CONTENTS

Page
Directory of Assistance ............................................................................. ii Welcome to Students ............................................................................... iii About the Writers ........................................................................... iii Contact Details for Unit Assessor ................................................... v Unit Statement ......................................................................................... vi Description ..................................................................................... vi Aims ............................................................................................... vi Objectives ...................................................................................... vii Handbook Entry ............................................................................ vii Syllabus ........................................................................................ viii Teletutorials .................................................................................. viii Workshops ...................................................................................... ix MySCU .......................................................................................... ix Overview of Assessment ................................................................. x Study Time Expectations ................................................................. x Text and References ................................................................................. xi Prescribed Text ............................................................................... xi Recommended Reference Materials............................................... xi Using the Study Guide ........................................................................... xiv Suggested Study Timetable .................................................................. xvii Assessment Requirements ..................................................................... xix Assignment 1 (Objective 1) ......................................................... xix Assignment 2 ................................................................................. xx Final Examination (all objectives) ............................................. xxiv Appendix A Cardboard Producers Pty Ltd ............................................................ xxxiii Appendix B Glossary ............................................................................................. xxxix Glossary ................................................................................................... xl Previous Exam Paper ............................................................................... lv

DIRECTORY OF ASSISTANCE

Southern Cross University Lismore campus ................................................................................... (02) 6620 3000 Business Programs External Studies Hot Line .................................................................................. (02) 6620 3835 Fax: ........................................................................................................................................................ (02) 6622 1724 Email: ....................................................................................................................................... commerce@scu.edu.au Business Programs Student Liaison Officers: Debbie Browning Monica Laurie Pat Walker ...................................................................................... (02) 6620 3835 General enquiries, assignment receipt and return, workshop details and bookings, teleconference details and bookings, program information and brochures, special consideration and examinations, query of assessment, appeals, textbook list, special requirements, withdrawal without failure, program of study advice, advanced standing, cross institutional study, re-admission, course transfer, changes of major, re-enrolment, variations to enrolment, admissions, exclusions, graduation. Bill McKenzie ................................................................................ (02) 6620 3314 Responsible for dispatch of study materials.

External Dispatch Officer:

University Student Admin. Team: Wendy Mills (Team Coordinator) .................................................. (02) 6620 3270 Paul Wardrop ................................................................................. (02) 6620 3686 Jen Coughran ................................................................................. (02) 6620 3210 Stefan Cop ...................................................................................... (02) 6620 3312 Fax: ........................................................................................ (02) 6622 4341 Responsible for enrolment, examination arrangements, fees/HECS John Reynolds ................................................................................ (02) 6620 3690 OTHER USEFUL UNIVERSITY CONTACTS Textbooks: Co-op Bookshop ............................................................................ (02) 6621 4484 Fax: ........................................................................................ (02) 6622 2960 Email: .................................................................................. coop@scu.edu.au Ordering textbooks. Janet Fletcher ................................................................................. (02) 6620 3455 Email: .............................................................................. libdesk@scu.edu.au Access network. Nola Rennie ................................................................................... (02) 6620 3752 Access to Library facilities, advice on borrowing from other institutions, Library procedures and services. (See also Library Guide for Distance Education Students.) Phone: .................................................................................... (02) 6620 3664 Email: ........................................................... learning.assistance@scu.edu.au Study skills advice and assistance. Counsellors .................................................................................... (02) 6620 3943 Careers ........................................................................................... (02) 6620 3396 Chaplain ......................................................................................... (02) 6620 3943 Disability Liaison Officer .............................................................. (02) 6620 3943

Electronic Library Services:

User Services Librarian:

Learning Assistance:

Student Support Services:

ii

WELCOME TO STUDENTS
Welcome to this unit ACC00150 Using Financial Information. We trust you will find the unit useful and interesting. There is no prescribed text. Instead, we will introduce you to different sources of financial information which are useful in decision making. The topics in this unit do build upon previous topics, providing both revision of key concepts and extension of previous ideas. Throughout the unit there are numerous activities designed to facilitate your understanding of a particular idea, and in accounting this revision is important. We have written this material for those of you who are considering working in business but not necessarily as accountants, hence our focus on using financial information for decision making. We look forward to working with you throughout this unit, and your feedback as to the suitability of the unit and the learning materials will be appreciated. A key component of this unit is the access to online information and interaction with lecturers and other students via MySCU. We hope you will take advantage of this additional learning tool throughout this unit. If youre new to distance education and youre not sure how to use these materials, take some time to read the section headed Using the Study Guide starting on page xiv.

About the Writers

Patricia Bakker
Patricia has a Bachelor of Business (majoring in both accountancy and economics) from the University of South Africa and a Master of Business (by research) from Southern Cross University. She is a member of the Institute of Chartered Accountants. She is presently enrolled in the Doctor of Philosophy degree at Southern Cross University. Patricia has over 16 years of experience in both commerce and public practice in Australia. Her commercial experience has primarily been with Darlington Commodities and the merchant bank BT Australia Limited. She gained her public practice experience while working for a Lismore Chartered

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ACC00150 USING FINANCIAL INFORMATION

Accountancy firm, Thomas, Noble and Russell. Since joining Southern Cross University in 1992, Patricia has been teaching mainly in the areas of taxation, accounting and financial management.

Margaret Drever
Margaret Drever is a Lecturer with the School of Business located at Coffs Harbour. She is the Mentoring Co-ordinator, School Director of Postgraduate Studies, Chisholm Project Co-ordinator for the School and the Schools Liasion Officer for the Australian Society of Certified Practising Accountants (ASCPA). Prior to commencing with the University, Margaret was a Parttime Teacher with TAFE in Sydney and Director/Accountant for Drever Engineering Pty Ltd. She has a Bachelor of Commerce, majoring in Accounting with a sub-major in Law from University of Western Sydney (Nepean), a Graduate Diploma in Technical Education from University of Technology (Sydney) and a Master of Economics from University of New England (Armidale), specialising in accounting and entrepreneurship. Margaret completed her PhD qualifier in 1998, and is currently studying for her PhD covering liquidity of small business and the entrepreneurial small business owner/ manager. Margaret has presented papers at conferences locally and internationally in the areas of small business and entrepreneurship. In 1998 Margaret conducted a survey with Cardiff University and the University of New England on small business profiles of businesses in the mid north coast of New South Wales, Australia and Wales, and the United Kingdom, and wrote a report for the State and Regional Development Board on Outstanding Debt. Margaret was nominated and collected the University Award in 1999 for Outstanding contribution to the University by a staff member.

Steve McDonald
Steve McDonald has been a lecturer in accounting with Southern Cross University since 1996 and is currently based at the Coffs Harbour campus. He holds a Diploma of Forestry, Graduate Certificate in Adult Education and a Master of Accountancy. Prior to coming to Southern Cross University he worked with Canadian Forestry in Canada, as a manager/instructor for Diving and Wild Water

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ACC00150 INTRODUCTION

Adventures, was a Training and Development officer at an enterprise and training company and lectured with Adult Community Education.

