Answer (a)
In this report concepts on business economics will be discussed. Business economic concepts are used for the execution of improved policies, strategies and plans for the development of the organization. Apple had implemented many policies, strategies for improving the national economy and also towards delivering the latest features in the products with the motive of amplifying the sales globally. This report also includes government strategies, policies aimed at controlling economic and secretarial flow within economic condition.
Apple has an adaptable set of behavior strategies due to its involvement in diverse business activities aimed at achieving definite objectives. It has been previously stated that Organization carries the business for the purpose earning maximum profits. Company’s Mission and vision statement are bases for the company’s success. Apple motivates its employees to perform efficiently and also supports a competitive spirit (Laird-Magee, Gayle and Preiss, 2015).
Apple’s is an American company and its head office is located in California. It is engaged in electronic products and also provides services through online platform for selling the products. It has been examined that the Apple’s has best strategy for trading the products and services in the worldwide market. Mission statement specifies the work scope and the current condition of the company. The mission statement states the baseline of the future acts which the company will execute such as in Apple Inc it declares Mac, OS X, iLife etc. In other words, it can be said that mission statement includes future plans which will implement in other businesses by the company. Thus in case of Apple’s mission statement it states ‘defining the future of mobile media and computing devices’. Such mobile media also include online media which is accessible through mobile device such as iPhone. Thus, it is examined through mission statement that Apple is perfect in describing goals (Apple Inc., 2017).
Thus, Mission statement of Apple can be enhanced. Defining the future of mobile media and the detailing is the key points. But at the same time it does not provide details on the corporate social responsibility, market leadership and others. Therefore, it is concluded after reading the mission statement that it practical, reachable, precise, convenient but it very narrow at the same time because it does not include the details of other businesses.
In this question, demand and supply of unleaded products and diesel products are discussed. Rule of Demand and supply describes that demand will increase only when the price of alternative product will increase. In this question, price of an unleaded product has fallen by 2.4paise that means previously it was 118.7 paisa/litre but now the price of unleaded product is 116.3 paisa/litre and also at the same time the diesel prices has also reduced by 3.1paise from 120.5 paisa/litre to 117.4 paisa/litre. Thus, it has been observed that unleaded price are based on many reasons and as a result diesel prices have been maintained by the fiscal, political and economic rules which has been placed by the government (Lütkepohl and Netšunajev, 2014). Likewise as per the fiscal policies of the nation if the administration wants to manage the flow of legal tender globally then they would augment the product sales and also boost the customer base in the market (Odell, 2014). Further, it has also been observed that prices of the diesel products are based on the diverse substitute products and services such as diesel, petroleum, petrol, kerosene oil and many others those are promoted in the market.
Answer (b)
The economy of United Kingdom is growing gradually and support new businesses. It has been examined that the law of supply and demand, government’s monetary policies, financial situations etc will affect the economic expansion and the GDP rate of the world. The expansion policy of the company and benefits of people will depend upon the company’s strategies, rules and plans which are execute by the executives of the company with the central bank of the nation. For example, if the administration or the government considers the expansion of the nation with the help of the budgets then in that case the investment opportunities and employment opportunities will enhance in the United Kingdom. If a business man or the individual has taken advances or currencies for their business then the motivation will definitely enhance for the expansion and innovation which in turn directly impact the employment of that individual in the state (Borio, 2014).
Conclusion
Hence, after examining many journals and books and articles, it has been analysed that the administration or the government and their rules, policies, strategies and mission of a particular nation has a very active part in the development of the economy. However, both the fiscal and economic policies, strategies of the government of United Kingdom must sustain both internal and external economic factors.
In this question proposition of investment assessment methods, financial statements, financial planning and other financial conceptions which govern the company are discussed. Further, it has been analyzed that financial advisor or the analyst functions is very vital for the expansion of the business activities and also support the company to improve.
