Reference no: EM132110071

Evaluate Organisation's Financial Performance

Learning Outcomes

On successful completion of this unit, the learner/trainee will be able to;

- Evaluate returns to operations
- Determine short-term and long-term needs
- Review performance

As well as demonstrating the performance criteria, to be assessed as competent, the learner must demonstrate their ability to apply the required knowledge and skills in a range of situations. These are summarised in the Competency Standards section below.

Performance Evidence

Evidence of the ability to:

- Evaluate returns to operations using standard financial analysis and accounting techniques, and following organisational policy and procedures
- Determine long-term and short-term organisational needs
- Review and monitor financial performance across an organisation

- Assess risk strategies and make recommendations regarding financial performance

Knowledge Evidence

To complete the unit requirements safely and effectively, the individual must:

- Discuss techniques for developing long-term and short-term plans, and determining financial priorities
- Explain the purpose and key features of standard financial analysis techniques and business review processes
- Explain the role of audits in evaluating financial performance
- Discuss ethical considerations in evaluating financial performance
- Identify and explain the key features of financial legislation relating to the evaluation of financial performance
- Identify and explain the key principles of:
o Cash flow and budgetary control
o Cost-benefit analysis and use of forecasting techniques
o Internal control, including statutory requirements
- Outline the key features of organisational structures and lines of management authority
- Discuss strategies for risk identification and management

Assessment Plan

Assessments for this unit have been developed by taking into account assessment guidelines as provided in the training package and evidence requirements stipulated in this unit of competency. Assessment is an ongoing process of gathering evidence to determine what each student/learner knows, understands and can do in order to inform teaching and support learning of the intended curriculum.

The purposes of this assessment are;

- To collect evidences that demonstrate competency in the performance criteria of the unit and satisfy skill, knowledge and employability skills requirements
- To provide feedback to the learners/trainees indicating the areas of improvement and professional development
- To measure the effectiveness of the delivery plan and evaluate the learning outcomes The required assessment criteria are provided in each assessment task for learner's information. Assessment Method
Assessment in this unit is based on assessment and evidence guidelines provided in the unit of competency
and the training package. The evidence is generated through summative assessment tasks. However, the role of Formative Tasks is crucial in developing the required skills and knowledge in completing the summative tasks. Formative tasks enable the trainers to evaluate their own delivery and adjust their facilitation based on the outcomes from these tasks. The role of formative assessments is to improve learning and adapt to student needs.

These tasks and activities usually take place throughout the unit and planned in accordance with the summative assessment plan/schedule. The formative tasks are generally referred to as "Portfolio" tasks. Portfolio is a collection of all the formative tasks completed during the learning sessions. The portfolio can be used by students as an evidence of participation or example of work completed as part of their learning.

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, 2017).

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 a 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 current financial statements are provided for your further information and analysis. Use MS Excel to complete the following tasks.

Task 1:
From the given financial statements, analyse;
1. Free Cash Flow (FCF) in the current financial year
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:

Task:

This task uses the same case/organisation context and background used in Assessment Task1. This is a progressive task building on the skills and knowledge developed in the process of completing Assessment Task1; 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 plan based on the following presumptions;

- Demographics of the local government area:
o Population levels have constantly increased over the last ten years with a rapid increase reported with the last two years
o The population growth trend is likely to continue over the next decade with new migrants choosing the city as a preferred home city
o 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)
o In 2009-2010, Total assets were up by 24.4% to $1,433m due to purchases and revaluations
o Assets held per head of population is $8,219
o Total revenue was down 1.2% to $162.1m
o Total expenditure was up 9.7% to $167.9m
o The council had an operating deficit of $5.9m
- Service Delivery
o 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

o Council intend implementing additional services in the next 10 years with new housing developments and population grown anticipated
o Council foresees major planned expenditure (capital works) as part of its strategic 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:

Q1. What is a 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 fundamental principles 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, plans 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 $224000. 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 the operating income?

Attachment:- Performance.rar