
the Altman’s z-score whose formula is z= 1.2A+
1.4B+3.3C+0.6D+1.0E.For this metric A represents a quotient
of the working capital and total assets,B is the quotient of the
retained earnings and total assets. The C here is got by dividing
the earnings before interest and taxes and the total assets and
the D involved a quotient of the market value of the equity and
the book value of the total liabilities. The last component, in
this case E is the quotient of the sales and total assets.
Computation of this ratio is shown in the attached excel sheet.
For the company in question this ratio was 6.396919109 and
4.962574123 in 2013 and 2014 respectively. The Alai Company
had 5.406895277 and 4.05752431 during these years.
The interpretation of the Z-score is based on their value. For the
Z values greater than 2.67 this are in non-distress zones and
therefore more preferred. A range of 1.81 and 2.67 is a grey
zone and a value less than 1.81 is a distress zone. With this
criterion, both the company in question and SABIC’s supplier,
Alai was non-bankrupt. It is therefore recommended for

sourcing in the facilities management division. The creditor’s
turnover ratio for the two companies during 2013 and 2014 was
4.09 and 3.71 in 2013 and 2014 for the company under question.
For the Alai Company, this was 0 for both years. This implies
that the company pays its creditors faster than its competitors.
It therefore has a higher affinity in honoring its obligations.
With this, I would consider this company for a sourcing
exercise for the facilities management services. In doing this,
the acceptable financial exposure acceptable is a range of
34,569-41482.8 and 40,359.5- 48431.4 at 2013 and 2014
respectively.
Conclusion
In conclusion, the statements of financial position and
comprehensive income have been utilized in assessing the
financial position of this company. From these statements, the
overall profit figure increased in 2013 and 2014.The
profitability ratios that were assessed are the gross and net
profit margins and the return on assets. For the profit margin,
the services industry allows a 0.15.In comparison to the attained
profitability ratios by the company in question; there was an
under-performance in these periods. The return on assets also
confirmed less profitability. This was such that the attained
ratio in these two periods was 8% and 0 for 2014 and 2013
respectively. The acceptable benchmark for an ideal
consideration in this ratio is a range of 15 to 20 percent. The
company therefore did not meet the performance standards.
In terms of efficiency, the turnover ratios are the most
preferred. This is because they measure the rate at which the
company utilizes its assets and other possessions to generate
sales. The company in question had a 6.2 in 2014 and 6.8 in
2013.The acceptable ratio in this classification is 1.20 and
therefore the company had good performance in both years
under analysis. The company’s credit turnover ratio exceeded
the industry’s benchmark and therefore the company meets its
obligations appropriately. I would consider the company in

question for a sourcing exercise for Facilities Management
Service. This is because it exhibits good financial strength from
the analysis done. The ratios of both the company in question
and a supplier to the Saudi Basic Industrial Corporation
indicated high efficiency in meeting its obligations.
This was in comparison with the Ulai Enterprises PVT Limited
which is a key supplier to the Saudi Basic Industrial
Corporation and engages in facilities management services. The
company in question performed comparatively well in utilizing
its assets to generate sales. Its turnover ratios were higher
compared to both the industrial averages and those attained by
the competitor for example the Ulai Enterprises PVT Limited.
The company’s strengths are its efficiency and liquidity in that
it pays its creditors really fast. The company in question’s
weaknesses are less profitability and this may cause a strain in
the company’s long term sustainability.
The company’s bankruptcy is under less distress. The Altman’s
Z-score value in 2013 and 2014 was 6.2 and 4.9 .This was a
good indicator in that it indicated no bankruptcy. The reputation
of this company is therefore good and hence a good justification
for consideration in the sourcing exercises in facilities
management service. The company’s ability to meet its debts
implies business continuity and therefore its ability to provide
the facilities management services when needed. This is a
reason as to why this company would be considered for a
sourcing exercise in facilities management service. The
company’s good financial responsiveness and ability to meet its
obligations is an action to consider for a sourcing supplies
negotiation.Recommendations
The strengths of the company lie in the efficiency and liquidity
of the company. The company in question has high reported
efficiency in utilizing its assets as well as meeting its
obligations. The company has a relatively good financial health
as indicated by the score in the Altman ratios. However the
weakness of this company lies in the most convincing aspect of

