MSc Accounting and Decision Making - Coursework - August 2013

MSc Management

Accounting and Decision MakingSummative Assignment

Deadline for submission: [ ]

Submission via Turnitin

Follow instructions given overleaf

MSC MANAGEMENT WITH STREAMS: ACCOUNTING & DECISION MAKING ASSIGNMENT

PLEASE READ CAREFULLY:

INSTRUCTIONS TO STUDENTS

Your assignment must be submitted via Turnitin

A Student Training video on how to use Turnitin may be found at the following URL:

http://turnitin.com/en_us/training/student-training/submitting-a-paper

Please ensure your submission is in Microsoft Word and not pdf. It must be submitted in one document, not multiple documents.

You must remember to include the declaration form which acts as your signed declaration. Here you are reminded that you must not write your name anywhere on your submission.

You must confirm that you have read and fully understood the rules governing plagiarism when you formally submit this piece of work for marking. Please refer to the General Academic Regulations and Manual of Policies and Procedures which are available on Blackboard within Regulatory Framework of the 'Academic Registry' tab.

Once loaded to this Turnitin site, you are not permitted to amend your submission. You have one option to submit so please be 100% sure in your mind that what you submit to Turnitin is what you intend to submit.

It remains your responsibility to ensure you submit a cohesive piece of work which adheres to all the rules and regulations as outlined by BPP.

BUSINESS SCHOOL 1

http://turnitin.com/en_us/training/student-training/submitting-a-paper


CASE STUDY INFORMATION

Bowman Entertainment plc

Bowman Entertainment plc (BEP) is a UK company which designs, distributes and sells a range of branded merchandise such as soft toys, dolls, children’s games and related accessories under licence.

1998 – 2004

BEP was founded by John Bowman in 1998 when he left his job as Sales Manager for a competitor UK toy company and started his own business wholesaling a range of good quality children’s toys to retail shops (e.g. Hamleys) and toy buying groups in the UK.

In 2003 he persuaded a well-known author to award BEP an exclusive licence to design and distribute merchandise and other spin-off products based on the characters in her best-selling book range, Harry Boulder, the Teenage Detective. John worked with a firm of product creation consultants to design a set of children’s toys and merchandise around the Harry Boulder brand and had them manufactured in the Far East through a friend who was living in China and specialised in sourcing production facilities for UK companies. Thanks to strong customer relationships in the UK toy market and his friend in China who made sure the products were good quality and delivered on time 150 days after first order, he was able to launch BEP’s first range of Harry Boulder products in time for the peak December sales period.

The range was massively successful and has supported the company’s profits ever since, as a new Harry Boulder book has been released each year and the first two books have been made into successful films.

The original licence cost BEP just £25,000 to secure, and the author received a 1% royalty on all sales of Harry Boulder products1. In 2008 the original licence was renegotiated at a cost of £80,000 and a new royalty deal was agreed at 3% to beat off stiff competition for the licence.

With the success of the Harry Boulder range, John was able to obtain £2m private equity investment to enable BEP to continue expanding. By the end of 2004, progress had been made in the following areas:

Several new licence deals completed, where BEP bought the rights to design and develop children’s merchandise using other well-known branded characters.

In-house product design and development team recruited to reduce BEP’s dependence on external consultants, plus a team to handle purchasing and ordering from the Chinese manufacturers.

A new Finance Director, Howard Dean, and an Operations Director, Peter Hawkins, had been recruited, leaving John able to focus on sales and business development.

BUSINESS SCHOOL 2

Footnote1A royalty is a commission. A 1% royalty means that for every £100 of sales made by BEP, they must pay the Harry Boulder author, £1. A 3% royalty means for every £100 of sales made by BEP they must pay £3 to the author.


2005 - 2008

Sales for the newly licensed products were poor in 2005 because of delays in getting the products into the shops. Designs from the new development team were released later than expected, so the purchasing team missed BEP’s “production slot” with the factory in China, meaning BEP had to wait for 60 further days until another slot became available. However, BEP’s retail customers remained loyal and the sales order intake for supply in 2006 (as at the end of 2005) matched expectations set in the 2006 sales budget.

The timeline from initial design to goods in the shops takes 8 months as shown below.

Day 0 30 45 60 210 240

Design concept

Product sample

Design finalised

Purchase planning – order placed

Overseas production completed Goods arrive in UK

All items purchased from China require a 10% deposit at time of order, followed by payment of the remaining balance immediately before the goods are put on the ship from China to the UK.