Geoff Lamberton
Geoff has been at Southern Cross University since 1991 lecturing mainly in finance and management accounting units. He also lectured in New Zealand for six years and has held a number of accounting appointments in the mining, manufacturing and horticultural industries. Geoffs research interests are in the areas of environmental accounting and horticultural management.

Steve Rowe
Steve has been at Southern Cross University since 1986 and has been responsible for the auditing units (among others) offered in our undergraduate and postgraduate programs since that time. After obtaining his B.Bus degree in 1979 he held several accounting and management positions in Sydney and Adelaide. During that time he became a member of the Australian Society of Certified Practising Accountants (CPAs) and currently has CPA status.

Contact Details for Unit Assessor

Your Unit Assessor this semester is Patricia Bakker. Phone: Fax: Email: (02) 6620 3982 (02) 6621 3428 pbakker@scu.edu.au

UNIT STATEMENT

Description
Title: Unit Number: Type of unit: Pre-requisites: Co-requisites: Mode of Study: Semester Offered: Teaching Unit: DEET Discipline: Unit Assessor: Using Financial Information ACC00150 Core Nil Nil Internal/External 1 School of Commerce and Management 09.02 Patricia Bakker

Aims
To introduce students to the types of decisions that are made in business, the range of qualitative and quantitative information that is available to assist decision making in business, and how to select information that is relevant to making particular types of decisions.

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ACC00150 INTRODUCTION

Objectives
On completion of this unit, you should be able to: 1. 2. 3. identify information relevant to specific business decisions perform a simple analysis of financial statements interpret elementary variances between actual and budgeted financial performance perform cost-volume-profit analysis perform discounted cash flow analysis distinguish the information needs of internal and external stakeholders interpret the information contained within stockmarket reports.

4. 5. 6. 7.

Handbook Entry
This unit acts as an entry point to all streams of the Bachelor of Business program by considering the context of business decision making. Recognising political and economic external influences, together with ethical and legal obligations, it considers the types of qualitative and quantitative information generated by and required by various functional decision makers in business. The role of accounting as the process of identifying, measuring, recording and communicating economic information to permit informed judgments and decisions is demonstrated throughout.

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Syllabus
Topic 1 2 3 4 5 6 7 8 9 10 Sources, Types and Uses of Business Information (2 weeks) Analysing Financial Statements (2 weeks) Cost-volume-profit Analysis and Budgets Decision Making and Relevant Cost Information Information for Decision Making (HR) Information for Decision Making (Marketing) Discounted Cash Flow and Ratio Analysis Investment Decisions Information and Tools for Strategic Decisions External Users Needs

Teletutorials
Teletutorials for external students will be held during Week 3 and Week 10. Each student is encouraged to participate in the teletutorials. An outline of the purpose and structure of each teletutorial will be sent to students early in the semester. Details of dates, times and how to book into a teletutorial will be provided in the current Contact Guide which will be sent to students in Week 1 of the semester. There is no cost to students for participation in the teletutorial.

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ACC00150 INTRODUCTION

Workshops
Subject to sufficient numbers a workshop will be held in this unit for external students at each of the following locations: Sydney Gold Coast Coffs Harbour. Details of dates, time, venues and how to book into workshops will be advised in the current Contact Guide.

MySCU
MySCU is a major development for students accessing their SCU environment online from Semester 2, 2000. This will provide access via a personalised entry page. Access to MySCU is available to enrolled students and you will need a valid user name and password. MySCU is a personalised environment in which you will have your own calendar, address book, book marks etc., and links to any online resources and activities set up for this unit. Go to http://study.scu.edu.au to access MySCU. You can download a copy of the MySCU brochure in PDF format. You will need the PDF reader to view this document. Students can obtain a copy from the computing site http://study.scu.edu.au/casc/freesoft/#PDF or you can go to the Adobe web site (www.adobe.com) and download from there. To ensure that your web browser is compatible with MySCU, we have created a testing area where you can check the settings and plug-ins. If you need any assistance or have any queries, you can contact: Username and passwords: helpdesk@scu.edu.au

Learning environment (CourseInfo): cinfohelp@scu.edu.au General web site: wsr@scu.edu.au.

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Overview of Assessment
Your formal assessment this semester will comprise both progressive assessment (accounting for 50% of the available marks) and a final examination (50% of the available marks). During the semester, you will be required to submit an assignment (10%) and two case studies (40%). At the end of the semester, you will sit a 3hour, closed-book examination covering the whole semesters content. (Further details on the exam format will be provided during the semester.) You must achieve a mark of at least 45% (22.5 out of 50) in the final examination and at least 50% overall to be awarded a Pass grade for the unit. It is preferable that assessment items are word-processed or typed. All assessment items submitted, including exam scripts, must be legible and presented in acceptable, business-like format. Illegible or poor quality work will be severely penalised. Details of assessment items and submission dates follow. Assignment 1 (due 23 March, 2001) Assignment 2 10% 30%

Notification of role (due Friday, 30 March, 2001) Preliminary conclusions (individual) (due Friday, 13 April, 2001) Team report (due Friday, 4 May, 2001)

Final Examination

60%

Study Time Expectations

The student workload for this unit consists of 150 learning hours across the semester, an average of about 12.5 hours per week. However, as this is for the average student, you may find yourself spending more or less time than this, depending on your existing knowledge and study skills. Also, you may find that some topics require more time than others for you to master. If you find yourself spending much more or much less time studying a topic than what is recommended, you might like to discuss this with your lecturer. The 150 hours of learning time includes time taken in studying the study guide provided, reading the textbook and any readings which have been supplied with the study guide, undertaking activities and review activities in the study guide and self-evaluation of your answers to those activities, preparing for assignments (including library research where appropriate), participating in teletutorials and preparing for the final exam.
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TEXT AND REFERENCES

Prescribed Text
There is no prescribed textbook for this unit. Students will be expected to access a variety of information sources, including the financial press and Internet resources. However, it is recommended that students purchase the following resource, which will be invaluable throughout their entire business degree: The Honourable Justice Ipp & Weerasooria, W.S. (Eds) (1997). Butterworths Business and Law Dictionary. Sydney: Butterworths.

Recommended Reference Materials

Books
Alley, C.R. (1997). Accounting with Spreadsheets. Brisbane: Wiley. Atrill, P., Harvey, D. & McLaney, E. (1994). Accounting for Business, 2nd edn. Oxford, UK: Butterworth-Heinemann. Atrill, P. & McLaney, E. (1997). Accounting and Finance for Non-specialists, 2nd edn. New York, NY: Prentice Hall. Bazley, M., Hancock, P., Berry, A. & Jarvis, R. (1999). Contemporary Accounting: A Conceptual Approach, 3rd edn. Melbourne: Nelson ITP. Blake, J. & Amat, A. (1996). Interpreting Accounts, 3rd edn. London, UK: International Thomson Business Press. Cunningham, B.M., Nikolai, L.A. & Bazley, J.D. (1999). Accounting Information for Business Decisions, Volume 1, Preliminary edn. Fort Worth, TX: The Dryden Press. Fleming, I. & McKinstry, S. (1998). Accounting for Business Management, 2nd edn. London, UK: International Thomson Business Press.

