You are required to select an SME organisation you are familiar with, either your current workplace, a business you own or one you have previously been part of or have an interest in. You may also select a public organisation

Unit aims:

The learners will develop knowledge, understanding and skills that will enable them to analyse internal and publicly available financial information. This will help to inform strategic decision making.

Assessment guidance:

To achieve this unit, learners must achieve the learning outcomes and meet the standards specified by the assessment criteria for the unit. Additional assessment guidance is provided on the ATHE sample assignment brief. Learners will need to demonstrate their full understanding of the use of financial information in business decision making. Learners can use their own experience or provide examples of businesses from their research to exemplify the points which are made. Learners will need to access and interpret published business accounts.

Learning outcomes –

1. Understand the importance of financial data in formulating and delivering business strategy.

1.1 Evaluate the sources of financial data which can be used to inform business strategy

1.2 Assess the need for financial data and information in relation to business strategy

1.3 Analyse the risks related to financial business decisions

2. Be able to analyse financial data for an organisation in order to inform strategic decision making purposes.

2.1 Interpret financial statements to assess the viability of an organisation

2.2 Conduct comparative analysis of financial data using ratio analysis

3. Be able to evaluate proposals for strategic decisions on capital expenditure in an organisation

3.1 Review methods for appraising strategic capital expenditure projects and strategic direction

3.2 Evaluate business proposals for capital expenditure in an organisation using appropriate financial techniques.

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Assessment Task

You are required to select an SME organisation you are familiar with, either your current workplace, a business you own or one you have previously been part of or have an interest in. You may also select a public organisation whose financial data and annual reports you can easily access. You are required to address the above mentioned criteria.

Task Methodology

1. To achieve minimum pass you must attempt all of the pass criteria from 1.1 – 3.2.
2. To achieve merit you must complete all of the pass criteria and the merit criteria 1M1 -3M1.
3. To achieve distinction you must attempt the above and attempt the distinction criteria.

Exemplar of learning outcomes tested within pass criteria

1. Understand the importance of financial data in formulating and delivering business strategy

• Sources of financial information: Internal (internal accounting systems, payroll etc.), External (suppliers, Companies House, the Budget etc.)
• Financial information: Profitability, Cash flow, Business value, Financial stability, Cost projections.
• Need for financial information: Assessing finance requirements, obtaining finance, reporting to owners, shareholders and stakeholders, Setting and meeting targets, appraising new projects, Managing risk, Internal needs v External needs.
• Business risks: Strategic, Market, Compliance, Operational, Risk modelling.

2. Be able to analyse financial data for an organisation in order to inform strategic decision making purposes

• Published accounts: Purpose, Provide information to shareholders/stakeholders, Users – for example, shareholders, potential shareholders, managers, employees, lenders, creditors, suppliers, customers, community, competitors, Annual reports, including main financial statements (statements of financial position, income statements, sources and statements of  cash flows), director’s report, audit report, notes to accounts etc., Internal management accounts versus published financial accounts, Structure of financial statements – content and requirements, Limitations of published accounts.
• Comparative analysis: Comparison between years, Comparison between businesses, Industry comparisons, Benchmarking.
• Ratio analysis: Reasons for using ratios, advantages and limitations, Ratio categories, including profitability, liquidity, efficiency, capital and investor.

3. Be able to evaluate proposals for strategic decisions on capital expenditure in an organisation

• Types of expenditure, difference between capital and revenue expenditure (definitions, decision making, treatment in financial statements)
• Investment appraisal techniques: Payback, Accounting rate of return, Net present value, Internal rate of return, Discounted cash flow, Cost benefit analysis, Value for money.
• Long term and short-term finance: Definitions of long term and short term, Importance of matching finance to project.
• Sources of finance: Range of sources, External and internal sources, Role of markets, Role of government, Long term and short term, Advantages and disadvantages of each source, Implications of each source, for example gearing.
• Cash flow management: Cash flow forecasts v Cash flow statements, Managing inventory, trade payables, trade receivables, etc., Budgetary control processes – budgets and variances

The coursework must be submitted in business report format with executive summary, contents, headings and references