In late 2005 John negotiated a three-way collaboration deal with KFun, a TV, cable and online channel specialising in children’s TV programming, and Tara Productions, a television production company (“the KFun deal”). It was agreed that ideas and concepts for KFun’s children’s shows would be developed by a committee formed from representatives from each company. Tara Productions would make the TV show, KFun would screen it, and BEP would be the sole provider of merchandise, books and toy products released to tie in with each upcoming show as it was released by the channel.

John was very excited about the opportunity presented by the KFun deal. As he saw it, BEP would have a greater level of control over its business, because it was directly involved in designing its own branded characters at an early stage.

However, his new Finance Director was not so sure. Firstly, BEP’s other deals were for brands that were already well established, so it was easier to accurately forecast sales and prepare a purchasing budget. Given the timeline between design and distribution, and the necessity of pre-booking slots in the Chinese factory, budgeting accuracy was vital to help BEP plan and control its working capital.

Secondly, this new agreement required BEP to release merchandise when the TV programme was first screened, before the company knew whether the programme would be successful or not. The 240 day production timeline would require BEP to commit 2 months or more of design team time to a product range that might fail, as well as being tied into irrevocable purchase orders in China (i.e. non-cancellable). In the worst case, BEP could be left with large piles of unsold stock if the initial sales budgets proved to be over-ambitious.

BEP’s operating expenses also increased following the KFun deal, with the recruitment of a dedicated design team and expansion of the purchasing, stores and warehousing departments. The company also took a lease out on a second building, as the old unit was now too small.

Fortunately, the Finance Director’s initial concerns proved to be unfounded.

BUSINESS SCHOOL 3


Over 2006 and 2007 the first four programmes from the KFun deal were successfully received by the viewers and sold worldwide. Sales of the related toy products at BEP rose so quickly BEP could not bring enough stock in from China to satisfy demand.

In 2007, the original private equity investor sold his investment when BEP successfully launched on the UK stock market, issuing shares to raise further funds for expansion. John Bowman sold a number of his shares on flotation, which made him a very wealthy man.

By June 2008, KFun was broadcasting a total of 5 programmes around the world, and BEP was selling merchandise across Europe, the US and the Far East, where the programmes had gained ground.

BEP had signed several more licence deals on other branded characters and sales of these were exceeding initial budget expectations. “Just as well”, complained Howard Dean to Peter Hawkins over coffee one day, “because John got nailed to the wall on the royalty rates – seems like every decent brand is asking for 5-10% royalties these days, compared to 3% when we started. And it’s not cheap to service these things either – we’ve got salesmen running all over the world, and you should see the expense claims they submit! I’ve been trying to get John to approve expenditure limits but he says he doesn’t care how the guys get the sales, just so long as they do”.

In July 2008, BEP successfully raised a further £3.6m on the stock market by way of a rights issue and this cash, together with new borrowings in the form of bank loans, was earmarked for future expansion and investment in licences and copyrights.

Also in July 2008, John was approached by a distribution company, Sports Events International (“SEI”) seeking a new supplier for major sporting event merchandise. Their proposal was for BEP to design and deliver a range of merchandise in pre-agreed quantities related to specific sporting events, in return for payment comprising (i) full cost + 25% on the imported goods, and (ii) a royalty based on 5% of the net sales price (i.e. sales excluding VAT) when the goods were sold. John agreed the deal on the spot, thinking it was a guaranteed profit and an easy design concept - it would provide a great training opportunity for junior members of the design team…”they are always loitering by the coffee machine, so they obviously don’t have enough to do”.

In August 2008 BEP ordered the first range of products approved by SEI for a rugby tournament scheduled to take place in June 2009. The price agreed with SEI for the goods to be supplied was £750,000 plus the 5% royalty on all sales, in line with the deal agreed by John.

Autumn 2008

At the end of August 2008 BEP received some bad news. The author of the Harry Boulder books unexpectedly announced her retirement, with the last book to be released in November 2008. There was still a chance films would be made from the existing books, but the lack of new stories would have a major negative impact on BEP’s product sales. BEP was holding large stocks of Harry Boulder products.

In September 2008 Lehman Brothers collapsed, triggering the world’s biggest ever financial and banking crisis. The predictions for the toy market were poor.