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Gaffikin, M. (1993). Principles of Accounting, 3rd edn. Sydney: Harcourt Brace. Hansen, D.R. (1990). Management Accounting. Boston, MA: PWS-Kent. Hey-Cunningham, D. (1998). Financial Statements Demystified, 2nd edn. Sydney: Allen & Unwin. Hoggett, J. & Edwards, L. (1999). Accounting in Australia, 4th edn. Brisbane: Wiley. Horngren, C.T., Harrison,W.T., Best, P.J., Fraser, D.J. & Izan, H.Y. (1997). Financial Accounting, 2nd edn. Sydney: Prentice Hall. Ingram, R.W., Albright, T.L., Baldwin, B.A. & Hill, J.W. (1999). Accounting: Information for Decisions. Cincinnati, OH: South-Western. Jones, K., Price, J., Werner, M. & Doran, M. (1996). Introduction to Financial Accounting: A User Perspective. Englewood Cliffs, NJ: Prentice Hall. Kogan, A., Sudit, E.F. & Vasarhelyi, M.A. (1998). The Internet Guide for Accountants. Upper Saddle River, NJ: Prentice Hall. Kotler, P., Chandler, P.C., Brown, L. & Adams, S. (1994). Marketing: Australia and New Zealand, 3rd edn. Sydney: Prentice Hall. Mayes, T. & Shank, T. (1996). Financial Analysis with Microsoft Excel. Fort Worth, TX: Harcourt Brace. Porter, G. & Norton, C. (1999). Financial Accounting: The Impact on Decision Makers, 2nd edn. Orlando, FL: Harcourt Brace. Stickney, C. & Weil, R. (1997). Financial Accounting. An Introduction to Concepts, Methods and Uses, 8th edn. Orlando, FL: Harcourt Brace. Taylor, D.W. & Pincus, K. (1999). Core Concepts of Accounting Information: A New Introduction to Accounting. Sydney: McGraw-Hill. Trotman, K. & Gibbins, M. (1998). Financial Accounting: An Integrated Approach. South Melbourne: Nelson ITP. Viljoen, J. (1994). Strategic Management: Planning and Implementing Successful Corporate Strategies, 2nd edn. Melbourne: Longman Business and Professional.

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Journals
Australian Accountant Australian Financial Review Business Review Weekly Charter Far Eastern Economic Review The Bulletin

Websites
The Business Centre: http://www.buscentre.com.au/ Australian Federal Governments Business Entry Point: http://www.business.gov.au/ ANET Business Encyclopedia: http://www.csu.edu.au/anet/business_encyclopedia/index.html AccountingNets student site: http://www.accountingstudents.com/ Students in Free Enterprise: http://www.sife.org/ Investor Web: http://www.investorweb.com.au Money Manager: http://www.moneymanager.com.au CNC Technology: http://www.cnctek.com/ Euromoney/World Link: http://www.emwl.com/ Business Sunday: http://businesssunday.ninemsn.com.au/ Michigan State University Center for International Business Education and Research: http://ciber.bus.msu.edu/busres/company.htm Asia Pacific Management Forum: http://www.apmforum.com/ Australian Bureau of Statistics: http://www.abs.gov.au/ CPA Online: http://www.cpaonline.com.au/ Institute of Chartered Accountants in Australia: http://www.icaa.org.au Australian Securities and Investments Commission: http://www.asic.gov.au/ NSW Deparment of Industrial Relations: http://www.dir.nsw.gov.au/ Australian Financial Review: http://afr.com.au/ IBMs Guide to Understanding Financials: http://www.ibm.com/FinancialGuide/
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USING THE STUDY GUIDE

The package of materials you are provided with is made up of two broad sections: the introductory material (which you are now reading) and the numbered topics, collectively referred to as the study guide. The introductory material is designed to give you an overview of the whole unit, including assignment details, textbook details, contact details etc. while the study guide (topics) contains the content and teaching aspects of the unit. It is important that you read both sections carefully. The study guide is designed to be fully self-instructional; that is, it takes the place of traditional face-to-face lectures and tutorials. In most units the study guide is written around one or more textbooks the textbooks contain the content and the study guide does the teaching. Occasionally there is no textbook, so the study guide presents all the content as well. Either way, the study guide guides you through the subject matter of the unit in a systematic and structured way, using features such as hierarchical headings, marginal notes and bold font to highlight key concepts and terms. It directs you when to read your textbook or other supplied readings, and when to undertake self-assessment activities to help you to see if youre handling the content that has been presented. So each topic is made up of three types of material: teaching (the lecturer/ writer talking to you), directions to read something, and directions to do something. Active learning is really important, especially when youre studying independently, and the activities and review activities in each topic give you the opportunity to do something with what youve just read or what you are about to read. Activities within the topic are designed to help to check your understanding of individual concepts while review activities at the end of topics are designed to draw together related concepts. All activities and review activities should be attempted as you come across them, and you should always try to answer the questions asked before looking at the feedback provided! The activities are also very important as a learning tool for preparation for the final exam. It is recommended that you review all your activities and review activities prior to sitting the exam. At the beginning of each topic you will find a list of learning objectives. These are expressed in terms of what you should be able to do once youve studied the material. The objectives cover a wide range of skills:

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knowledge: recalling information (e.g. define, name, label) comprehension: interpreting information in your own words (e.g. classify, describe, discuss, explain, identify) application: applying knowledge to a new situation (e.g. apply, illustrate, interpret, solve) analysis: breaking down knowledge into parts and showing the relationship among the parts (e.g. analyse, calculate, compare, contrast, criticise, differentiate, examine) synthesis: bringing together parts of knowledge to form a whole and building relationships for new situations (e.g. construct, create, design, prepare) evaluation: making judgments on the basis of certain criteria (e.g. appraise, argue, attack, defend, evaluate, predict).

It is important to realise that recalling knowledge is a very small part of what you are required to do in your learning for this course. Rote learning is not appropriate at this level of study. You must acquire skills of analysis, interpretation etc. and by undertaking the activities and review activities you will gradually acquire these important skills. The content of each topic and the activities set should all relate to the objectives, so you should check off your achievement of each objective as you complete each topic. The study guide is also designed with lots of white space (wide margins as well as space for you to attempt activities), to encourage you to make your own notes throughout the materials. The materials belong to you, and you should learn to use them effectively and efficiently to help you to learn. There is a glossary of terms associated with this unit provided as Appendix B on page xxxi of this introduction. Youll find some of the following icons (pictures) included throughout this study guide. Each has a specific meaning, as described below.
T

required reading (text, reading etc.)

optional reading (text, reading etc.)

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written activity answer outside study guide

written activity answer in study guide

feedback on activity

continued over

view videocassette

connect to network

key point to be noted

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SUGGESTED STUDY TIMETABLE

Week / commencing Topic No. 1 Topic Sources, Types and Uses of Financial Information Sources, Types and Uses of Financial Information Analysing Financial Statements Analysing Financial Statements Cost-volume-profit Analysis and Budgets Decision Making and Relevant Cost Information Information for Decision Making (HR) Assignment 2 Preliminary conclusions (individual) due Friday, 13 April, 2001 Assignment 1 due Friday, 23 March, 2001 Assignment 2 Notification of roles due Friday, 30 March, 2001 Key Dates

1 26 Feb 2 5 Mar 3 12 Mar 4 19 Mar 5 26 Mar 6 2 Apr 7 9 Apr 8 16 Apr 9 23 Apr 10 30 Apr 11 7 May 12 14 May 13 21 May 14 28 May 15 4 Jun

FREE STUDY WEEK

Information for Decision Making (Marketing) Discounted Cash Flow and Ratio Analysis Assignment 2 Team report due Friday, 4 May, 2001

Investment Decisions Information and Tools for Strategic Decisions External Users, Needs

10

CONSOLIDATION AND REVISION

STUDY VACATION WEEK

Examination date to be advised (exam period 11 June to 23 June 2001).