Finance development is very significant issues for the company because it helps the company in accomplishing objectives. Further, it has been examined that the finance expansion in the company and fiscal wealth of the country both cosset mutually for the purpose of supporting the company in accomplishing targets and objectives. If a financial analyst of the company does not make any assessments about the financial planning and control of the company such as investment appraisals, capital budgeting techniques for the purpose of raising the finances with the examination to minimize its obstacle then it would eventually enhance the company’s cost of production (Grinblatt and Titman, 2016). Capital budgeting techniques are the best options for the company for the purpose of expansion. Managers of the company are not well versed with the financial planning methods and heave the funds that are managers not even turn the company into inept company in its activities but also increase its cost of the production. In addition to this, it has been analyzed that accounting principle and financial concepts not only propose the main factors of the company but also supports the managers to prepare the financial reports and tools to reflect the company’s better position. For example, if the supervisors or managers of the company have an adequate knowledge of financial concepts tools or knowledge of capital budgeting techniques, then the managers or supervisors with the support of such tools could easily differentiate that which options will generate benefits (Brigham and Ehrhardt, 2013). Another example is if the managers understand the result of entering two times the transaction then they must smoothly fix the financial statements as per the concept of double-entry system.
Answer (c)
Conclusion
Thus, it can be concluded that financial planning and control supports the managers or the supervisors to identify internal and external issues that affect the finance development in the company. Further, it has also been assessed that if the supervisors applies their own judgment for the purpose of selecting the projects then also it will enhance the company’s worth the also improves the business capacity to carry their activities.
In this question financial health of Greggs Plc (main company) are assessed through ratio analysis and compare the performance of Greggs plc with Wesfarmers Limited (Competitor Company). The data of financial statements of both companies are taken from annual report for 2014. This question will described about liquidity ratio, market value ratio, asset management ratio, debt management ratio and profitability ratio.
This ratio describes the capability of the company to payback its current debt commitments as and when they have fallen outstanding. In this ratio, only current ratio is computed for the purpose of analyzing the Greggs Plc. Liquidity position (morning star, 2017).
Formula for Current ratio = Current Assets/Current Liabilities
Greggs Plc (2014)
|
Particulars |
Amount (£’000) |
|
Current Assets |
101,496 |
|
Current Liabilities |
102,119 |
|
Current Ratio |
0.99 |
(Source: Appendix)
|
Particulars |
Amount ($ millions) |
|
Current Assets |
9,311 |
|
Current Liabilities |
8,229 |
|
Current Ratio |
1.13 |
(Source: Appendix)
Higher current ratio depicts the better liquidity position because it signifies short-term debt liabilities will be pay-off by the company when they fall due. After the above computation, it has been examined that the current ratio of Greggs Plc is 0.99 whereas the current ratio of Wesfarmers limited is 1.13 which depicts that the liquidity position of the Greggs Plc is not sound.
This ratio evaluates the public company’s share price. This ratio is used by the shareholders both current as well as potential in order to assess whether the share price of the company are highly-priced or under-priced. Thus, Earning per share is computed by the investors for the purpose of finding the worth of the shares of Greggs Plc (morning star, 2017).
Greggs Plc (2014)
|
Particulars |
Amount per share |
|
Basic EPS |
37.4 |
(Source: Appendix)
Wesfarmers Limited (2014)
|
Particulars |
Amount per share |
|
Basic EPS |
234.6 |
(Source: Appendix)
Market value ratios are only considered by the investors in order to determine the worth of the share price. Thus, after the above computation, it has been examined that EPS of Greggs Plc is 37.4 whereas EPS of Wesfarmers limited is 234.6 which signifies that the profitability position of the Greggs Plc is not satisfactory.
This ratio is calculated to determine the company’s capability to supervise assets for the purpose of producing revenues. This ratio also termed as turnover ratios or efficiency ratios. Thus, total asset turnover ratio is computed for Greggs Plc for measuring the output of company’s assets (morning star, 2017).
