ARM Holdings Plc

ARM Holdings Plc

Question 1

Prepare a business report for the board of directors which analyses the performance of ARM Holdings Plc over the financial years 2013 to 2015 and recommend any action the board should take.

Your report should utilise key ratios, horizontal and vertical analysis.

(50 marks)

Marking Allocation

Assessment Criteria Max Mark
Question 1
Vertical trend analysis:
 Revenues  1/4
Selling/General/Admin. Expenses  1/4
Research and Development  1/4
Operating Income  1/4
Finance Expenses  1/4
Finance Income  1/4
PBT  1/4
Taxation  1/4
Net Income  1/4
 Total non-current assets  1/4
 Total current assets  1/4
 Total assets  1/4
 Total non-current liabilities  1/4
 Total current liabilities  1/4
 Total liabilities  1/4
Total Equity  1/4
Interpretation of vertical analysis 4
 
Horizontal trend analysis:
 Revenues  1/4
Selling/General/Admin. Expenses  1/4
Research and Development  1/4
Operating Income  1/4
Finance Expenses  1/4
Finance Income  1/4
PBT  1/4
Taxation  1/4
Net Income  1/4
 Total non-current assets  1/4
 Total current assets  1/4
 Total assets  1/4
 Total non-current liabilities  1/4
 Total current liabilities  1/4
 Total liabilities  1/4
Total Equity  1/4
Interpretation of Horizontal analysis 4
 
Financial ratios and discussion*:
 ROCE  3/4
 Return on assets  3/4
 Asset turnover  3/4
 Net profit margin  3/4
 Profitability narrative 6
 Receivables collection period  3/4
 Payables period  3/4
Inventory Turnover Period  3/4
Cash Conversion Cycle  3/4
 Efficiency narrative 3
 Current ratio  3/4
 Acid test ratio  3/4
 Liquidity narrative 4
 Gearing  3/4
Interest Coverage  3/4
 Gearing narrative 5
 
Conclusions 3
Recommendations 2
Layout, structure and grammar 2
 
Total 50

 

 

Question 2

 

Required:

 

With consideration of both financial and non-financial factors, advise management on whether or not to close the Tyseley and Solihull restaurants.

(10 marks)

Advise management whether or not to proceed with the opportunity to open a second restaurant in Solihull.  Your answer should include consideration of financial and non-financial information available to you, make use of an investment appraisal technique, explain the limitations of your analysis and analyse potential sources of finance for the investment.

(20 marks)

(Total 30 marks)

 

Marking Allocation

 

Question 2
Marginal costing statement 4
Tyseley makes negative contribution  1/2
Look to close Tyseley  1/2
Recognition of 6 months on lease 1
Solihull makes positive contribution  1/2
Look to keep Solihull open  1/2
Consider impact of new restaurant  1/2
Positive contribution from others  1/2
Conclusion 2
Calculation of NPV 8
Recognition of purchase not leasing 1
Impact on existing Solihull restaurant 1
Conclusion 2
Limitations of analysis 3
Suggestions of sources of finance 2
Suitability of sources of finance 2
Layout, structure and grammar 1
Total 30

 

 

 

Question 3

 

 

Required:

 

Critically examine the effect that gearing has had on the profit after-tax earned for ordinary shareholders for each year and for each company.

(20 marks)

Marking Allocation

 

Question 3
Correct Calculations for Marvel Plc 4
Correct Calculation for DC Plc 4
Discussion on the effect of gearing 10
Layout, structure and grammar 2
Total 20

 

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