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Level 1
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Category: Level 1

ICAG Knowledge Level
1.2 Business Mgt. & Information SystemsLevel 1Strategic planning

May 2019 Q2.

TestCo Company Ltd (TCL) introduced a product, YZ Sap, into the North East Region market and the patronage was very encouraging. In a conversation with a friend, the Managing Director of TCL, Asembibeba, made a strong case for taking risks without necessarily planning for the outcome. In his opinion, introducing YZ Sap into the North East Region without a formal planning process and its positive outcome suggests that planning is not necessary when entering a new untapped market.
Required:
a) Write a note to Asembibeba explaining clearly FIVE (5) reasons why there is the need for planning before embarking on a business venture.                                                                                                                                                                (10 marks)

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  • It helps the organisation to take a long view and avoid short-termism, while at the same time providing a sensible approach to the uncertainty of the future.
  • It guides the allocation of resources.
  • It co-ordinates the activities of the various parts of the organisation, ensuring the integration of operational management decisions into the higher strategy, the wider organisational context and longer-term goals.
  • It sets a standard by which the actual performance of the organisation is measured and controlled.
  • It comforts providers of finance in particular, and encourages suppliers and employees to think in terms of a long-term relationship.
  • The process of forming strategy requires wide and complex input, so it can have a beneficial effect on managers’ personal development and awareness, and can assist with management succession planning.

b) Write a second note to Asembibeba explaining FIVE (5) advantages of a formal system of strategic planning when embarking on a business venture.                                                                                                                                      (10 marks)

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  • Identifies risks. Strategic planning helps identify and manage risks.
  • Forces managers to think. Strategic planning can encourage creativity and initiative by tapping the ideas of the management team.
  • Forces decision making. Companies cannot remain static – they have to cope with changes in the environment. A strategic plan draws attention to the need to change and adapt, not just to ‘stand still’ and survive.
  • Better control. Management control can be better exercised if targets are explicit.
  • Enforces consistency at all levels. Long-term, medium-term and short-term objectives, plans and controls can be made consistent with one another. Otherwise, strategies can be rendered ineffective by budgeting systems and performance measures that have no strategic content.

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1.2 Business Mgt. & Information SystemsInformation, Information technology and systemsLevel 1

May 2019 Q1 d.

Outline FIVE (5) characteristics each of the following:

Management Information Systems

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  • Support structured decisions at operational and management control levels.
  • Designed to report on existing operations.
  • Have little analytical capability.
  • Relatively inflexible.
  • Have an internal focus

 

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1.2 Business Mgt. & Information SystemsLevel 1Strategic planning

May 2019 Q1 c.

Outline FIVE (5) characteristics each of the following:

Strategic Plans

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  • They are written down.
  • They are circulated to interested parties in the organisation.
  • They specify the outcomes (eg where the business wishes to be in five years’ time.
  • They specify how the outcomes are going to be achieved.
  • They trigger the production of operational plans lower down the hierarchy

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1.1 Financial AccountingLevel 1Ratio analysis & Interpretation

May 2016 Q5

BB is the owner of a business supplying goods to other traders. He has just received the financial accounts for his business for the year ended 31st December 2014 from his accountant. These are reproduced below.

Note: Inventory on 1st January 2014 was valued at GH¢48,000.
BB has also obtained comparative information about a competitor for the year ended 31st December 2014.
Net profit margin                              6%
Return on capital employed             10.50%
Current ratio                                     4.2:1
Liquid (acid test) ratio                      0.3:1
Rate of inventory turnover               4 times
Required:
a) Calculate for BB each of the following ratios for the year ended 31st December 2014 (where appropriate, calculations should be approximated to two decimal places):
i) Net profit margin.                                                                                                                                                            (2 marks)
ii) Return on capital employed (using the closing year end value for capital employed)                                                  (2 marks)
iii) Current ratio.                                                                                                                                                                 (2 marks)
iv) Liquid (acid test) ratio.                                                                                                                                                  (2 marks)
v) Rate of inventory turnover.                                                                                                                                             (2 marks)

