You have been asked to produce a report. It should contain the following: Appropriate coversheet (as attached in this document) Title Page, including the given title in full. Executive Summary 
 Contents Page 
 Introduction
 Literature review to support your accounting models used. 
 Sources of Funding 
 Investment appraisal 
 Cash budgeting 
 Breakeven analysis 
 Evaluation
 Any other issues to be considered. 
 Conclusions and Recommendations 
 Appendices which should be numbered. Make sure you refer your reader to them as required.

QUESTION

Word count: 2500 not including executive summary and reference

CASE STUDY: Williams Limited

WILLIAMS is a limited company, whose head office in based in South Africa. The company has been operation in the UK for the past 10 years. WILLIAMS provides financial services to a number of organisations which include SME’s, property developers and investment property funds in the UK and Africa. For the past 10 years, WILLIAMS has been a profit making firm as it has retained its previous clients, in addition to capturing an increasing share of the market. However, the finance director of WILLIAMS has recently got in touch with your professional consulting firm, and has engaged your firm with the mandate to provide them with an explanation of the cash flow problem that WILLIAMS Limited had been facing. The company is also dependent on the parent based in South Africa for and when required.

In the past month there has been a number of meetings in London and South Africa where it has been agreed that WILLIAMS Limited should do their best to expand the business and raise the required capital in England, or perhaps in Europe, so as not to depend so much on cash coming from the parent company all the time. Consequently, the management of WILLIAMS is considering the followings:

New Software

The current product that Williams Limited has to offer mostly to specialist developers and investment funds companies is outdated. The company is looking to invest in a new product, and the details of this proposal is outlined below.

Advanced Suite

All of the above estimates have been prepared in terms of present day cost and prices. Assume that cash flows arise at the end of each period. In addition

• Revenues are expected to rise by 4% in price terms per year from year 1 (start of year 2) the budget estimated selling price at start was £120.

• Overheads and working capital are expected to rise by 4% per year from year 1(start of year 1)

• The cost of Module A and Module B are expected to rise in line with inflation of 4% per year from the beginning of year 1.

• The cost of Technicians, who have come from the South Africa have not been taken into consideration in the forecast and are as follows:

Technician (T1): Will be paid £120 per hour and expected number of hours for T1 are 1,300hrs. The rate paid is expected to rise in line with inflation at 4% per year from year 2 and the number of hours is expected to reduce by 3% per year, every year from year 2 onwards.

Technician 2 (T2): Will be paid £110 per hour and expected number of hours for T2 are 1,400hrs. The rate paid is expected to go up in line with inflation at 4% per year from year 2 and the number of hours is expected to reduce by 3% per year, every year from year 2 onwards.

If WILLIAMS Limited invests in Advanced Suite, then the discount rate that would be required to assess the NPV would be 6%. The table above shows the estimated outgoings and inflows for the project.

New Drop-in Centre

The manager in charge of sales has just informed your company that they plan to open a Drop-in Centre in London and it is hoped that this Centre will be opened for business on 1April 2020. You have also been informed that to start with, the company will only sell 2 types of service as packages: Entry Level package (ELP) and Advanced Level package (ALP). This will be done to test the market and see if the business will break-even in the same period. These two are the most popular asked for packages and will be offered at £300 for ELP and £400 for ALP.

The company has provided you with the following information regarding the costs and estimated sales for the period mentioned above.

WILLIAMS plan to put in £6,000 as start-up capital and plan to sell a total of 1320 (combined) of ELP and ALP for the same period. They are not sure which of the two services will produce the most profits for WILLIAMS.

Total budgeted sales for each month are as follows: April 440, May 440 and June 440, of which 30% of each month will be for ALP. You will be required to assess the best product combination of sales for the Aril and May 2020.

To help with the setup of the Centre, the company has just concluded a deal with one of the high street banks to get a loan of £21,000 on the 1st of April 2020. The interest on this loan will be 3.5% to be paid every month. The company will be required to make 12 equal payments to repay the loan starting end of May 2020.

Financial information

As mentioned above the company plans to sell a total of 1320 product packages between 1st April and June 2020. The fixed costs for the period are as below:

From their costs estimates, the variable cost of the services are £180 for the ELP and £210 for the ALP. The fixed costs are for the whole period, so they are not affected by the level of service. However, the variable costs will increase with services output (ie sales output multiplied with variable cost per product).

Revenue from the sale of ELP and ALP will be on the basis of 30% cash in the same month, and the remaining 70% credit to be paid the following month.

Requirement:

You will be required to write a management report to the management of Williams limited directors in which the following points should be discussed.

• Provide an explanation on the different sources of funding the company can have and their advantages and disadvantages. You should make recommendations as to how the company can manage the same to help in the planned expansion program.
• Analyse the Investment proposals by using NPV and provide recommendations. You should also briefly comment on other investment proposal techniques that Williams Limited may use, and the limitations of using those techniques
• The use of management tools such as Breakeven analysis and Budgets.
• A computation of your breakeven analysis and the cash budget for the first 3 months.
• An evaluation of the estimated company performance or position during the same period
• A detailed Literature Review of the tools you have used such as breakeven analysis and budgets and their importance to business.
• Other issues for management to consider that you think are vital for them to survive and make a profit.