BUSINESS SCHOOL 4


In November 2008, the first signs of trouble emerged with the KFun deal. Two new series for existing programmes were due to air in February/March 2009 but were suddenly cancelled by the KFun board. There were rumours in the market place that KFun had overextended its balance sheet by taking on excessive loans and was struggling to meet payments.

2009

In January 2009 Howard, Peter and John met to discuss the 2008 actual results and 2009 budgets. It was a heated meeting. Howard Dean was very worried about the financial prospects of the business. Expenditure remained at 2008 levels, and no steps had been taken to reduce staff numbers or costs ahead of the expected decline in Harry Boulder sales.

“We are responsible to our shareholders now”, he argued, “Look at this (waving a report by Keynote on the Toys & Games Market 2008): “Consistent growth between 2004 and 2007 halted in 2008. The Toys and Games market is facing a difficult year in 2009, as negative economic growth is forecast. Whilst character licensing and branding are key value drivers, retail competition is intensifying which will mean prices will fall, with some supermarkets using toys as loss leaders to promote sales of other goods…”. We’ve already had our customers demanding discounts in the second half of 2008 so we need to be realistic in terms of planning our trading budgets and likely cash flows for 2009.”

John Bowman was more positive. “Don’t be so negative, Howard, it’s just a blip. We delivered over 30% growth in sales in 2008 over 2007. You’ll see – it will all be back to normal in a couple of months. This KFun thing will sort itself out… and on the licensing side, we just need to find another Harry Boulder.”

By March 2009, it was clear that things were not back to normal.

There were no signs of a new licence to replace Harry Boulder and any licences which were available were outside the financial reach of BEP.

The goods for the rugby tournament had arrived from China but SEI only bought 30% of the stock at the agreed price (£750,000 x 30% = £225,000) due to fears of economic downturn. After much negotiation, they offered to buy the remaining stock for £336,000, a discount of 20% on cost. John was outraged: “I did that deal at cost PLUS 25% profit PLUS a 5% royalty on sales. I’d be better off standing outside the stadiums selling the stuff myself…..” Worried about being left with unsold stock in the company, Howard suggested that perhaps a detailed costing exercise might be a good idea, to see what the real loss might be if the stock was sold at a discount.

Finally, KFun had confirmed that without a buyer or new investor, its banks would foreclose and the business would collapse. BEP was holding over £2.4m stock related to this venture, up from £2.26m at year end and in 2008 over 47% of its toy product sales arose from the continuing screening of the KFun programmes.

“For every £100 in revenue we make £13 operating profit. We just have to protect those KFun sales” John told BEP’s Board, “especially with the Harry Boulder sales about to decline this year, so I’ve been thinking. The stock market loves us. We are just about to pay a handsome dividend to shareholders… What about if we put in a bid to buy KFun? I’m sure there’s nothing wrong with the company itself, just that they took on too many loans. If we could buy that business cheaply now, it could be a great investment for the future. Word on the street is that £9.5m is the number needed to keep those banks away from KFun. We’re sitting on nearly £6m cash right now – why don’t we use it?”

BUSINESS SCHOOL 5


Howard and Peter were less sure. They saw this as a very high risk opportunity. BEP knew nothing about TV programming and would have to rely completely on KFun’s management team. If the underlying problems at KFun were deeper than just an overload of debt, then it could bring down the whole of BEP. Howard also knew that the £6m in the bank was needed to pay dividends and other liabilities, plus provide a cash buffer for difficult trading conditions in 2009. To do a deal with KFun BEP would need to raise at least £5m in the form of a new loan (estimated at 7% interest cost) or £5m equity from shareholders. But John wasn’t listening. Excited about what he saw as a sure-fire way of fixing BEP’s sales and stock problems, he spoke to KFun’s CFO, who sent over the actual results for 2008, and trading and cash flow forecasts for 2009-2014 (5 years) which had just been prepared for KFun’s bankers.

Howard suggested a formal Board meeting be arranged to deal with each issue in turn.

He has prepared a pack of relevant financial information (see Appendices 1-5) and has emailed you, the Financial Controller, as follows:

To: Financial ControllerFrom: Howard DeanStatus: URGENT

Please prepare a report for the Board of BEP setting out relevant financial information, issues and potential solutions available to BEP ahead of the decisions it must make. Your report should discuss and critically evaluate the following topics, using appropriate accounting and financial techniques to support your conclusions and recommendations.