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ASSESSMENT REQUIREMENTS
There are two different types of assessment for this unit. We have already discussed self-assessment, which encourages you to undertake the many activities and review activities within topics, and then to assess your learning by checking your answers against the feedback provided. These activities and review activities are not to be submitted for grading, and they do not form part of the formal assessment for the unit, although they should certainly contribute to your learning! As mentioned before, these activities and review activities are an excellent way to prepare for the final exam. Formal assessment items for this unit comprises an assignment, two case studies and a final examination. The marks you achieve for these assessment items are used to determine your final grade. Full details of formal assessment follow.

Assignment 1 (Objective 1)
Due Date: Friday, 23 March, 2001 (Week 4) Value: Length: 10% 600 words

There are many sources of financial information that can be used in the decision-making process. You have inherited $20,000 and there are three alternatives you are considering spending this money on: 1. 2. 3. a car living expenses for completion of your degree a deposit on a small unit in Lismore where you will live while completing your degree.

Required: For each of the alternatives separately identify: 1. What specific financial information would you need to assist your decision?

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ACC00150 USING FINANCIAL INFORMATION

2.

Identify actual sources of information which you would use including names of publications, Internet sites etc. Apart from financial information, what other information would assist you in making your decision? Explain how the five step decision-making model could be used to select one of these three alternatives.

3.

4.

Assignment 2
Due Dates: Notification of roles Friday, 30 March, 2001 Preliminary conclusions (individual) Friday, 13 April, 2001 Team report Friday, 4 May, 2001 Value: Length: 30% 1,000 words

This assignment is based on the Cardboard Producers Pty Ltd case study, which is reproduced as Appendix A at the end of this Introduction to the Study Guide. For this case study, the unit assessor will divide the class into teams of 4 students each. You are required to work as a member of your team, in a negotiated role, to make a team decision based on the facts of the case (and other relevant material you may choose to research). Depending on the role allocated to you, you may need to read ahead in the Study Guide to familiarise youself with relevant concepts. While online discussion through MySCU (which is facilitated by SCUs computer systems) is the preferred means of communication, your team may choose to meet by way of telephone hookups (to be arranged by the team and at team members expense) and/or email and/or face-to-face. Required: Notification of roles 1. At the first team meeting, which should take place no later than Week 5 of semester, each team member should choose a different role from the following four options: Plant Manager

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Accounting and Finance Manager HR Manager Marketing Manager

By the end of Week 5 of semester, the team should advise Jill Phillips (by fax (02) 66213 428 or email jphillip@scu.edu.au or using MySCU communication) as to which role is being played by each team member. Please use appropriate form enclosed. This form can also be downloaded from the ACC00150 MySCU site. Preliminary conclusions (individual) 2. In your individual role, you should consider the case study data and draw some preliminary conclusions (not a final recommendation) about the future of the business. The four options open to the business are to: maintain the status quo (that is, to make no changes at all) rationalise the range of products offered to customers rationalise the equipment used in production rationalise operations management

By the end of Week 7 of semester (Easter Thursday), each student should forward to Jill Phillips (by fax (02) 6621 3428 or email jphillip@scu.edu.au) a summary (not exceeding 500 words) of their preliminary conclusions, based only on their individual role in the team. Please use appropriate coversheet enclosed. This form can also be downloaded from the ACC00150 MySCU site. 3. No later than the end of Week 7, the team should hold its first meeting to discuss each team members thoughts on the direction the business should take and to try to draw a single team recommendation based on that discussion, supported by the facts of the case and any other material which team members believe is relevant to the decision (such as forecasts of the state of the economy over the next 1 to 5 years).

Team report 4. No later than the end of Week 10, the team should submit by mail a report addressed to the Managing Director, detailing the teams recommendation for this rundown business in its competitive environment, and justification for that recommendation. The report (excluding any appendices) should be approximately 1,2001,500 words in length. (See further information below on report format and

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presentation.) Please use appropriate coversheets enclosed. These forms can also be downloaded from the ACC00150 MySCU site. Please note that you need to include ONE team cover sheet for markers comments and ONE cover sheet for EACH individual team member (to enable posting feedback to each team member). PLEASE DO NOT BIND ASSIGNMENTS. Staple once in top left hand corner only. Marking criteria Preliminary conclusions advised by individual team member (Week 7) Report on team recommendation (Week 10) * Report format and effectiveness of written communication Analysis (including information gathering) and evidence of team interaction Justification and appropriateness of the recommended solution (with supporting data) 7% 10% 5% ______ 30% 8%

* Each member of a team will be awarded the same mark for the team recommendations. In both the case study analysis and recommendation your team is expected to access and analyse a variety of information sources. For example, your team might include some information on predictions regarding the economy and how they would affect this company. Remember, that a good case study analysis reads into the case study and extrapolates beyond the bare facts of the case. However, always remember to back up any of your assertions with sound analysis. This is a team project with each team member expected to contribute equally to their teams report. It is therefore recommended that each team follow an active and consultative process in this case study project.

Formatting and presenting your teams report

The report your team submits should contain the following components: 1. A title page (this is in addition to the assignment cover sheet) make sure your title is a concise summary of the scope and content of your report

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2.

A brief summary or synopsis of the teams recommendation and how your team reached its conclusions (maximum 100 words) The body of the report, comprising: an introduction covering background, purpose, scope, research/information-gathering methods, and definitions of any terms that you think the Managing Director would need to have explained discussion or findings here you should clearly develop your argument, that is, on what basis your team reached its conclusions (including perhaps some ideas that were considered but later discarded, and why) based on the primary data (the case study) and any secondary data (from sources other than the case study) that your team used this section focuses more on facts than on opinions a precise statement of your teams conclusions and recommendations based on the preceding discussion remember that your recommendation needs to be specific

3.

4. 5.

A list of references used (if any) in the preparation of your report Any appendices containing material that your team believes will help to substantiate your recommendations but which is too large to include in the body of the report without breaking up the flow of your argument. (You may not need to have any appendices.)