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  • net profit margin                               = 4.65%
  • return on capital employed               = 15.11%
  • current ratio                                       = 7.89:1
  • liquid (acid test) ratio                        = 1.78:1
  • rate of inventory turnover                 = 6 times

b) Based on the ratios calculated in part (a) and all other information provided, demonstrate the performance (profitability and liquidity) of BB’s business.                                                                                                                                             (10 marks)

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  • The net profit as a percentage of sales is lower than the competitor, this may be because the cost of the goods is higher for BB, or he is not marking his purchases up as much as his competitor. It could also be caused by his expenses being higher than his competitor.
  • BB’s ROCE is better than his competitor at 15.11% compared to 10.50%, this means that he is making more profit per cedi on investment in the company.
  • The current ratio of 7.89:1 is extremely high, the current ratio of his competitor is also on the high side as the generally accepted ratio should be around 2:1, in BB’s case this is probably caused by high inventory holding.
  • The acid test ratio at 1.78:1 is also a little high as here the generally accepted ratio is 1:1, however the ratio of his competitor of 0.3:1 is very low and may not be making the best use of resources.
  • BB’s inventory-turnover is higher than his competitor which means that he is selling it more frequently than his competitor. This is a better performance than that of his competitor, since he is selling his inventory more frequently than them.
  • This means that he makes a profit on every item he sells this contributes to the profitability to a greater extent than his competitor.
  • Although BB’s net profit ratio is lower than that of his competitor his other ratios are all better, and his liquidity position is healthier than that of his competitor, in fact his competitor does look to have very poor liquidity which may lead to serious cash flow problems.

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1.2 Business Mgt. & Information SystemsLevel 1Public corporation

May 2019 Q1 b.

Outline FIVE (5) characteristics each of the following:

Public Sector

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  • Accountability, ultimately to Parliament.
  • Funding. The public sector can obtain funds in three main ways.
    o Raising taxes
    o Making charges (e.g. for prescriptions)
    o Borrowing
  • Demand for services. There is a relationship between the price charged for something and the ‘demand’. In the public sector demand for many services is practically limitless.
  • Limited resources. Despite the potentially huge demand for public services, constraints on government expenditure mean that resources are limited and that demand cannot always be met.
  • Public interest. Governments once believed the public interest was best served if the state run certain services.

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1.1 Financial AccountingFinal Account of Company: Cashflow StatementLevel 1

May 2016 Q4

The Statements of Financial Position for the last two years for AO Ltd are shown below. AO Ltd implemented an expansion programme during the year ended 31st May 2015.

Additional information:
i) The total depreciation provision incorporated in the statements of financial position was GH¢48,000 at 31st May 2014 and GH¢122,000 at 31st May 2015.
ii) During the year ended 31st May 2015 a non-current asset costing GH¢22,000 with a carrying of GH¢6,000 was sold for GH¢1,000. No other disposals took place.

iii) The revaluation surplus, represents a revaluation of premises during the year ended 31st May 2015.
Required:
a) Prepare a Statement of Cash Flow for AO Ltd for the year ended 31st May 2015 in accordance with IAS 7. (Use the indirect method).                                                                                                                                                                            (12 marks)

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b) State the effects of the expansion policy on AO Ltd.                                                                                                     (8 marks)

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  • The liquidity position has fallen as evidenced by the decrease in cash. The current ratio has fallen from 1.85:1 to 1.68:1.
  • The acid test for both years is below 1:1 which could indicate that the company may have a problem in paying short-term debts.
  • The company has large amounts of cash invested in inventory and the inventory holding has increased by GH¢28,000. Inventory is not a liquid asset and it will take time to convert into cash
  • Investment in non-current assets has increased and the total cost of the investment in non-current assets was GH¢218, 000. The increased investment may increase future profits and increase the return on capital employed and returns for the shareholders.
  • The company has taken a risk with a large investment and if income does not increase, then it may make a lower return for shareholders.
  • The equity share capital has increased due to the issue of shares of GH¢140,000. More shares are available for purchase on the stock market. Although this increases equity, the control factor could change because of the increase in the number of votes by ordinary shareholders.

