Task One Guidance: Format and Structure Present your report in an appropriate format. For example: Subject: Date: Introduction Please include a short paragraph that introduces: - The objective of the task. - Some background context (i.e. who is your company and what do they do?) Sub-heading (For example: ‘Efficiency’ or ‘Liquidity’) Break up your report into smaller sections that have appropriate sub-headings. This helps to organise your report and to signpost the reader to significant matters. For each sub-section organise your narrative so that it is clear, concise and meets the specific criteria of the marking guide. The following structure is recommended: 1. Introduce the area of analysis and why it is important in understanding the company’s financial position and performance: i.e. if you are analysing some aspect of liquidity explain to the reader what this is and why understanding a company’s liquidity is part of financial analysis. 2. Identify the key trend you wish to discuss, i.e. what is the ratio you are discussing and how does it compare to the previous year. 3. Where relevant, suggest plausible reasons why this trend has occurred, i.e. was it the result of a business decision made by your group. 4. Where appropriate, provide some sort of appropriate benchmark for discussing the ratio, e.g. is the ratio particularly good or bad when compared to a target ratio or to competitors. 5. Explain the actual or potential significance of the trend to the company. Here is an example showing how to structure an answer - let’s assume we are analysing the liquidity of a company and we have identified a significant decrease in the current ratio: Liquidity Analysis Liquidity refers to the ability of a company to generate sufficient cash to meet its short term obligations. If a company has poor liquidity it may not be able to make payments when they fall due. The current ratio is a measure of liquidity which compares current assets with current liabilities. The liquidity of ABC Plc appears to have deteriorated during the year. This is evidenced by the reduction in the current ratio from 1.3 in 2013 to 1.1 in 2014. The reduction in the current ratio means that ABC Plc have less current assets, such as inventory and trade receivables, at their disposal to generate cash internally to meet their short term obligations. The level is well below the traditional benchmark for the current ratio of 1.5 and is also below their main rival, XYZ Plc, who reported a current ratio of 1.7 in 2014. The key driver of this trend is the fact that the company has no inventory in 2014, which reduces the value of current assets. This trend was caused by a decision to reduce production in 2014, meaning that no goods are left in stock at the year end. This could be significant as it means sales have been lost. Conclusions You should include the following in your conclusions: - A brief summarise of the key findings of the analysis. - A suggestion of recommendations w ...

1. Task One Guidance: Format and Structure
Present your report in an appropriate format. For example:
Subject:
Date:
Introduction
Please include a short paragraph that introduces:
- The objective of the task.
- Some background context (i.e. who is your company and
what do they do?)
Sub-heading (For example: ‘Efficiency’ or ‘Liquidity’)
Break up your report into smaller sections that have appropriate
sub-headings. This helps to organise your report and to signpost
the reader to significant matters.
For each sub-section organise your narrative so that it is clear,
concise and meets the specific criteria of the marking guide.
The following structure is recommended:
1. Introduce the area of analysis and why it is important in
understanding the company’s financial position and
performance: i.e. if you are analysing some aspect of liquidity
explain to the reader what this is and why understanding a
company’s liquidity is part of financial analysis.
2. Identify the key trend you wish to discuss, i.e. what is the
ratio you are discussing and how does it compare to the
previous year.
3. Where relevant, suggest plausible reasons why this trend
has occurred, i.e. was it the result of a business decision made
by your group.
4. Where appropriate, provide some sort of appropriate
benchmark for discussing the ratio, e.g. is the ratio particularly
good or bad when compared to a target ratio or to competitors.
5. Explain the actual or potential significance of the trend to
the company.
Here is an example showing how to structure an answer - let’s

2. assume we are analysing the liquidity of a company and we
have identified a significant decrease in the current ratio:
Liquidity Analysis
Liquidity refers to the ability of a company to generate
sufficient cash to meet its short term obligations. If a company
has poor liquidity it may not be able to make payments when
they fall due. The current ratio is a measure of liquidity which
compares current assets with current liabilities. The liquidity of
ABC Plc appears to have deteriorated during the year. This is
evidenced by the reduction in the current ratio from 1.3 in 2013
to 1.1 in 2014. The reduction in the current ratio means that
ABC Plc have less current assets, such as inventory and trade
receivables, at their disposal to generate cash internally to meet
their short term obligations.
The level is well below the traditional benchmark for the
current ratio of 1.5 and is also below their main rival, XYZ Plc,
who reported a current ratio of 1.7 in 2014.
The key driver of this trend is the fact that the company has no
inventory in 2014, which reduces the value of current assets.
This trend was caused by a decision to reduce production in
2014, meaning that no goods are left in stock at the year end.
This could be significant as it means sales have been lost.
Conclusions
You should include the following in your conclusions:
- A brief summarise of the key findings of the analysis.
- A suggestion of recommendations which may improve your
company’s financial position and performance in the future.
- A brief overview of the key limitations of your analysis.
Appendices
Please supply all the working to the ratios calculated for all
periods of review for your analysis.
Note that the word count for this task is 1,200 words. You
do not have enough word count to discuss every ratio in the