any partnership with this company. Its profitability is low from
the computed values of the profit margin ratios and the
efficiency ratios. This puts a doubt on the long term
sustainability of the company and therefore needs to be
addressed. The company in question should consider cutting
down on the expenses so as to improve on its profitability
ratios. The company can consider alternatives to this for
instance insourcing so that some expenses are done away with.
In doing this, the company should aim at increasing the profit
margins to more than the 0.15.
The company in question should consider a long term
perspective of their operations and therefore sustain their
relationships with their partners. This will ensure the continuity
of the business to ensure it meets its commitments such as
procurement. The company’s effectiveness in managing
bankruptcy should be stabilized through close monitoring. This
will strengthen this competitive advantage and therefore put the
company on a sustainable advantage position to even fit as a
sourcing requirement for facilities management. With an aim to
better future performance, the financial statements prepared and
presented should be more comprehensive. This will facilitate an
up to date ratio and trend analysis and therefore ease decision
making for various contexts.
References
Beaver, W. H., Correia, M. M., and McNichols, M. (2011).
Financial statement analysis and the prediction of financial
distress. Boston: Now
Bernstein, L. A., and Wild, J. J. (2000) .Analysis of financial
statements. New York: McGraw-Hill.
Fridson, M. S., Fridson, M. S., and Alvarez, F. (2011).Financial
statement analysis: Apractitioner's guide. Hoboken, N.J: Wiley
https://csimarket.com/screening/index.php?s=at

https://www.indiamart.com/ulai-enterprises-pvtltd/aboutus.html
Instructor Points for First submittion to be Incorporated for
below : Note: I did not show him this draft yet so some of his
points I already fixed but we need more :
Strengths and weaknesses of the Assessment:
It was good to see the inclusion of your contents page, but you
should take care to complete this by including the page
numbering. This was followed by your executive summary and
whilst this included interesting discussion, you should note that
a better summary would have been provided if you had
underlined the main strengths and weaknesses with the potential
supplier’s financial standing. This should comment on the main
strengths and weaknesses with the potential supplier’s financial
standing. You were also required to provide a recommendation
on any limit to the financial exposure and should note that a
limit of exposure to 25% - 30% of their turnover would be
appropriate in this case.
You then produced an introduction section which was really an
extension of the executive summary but did provide some
general background into financial analysis which was useful.
You then produced a section discussing the financial position of
the company without including any evidence of financial
analysis having been undertaken. You produced a discussion
which was very generic in places that did not refer to ratios as
required by the assignment task. You did however produce a
recommendation on as to if the company should be selected but
again you did not back this up with any specific financial
information and analysis.

To achieve higher marks, you can carry out research into the
facilities management sector and benchmark the ratios that
should be calculated against any of the suppliers that may be
used by SABIC or industry leading suppliers that operate in the
Kingdom of Saudi Arabia. It would also be beneficial if you
provide the Altman or Springate scoring calculations that were
featured in the course content to assess potential bankruptcy.
A key part of the programme is the demonstration of the
application of the tools and techniques taught on the programme
by the candidate in the assignment and this was not evident in
this report.
You did use several external sources but these appeared to
replace rather than support your discussion in large parts of this
report. You do produce a conclusions section but could also
include some recommendations as well at the end of the report.
Areas for Improvement:
Better marks could have been achieved if you had expanded
your discussion to include some of the ratios taught on the
programme and then discussed the findings of this analysis as
well as considering the implications. You could also have
included an analysis of another FM organisation for comparison
purposes. As well as considering the limitation of financial
analysis as well. You should also have provided an executive
summary in the format discussed above. A recommendations
section at the end of the report would also enhance the
structure. In terms of external sources you should use them to

support your discussion and not replace it.

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