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1.2 Business Mgt. & Information SystemsLeadership and managementLevel 1

Nov 2018 Q7.

A Supervisor’s role as the lowest level of management is to interface between managerial and non-managerial staff. Management can be exercised over resources, activities, projects and other essential non-personal things while Leadership can only be exercised over people.
Required:
a) Explain FOUR (4) key features of supervision.                                                                                                           (10 marks)

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  • Front line manager dealing with the day to day operational level.
  • Does more technical and operational work.
  • Gatekeeper for communication between managerial and non managerial staff, both upward (conveying reports and suggestions) and downward (conveying policies, instructions and feedback).
  • Monitors and controls work by means of day to day, frequent and detailed information.

b) State FIVE (5) range of business and managerial skills important to a good leader.                                                  (10 marks)

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  • Entrepreneurship – ability to spot business opportunities and mobilise resources to capitalise on them.
  • Interpersonal skills – networking, influencing, negotiation, resolution coaching etc.
  • Decision making and problem solving skills – seeing the big picture.
  • Time management and personal organisation.
  • Self development skills – ability to learn continuously from experience, to grow in self awareness and to exploit learning opportunities.

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1.1 Financial AccountingBank reconciliation statementLevel 1

May 2016 Q3

The following is a summary from the cash book of BW Ltd for July 2015:
                                         GH¢
Opening balance            1,530
Receipts                        23,104
Payments                    (23,005)
Closing balance             1,629
On investigation it was discovered that:
i) Bank charges of GH¢15 shown on the bank statement have not been entered in the cash book.
ii) A cheque drawn for GH¢110 to pay a supplier has been entered in the cash book as a receipt.
iii) A cheque from a customer for GH¢120, which was banked (and included above in receipts), has been returned by the bank, but this has not been adjusted in the company’s books.
iv) An error of transposition which occurred in the opening balance of the cash book should have been recorded as GH¢1,350.
v) Cheques totaling GH¢264 have been sent by post to suppliers but were not presented to the company’s bank until August 2015.
vi) The last page of a bank account paying-in book shows a deposit of GH¢1,040 which was not credited to the account by the bank until 1st August 2015.
vii) The company’s bank statement at 31st July 2015 shows a balance of GH¢318.
Required:
a) Demonstrate any adjustments needed to the company’s accounting records.                                                               (8 marks)

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b) Prepare a Bank Reconciliation Statement as at 31st July 2015.                                                                                    (6 marks)

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c) Explain THREE benefits to BW Ltd of reconciling its cash book and bank statement balances.                                 (6 marks)

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  • It enables missing entries in the cash book to be accounted for, preventing errors in the financial statements. For example, the bank charges and the returned cheque.
  • It enables errors in the cash book to be identified and corrected, preventing errors in the financial statements. For example the transposition error and the cheque paid to the suppliers.
  • It enables errors on the bank statement to be identified/investigated and notified to the bank for correction.
  • It enables out-of-date cheques to be identified and cancelled in the cash book.
  • It acts as a deterrent to fraud due to the bank statement being an independent accounting record prepared by the bank.

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1.2 Business Mgt. & Information SystemsElements of a marketing planLevel 1

Nov 2018 Q6 b.

A Marketing Officer who has just been employed by NACAP Ltd has identified the need for a marketing plan for the company although the Managing Director and the wife, who own the business, do not share her view. She is convinced that there should be a corporate strategy to drive the marketing plan.
Required:

Identify FOUR (4) sections in the format of a marketing plan and describe the contents of the sections identified.      (10 marks)

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1.2 Business Mgt. & Information SystemsLevel 1Marketing management

Nov 2018 Q6 a.

A Marketing Officer who has just been employed by NACAP Ltd has identified the need for a marketing plan for the company although the Managing Director and the wife, who own the business, do not share her view. She is convinced that there should be a corporate strategy to drive the marketing plan.
Required:
a) Explain FOUR (4) relationships between corporate planning and marketing strategy.                                             (10 marks)

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