1. Identify and discuss FOUR areas of subjective judgement in BEP’s financial statements for 2008. As part of your discussion, you should highlight any changes that you would recommend to ensure that the final statements are in accordance with the IASB’s Conceptual Framework and present a “true and fair” view as required by the Companies Act 2006 and GAAP.

(12 marks)

2. Prepare the Statement of Cash Flows for BEP for 2008. Use the information provided in the case study information only. Do NOT incorporate any amendments you might recommend in your answer to Question 1.

(8 marks)

3. Critically evaluate the trends in BEP’s sales, costs, overheads and profitability during 2008 relative to 2007, using your analysis to discuss any issues you believe BEP’s Board should address or investigate in the light of the company’s present circumstances and the trading outlook for 2009.

(16 marks)

4. Use the Statement of Cash Flows that you prepared in Question 2, together with an analysis of the operating cash cycle for BEP in 2007 and 2008, to critically discuss whether BEP has any cash flow issues it should address, and recommend solutions for the Board which might improve cash generation in the business.

(15 marks)

BUSINESS SCHOOL 6


5. Use an appropriate costing technique to recommend whether the Board should accept or reject the offer from SEI to purchase the remaining stock. Your answer should explain the rationale behind your recommendation and discuss at least TWO non-financial factors which BEP’s Board should take into account in its final appraisal of the offer.

(10 marks)

6. Perform a critical analysis of KFun’s trading results and cash flows in 2008 against its budget for 2008, using your interpretation of the variances as well as other information supplied in the case study to comment on any vulnerabilities in KFun’s profit and cash forecasts for 2009-2013. .

(12 marks)

7. Evaluate the opportunity to buy KFun, using an appropriate appraisal technique over the 5 years from 1 January 2009 to 31 December 2013. BEP’s cost of capital for its existing business activities is 9%. Your answer should include:

(i) A recommendation to the Board as to whether the proposed investment should proceed, including a clear demonstration of how you arrived at your conclusion;

(5 marks)

(ii) A critical discussion of the advantages and disadvantages of BEP raising £5m debt or £5m equity to fund an acquisition, including supporting calculations showing the impact of any financing structure on BEP’s liquidity, capital structure and financial risk.

(14 marks)

(iii) A critical discussion of any other factors that you believe should be taken into consideration by the Board in relation to this potential acquisition.

(8 marks)

Total (100 marks)

BUSINESS SCHOOL 7


Appendix 1

BEP draft Financial Statements

The draft Income Statement and Statement of Financial Position for BEP for the years ending 31 December 2008 and 2007 are reproduced below. These are in draft format pending the outcome of discussions at the Board meeting.

Income Statement

2008 2007

£000 £000

Sales revenue 23,862 18,572

Total cost of sales -14,470 -10,838

Gross profit 9,392 7,734

Less: overheads & administration costs -6,290 -4,904

Profit before interest and taxation 3,102 2,830

Interest charges -678 -334Profit before taxation 2,424 2,496

Taxation -606 -624

Profit / (Loss) after taxation 1,818 1,872

Dividends declared -950 -850Retained profit 868 1,022

BUSINESS SCHOOL 8


Statement of Financial Position

2008 2007

£000 £000Non-current assets

Intangible assets: licences 285 260

Intangible assets: copyrights 2,500 1,900

Other property, plant and equipment 1,755 1,608

4,540 3,768

Current Assets

Inventory 3,677 1,679

Trade receivables 4,785 2,687

Prepayments - order deposits (China) 537 409

Cash 5,974 1,659

14,974 6,433

Current Liabilities

Trade payables -944 -709

Taxation payable -400 -450

Dividends payable -950 -850

-2,294 -2,009

Non-current liabilities

Bank loan -8,400 -3,877

Net assets 8,820 4,315

Equity

Called up ordinary share capital 1,812 1,175

Share premium account 3,000

Retained profit for the year 868 1,022

Retained earnings 3,140 2,118

8,820 4,315

BUSINESS SCHOOL 9


Further detail supporting the numbers given in the Income Statement is provided below.

