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Where did you find the capital employed figure for use in Q1?
I either missed it or I am being really stupid and couldn’t work it out.- Topics: 0
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How many mark is attributed to the evaluation of the report?
To start with the exam was pretty fair this time around (comparing i sat last two attempts as well). Overall the exam went pretty decent except the EVA part (I messed the a part of that badly).
Q 1- A- 14 marks on evaluation of report – No NFPIS, Mission statement parts not taken into account, Not enough comprehensive financial measures such as liquidity, working capital and gearing ratios, Suggested that report should include a more comprehensive analysis along with NFPIS, measures addressed to specific parts of missions statement and other financial measures.
B- Op per Square meter and Revenue per square meter- Overall decent measures but they on their own not enough to present the part of mission statement ” Using all our resources”, Calculated both measures and briefly compared them, Suggested rivals or past year data should be given as well to compare and look for growth.
C- Residual Income Vs Roce/EPS- Encourages manager to look and build for future as the capitalized investments are taken account of, Good divisional measure compared to ROCE and EPS, ROCE can be manipulated by holding assets which are aged.
D- Calculated ROCE- Expected values of Revenues around 13.05M and Op margin around 4.9% smth, calculated ROCE and argued that it is not comprehensive enough measure for company to decide on new stores to be built, NPV should be used and Effects of new store on ROCE should be calculated.
E- Information systems- Customer Retention, Customer Loyalty, Increases knowledge base of the company regarding customers, Buying habits, Aggressive marketing and a more target based approach.
Attempted Q2 and Q4.
Q2 A- BPR- Changes to production lines, faster production, greater motivated workforce, autonomy, improved production lines and methods, employees having a feeling of their own (freedom), adaptability, savings on Supervisor costs, particular disadvantages could be quality compromised and inconsistency and behavior issues of machinists regarding how they see the change
B- Bonus on number of times sewn per week is outdated after BPR, suggested team bonus should be announced related to quality standards being in place, can use a grading system for Jackets produced, A bonus should be given to team over number of A (best) graded Jackets produced and a further bonus should be given to team who has most A graded quality jackets made without defects. Also argued briefly that supervisor cost savings could be used to increase hourly wages of machinists.
Q4- A – Calculated EVA- One was negative one was positive, added back lease payments, added back acc depreciation of 1 in each as i thought economic depreciation was 9 and 4 and in income statement 10 and 5 was deducted, added non cash expense, adjusted capital employed as well, Wacc was around 9-10 %.
B- Cant recall what this was about but wrote in favor of EVA being used as performance measure system against traditional methods.
C- Value adding activities vs non value adding activities, shifting management focus, addressing mission statement of maximizing shareholder wealth.
Hoping to scrap a 50 this time around and get done with exams!- Topics: 0
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How many mark is attributed to the evaluation of the report?
@mustapo said:
How many mark is attributed to the evaluation of the report?There were 14 marks for Q1 part a- evaluation of report
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Q1 clearly asked to evaluate performance of the report.
For the WACC I have found 12%*75%+ 8%*25%=11%
The ratio was debt / equity was 1/3 hence 25% and 75% ?HI everyone.
Attempted Q4 and Q3.
In Q4 one EVA was positive ~7 and one negative ~(25). WACC was 11% (1/4*8%)+(3/4*12%). As far as I remember there was a post tax cost of debt of 8%.In Q1 expected ROCE was 13.3.
Does anybody remember whether a calculation of current measures (rev and profit per metre) was required?Hi Senya, web have the same calculation except that I had no positive EVA both were negative
I have found 13.33 % as wellFor the revenue and operating profit per square metre it was unclear hence I have done the calculation
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Got the same numbers too. Although i did invent NOPAT and CE on EVA and moved on to comment on the results so i could grab the interpretation Marks
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Think it was 14 marks
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I got 11% for the WACC too, think I got that one right
Wacc : equity 12 x 75% = 9 % pre-tax debt 8% x 25% x (1 – 0.30) 1.4%
Tax rate 30%I got the wacc to be 11%. Both EVA’S were negative. For Q1 I got 13.3% for the EV ROCE but my explanation for using EV went horribly wrong now that I’m reviewing. I am so nervous.
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go relax, exam finish
Much better paper especially in terms of timing and examiner has probably understood the previous papers were a bit too long to finish within 180 mins.
1.
a) Performance Evaluation – 14 m
b) 2 Measures on Rev/ OP sqm – 8 m
c) RI to replace as main measure over Operating Profit Margin – 8 m
d) ROCE Calculation and suggestion of another techniques (New Store) – 8 m
e) Loyalty Programme/ IS Benefits – 8 m
f) Structure of Answer – 4 m2.
a) BPR and 3 Initiative Evaluation – 14 m
b) Reward System Evaluation – 11 m4.
a) EVA Calculations for B/G – 10 m
b) EVA for Divisional Performance – 7 m
c) Value Based Management – 8 m- Topics: 0
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With me I added lease expenses back because it is value adding…
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Hey… I found wacc of 11% . I worked out exactly the way u di and iam sure it is correct
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Accuarate.. with me I didn’t adjust the cost of debt with the tax rate. I took it that since we were given the post tax cost of debt… we didnt have to adjust it
4for 4ii) i said it was incorrect to use rev and profit per sq meter mainly because the small stores were located in densely populated areas where they were guarenteed high sales and the big stores were in the outer city areas where the population was small and they would get less sales per sq meter.
but i also calculated variences,,, i foung that the larger stores ( which had less rev and profit per sq meter) exceeded budgeted expectations by 2% but the smaller stores only exceeded by 1%
This mean that despite the fact that the larger stores had less revenue per sq meter they were doing better than the smaller stores..
using revenue and profit per sq meter would mean rewarding managers for effort which they really didnt make…
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