Helpful hints No one student has the responsibility to call the first team meeting; dont wait for someone to contact you be proactive and make the first move! At the outset of discussions, all team members should agree on an outline of what the team report will look like, so each person can organise their research and viewpoints in accordance with the sections and sub-sections of the final report. (This will help to keep you on task rather than getting sidetracked onto what the report is not about!) Remember that you are addressing your report to the Managing Director, a person within the organisation who is familiar with the facts and for whom confidentiality is not an issue. This will affect your writing style (including the degree of formality and use of jargon), how much technical background you provide, how open you can be, and so on. You may need to make (and state for the marker)

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assumptions about the initial attitude of the Managing Director which would affect the way you report your recommendations. Particularly in the findings section of the body of your report, you should ensure that you use sections with headings (and possibly subheadings) to give structure to your argument. Your Study Guide uses different levels of heading/subheading in this way, with larger font sizes showing more important or higher level headings; an alternative is to use numbering of headings and subheadings throughout the whole report. Break the text up into paragraphs (or bullet points, where appropriate) to develop each complete thought. Dont ignore the possibility of presenting some aspects of your report using graphics or diagrams these are often more effective than many words. You should pay attention to language in terms of grammar, spelling, punctuation, etc. If your report is complex, containing more than, say, 8 headings and subheadings, it would be helpful to include a contents page (showing headings/subheadings and their page numbers) immediately following the title page. Dont assume that the first draft of your teams report is the best your team can do! The first draft will need to be evaluated then reworked if, for example, the argument doesnt flow logically or the report is too long (or too short!). Then, when you have a draft that says what you want it to say, it should be edited and proofread before being submitted for grading.

Final Examination (all objectives)

Due Date: Value: To be advised (during examination period) 50%

All topics are assessable. To pass this unit, a minimum mark of 45% (22.5 out of 50) is required in the examination plus a total mark of 50% or more. Final results in this unit may be scaled in accordance with University policy on grade distribution.

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COVER SHEET FOR ACC00150 USING FINANCIAL INFORMATION ATTENTION: JILL PHILLIPS (FAX 02 6621 3428)
Assignment 2 (Week 5) Notification of roles of team members
Dear Jill:

Below please find notification of roles for Assignment 2:

Team member name: Team member Student No.: Team member Address: Team member Telephone: Team member Fax: Team member Email address: Role taken:

Our team will most likely use: 1. Email 2. MySCU discussion forum 3. Facsimile 4. Face-to-face 5. Telephone 6. Other (please specify) as our main means of communicating for this assignment (please circle one of the above).

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COVER SHEET FOR ACC00150 USING FINANCIAL INFORMATION ATTENTION: JILL PHILLIPS (FAX 02 6621 3428)
Assignment 2 (Week 7) Preliminary conclusions (individual)

Name: Address: Postcode:

Telephone: (daytime) (evening) Fax: (daytime) (evening: Email: Student ID No.

I declare that all material in this assignment is my own work. Signed: Date: No. of pages (incl. cover):

Markers comments:

Mark

/8

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COVER SHEET FOR ACC00150 USING FINANCIAL INFORMATION ATTENTION: JILL PHILLIPS (FAX 02 6621 3428)
Assignment 2 (Week 10) Team report (individual cover sheet)

Name: Address: Postcode:

Telephone: (daytime) (evening) Fax: (daytime) (evening: Email: Student ID No.

This assignment was completed with the following team members:

Team member name: Team member Student No.:

Please note: For the team report you need to include one cover sheet per team for markers comments AND an individual cover sheet for each team member (to enable feedback to be posted to your mailing address).

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ACC00150 USING FINANCIAL INFORMATION

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COVER SHEET FOR ACC00150 USING FINANCIAL INFORMATION ATTENTION: JILL PHILLIPS (FAX 02 6621 3428)
Assignment 2 (Week 10) Team report (Markers comments)
This assignment has been completed by the following team members:

Team member name: Team member Student No.:

Please note: For the team report you need to include one cover sheet per team for markers comments AND an individual cover sheet for each team member (to enable feedback to be posted to your mailing address).

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APPENDIX A CARDBOARD PRODUCERS PTY LTD

Collins, R.R. & McLaughlin, Y. (1996) Effective Management, 2nd edn North Ryde, NSW: CCH Australia Ltd pp. 603605.

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APPENDIX B GLOSSARY

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GLOSSARY
Accelerated depreciation method Records the highest depreciation in the first year of an assets service life and lower depreciation in subsequent years. Accounting cycle Steps that a company completes during each accounting period to record, retain, and report the monetary information from its transactions. Accounting equation Assets = Liabilities + Owners Equity. Accounting period Time span for which a company reports its revenues and expenses. Accounting system Process used to identify, measure, record, and retain information about a companys activities so that the company can prepare its financial statements. Accounts Documents used to record and retain the monetary information from a companys transactions. Accounts payable Amounts owed to suppliers for credit purchases. Accounts receivable Amounts owed by customers to the company. Accrual accounting Recording revenues and related expense transactions in the same accounting period that goods or services are provided, regardless of when cash is received or paid. Accrued expense Incurred by a company during the accounting period but not paid or recorded. Accrued liabilities Short-term obligations (other than accounts payable) that a company owes at the end of an accounting period and that result from the companys operating activities during the period. Accrued revenue Earned by a company during the accounting period but neither collected nor recorded. Accumulated depreciation Total amount of depreciation expense recorded over the life of an asset to date.

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Activity-based costing (ABC) System which allocates factory overhead to units of product; first allocates factory overhead costs to activity pools, then assigns costs in each activity pool to jobs based on the relative number of activities needed to complete the jobs, and finally assigns the total factory overhead costs allocated to each job equally to the individual units of product in the job. Amortisation expense Portion of the acquisition cost of an intangible asset that a company allocates as an expense to each accounting period over the assets service life. Annual report Document that includes a companys income statement, balance sheet, and cash flow statement, along with other related financial accounting information. Annuity Series of equal periodic future cash flows. Assets A companys economic resources that it expects will provide future benefits to the company. Auditing Examination of a companys accounting records and financial statements by an independent certified public accountant. Audit report Report issued by an auditor stating that an audit was performed for a company which expresses an opinion as to how well the companys financial statements comply with GAAP. Average cost flow assumption Allocates the average cost per unit for the period to both the ending inventory and the cost of goods sold. Average cost method Assigns the total costs of direct materials and conversion separately to products at the average costs per equivalent unit by adding the amount of each type of cost in the beginning inventory to the amount of that cost type incurred during the month. Average rate of return on investment Average return on the investment per year, per dollar invested for a capital expenditure proposal. Bad debts expense Expense that represents the estimated cost, for the accounting period, of the eventual noncollection of accounts receivable. Balance sheet Accounting report that summarises a companys financial position (assets, liabilities, and owners equity) on a given date.

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Bank statement Statement which summarises a companys banking activities during the month. Basic earnings per share Corporations net income per share available to its common stockholders. Board of directors Group of individuals who has the responsibility and authority to supervise a corporations ordinary business activities, make future plans, and take whatever action is necessary in managing the corporation. Book value Assets original cost minus the related accumulated depreciation. Break-even point Unit sales volume at which a company earns zero profit. Budget Report that gives a financial description of one part of a companys planned activity. Budgeting Process of quantifying managers plans and showing the impact of these plans on a companys operating activities. Business plan Describes a companys goals and its plans for achieving those goals. Capital Funds a company uses to operate or expand its operations. Capital expenditure Cost that increases the benefits a company will obtain from an asset. Capital expenditure decision Long-term decision in which a company determines whether or not to make an investment at the time of the decision in order to obtain future net cash receipts totalling more than the investment. Capital expenditures budget Set of schedules that shows the effects that each new project to be undertaken is expected to have on the other master budget schedules. Carrying costs Costs per unit of keeping an inventory item on hand. Cash Money on hand, deposits in chequing and savings accounts, and cheques and credit card invoices that a company has received from its customers but not yet deposited.

