733N1 – Accounting for Decision Makers
Coursework Assessment – weighting 50%
Instructions
⦁ You have a choice. You must attempt EITHER Question 1 OR Question 2.
⦁ Your answer must be 1,500 words in total EXCLUDING any abstract, bibliography, or appendices.
⦁ refer to the “⦁ Writing ⦁ &⦁ Assessment” section on the University of Sussex Skills Hub webpages for suggestions on writing a good essay.
⦁ Also, refer to the “⦁ Referencing ⦁ &⦁ Academic Integrity” section on the University of Sussex Skills Hub webpages for guidelines on referencing and plagiarism. You should use the ⦁ Harvard referencing s⦁ tyl⦁ e.
⦁ Each student should submit only ONE document: the written essay, in Word (.doc or .docx), through Canvas. Please do not email your work directly to the module tutor. It will not be accepted as a submission.

The marking criteria will be the standard marking criteria for Business and Management postgraduate work, a copy of which is provided below.

 

Assessment notice
Students submitting essays and other coursework assessments should be aware that the penalties imposed upon students committing academic misconduct may include obtaining zero marks for the assessment unit, or even more severe penalties. See http://www.sussex.ac.uk/s3/?id=155 for further information. The most common forms of misconduct that are usually detected are plagiarism and personation. To find out more about them – and how to avoid them, see: http://www.sussex.ac.uk/s3/?id=35

Guidance on how you may approach this assessment will be provided in the seminars.

Question 1
Rogers & Lewis LLC is a Norwegian private equity firm with an eye on the UK retail sector. They are particularly interested in the supermarket business, which they believe has huge potential for growth in the post Covid-19 era.

The firm is looking to acquire a suitable supermarket chain in the UK. Two public listed companies doing business in this sector, PennyWise plc and SavvyShopper plc have been identified as potential takeover targets.

The directors of Rogers & Lewis have asked you, as the chief accountant, to assess the performance of the two companies.

The following are the internal draft financial statements of both companies for the year to 31 March 2021:

Statements of profit or loss for the year ended 31 March 2021

PennyWise SavvyShopper
£000     £000     £000     £000
Turnover        3,216           2,815
Opening inventory  173           229
Purchases  2,289           2,022
2,462           2,251
Closing inventory  (117)     (2,345)     (186)     (2,065)
Gross Profit        871           750
Operating expenses        (742)           (594)
Profit from operations        129           156
Interest payable        (24)           (18)
Net profit before tax        105           138
Tax        (29)           (38)
Net profit for the year        76           100
Retained profit b/f        128           258
Retained profit c/f        204           358

Statements of financial position at 31 March 2021
PennyWise    SavvyShopper
£000     £000     £000     £000
Non-current assets
PPE at cost           1,305           972
Less: Accumulated depreciation           (268)           (136)
1,037           836
Current assets
Inventories     117           186
Trade account receivables     461           314
Bank     39     617     –     500
1,654           1,336
Equity and liabilities:
Capital and reserves
Ordinary shares @ £1     880           540
General reserve     27           23
Retained profit     124     1031     318     881

Non-current liabilities
8% debentures (secured)           360           –
Current liabilities
Trade account payables     215           297
Bank overdraft     –           140
Other provisions     48           18
263          455
1,654           1,336

The following additional information has also been obtained:
(i) All sales and purchases for both companies are made on credit. They allow two months credit for their customers and receives the same term from their suppliers.
(ii) The market share prices for PennyWise plc and SavvyShopper plc are £2.75 and £2.60 respectively.

You are required to:
⦁ Calculate the following ratios for PennyWise and SavvyShopper based on the above financial statements:
⦁ Gross profit margin
⦁ Return on capital employed
⦁ Current ratio
⦁ Accounts payable payment period
⦁ Earnings per share
⦁ x 2 = 10 marks)
⦁ Prepare a report for Rogers & Lewis LLC, evaluating the performance of the two supermarket chains based on the above ratios and any other relevant ratios, and identifying areas which you consider require further investigation before a final decision is made.  (Word limit = 500)
(30 marks)
⦁ A trainee accountant says to you that a problem with ratio analysis is the lack of standardisation i.e., unlike the preparation of company financial statements, there are no accounting standards regulating ratio analysis. She argues that standardisation would ensure uniformity and comparability thereby making the analysis much more meaningful, as is the case with company financial statements.

Discuss to what extent you agree with her sentiments. (Word limit = 1000)
(60 marks)

[TOTAL = 100 marks]