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FNSACC501 Provide financial and business performance information: Assessment Task 2

Assessment Task 2 Instructions 

Carefully read the following:

Mary and Mike Maroney have decided to set up a company that manufactures and sells children’s toys. 

Mary and Mike are married and are in their mid 50s. Their children have left home, so they have no dependents. They have a small mortgage on their house. 

Mary has sent you the following email:

Dear Accountant

My husband and I have decided to set up a business that manufactures and sells children’s toys wholesale to retailers. Our focus will be on Australian made, high quality educational toys. The name of the company will be Oz Quality Toys. I would like to set up a meeting with you to discuss the best business structure for us, and the best way to fund our business. We estimate that we will need $50,000 in start-up capital. I would appreciate your advice on the above, including business structure and possible sources of finance, as well as the type of business risks that you consider we should take into account. 

Kind Regards

Mary

Complete the following activities: 

  1. Prepare for meeting

The first part of this assessment requires you to prepare for the meeting with the client (Mary) to discuss and confirm the business’ objectives, as well as to confirm legal and financial requirements in relation to setting up, structuring and financing their proposed business.

Review the information provided in the email and identifies a range of initial financial options and processes. This should include:

  • Potential business structures (at least three) and advantages and disadvantages of each
  • Sources of funding (at least three) and the advantages and disadvantages of each
  • Proposed business structure and sources of funding based on information provided 
  • Actions to be taken to achieve the proposed business structure and sources of funding. 

Make notes on these options to discuss at the meeting with the client. Your assessor will advise you of the date and time of the meeting. 


  1. Participate in a meeting with client to assess their needs

The next part of this assessment requires you to participate in the meeting with your client to discuss and confirm their business objectives, as well as to confirm their legal and financial requirements in relation to setting up, structuring and financing their proposed business.

In the meeting, you will be required to discuss the following according to the notes you prepared:

  • Potential business structures (at least three) and advantages and disadvantages of each
  • Forms of funding (at least three: one short-term and one long-term) and the advantages and disadvantages of each
  • Proposed financial options based on information provided and actions to be taken to achieve the above. 

During the meeting, you will be required to demonstrate effective communication skills including:

  • asking and responding to questions
  • active listening techniques. 
  • effective non-verbal communication to assist with understanding. 

At the conclusion of the meeting you will need to verbally confirm the client’s expectations and objectives and secure the client’s agreement to proceed with the proposed business structure and funding options. 

  1. Write a business report for the client. 

Write up the proposed business structure and recommended financing in the form of a short report to send to the client (your assessor). 

Use Business Report Template to structure your response.

The report should be about two pages long.

  1. Send an email to Mary (your assessor)

The text of the email should be in grammatically correct English, written in an appropriate (polite, business-like) style.

It should introduce and summarise the contents of the attachment.  Attach your business report to the email.

Assume that you have now received the following email from Mike and Mary:

Dear Accountant

We are six months into the operations of our business and it is going pretty well. Thank you for the recommendation to make it a family trust. This has proved to be relatively simple. 

Our average monthly sales are currently $40,000 with the cost of sales being $20,000. As discussed with you originally, our Accounts Receivable turnover is set at 60 days with no cash discount payable for early payment.  However, based on a review of our competitor’s policies, we are thinking about offering a cash discount of 3% to our customers who pay within 30 days. The aim of this is to increase sales, which we estimate by offering the discount would rise to $45,000, with the cost of sales being $22,500, and 50% of our customers paying within the discount period. 

Just as a reminder, as discussed at our last meeting our plan is to achieve a 12% return on our investment. 

Please advise as to whether we should proceed with this action.

Kind Regards

Mary 


  1. Monitor company progress

Based on the information above, calculate the present value of the gross profit under the current credit policy, and the present value of the gross profit under the proposed credit policy.


  1. Send an email to Mary (your assessor)

The text of the email should be in grammatically correct English, written in an appropriate (polite, business-like) style.

The contents of the email should show your calculations and provide advice as to whether to proceed with the proposed changes to the credit policy. 



 

Mary and Mike have now been trading for one year and have provided you with the data for one year’s trading plus their forecasts for the following year. They would like you to prepare their balance sheet for the financial year 2016/2017, as well as the profit and loss statement, plus the same for forecasted amounts. 

They have also asked for your:

  • advice on current business performance
  • forecasted performance
  • a reminder of their statutory obligations in terms of reporting to the ATO and ongoing tax obligations. 
  1. Prepare a Balance Sheet and an Income Statement.

Review the data in the Client Data document provided by Mary and Mike, and then prepare a Balance Sheet and Income Statement according to standard formats for financial statements. 

Note that you will need to check all of the figures well, as there will be a discrepancy in the figures that you will need to check with Mary and Mike before proceeding. As per your company’s procedures, you are required to do this in writing so you will need to verify the data via an email to Mary and Mike (your assessor). 


  1. Send an email to Mary (your assessor)

The text of the email should be in grammatically correct English, written in an appropriate (polite, business-like) style.

The contents of the email should ask for clarification of the figure(s) that you consider to be discrepancies. 


  1. Complete the Balance Sheet and Income Statement.

Use the new figures given to you by Mary in her return email to complete the Balance Sheet and Income Statement


  1. Write a company performance report.

In addition to the financial statements above, you are also required to prepare a short (one page) report that addresses the following: 

  • An introduction to the report confirming the client’s objectives. 
  • The ratios you have identified to assess the client’s performance, including an outline of the rationale behind the ratio that you have selected.
  • The financial performance of the business based on your calculations i.e. profitability, efficiency and financial stability.
  • The financial potential of the business based on your analysis, as well as any future financing requirements. 
  • Risk management, including future cash flows and risk management options and rights and obligations?
  • Statutory obligations in terms of reporting and lodgement dates and ongoing tax obligations (include the link to the relevant section/s of the ATO web site to assist with understanding for the client). 


Use the Performance Report Template to guide your work.

  1. Send an email to Mary (your assessor)

The text of the email should be in grammatically correct English, written in an appropriate (polite, business-like) style.

It should introduce and summarise the contents of the attachments. 

Attach your Balance Sheet, Income Statement, and Performance Report to the email. 

Answer

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