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ACC00150 INTRODUCTION

Cash balance management Setting and following policies for maintaining an optimal amount of cash. Cash budget Budget showing a companys expected cash receipts and payments and how they affect the companys cash balance. Cash discount Percentage reduction of the invoice price if the customer pays the invoice within a specified period. Cash equivalents Investments that are short term, are highly liquid, and involve very little risk. Cash flow return Companys cash flows divided by the dollar amount of its assets or owners equity. Cash flow statement Accounting report that summarises a companys cash receipts, cash payments, and net change in cash for a specific time period. Compound interest Interest that accrues on both the principal and the past (unpaid) interest. Conceptual framework Set of concepts that provides a logical structure for financial accounting and reporting. Conservatism principle Holds that a company should apply GAAP in such a way that there is little chance that it will overstate assets or income. Consolidated financial statements Combined financial statements of the parent company and all other companies over which it has control. Contingency Existing condition that will lead to a gain or loss if a future event occurs. Contributed capital Total investments made by stockholders in the corporation. Contribution margin per unit Difference between the sales revenue per unit and the variable costs per unit. Conversion costs Direct labour and factory overhead costs necessary to convert raw materials into a finished product. Cost accounting (Cost analysis) Process of determining and evaluating the costs of specific products or activities of a company.

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Cost of an asset All the costs a company incurs to acquire an asset and to get it ready for use. Cost of capital Weighted average cost (rate of return) a company must pay to all sources of capital. Cost of ending inventory Dollar amount of merchandise on hand, based on a physical count, at the end of the accounting period. Cost of goods sold Major expense of a retail company consisting of the cost of the goods (merchandise) that it sells during the accounting period. Cost-volume-profit (C-V-P) analysis Shows how profit is affected by changes in sales volume, selling prices of products, and the various costs of a company. Creditors External parties to whom a company owes debts. Current assets Cash and other assets that a company expects to convert into cash, sell, or use up within one year. Current liabilities Obligations that a company expects to pay within one year by using current assets. Current ratio Current assets divided by current liabilities. Debt capital Money that a company borrows from creditors. Debt ratio Total liabilities divided by total assets. Deferred tax liability Account a corporation uses to report on its balance sheet the amount of its future additional income taxes resulting from taxable temporary differences. Depreciable cost Cost of a physical asset less its residual value. Depreciation expense Part of the cost of property, plant, and equipment (physical asset) that a company allocates as an expense to each accounting period in which the company uses the asset. Direct labour Labour of the employees who work with direct materials to convert or assemble them into a finished product. Direct labour budget Schedule that shows the hours and the cost of the direct labour required to meet the budgeted production.

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ACC00150 INTRODUCTION

Direct labour efficiency variance Difference between the standard cost of the direct labour hours that a company should have used for the actual number of units produced and the standard cost of the direct labour hours that it did use to produce those units. Direct labour price standard Current wage rate that a company should incur per hour for a specific type of direct labour employed in production. Direct labour price variance Difference between the cost that a company should have incurred for the actual labour hours worked and the actual direct labour cost is did incur for the number of actual labour hours worked. Direct labour quantity standard Amount of direct labour time that a company should use to produce one unit of product. Direct materials Raw materials that physically become part of a manufactured product. Direct materials price standard Cost that a company should incur to acquire one unit of a direct material for production. Direct materials price variance Difference between the standard cost that a company should have incurred to acquire the direct materials and the actual cost it did incur to acquire the direct materials. Direct materials quantity standard Amount of a direct material that a company should use to produce one unit of product. Direct materials quantity variance Difference between the standard cost of the quantity of direct materials that a company should have used for the actual number of units produced and the standard cost of the quantity of direct materials that it did use to produce those units. Direct materials purchases budget Schedule that shows the number of direct material units that must be purchased in each budget period to meet production and ending direct materials inventory requirements. Direct method Subtracting the operating cash outflows from the operating cash inflows to determine the net cash provided by (or used in) operating activities on the cash flow statement. Dual effect of transactions A company must make at least two changes in its assets, liabilities, or owners equity when it records each transaction.

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ACC00150 USING FINANCIAL INFORMATION

Earnings per share (EPS) Amount of net income earned for each share of common stock. Entity concept Separation of accounting records of a company from the records of the companys owner or owners. Entrepreneur Individual who is willing to risk the uncertainty of starting a company in exchange for the reward of earning a profit (and the personal reward of seeing the company succeed). Equity Claims by creditors and owner(s) against the assets of a company. Equity capital Money that a corporation brings in through the sale of the corporations own stock. Estimated residual value Cash a company estimates it will receive from the sale or disposal of an asset at the end of its estimated service life. Estimated service life Life over which a company expects an asset to be useful. Exchange gain or loss Caused by a change in the exchange rate between the date that a company records a credit sale (purchase) and the date that the company collects (pays) the cash. Exchange rate Measures the value of one currency in terms of another currency. Expected inflation rate Additional interest rate paid by the borrower to compensate for the expected inflation over the life of the borrowing. Expenses Costs a company incurs to provide goods or services to its customers during an accounting period. External users Individuals outside of a company who use the companys information for decision making. Extraordinary item Event or transaction that is unusual in nature and infrequent in occurrence. Factory overhead All items, other than direct materials and direct labour, that are necessary for the manufacture of a product. Factory overhead budget Schedule showing estimates of all factory overhead costs and their related cash payments for each budget period.

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ACC00150 INTRODUCTION

Finance function Plans a companys capital requirements for both the short and the long term. Financial accounting Identification, measurement, recording, accumulation, and communication of economic information about a company for external users to use in their various decisions. Financial flexibility Companys ability to adapt to change. Financial statements Accounting reports used to summarise and communicate financial information about a company. Financing activities Obtaining capital from the owner and providing the owner with a return on investment, as well as obtaining capital from creditors and repaying the amounts borrowed. Financing activities section Section of a companys cash flow statement (or cash budget) that shows the cash receipts and payments from its actual (or planned) financing activities. Finished goods inventory Finished products that are ready to be sold. First-in, first-out (FIFO) Earliest (first) costs incurred are included in cost of goods sold as the products are sold, leaving the latest costs incurred in ending inventory. Fixed costs Costs that are constant in total and that are not affected by changes in volume. Fixed overhead volume variance Difference between the amount of applied fixed overhead and the amount of budgeted fixed overhead. Flexible budget Cost or expense budget that shows expected costs or expenses at various activity levels. General and administrative expenses Operating expenses related to the general management of a company. General ledger Entire set of accounts for a company. Generally accepted accounting principles (GAAP) Currently accepted principles, procedures, and practices that are used for financial accounting in the United States. Goodwill Difference between the total price a company paid to buy another company and the market value of the identifiable net assets it acquired.

