Essay ElectroChip Limited and Tegal Foods Limited Case Study – Finance Assignment Help

Assignment Task:

Scenario 1: ElectroChip Limited 

ElectroChip Limited is a producer and supplier of machine parts to local and Australian customers. Five years ago, it appeared that the company was in danger of closing down. Profits were down, and shareholder confidence was very low.

In an effort to reduce costs and increase profits, the Chief Financial Officer and the Chief Operating Officer put in a number of efficiency and cost-saving measures. These measures include:

• Ensuring wasteful processes in the company are overhauled and efficient methods of working are introduced.
• Borrowing from the Green Bank to invest in new machinery. The Green Bank was selected because the Managing Director of ElectroChip is a member of the bank’s Board.
• Not upgrading their pollution control systems to match the requirements of the new machinery. This has resulted in an increase in emissions.
• Not upgrading their safety systems and providing safety training to workers to match the requirements of the new machinery.
• Not paying cash dividends to shareholders for the past six years.
• Stopping the company’s support to the local charity.
• Laying off older workers who were on a higher pay scale in favour of recruits straight out of college for lower pay.
• Implementing a profit-sharing plan where managers are given a percentage of the company’s profits.

As a result of these measures, the company’s profits in the past three years have been consistently rising. However, although profits are up, the company’s stock price has declined by $5.50 per share over the past 15 months. The perception in the market is that ElectroChip does not care for its shareholders.

Answer the following questions based on Scenario 1.

Q 1. Briefly explain three different roles of financial manager in financial management.  Your answer should include a relevant example from the given scenario.

Q 2.

a. List three stakeholders that have been affected by ElectroChip’s efficiency and cost-saving measures. Explain the reasons based on the given scenario.

b. For each stakeholder listed in Q2a, describe what steps ElectroChip might take to ensure stakeholders requirements are met. The steps described must be professional, ethical, and socially and culturally appropriate.

Q 3. In Scenario 1, identify the principal and the agent in the agency relationship. Explain the reason for the decline in the share price while the profits are up.                                                   

Scenario 2: Tegal Foods  Limited

 Use the ratio analysis that you have done in Task 1 to answer this question.

Q4.  Analyse the trends and explain the impact of the changes in the ratios in the following areas. Your trend and ratio analysis must focus on the impacts of Tegal Foods Limited’s return and risk elements.

1. Liquidity and solvency
2. Profitability
3. Efficiency of operations                                                                                                                   

General Questions

Q 5. Briefly explain the objectives and elements of each of the four financial statements listed below:

• income statement (statement of financial performance)
• balance sheet (statement of financial position)
• statement of changes in equity
• cash flow statement   

 Q 6. Three main factors can influence business investment decisions. These include:

1. Capital rationing vs unlimited funds
2. Independent vs mutually exclusive projects
3. Expansion vs replacement projects

Briefly explain each of these influencing factors.

Q7. You are hired by the local restaurant to analyse their financial state of affairs and provide a report. You realise that you need to understand how the five areas of business, viz., operations, accounting, sales and marketing, human resources, and risk management are managed in order to produce a report that is well-balanced and takes into account all aspects of the business.

Identify and explain at least one evidence for each area of business related to financial analysis.

Q 8. Companies are increasingly global in their operations. Some of the factors that impact the financial decision making and forecasting functions of such companies are listed below. Select any two factors and analyse how they may influence the global capital budgeting and valuation of the business.

Factors may include (select any two)

• Divisional differences
• Currency
• Taxation
• Country risks
• Adaptable incentive systems.