BAM4013 Financial Decision Making in Business Assignment 2026 | University of Bolton

BAM4013 Financial Decision Making in Business Assignment

Question 1

Part-A

Robert Company Ltd is considering which of two projects it should accept. You are the Finance Director (FD) and have decided that the project with the higher NPV should be chosen, whereas the Managing Director (MD) thinks that the premise is inaccurate because both projects have the same length of life. The director anticipates a cost of capital of 10% cashflows of the projects are as follows: Additionally, the director plans to apply the two main methods of appraisal analysis: Net Present Value (NPV) and Payback Period.(25 Marks)

Required:

a)Calculate the NPV for projects A and B (3 Marks)
b)Calculate the Payback Period for Projects A and B (3 Marks)
c)Explain the outcomes in (a) and (b) above. (3 Marks)
d)Evaluate the merits of NPV over Payback Period and dispel the manager’s confusion. (6 Marks)

Part-B

Answer the Multiple-Choice Questions

(i)What is the difference between cash inflow and outflow? (3 Marks)

a)Receipts from sales and purchases of assets and expenses
b)Receipts on purchases of assets and expenses
c)Purchases and payments of assets and expenses

(ii)Why is the NPV method of investment appraisal superior to all others? (2Marks)

a)It considers the time value of money.
b)It is based on the cash flow of the payback period.
c)It leads to the minimisation of the shareholders’ wealth.

(iii)Which of the following is a decision rule for NPV? (2 Marks)

a)If NPV is zero, the project breaks even.
b)If the payback period is zero, the project breaks even.
c)If NPV is negative and payback is positive, the project is viable.

(iv) A capital investment project is the spending of money now to receive benefits (or reduce costs) in future years. (3 Marks)

a)True
b)False

Question 2

Businesses keep various financial records to test the strengths and weaknesses in performance using ratios of the business and to ensure that taxes are paid. These records include income statements(Table 1) and Statements of Financial Position(Table 2). (25 Marks)

Table 1: Income Statement (Profit and Loss)

Table 2: Statement of Financial Position (Balance Sheet)

Required:

Part A:

Answer the Multiple-Choice Questions (MCQ) below:

Write the answer only for example(i) a, b or c

(i) What does an income statement show? (2 Marks)

a)The financial performance of a business
b)A sales projection for a business
c)The value of a business

(ii) What must be taken away from sales revenue to show the gross profit of a business? (3 Marks)

a)Expenses
b)Expenses and cost of sales
c)Cost of sales

(iii) Select which type (below) is legally required to produce and publish an income statement? (2 Marks)

a)Partnership
b)Sole trader 
c)Limited company

(iv) Which of the following formulas is referred to as a current ratio? (3 Marks)

a)(current assets – closing inventory)/ current liabilities.
b)current assets/ current liabilities
c)cost of sales/ average inventory

Part B: Calculation of Ratios

(a)Using Tables 1 and 2, calculate the different ratio categories listed in Table 3below for 2021 and 2022. (12 Marks) 

(Show your workings on Table 3)

b) Based on the outcome in Question A of Part B: Evaluate the trend in performance for 2021 and 2022 in relation to the ratio types calculated.(3 marks)

Table 3: Ratio Analysis

Question 3

Mehedi Company Ltd uses Break-even analysis (also known as Cost-Volume-Profit(CVP) analysis) to study the effects on its future profit in respect to changes in fixed cost, variable cost, sales price, and quantity. This helps the company in its short-term decision-making.(25 Marks)

Part A:

Answer the MCQs on Breakeven by selecting the right choice.

(i)What is the break-even point? (2 Marks)

a)The point at which a business makes a profit.
b)The point at which a business makes a loss.
c)The point at which revenue and total costs are the same, meaning the business makes neither a profit nor a loss.

(ii)Choose the correct formula for computing the break-even point. (3 Marks)

a)Variable costs ÷ (selling price − fixed costs)
b)Fixed costs ÷ (selling price − variable costs)
c)Selling price ÷ (fixed costs − variable costs)

(iii)If fixed costs are £21,000, the selling price is £7, and the variable cost is £4per unit, what is the break-even point? (3 Marks)

a)7,000 units
b)4,000 units
c)4,500 units

(iv)What does the margin of safety show?(2 Marks)

a)The amount by which sales exceed the break-even point.
b)The number of sales a business needs to make to break even.
c)The maximum number of sales a business can make.

Part B:

Mehedi Company Ltd would like to improve its sales of toiletries. The following data are available in Table 4:

Table 4:

From Table 4

a)Calculate the Breakeven points (in units) for the coconut and pomegranate. (6 Marks)
b)Calculate Margins of Safety for the coconut and pomegranate. (5 Marks) 
c)Critically review the benefits and drawbacks of the Breakeven point. (4 Marks)

Question 4

Mediterranean Ltd (a medium-sized private company) and Oceanic Ltd (a small-sized private company) both trade in the hospitality industry. The Boards of Directors of both corporations are confronting a variety of options to decide on how their business might be financed to merge their business.

Required:

Part-A

a.Distinguish between merger and acquisition of a business with examples.(7 Marks)

b. Categorise and critically discuss the principal sources (long-term and short-term options) of finance that the above LTD Companies may have access to. Explanation must come with an example. (8 Marks) 

Part-B

1) What is the purpose of a cash budget? (2 Marks)

a)To show planned receipts and payments and to help make decisions.
b)To show the profit or loss of a business
c)To show the value of a business

2) What does business expansion mean? (2 Marks)

a)When an owner sells a share in their business
, b)When a business moves to a different supplier 
c)When a business increases the size and scale of its operations

3) Which method of growth will allow a business to keep its own values? (2 Marks)

a)Internal (organic)
b)Merger 
c)Acquisition

4)Which is a method of internal (organic) growth? (2 Marks)

a)Acquisition
b)Merger 
c)Franchising

5)What outcome would you expect if more cash is leaving a business than coming into it? (2 Marks)

a)A surplus closing balance.
b)Sales will be seen to increase.
c)A closing balance showing a deficit.

RATIO FORMULA