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Gross profit Net sales minus cost of goods sold. Gross profit method Used to estimate the cost of ending inventory by multiplying the net sales by the historic gross profit percentage and subtracting this amount from net sales to determine the estimated cost of goods sold, and then subtracting this amount from the cost of goods available for sale. Gross profit percentage Gross profit divided by net sales. Historical cost concept Concept that a company records its transactions based on the dollars exchanged at the time the transaction occurred. Horizontal analysis Shows the changes in a companys operating results over time in percentages as well as in dollar amounts. Human resources function Managing the companys employee-related activities, such as recruiting, hiring, training, and compensating employees, as well as providing a safe workplace. Income statement Accounting report that summarises the results of a companys operating activities for a specific time period. Income tax expense Income taxes that a corporation must pay on its earnings. Indirect labour Labour that is not traceable to individual products. Indirect materials Raw materials that are not traceable to individual products. Indirect method Adjusting net income to compute net cash provided by operating activities on the cash flow statement. Intangible assets Companys long-term assets that do not have a physical substance. Interest expense Cost to a company of borrowing money for a period. Internal control Procedures needed to safeguard a companys economic resources and to promote the efficient and effective operation of its accounting system. Internal control structure Set of policies and procedures that directs how employees should perform a companys activities.

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ACC00150 INTRODUCTION

Internal users Managers within a company who use information about the company for decision making. Intracompany analysis Comparing a companys current operations and financial position with its past results or with its expected results. Inventory Merchandise a retail company is holding for resale. Inventory turnover Cost of goods sold divided by average inventory. Investing activities Include lending money and collecting on loans, investing in other companies, and buying and selling property and equipment. Investing activities section Section of a companys cash flow statement (or cash budget) that shows the cash receipts and payments from its actual (or planned) investing activities. Last-in, first-out (LIFO) Latest costs incurred before a sale are included in cost of goods sold and the earliest costs incurred are included in ending inventory. Lease Agreement giving the right to use property, plant, or equipment without transferring legal ownership of the item. Lessee Company that acquires the right to use a leased item. Lessor Company that gives up the use of a leased item. Limited life Occurs when a companys life is linked directly to the operating intentions of its owner. Line of credit Amount of money a company is allowed to borrow with a prearranged, agreed-upon interest rate and a specific payback schedule. Liquidity Measure of how quickly an asset can be converted into cash or a liability can be paid. Liquidity management A companys policies and activities that control its liquidity position. Long-term capital Capital which will be repaid to creditors or returned to investors after more than one year.

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Long-term investments Items such as notes receivable, government bonds, bonds and capital stock of corporations, and other securities which as company intends to hold for more than one year. Long-term liquidity Relates to the amount of cash a company will generate over the long run to pay off its liabilities as they become due. Lower-of-cost-or-market (LCM) method When the market value of a companys inventory falls below its cost, the company is required to reduce, or write down, the inventory to that market value. Management accounting Identification, measurement, recording, accumulation, and communication of economic information about a company for internal users in management decision making. Manufacturing company Company that makes its products and then sells these products to its customers. Marketing function Identifies consumer needs, analyses consumer behaviour, evaluates customer satisfaction, and promotes a companys products. Master budget Set of interrelated reports showing the relationships among a companys goals to be met, activities to be performed, resources to be used, and expected financial results. Matching principle To determine its net income for an accounting period, a company computes and deducts the total expenses from the total revenues earned during the period. Materiality Occurs when a monetary amount is large enough to make a difference in a users decision. Mortgage payable Long-term liability for which the lender has a specific claim against an asset of the borrower. Net assets Assets minus liabilities. Net income Excess of a companys revenues over its expenses from providing goods or services to its customers during a specific time period. Net loss Excess of a companys expenses over its revenues from providing goods or services to its customers during a specific time period.

ACC00150 INTRODUCTION

Net pay The amount of earnings after payroll taxes have been deducted. Net present value Present value of the expected future net cash receipts and payments minus the initial cash payment for a capital expenditure proposal. Noncurrent liabilities Obligations that a company does not expect to pay within one year. Notes to the financial statements Inform external users of a companys annual report about its accounting policies and of important financial information that is not reported in the companys financial statements. Operating Management activity that enables a company to conduct its business according to its plan. Operating activities Include the primary activities of buying, selling, and delivering goods for sale, as well as providing services. Operating activities section Section of a companys cash flow statement (or cash budget) that summarises the cash receipts and payments from its actual (or planned) operating activities. Operating cycle Average time it takes a company to use cash to buy or produce goods (or services) for sale, to sell these goods (or services) to customers, and to collect cash from its customers. Operating efficiency How well a company uses its assets to generate revenue. Operating expenditure Cost that only maintains the benefits that a company originally expected from an asset. Operating expenses Expenses (other than cost of goods sold) that a company incurs in its day-to-day operations. Operating income All the revenues earned less the expenses incurred in the primary operating activities of a company. Operating lease Does not transfer the risks and benefits of ownership. Owners equity Owners current investment in the assets of a company. Partnership Company owned by two or more individuals who each invest capital, time and/or talent into the company and share in its profits and losses.

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Partnership agreement Contract signed by partners of a partnership before the company begins operations. Prepaid insurance Cost paid for the right to insurance protection. Prepaid item Current asset (economic resource) that a company records when it pays for goods or services before using them. Present value Value today of a certain amount of dollars to be paid or received in the future. Price/earnings ratio Market price per share divided by earnings per share. Production budget Schedule showing how many units a company should produce during each budget period both to satisfy expected sales for that period and to end each period with a desired finished goods inventory level. Production function Manufacturing activity that uses people and equipment to convert materials, components, and parts into products that the company will sell to customers. Profit Difference between the total revenues of a company and the total costs (expenses) of the company during a specific time period. Profit margin Net income divided by net sales. Projected income statement Statement summarising a companys expected revenues and expenses for the budget period. Property, plant, and equipment All of the physical (tangible), longterm assets a company uses in its operations. Purchases budget Budget showing the purchases (in units) required in each month to make the expected sales in that month (from the sales budget) and to keep inventory at desired levels. Quick ratio Quick assets divided by current liabilities. Ratio analysis Computations made in financial analysis in which an item on a companys financial statements is divided by another related item. Raw materials Materials, ingredients, and parts that make up a companys manufactured products.

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ACC00150 INTRODUCTION

Raw materials inventory Raw materials a company uses either directly or indirectly in manufacturing its products. Residual value Estimated cash to be received from the sale or disposal of an asset at the end of its estimated service life. Retained earnings A corporations total lifetime net income that has been reinvested in the corporation and not distributed to stockholders as dividends. Return on owners equity Net income divided by average owners equity. Return on total assets Net income and interest expense are added together and then divided by average total assets. Revenues Prices charged to a companys customers for the goods or services the company provides to them. Sales budget Budget showing the number of units of inventory that a company expects to sell each month, the related monthly sales revenue, and in which months the company expects to collect cash from these sales. Selling expenses Operating expenses related to the sales activities of a company. Selling expenses budget Budget showing the expenses and related cash payments associated with planned selling activities. Service company Company that performs services or activities that benefit individuals or business customers. Service life Life over which a company expects an asset to be useful. Short-term capital capital which will be repaid within a year or less. Sole proprietorship Company owned by one individual who is the sole investor of capital into the company. Solvency Companys long-term ability to pay its debts as they come due. Stockholders (Shareholders) Owners of a corporation who hold shares of the corporations capital stock. Stockholders equity Owners equity of a corporation, consisting of contributed capital and retained earnings.

