Assessment Task 1 - Evaluate Return on Operations

Description: Financial performance is a subjective measure of how well an organisation can use assets from its primary mode of business and generate revenues. This term is also used as a general measure of a firm's overall financial health over a given period of time, and can be used to compare similar firms across the same industry or to compare industries or sectors in aggregation (Investopedia, 2012).

In this assessment task, you will be using standard financial analysis, and accounting techniques to evaluate returns to operations of a case organisation. You will be provided with a case study for the purpose of this task.

Background: Penrith City Council (NSW) was formed in 1871. Penrith is o city on the western fringe of the Sydney metropolitan area, in east central New South Wales, Australia. Penrith is approximately 54 kilometres by road west of Sydney. The local government boundaries of the City of Penrith cover an area of some 407 square kilometres on the Nepean River flats of the Cumberland Plain.

The council defines its vision to promote the city as "a sustainable and prosperous region with a harmony of urban and rural qualities with a strong commitment to environmental protection and enhancement. It would offer both the cosmopolitan and cultural lifestyles of a mature city and the casual character of a rural community."

Council's 2009-2010 financial statements are provided for your further information and analysis. Use MS Excel to complete the following tasks.

Task1: From the given financial statements, analyse;

1. Free Cash Flow (FCF) in 2009-2010

2. Operating cash flow trends over the last five years

3. Investing cash flow trends over the last five years

4. Total Income trends from Continuing Operations

5. Net operating profit trends

Depict the trends in a graphical formative using MS Excel, with appropriate labels.

Task 2: Using the financial statements provided, calculate:

1. Current ratio

2. Debt/equity ratio

3. Return on Investment over five years using the cash flow method

4. Gross profit margin

5. Breakeven revenues

Assessment Task 2 - Team Project: Penrith City Council: Evaluate Financial Performance

Description: Note to Trainers/Assessors: With a focus on this major project at the end of the term, learning sessions should include aspects of this project (aligning with previous assessment tasks) with on opportunity for the learners to practice within the class. Ideally, some time should be allocated in each learning session for the project, helping the learners to progress as the term progresses. Case organisation provided in this task may be changed from time to time or between groups to maintain originality and variety of work, if needed. Any changes/variation to the task must be recorded and reported through Learning and Assessment Materials Feedback Form.

Depending on the group profile and orientation, this task con also be given os an individual project.

Task: This task uses the same case/organisation context and background used in Assessment Task 1. This is a progressive task building on the skills and knowledge developed in the process of completing Assessment Task 1; and in conjunction with the respective learning sessions. In this task, you and your team will be evaluating financial performance of the Penrith City Council and preparing a financial forecast for the council based on assumed capital works.

This is a team project that can be undertaken by a team of two students. The team should be balanced with the required skills and knowledge available to complete the task. Trainer/assessors may assist in formation of teams. Teams should be formed early in the term to help develop the required rapport and constancy among the team members.

Consider the following additional information:

Considering the growth of the city and prepare for future challenges, the council needs to prepare a financial in based on the following presumptions;

Demographics of the local government area:

• Population levels have constantly increased over the last ten years with a rapid increase reported with the last two years
• The population growth trend is likely to continue over the next decade with new migrants choosing the city as a preferred home city
• Age profile of the community is likely to change over the next decade with number of young family substantially increasing

Economic growth/development (of council)

• In 2009-2010, Total assets were up by 24.4% to $1,433m due to purchases and revaluations
• Assets held per head of population is $8,219
• Total revenue was down 1.2% to $162.1m
• Total expenditure was up 9.7% to $167.9m
• The council had an operating deficit of $5.9m

Service Delivery

• Council intends to maintain the services it provides over the next 10 years i.e. increase child care centres as population trends show population more likely to need them, increase after school care
• Council intend implementing additional services in the next 10 years with new housing developments and population grown anticipated
• Council foresees major planned expenditure (capital works) as part of its strategic plan Council's Plan

Council's Plan:

• Council wishes to construct a new P-12 public school in one of the growth corridors with an estimated cost of $24.6 million. The school would accommodate approximately 800 pupils each year.
• Council wishes to undertake a major renovation of public playgrounds and parks with an estimated expenditure of $10.6 million.
• Council wishes to introduce a new levy for maintenance of nature strips with an estimated return of $7.6 million per annum.
• Council will undertake major road works over the next three years with a total budget of $22.6 million.
• Council will commit to building two new recreational facilities with an estimated cost of $54.4 million over next four years.