Segmental information

Revenue: 2008 2007

Harry Boulder 4,721 4,268

Other character deals 7,888 5,467

KFun character ranges 11,253 8,837Total 23,862 18,572

Cost of sales analysis 2008 2007

Cost of goods sold – royalties paid 630 438

Cost of goods sold – amortisation of copyright 0 0

Cost of goods sold – purchasing costs 10,738 8,172

Import & distribution costs 3,102 2,229Total 14,470 10,838

Analysis of overheads 2008 2007

Sales & marketing1 1,909 1,486

Design and development2 2,151 1,570

Professional/consultancy fees 154 198

Depreciation - property, plant and equipment 320 228

Directors costs 683 586

Office & property costs3 853 596

Other 220 240Total 6,290 4,904

Notes:

1. Includes 18 sales staff, marketing & advertising, commissions and related travel/entertainment costs

2. Includes 29 design team staff, printing, graphics, product sampling and other development costs

3. Includes rent for existing offices plus larger warehouse.

Additional notes:

The value of the intangible asset relating to the Harry Boulder licence has been included in the balance sheet at £80,000. No amortisation has been applied to this figure.

The value of the intangible asset relating to the KFun/Tara Productions venture has been included in the balance sheet under “copyrights” at £2.5m. This includes the original cost of signing the deal and other costs, plus an amount of £2.1m which represents an estimate of the costs of the design team’s time developing products for the individual programmes (£300,000 per programme). John Bowman argues that all rights to the merchandise for characters in the programmes belong entirely to BEP and has been built up and created by BEP using the design team, that a future benefit in the form of sales will take place, and therefore the amounts can be included in the balance sheet as an intangible asset. There is some concern on the reliability of its classification as an asset and even if it were an asset, there is no amortisation charged on these figures nor has any allowance been made for the latest information relating to the prospects for future benefit attaching to both these intangible assets.

BUSINESS SCHOOL 10


Inventory includes:

Historic cost At 31 Dec 2008, £000

Harry Boulder 680Other character products 734KFun character ranges 2,263

3,677No provision has been made against any of these values based on the latest information and John Bowman remains confident that the stock will be sold at a price higher than historic cost, even if it takes a little longer.

Trade receivables include £123,000 due for payment from a customer in the UK. However, this customer has received two complaints from worried mothers about the eyes in the toy falling out and potentially being swallowed by small children. It is negotiating with BEP to return its entire stock of this product to BEP for a full refund of the £123,000 receivable. BEP has countered by suggesting that the quality was acceptable, and that the children must have caused the damage. However, the customer is still refusing to pay, so BEP has suggested some of the products should be recalled for tests to resolve the matter.

In June 2008 John Bowman had commissioned a tax consultancy to review BEP’s affairs and corporate structure, seeking to reduce its overall tax bill. The tax consultants discovered that BEP may have been under-declaring its VAT on sales due to a coding error on its invoicing system, with a potential overstatement of sales and understatement of VAT amounting to £45,000 by the end of 2008. BEP is still investigating whether there is a problem with its accounting system. HMRC (the UK VAT authorities) have not raised any concerns or queries yet, so no provision has been made for this issue.

Included in the cash at bank in December 2008 is £10,000 which came about due to accidental overpayment on a receivables balance. The customer has said BEP might as well keep the payment for now, as a deposit towards its next order. So the £10,000 is shown in BEP’s cash balance but no other entries have been made in the SOFP.

There are arguments at Board level about the amount of information to be disclosed on the Annual Accounts. John Bowman favours a very short presentation of the Income Statement, showing just Sales and Profit before Interest and Tax. Howard believes that a greater level of detail should be supplied. “But that will just play straight into the hands of the competitors… and besides, how can I negotiate prices with customers when they all know my gross profit margins?”, complains John.

BUSINESS SCHOOL 11


Appendix 2

Shown below is the original quotation for supply to SEI for the Rugby Tournament products.

The total cost of goods to BEP was £600,000, and the agreed price payable by SEI including the profit margin was £750,000. 30% of this stock has already been sold for the originally agreed price of £225,000. SEI has offered £336,000 to buy the remaining 70%. Additional notes describing the indirect costs included in the quotation are listed below.

Product Supply Quotation for SEI - 2009 Rugby Tournament

All figures in £

Direct costs:Purchase from Chinese factory 360,000 Import & distribution costs 97,500

457,500 Indirect costs:

Design team time1 78,000 Product sampling costs 9,500 Sales & marketing - allocated costs 35,000 Other allocated overheads 20,000

142,500

Total cost 600,000

PLUS 25% profit margin 150,000

Price agreed with SEI for total order 750,000 Plus 5% royalty on sales

Notes:

1. Design team time is the time spent by existing employees in the design department designing the ranges before they are approved and purchased.