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Straight-line method Computes depreciation expense by allocating the cost of an asset, less its estimated residual value, equally to each period of the assets estimated service life. Tax Amount of money that a government requires a taxable entity to pay. Total cost Sum of the fixed costs and variable costs at a given volume. Total equity Total of the liabilities and owners equity. Unearned revenue Obligation of a company to provide goods or services in the future, resulting from an advance receipt of cash. Variable cost Cost that is constant per unit and that changes in total in direct proportion to changes in volume. Variable manufacturing cost Constant for each unit produced but varies in total in direct proportion to the volume produced. Variance Difference between a standard cost and an actual cost. Wages and salaries payable Amounts owed to employees for work they have done. Withdrawals Payments from the company to the owner. Working capital A companys current assets minus its current liabilities.
Adapted from: Cunningham B.M., Nikolai L.A. and Bazley J.D., 2000, pp. 9941010.

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PREVIOUS EXAM PAPER

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FIRST SEMESTER 2000 EXAMINATION UNIT: TIME ALLOWED: PERMITTED MATERlALS: SPECIAL INSTRUCTIONS: ACC00150 USING FINANCIAL INFORMATION Three (3) hours + 10 minutes reading time. Closed Book Examination Silent, Non-programmable Calculators may be used.

Take time to plan your answers - the questions are not a test of how much you write in the available time. Assessment emphasises the quality of answers rather than volume of words and answers that demonstrate understanding of the concepts will Wpically score better than answers that demonstrate an ability to memorise and repeat long list of points. Answer ALL SEVEN (7) questions. Question 1 The accounting equation and financial statements Question 2 Analysing financial statements Question 3 Cost - Volume Profit Analysis Question 4 Marketing 8 marks Question 5 Human Resource Management Question 6 Strategic Management Question 7 Finance and social issues Total

15 marks

20 marks

18 marks

8 marks

15 marks

16 marks 100 marks

You are permitted to annotate exam paper during reading time.

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QUESTION l (15 marks) PART A Accounting equation (7 marks) The financial statement information of the Charles Clothing Company for 2000 and 2001 is as follows: 2000 C.harles, capital 31 Dec Ctlarles, drawings Revenue Charles, capital I Jan Liabilities Net profit Charles, capital contributed Expenses Assets REQUIRED: Calculate the blanks lettered (a) to (g). All the information is listed (Hint: It is not necessary to calculate your answers in alphabetical order) $83,500 (a) (b) $69,400 (c) $24,100 $8,000 $35,200 $184,500 2001 (d) $24,000 $6,000 (e) $116,800 (f) (g) $39, 800 $211,500

PART B Financial Statements (8 marks) The major financial statements are the profit and loss statement, the balance sheet and the statement of cash flows. REQUIRED: (a) Describe the purpose and content of each of the three major Financial statements (6 marks) Explain how both the profit and loss statement and the statement of cash flows can be used to assess financial performance (9 marks)

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ACC00150 INTRODUCTION

QUESTION 2 Analysing financial statements (20 marks) PART A (20 marks) Refer to the following summary financial statements for Hanover Ltd and perform each of the following tasks: (a) Comment on the profitability (without calculating any ratios) in 2000 compared to l999. (4 marks) Briefly explain using Hanover s Statement of Cash Flows why the cash balance has changed over the 2000 financial year. (3 marks) For both the 1999 and 2000 years (i) Compare current assets to current liabilities. What is the relevance of the change in the level of current assets to current liabilities for Hanover Ltd? (3 marks) (ii) Compare the level of total debt to shareholders funds. What is the relevance of the change in the level of total debt to shareholders funds for Hanover Ltd? (3 marks) Compare the level of profit to the level of shareholders funds. What is the relevance of the change in the level of profit to shareholders funds for Hanover Ltd? (3 marks)

(b)

(c)

(iii)

(d)

Do you think that Hanover is better off in financial terms at the end of 2000

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Question 2 (cont): Hanover Limited Summary Profit and Loss Statement for the year ended 30 June: 2000 $000s Sales revenue Net profit 6,712 2,539 l 999 $000s 6,515 2,756

Hanover Limited Summary Balance Sheet as at 30 June: 2000 $ 000 s Current assets Non-current assets 13,162 10,750 $23,912 1999 $,000s 11,774 9,783 $21,557

Current liabilities

12,391

13.981 1,389 6,187 $21,557

Non-current liabilities 3,816 Shareholders equity 7.705 $23,912

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Hanover Limited Summary Statement of Cash Flows for the yeal ended 30 June: 2000 $.000s Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Net change in cash held Cash at beginning of period Cash at end of period 2.825 (2.252) (86) 487 268 $755 1999 $,000s 3,468 1.114 (4 952) (370) 638 $268

QUESTION 3 Cost-Volume Profit Analysis (18 marks) Michaels Hair Styling Salon is based in Singapore and has five hairdressers. (Michael is not one of them.) Each hairdresser is paid $8.90 per hour and works a 40 hour week and a 50 week year. Rent and other fixed expenses are $1,750 per month. Assume that the only service performed is the giving of haircuts, the unit sellina price of which is $ l l . 1. Find the contribution margin per haircut. Assume that the hairdressers? compensation is a fixed cost. (2 marks) 2. Detennine the annual breakeven point in number of haircuts. (2 marks)

3. What will the operating profit be if the budget of 20 000 haircuts are sold? (2 marks) 4 Suppose Michael revises the compensation method. The hairdressers will receive $4 per hour plus $5 for each haircut. (i) What is the new contribution margin per haircut? (ii) What is the new breakeven point in number of haircuts? (iii) What will the new operaling profit be if the budget ol 20,000 haircuts are sold? (6 marks) 5. Compare the breakeven point and operating profit for both compensation methods and determine which method would be preferable for Michael. (6 marks)
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QUESTION 7 FInance & Social Issues (16 marks) Sandalwood Eaglefeather (formerly Agnes Smith) lives in a peacelful community in Lillian Rock, NSW. Sandalwood has inherited $100 000 from her eccentric Aunt Edna and she wishes to invest these funds. She seeks your advice on possible investment opportunities. She has identified the following two possibilities: 1. Purchase $100,000 of shares in the Body Shop which is a retailer of natural cosmetics with a well documented social and environmental conscience. The current share price is $20 each. 2. lnvest in a term deposit with Westpac at 1.5% per quarter. REQUIRED: a) ldentify specific financial and non financial information which you require to make a valid comparison of the two investment opportunities and tor each item of inlormation identify where you would obtain this information from. (6 marks) b) You calculate that Sandalwoods return on her investment in Body Shop shares should include a dividend of $0.50 per share and the shares should rise in price by 5% over the next 12 months. Prepare a brief financial comparison of the two investments listed above. (6 marks) c) Comment on Sandalwoods risk exposure if she selects one of the two investment opportunities presented above. How might she restructure her investment to reduce her risk exposure? (4 marks)

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