Structure

You have been asked to produce a report. It should contain the following:

• Appropriate coversheet (as attached in this document)
• Title Page, including the given title in full.
• Executive Summary 

• Contents Page 

• • Introduction

  • Literature review to support your accounting models used. 

  • Sources of Funding 

  • Investment appraisal 

  • Cash budgeting 

  • Breakeven analysis 

  • Evaluation

  • Any other issues to be considered. 

  • Conclusions and Recommendations 

  • Appendices which should be numbered.
    • Make sure you refer your reader to them as required.

  LayoutYour work should be word processed in accordance with the following:

  • Font style, Arial, font size 12
  • 1.5 line spacing.
  • The page orientation should be ‘portrait’
  • Margins on both sides of the page should be no less than 2.5 cm
  • Pages should be numbered
  • Your name should not appear on the script.

  • ANSWER

  • Management Report: Funding, Investment Appraisal, and Financial Analysis for Williams Limited

    Executive Summary

    This management report provides an analysis of the funding options available to Williams Limited for its planned expansion program. It explores various sources of funding and their advantages and disadvantages. The report also evaluates investment proposals using the Net Present Value (NPV) method and discusses other investment appraisal techniques. Additionally, it examines the use of management tools such as breakeven analysis and budgets. A detailed computation of the breakeven point and cash budget for the first three months is included. Furthermore, an evaluation of the company’s performance and position during this period is presented. The report concludes with recommendations and considerations for Williams Limited’s survival and profitability.

    Introduction

    The introduction provides background information about Williams Limited, its operations, and the cash flow problem it has been facing. It also highlights the company’s plan to expand its business and reduce dependence on the parent company in South Africa.

    Literature Review

    This section presents a comprehensive review of relevant literature on accounting models such as breakeven analysis and budgets (Irani & Love, 2002). It explores the importance of these tools in assessing financial performance and making informed business decisions.

    Sources of Funding

    Various sources of funding available to Williams Limited are discussed, including equity financing, debt financing, and internal sources such as retained earnings. The advantages and disadvantages of each funding option are presented, along with recommendations on managing funding for the expansion program.

    Investment Appraisal

    The investment proposals, specifically the investment in the new software called Advanced Suite, are analyzed using the NPV method (Götze et al., 2008). The report provides recommendations based on the calculated NPV and briefly discusses other investment appraisal techniques, highlighting their limitations.

    Cash Budgeting

    A cash budget for the first three months is computed, taking into account the estimated sales, fixed and variable costs, and cash inflows and outflows. The cash budget helps in assessing the company’s liquidity position and managing cash flows effectively.

    Breakeven Analysis

    The breakeven analysis determines the level of sales needed to cover all costs and reach the breakeven point. The computation of the breakeven point for Williams Limited is presented, along with its implications for the company’s profitability.

    Evaluation

    This section evaluates the company’s estimated performance and position during the initial period of the expansion program. It considers factors such as revenue, costs, profitability, and liquidity to provide insights into the company’s financial health.

     Other Considerations

    Additional vital factors for management to consider for the company’s survival and profitability are discussed (Breakeven Analysis, n.d.). These factors may include market conditions, competition, customer preferences, and technological advancements.

     Conclusions and Recommendations

    The report concludes by summarizing the key findings and recommendations. It emphasizes the importance of managing funding sources effectively, making informed investment decisions, utilizing management tools, and considering various factors for long-term profitability.

    Appendices

    Supporting information, calculations, and relevant data are provided in the appendices and referred to throughout the report as necessary.

    In conclusion, this management report provides Williams Limited’s management with a comprehensive analysis of funding options, investment appraisal, cash budgeting, breakeven analysis, and financial evaluation. It highlights the importance of utilizing these tools and considering key factors to ensure the company’s success in its planned expansion program.

    References

    Breakeven Analysis. (n.d.). Google Books. https://books.google.com/books?hl=en&lr=&id=6zwuXAYPIXIC&oi=fnd&pg=PR7&dq=Breakeven+Analysis&ots=uF3ng5QbsE&sig=17B3EN9gONQv6hoUkNIOzgTQcEYhttps://books.google.com/books?hl=en&lr=&id=6zwuXAYPIXIC&oi=fnd&pg=PR7&dq=Breakeven+Analysis&ots=uF3ng5QbsE&sig=17B3EN9gONQv6hoUkNIOzgTQcEY 

    Götze, U., Northcott, D., & Schuster, P. (2008). Investment appraisal. Methods and models, 2.https://link.springer.com/content/pdf/10.1007/978-3-662-45851-8.pdf 

    Irani, Z., & Love, P. E. (2002). Developing a frame of reference for ex-ante IT/IS investment evaluation. European Journal of Information Systems, 11, 74-82.https://link.springer.com/article/10.1057/palgrave.ejis.3000411