3. same amount of detail, so while you should ensure that all ratios
are mentioned, you should focus your discussion on the ratios
which are most significant for your company.
Assessment Criteria
For Task 1, the following marking criteria will be applied:
1. Structure and presentation (10%):
1. Provides a clear and coherent structure including an
introduction, conclusion and appropriate headings and sub-
headings.
1. Professionally written and presented with a logical flow.
1. No (or only minor) spelling and grammatical errors.
1. Understanding of relevant concepts (20%):
1. Demonstrates an understanding of the meaning and relevance
of categories of ratios and individual ratios.
1. Presentation of ratios (10%):
1. Clear presentation of ratios including relevant workings for
calculations
1. Analysis (50%):
1. Comprehensive discussion of appropriate business factors
which potentially explain the movements and comparisons
identified.
1. Makes appropriate use of the ROCE tree for profitability and
efficiency ratios. Makes appropriate references to target values
of liquidity and stability ratios.
1. Provides linkages between ratios. No errors and no irrelevant
material provided.
1. Demonstrates an understanding of the limitations of the
analysis.
5. Commercial awareness (10%):

4. 1. Includes appropriate reference to decisions made during the
business simulation, commenting on the impact that those
decisions have had on the business’ financial positon and
performance.
Team 5 ElectroServe Plc. Year: 2032
_____________________________________________________
_____________________________________________________
____
STATEMENT OF PROFIT & LOSS STATEMENT OF
FINANCIAL POSITION
W$000 W$000 W$000 W$000
REVENUE 5413 NON CURRENT ASSETS:
Materials 3158 Property, plant & equip. 1750
Direct Labour 1497 Development Costs 740
COST OF SALES 4655 Total Non Current Assets 2490
GROSS PROFIT 758 CURRENT ASSETS:
OPERATING EXPENSES: Inventory 0
R & D 200 Receivables 890
Marketing 204 Cash at bank 101
Warranty 0 Total Current Assets 991
Administration 287
Overheads 1076 TOTAL ASSETS 3481
Total Expenses 1767 CURRENT LIABILITIES:
Payables 859
OPERATING PROFIT -1009 Bank borrowings 0
Net Financial Cost 73 Accruals 40

5. Provisions 230
PROFIT BEFORE TAX -1082 TOTAL CURRENT
LIABILITIES
Taxation 000 1129
NON CURRENT LIABILITIES
PROFIT AFTER TAX -1082 Long Term Loan 1000
NET ASSETS 1352
EQUITY:
Share Capital 120
Share Premium Account 0
Retained Profits 1232
TOTAL EQUITY 1352
_____________________________________________________
_____________________________________________________
____
STATEMENT OF CASH FLOWS PERFORMANCE
INDICATORS
Profit after tax -1082 Staff Morale 6
Add: Depreciation +194 Staff Skills 7
Add: Amortisation +200 Staff Turnover (%) 8
Change in working capital: Product Quality 6
1. Inventory Change +611 Consumer Satisfaction 6
2. Receivables Change +482 Retailer Satisfaction 7
3. Payables Change -004 Brand Awareness (%) 20
4. Accruals Change +040
5. Provisions Change +230
Less: Capital Expenditure -700

6. Less: Dividends Paid -000
Add: Proceeeds from share issue +000
Add or Less: Change in bank loan +000
Net Cash Flow -029
_____________________________________________________
_____________________________________________________
____
Team 5 ElectroServe Plc. Year: 2032
_____________________________________________________
_____________________________________________________
____
KEY RATIOS SUPPLY AND DEMAND
Sales Volume I (units) 1263
Return on Net Assets (%) -80.0 Lost Sales I (units) 947
Sales Volume II (units) 0
Gross Margin (%) 15 Lost Sales II (units) 0
Operating Expenses to Sales (%) 32.6 Production I (units) 1100
Revenue on Capital Employed 2.30 Production II (units) 0
Total Capacity (units) 1644
Acid-Test Ratio 0.88 Service Revenue (W$) 0
Inventory Days 0 Warranties Sold 0
Receivables Days 60 Call Outs 0
Payables Days 67 Repairs Requested 0
Unfulfilled Repairs 0
Interest Cover -12.6
Earnings / Share (W$) -9.02

7. SharePrice(W$) 3
_____________________________________________________
_____________________________________________________
____
MESSAGES:
Auditors report your Gross Margin is too low.
Your retailers complain about the late deliveries.
Shareholders are concerned about your current financial
performance.
Completed R & D: 10, 14,
_____________________________________________________
_____________________________________________________
____
MARKET SUMMARY
Team 1 Team 2 Team 3 Team 4 Team 5 Team 6
Supply :
Production I (units) 1534 1200 1450 1534 1100 1400
Production II (units) 0 0 0 0 0 0
Closing inventory I (units) 0 0 610 0 0 129
Cl. inventory II (units) 0 0 0 0 0 0
Lost sales I (units) 643 22 0 522 947 0
Lost sales II (units) 0 0 0 0 0 0
Demand :
Price I 4799 6000 7000 4800 5350 6000
Price II 0 0 0 0 0 0
Market Share (%) 18.3 18.7 10.0 19.9 15.1 18.0
Sales Volume I (units) 1534 1563 840 1666 1263 1507

8. Sales Volume II (units) 0 0 0 0 0 0
Salaries (W$ p.p. p.a.) 10.1 10.0 10.5 10.2 10.4 10.5
Financials :
Revenue (W$) 5909 7502 4718 6409 5413 7236
Net Profit (W$) -524 188 -8 -482 -1082 483
Net Assets (W$) 1642 2682 3111 1893 1352 5661
Bank Borrowings (W$) 998
Business Simulation Tasks
Assessed Task 1: Financial Analysis
The Board of directors has asked you to perform a review of the
financial performance and financial position of the business
based on the company’s 2032 financial statements and key
financial ratios, and using any other available information
which you consider to be relevant.
Required:
Prepare a report for the Board of Directors in which you analyse
the company’s financial performance and financial position and
which specifically addresses the company’s profitability,
efficiency, liquidity and stability.
Word limit: 1,200 words (excluding tables and appendices)