2. Product sampling costs relate to the one off costs of a set of mock up products ready for approval prior to purchase.

3. Allocated sales and marketing costs are based on an allocation of the Sales Manager’s time in dealing with SEI.

4. Other allocated overheads include an allowance for travel, telephone, warehouse space etc.

BUSINESS SCHOOL 12


Appendix 3

Shown below are the forecasts received from the KFun CFO for 2009-2013 inclusive. These have been provided together with actual results for 2007 and the original budget and actual results for 2008, as well as notes on the key assumptions in the forecasts.

Key assumptions: The economic downturn

will cause a serious decline in advertising sales during 2009 and 2010, only recovering to 2008 levels by 2011.

Employee numbers will be reduced if sales fall. Greater efficiencies will be obtained from remaining workers.

The level of investment in 2007 and 2008 will secure the programme pipeline without major capital expenditure required until 2013.

Repayments on the existing KFun loan will continue as per original agreement with bank (currently pressing for faster return of cash).

BUSINESS SCHOOL 1

K-Fun summary financials

Profit and loss account 2007 2008 2008 2009 2010 2011 2012 2013Actual Budget Actual Forecast Forecast Forecast Forecast Forecast£000 £000 £000 £000 £000 £000 £000 £000

Revenue Advertising 15,576 18,691 17,435 14,450 16,020 19,203 22,908 25,779 Rebroadcast/content sales 6,580 6,345 6,900 7,050 7,200 7,500 7,800 8,000Total revenue 22,156 25,036 24,335 21,500 23,220 26,703 30,708 33,779Employee costs -11,879 -13,985 -14,290 -12,900 -13,254 -15,093 -17,105 -18,286Distribution costs -4,431 -4,256 -3,894 -3,655 -3,947 -4,540 -5,220 -5,742Other overheads inc. depreciation -3,951 -4,545 -4,154 -3,445 -3,719 -4,320 -5,183 -6,166Profit before interest and tax 1,895 2,250 1,997 1,500 2,300 2,750 3,200 3,584Interest -393 -644 -644 -595 -542 -486 -430 -374Profit before tax 1,502 1,606 1,353 905 1,758 2,264 2,770 3,210

Average number of staff 238 280 275 250 265 275 290 310

Proforma cash flows 2007 2008 2008 2009 2010 2011 2012 2013Actual Budget Actual Forecast Forecast Forecast Forecast Forecast£000 £000 £000 £000 £000 £000 £000 £000

Profit before interest and tax 1,895 2,250 1,997 1,500 2,300 2,750 3,200 3,584Add back:Amortisation and depreciation 550 550 550 530 560 580 600 580Loss on sale of assets 100Interest paid -393 -644 -644 -595 -542 -486 -430 -374Investment in intangible assets (and capex) -970 -1,300 -1,900 -350 -900 -600 -750 -1,350New bond - repayable in 2017 5,000 0 0Repayment of existing KFun loans -580 -580 -660 -650 -700 -750 -750 -750Net cash flows 5,502 276 -557 435 718 1,494 1,870 1,690


Appendix 4

Financial ratios

Revenue growth (%) = Revenue (yr 1) – Revenue (yr0) x 100 Revenue (yr 0)

Return on capital employed (%) = Profit before interest and taxation x 100Equity plus Liabilities

Gross profit margin (%) = Gross profit x 100Revenue

Net profit margin (%) = Profit before interest and taxation x 100 Revenue

Inventory turnover (times) = Cost of goods soldAverage inventory held or year end inventory

Inventory days = Inventory x 365Cost of goods sold

Receivables days = Trade receivables x 365Revenue

Payables days = Trade payables x 365Material Purchases (in cost of goods sold)

Current ratio = Current assetsCurrent liabilities

Acid test or quick ratio = Current assets less inventoryCurrent liabilities

Debt/equity ratio (%) = Total debt x 100Total equity

Capital gearing ratio (%) = Total debt x 100Total equity + Total debt

Interest cover (times) = Profit before interest and taxationInterest charges

Dividend per share (pence) = Total dividends approved x 100Number of ordinary shares

BUSINESS SCHOOL 1


Appendix 5 – Present value table

BUSINESS SCHOOL 2

Documents

MSc Accounting and Decision Making - Coursework - August 2013