Based on the above information:

1. Develop short term and long term objectives for the council.

2. Conduct cost-benefit analyses for two of the major investments, P-12 school and recreational facilities.

3. Calculate a breakeven analysis for 2x recreational facilities with an assumption of percentage of population accessing the services (swimming and indoor sports) and an average fee per family.

4. Identify new resource requirements (e.g. new staff, equipment, vehicles, workspaces etc.) based on perceived activities.

5. Calculate revenue estimates using fictitious data of population and users of new facilities and analyse the same.

6. Develop a policy document for periodic monitoring and transparency of expenditure.

7. Calculate ROI on P-12 school and recreational facilities and analyse the same.

8. Plan and articulate how the council will raise the funds necessary for new investments and suggest financial options.

9. Develop risk management strategies (e.g. periodic analysis, reporting, policy, risk analysis etc.).

10. Based on the current year's (2009-2010) financial reports, prepare projected income statement and projected balance sheet for 2010-2011 with above provisions.

11. Prepare a budget variance template in Excel that links to forecasts and tracks actual verses budgeted income statement and balance sheet.

12. Calculate total debt to equity ratio on total new liability and current equity and analyse the same.

13. Prepare an impact statement outlining how new investments, expenditures and estimated borrowings may affect council's services and service standards.

14. Explain how council's financial performance will be affected over the courses of next four years with the planned capital works.

Ideally, you should complete all the financial calculations/data in the same Excel file with different tabs/worksheets for different purposes with appropriate labels. Written aspects (e.g. objectives, policy document, analyses/comments, and risk strategies) must be work-processed.

Assessment Task 3 - Knowledge Test

Q1. What is the SWOT analysis? How can SWOT analysis be used in managing the financial performance?

Q2. What are the key obligations of the auditor under s311 and 601HG of Corporations Act? What happens if the auditor's fail to meet their obligations?

Q3. List and describe five fundaments principle that underpin Code of Ethics for Professional Accountants under APES 110 (Accounting Professional and Ethical Standards Board).

Q4. List and describe three key principles of cash flow and budgetary control.

Q5. What is a cost-benefit analysis (CBA)? List the key steps for conducting a CBA?

Q6. What is Corporate Governance? List and describe eight key principles of internal control for public companies as described in ASX Corporate Governance Principles.

Q7. List and describe key elements of the risk management process.

Q8. DecMeg, a magazine publisher, plan to publish and sell a new fashion magazine at a retail price of $8.95. Variable costs are estimated to be $1.50 per copy, with variable selling and distribution costs amounting to $0.45 per copy. DecMeg expects to incur fixed costs of $224,000. The maximum capacity of the plant is 185,000 copies. Calculate the number of copies that need to be sold to breakeven.

Q9. What sales volume is necessary for DecMeg to earn a profit of $75,000?

Q10. DecMeg's contribution margin ratio is 35% (or 0.35). If total sales are $125,000 and breakeven sales are $90,000, what is operating income?

Assessment Task 4 - Portfolio

Description: You would have completed a number of activities and practical tasks during this unit. Most of those activities contribute towards assessment for this unit of competency.

Submit your complete portfolio with copies of all activities and tasks completed, including any handwritten notes or copies of reference documents.

All the documents contained within the portfolio must be relevant to the class activities and tasks completed during each learning session during the course of this unit.

Assessment Criteria - The following assessment criteria will be used for marking this assessment task. Ensure that you have addressed all of the criteria in your work;

• Attended relevant learning sessions and completed the required activities and practical tasks
• Communicated effectively in classroom and team/group discussions
• Demonstrated effective research and analytical skills in the given tasks
• Demonstrated learning skills to maintain knowledge of key concepts and theory
• Demonstrated self-organisation skills to plan and sequence on work and coordinate with the other group/team members
• Used a range of software and computer applications
• The portfolio contains evidences of all the activities and tasks conducted during the unit
• Portfolio is organised and orderly with evidences of own work.