The formula for asset turnover ratio = Revenues/ average total assets
Where,
Average total assets = (opening total assets + closing total assets)/2
Greggs Plc (2014)
|
Particulars |
Amount (£’000) |
|
Revenue |
803,961 |
|
Average total assets |
351,394.5 |
|
Asset turnover ratio |
2.29 |
(Source: Appendix)
|
Particulars |
Amount ($ millions) |
|
Revenue |
60,181 |
|
Average total assets |
41,441 |
|
Asset turnover ratio |
1.45 |
(Source: Appendix)
As already discussed that asset turnover ratio measures the effectiveness of the company of utilizing the assets in order to generate sales. Thus, after the above computation, it has been examined that Asset turnover ratio of Greggs Plc. is 2.29 whereas the Asset turnover ratio of Wesfarmers limited is 1.45 which depicts that Greggs Plc is earning profits because of effective utilization of the assets.
Managerial Decisions on Finances
This ratio measures the company’s ability to use debt and evade the monetary distress in the long-term. This ratio is also termed s long-term solvency ratio. Thus, Debt to equity ratio is computed for Greggs Plc for measuring the riskiness position (morning star, 2017).
Formula for Debt-to-Equity ratio = Total Debts/Total shareholder’s equity
Where,
Total debts = Total assets – Total shareholder’s equity
Greggs Plc (2014)
|
Particulars |
Amount (£’000) |
|
Total Debts |
122,233 |
|
Total shareholder’s equity |
246,703 |
|
Debt-to-equity ratio |
0.50 |
(Source: Appendix)
|
Particulars |
Amount ($ millions) |
|
Total Debts |
13,740 |
|
Total shareholder’s equity |
25,987 |
|
Debt-to-equity ratio |
0.53 |
(Source: Appendix)
As already discussed that debt-to-equity ratio measures the financial sustainability of the company. Thus, after the above computation it has been examined that debt-to-equity ratio of Greggs Plc is 0.50 whereas debt-to-equity ratio of Wesfarmers limited is 0.53 which depicts that the Greggs Plc has low financial risk as compare to Wesfarmers limited.
Profitability ratio
Profitability ratios are computed for the purpose of determining the company’s ability to earn profits from their business operations. Thus, net profit margin is calculated for Greggs Plc. to measure the profitability position. (morning star, 2017).
Formula for Net profit margin = (Net income *100)/ Revenue
Greggs Plc (2014)
|
Particulars |
Amount (£’000) |
|
Net Income |
37,556 |
|
Revenue |
803,961 |
|
Net profit margin |
4.67% |
(Source: Appendix)
|
Particulars |
Amount ($ millions) |
|
Net Income |
2,689 |
|
Revenue |
60,181 |
|
Net profit margin |
4.47% |
(Source: Appendix)
As already discussed that profitability ratio describes the ability of the company to generate profits. Thus, after the above computation it has been examined that net profit margin of Greggs Plc is 4.67% which is higher than the net profit margin of Wesfarmers limited. Hence, the profitability position of the Greggs Plc is sound.
Conclusion
Thus, after conducting the ratio analysis it can be concluded that the financial health of the Greggs is better as compare to Wesfarmers limited.
