You are required to do as follows:
Task One
Using the Annual Report and Accounts of General Motors AG:
You should:
(a) Evaluate the performance of General Motors in the following areas, using ratio
analysis:
– Profitability
– Liquidity/Solvency
– Working capital efficiency
– Long term financial structure
– Investors’ perspective
You should summarise your findings and make particular reference to the
interests of the different stakeholders of the company.
i) You may use earlier years’ financial accounts to supplement your analysis
if you wish to be specific with certain trends that you have identified.
ii) In addition you could also consider the performance of General Motors in
comparison with its peer group of competitors.
Note: Any accounting ratios for General Motors must be calculated (and
workings shown) and not extracted from external databases, although, further
analysis may be supported by downloading ratios from external databases for
competitor companies.
(15% will be awarded with regard to the relevance and accuracy of the ratios
and 25% will be rewarded according to the quality of your written analysis)
Task Two
Considering your response to Task One you are required to provide advice, accompanied by
rationale, as to whether you would recommend a buy, sell or hold (if they are already
owned) policy for investors/potential investors in General Motors shares.
!4
Task Three
This is a hypothetical case
General Motors is known to trade with Vence Ltd, which is a UK based company providing
customised business products, such as tablets, together with support facilities for the
same. The company has a series of suppliers who supply the finished products which are
then, through their own operations, tailored to suit each customer’s needs. Once each
customer receives their products they also have an option to utilise the support services of
Vence Ltd to ensure smooth implementation and operation of the products.
The business that Vence Ltd has budgeted for in the next accounting period is as follows:
Vence Ltd is considering the adoption of an activity based costing system. They recognise
that customers are key to their success and competitive advantage, and as such have
undertaken an analysis of the budgeted costs associated with supporting these customers.
The details of the budgeted costs and activities for the next accounting period are as
follows:
Customer group Small
businesses
Medium
businesses
Large
businesses
Total
Number of customers 1,000 1,200 500 2,700
£ £ £ £
Total revenue generated 240,000 360,000 400,000 1,000,000
Total contribution 180,000 240,000 300,000 720,000
Overheads – customer
support costs
(120,000) (150,000) (200,000) (470,000)
Net gain 60,000 90,000 100,000 250,000
Activity Customer support costs
Personal advice meetings £160,000
Team training on site £200,000
Team training off site £100,000
Telephone enquiries £10,000
Total £470,000
!5
Required:
1. Using the information above, prepare a customer profitability statement for the
next accounting period, clearly showing:
a. The profit per customer group for the year
b. The profit per customer within each customer group for the year
c. The profit to sales ratio per customer group for the year
2. Using the information above, having analysed the budgeted information (as shown
in the question) and the further information obtained from your answer to part a,
evaluate with appropriate rationale, which of the customer groups, if any, should
be discontinued. Consider also how the services offered should be stream-lined to
minimise the cost burden to the company, whilst still maintaining customer
satisfaction.
3. Management accounting as a function has evolved over the decades from being
simply a costing mechanism to becoming a strategic management function. This
evolution has witnessed various changes in approaches, many of which were
considered during the following lectures:
a. Performance to the limit
b. Managing the chain
c. From inventory to infrastructure
Using these discussions as the basis for your analysis, research further and critically
consider the evolution of the strategic management accounting function, and
suggest, with both academic and practical support, whether the changes in
approach have been effective or not.
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