The Future value after 3th year is calculated as below:
Formula for Future Value:
FV = PV × (1 + r)n
Where,
FV = Future value after 3th year
PV = Present value i.e. $ 700
r = interest rate i.e. 8%
n = time in years i.e. 3 years
FV = 700 × (1 + 0.08)3
FV = $ 881.80
|
Given Information: |
||||
|
Rate of return of Project A and Project B |
10.25% |
|||
|
Project A |
Project B |
|||
|
Cost of the Project |
£ 50,000.00 |
Cost of the Project |
£ 50,000.00 |
|
|
Year |
Cash Inflows |
Year |
Cash Inflows |
|
|
1 |
£ 17,000.00 |
1 |
£ – |
|
|
2 |
£ 17,000.00 |
2 |
£ – |
|
|
3 |
£ 17,000.00 |
3 |
£ – |
|
|
4 |
£ 17,000.00 |
4 |
£ – |
|
|
5 |
£ 17,000.00 |
5 |
£ 99,500.00 |
|
|
Calculation of Net Present Value |
||||
|
Net Present Value= Pv Of Ci- Initial Cost Of The Project |
||||
|
Project A |
||||
|
Years |
Cash Flows |
Coc @10.25% |
PV of CI |
|
|
1 |
£ 17,000.00 |
0.91 |
15420 |
|
|
2 |
£ 17,000.00 |
0.82 |
13986 |
|
|
3 |
£ 17,000.00 |
0.75 |
12686 |
|
|
4 |
£ 17,000.00 |
0.68 |
11506 |
|
|
5 |
£ 17,000.00 |
0.61 |
10437 |
|
|
£ 64,033.90 |
Net Present Value = £ 64033.90 – £ 50000.00
Net Present Value = £ 14034
|
PROJECT B |
|||
|
Years |
Cash Flows |
Coc @10.25% |
PV of CI |
|
1 |
£ – |
0.91 |
0 |
|
2 |
£ – |
0.82 |
0 |
|
3 |
£ – |
0.75 |
0 |
|
4 |
£ – |
0.68 |
0 |
|
5 |
£ 99,500.00 |
0.61 |
61084 |
|
£ 61,084.37 |
Net Present Value = £ 61084.37 – £ 50000.00
Net Present Value = £ 11084
Conclusion: In case of mutually exclusive projects, one project is selected and other projects are rejected for investment. The company cannot select all the projects for investment. Thus, According to this question, Project A is preferred over Project B because of higher Net present value.
References
Apple Inc. 2017, Apple mission statement, viewed on 25 July 2017 from < https://appleincproject.weebly.com/apples-mission-statement.html>.
Borio, C. 2014, ‘The financial cycle and macroeconomics: What have we learnt?’, Journal of Banking & Finance, vol.45, pp.182-198.
Brigham, E.F. and Ehrhardt, M.C. 2013, Financial management: Theory & practice. Cengage Learning.
Greggs, 2014, Annual report and accounts, viewed on 25 July 2017 from < https://corporate.greggs.co.uk/sites/default/files/GREGGS%2021488%20AR2014%20Web.pdf>.
Grinblatt, M. and Titman, S. 2016, Financial markets & corporate strategy.
Laird-Magee, T., Gayle, B. M., & Preiss, R. 2015, ‘Personal Values and Mission Statement: A Reflective Activity to Aid Moral Development’ Journal of Education for Business, vol. 90, no.3, pp. 156-163.
Lütkepohl, H. and Netšunajev, A. 2014, ‘Disentangling demand and supply shocks in the crude oil market: How to check sign restrictions in structural VARs’, Journal of Applied Econometrics, vol.29, no. 3, pp.479-496.
Morningstar, 2017, Efficiency Ratios, viewed on 25 July 2017 from < https://news.morningstar.com/classroom2/course.asp?docId=145093&page=3&CN=sample>.
Morningstar, 2017, Leverage Ratios, viewed on 25 July 2017 from < https://news.morningstar.com/classroom2/course.asp?docId=145093&page=5&CN=sample>.
Morningstar, 2017, Liquidity Ratios, viewed on 25 July 2017 from <https://news.morningstar.com/classroom2/course.asp?docId=145093&page=4&CN=sample>.
Morningstar, 2017, Profitability Ratios, viewed on 25 July 2017 from <https://news.morningstar.com/classroom2/course.asp?docId=145093&page=6&CN=sample>.
Odell, J.S. 2014, US international monetary policy: Markets, power, and ideas as sources of change. Princeton University Press.
Ross, S.A., Westerfield, R., Jaffe, J.F. and Roberts, G.S. 2002, Corporate finance, New York: McGraw-Hill/Irwin.
Wesfarmers, 2014, annual report, viewed on 25 July 2017 from < https://www.wesfarmers.com.au/docs/default-source/asx-announcements/wesfarmers-limited-2014-annual-report.pdf?sfvrsn=0>.
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