ACCA考试P1-P3模拟题及解析10

　　以下是高顿网校小编为学员整理的：ACCA P1-P3模拟题及解析。
 

　　Emile Gonzalez is an industrial chemist who worked for the government of Pablos for more than 20 years. In his spare time, he continually experimented with formulating a product that could remove graffiti from all surfaces. Graffiti is a particular problem in Pablos and all previous removal methods were expensive, dangerous to apply and did not work on all surfaces. After many years of experimentation, Emile formulated a product that addressed all these issues. His product can be applied safely without protective clothing, it removes graffiti from all surfaces and it can be produced economically in small, as well as large, volumes.

　　Three years ago, Emile left his government job to focus on refining the product and bringing it to market. He formed a limited liability company, Graffoff, with initial share capital funded by his savings, his family’s savings and a legacy from a wealthy relative. He is the sole shareholder in the company, which is based in a factory in central Pablos. The company has filed two years of results (see Figure 1 for extracted information from year (2), and it is expected to return similar net profit figures in its third trading year. Emile takes a significant dividend out of he company each year and he wishes that to continue. He also wishes to remain the sole owner of the company.

　　Four years ago, Emile was granted a patent for the formula on which his product is based and a further patent on the process used to produce the product. In Pablos, patents are protected for ten years and so Emile has six further years before his formula becomes available to his competitors. Consequently, he wants to rapidly expand the company and plans to lease premises to create 30 new graffiti removal depots in Pablos, each of which will supply graffiti removing services in its local region. He needs $500,000 to finance this organic growth of his company.

　　Emile does have mixed feelings about his proposed expansion plan. Despite the apparent success of his company, he prefers working in the laboratory to managing people. ‘I am just not a people person’, he has commented. He is aware that he lacks business experience and, despite the technical excellence of the product, he has failed to build a highly visible brand. He also has particular problems in the accounts receivables department, where he has failed to address the problems of over-worked and demotivated employees. Emile dislikes conflict with customers and so he often offers them extended payment terms to the dismay of the accounts receivables section, who feel that their debt collecting effectiveness is being constantly undermined by his concessions. In contrast, Graffoff pays bills very promptly, due to a zealous administrator in accounts payable who likes to reduce creditors. Emile is sanguine about this. ‘I guess we have the money, so I suppose we should pay them.’

　　In Pablos, all goods are supplied to customers on 30 days credit. However, in the services sector that Graffoff is trading in, the average settlement period for payables (creditors) is 40 days. One supplier commented that ‘Graffoff is unique in its punctuality of payment.’

　　Emile is currently reviewing how to finance his proposed organic growth. He is unwilling to take on any further external debt and consequently he has also recently considered franchising as an alternative to organic growth. In his proposed arrangement, franchisees would have responsibility for leasing or buying premises to a specification defined in the franchise agreement. The franchise would have exclusive rights to the Graffoff product in a defined geographical region.

　　The Equipment Emporium has 57 superstores throughout the country selling tools and machines such as air compressors, generators and ventilation systems. It is a well-recognised brand with a strong marketing presence. It focuses on selling specialist products in bright, well-lit superstores. It has approached Graffoff to ask whether it can sell the Graffoff product through its superstores. Emile has rejected this suggestion because he feels that his product requires proper training if it is to be used efficiently and safely. He sees Graffoff as offering a complete service (graffiti removal), not just a product (graffiti removal equipment) and so selling through The Equipment mporium would be inappropriate.

　　Figure 1: Extracted financial data for Graffoff’s second year of trading, reported at 31 December 2011 Extract from the statement of financial position: Extracts from the income statement:

　　as at 31 December 2011 as at 31 December 2011

　　All figures in $000: All figures in $000

　　ASSETS Revenue 1,600

　　Non-current assets Cost of sales (1,375)

　　Property, plant and equipment 1,385 Gross profit 225

　　Intangible assets 100 Administrative expenses (100)

　　––––––

　　Total non-current assets 1,485 Finance costs (15)

　　Current assets Profit before tax 110

　　Inventories 100 Income tax expense (20)

　　Trade receivables 260 Profit for the period 90

　　Cash and cash equivalents 30

　　––––––

　　Total current assets 390

　　––––––

　　Total assets 1,875

　　––––––

　　EQUITY AND LIABILITIES

　　Share capital 1,500

　　Retained earnings 30

　　––––––

　　Total equity 1,530

　　Non-current liabilities

　　Long-term borrowings 250

　　––––––

　　Total non-current liabilities 250

　　Current liabilities

　　Trade and other payables 75

　　Current tax payable 20

　　––––––

　　Total current liabilities 95

　　Total liabilities 345

　　––––––

　　Total equity and liabilities 1,875

　　––––––

　　(a) Evaluate the franchising option being considered by Graffoff, highlighting the advantages and disadvantages of this approach from Emile’s perspective. (10 marks)

　　(b) Johnson, Scholes and Whittington have identified franchising as a form of strategic alliance.

　　Evaluate how other forms of strategic alliance might be appropriate approaches to strategy development at Graffoff. (7 marks)

　　(c) A consultant has suggested that Graffoff should be able to completely fund its proposed organic expansion (at a cost of $500,000) through internally generated sources of finance.

　　Evaluate this claim. (8 marks)(25 marks)

　　(a) Johnson and Scholes have identified franchising as a form of strategic alliance in their classification of methods of strategy development. In this approach, franchises are independently run businesses that would enter into a licence agreement with Graffoff to purchase training, equipment and materials in return for an exclusive geographical franchise area. The proposal is

　　that the franchisee would buy or lease appropriate premises, not Graffoff as in Emile’s organic expansion plan. Most franchises are required to make a large up-front payment, which would provide Emile with significant funds for investment or, indeed,for further dividend payments. There are also a number of avoided costs as franchisees usually pay for all the operating costs of the franchise.

　　Running their own business is usually sufficient to motivate the franchise owners and the motivation of any staff they employ is also their responsibility. Emile has already acknowledged that he is not a people person and so franchising neatly sub-contracts this issue. Thus, Emile could continue running Graffoff more or less as it is currently and he would avoid the problem of raising significant finance and managing a difficult period of expansion.

　　However, it is possible (but not inevitable) that the long-term returns to Graffoff might be lower than through directly owned or leased depots. Franchisees will take most of the profits and Graffoff will be dependent for income from materials supply and, usually, from a relatively small percentage of the franchise’s annual sales specified in the licence contract. There are also important issues to consider in the appropriate selection and control of franchises. Although the initial fee will be received by Graffoff irrespective of the franchise’s success, continuing income (and brand awareness) is dependent upon the success of the franchise. Graffoff has no experience in selecting appropriate franchisees, neither is there any evidence that it has systems in place to control quality and audit performance. These would be needed to ensure that the product is being used correctly and that the correct percentage of sales is being paid to Graffoff. Such systems will need investment and development and need to be in place before the franchise scheme is launched.

　　Furthermore, the success of franchises is often determined by the visibility of the brand. Emile himself recognises that Graffoff has a very low profile and he acknowledges that he has very little expertise in this area. Also, it would be obvious to potential franchisees that it may be difficult to maintain sales volumes once the patent has expired. Thus, there may be problems in attracting franchisees, particularly those willing to invest a significant amount for a product which, they may consider, has a relatively short lifetime and whose brand awareness is low. Emile could address the first of these issues by employing marketing expertise and launching vigorous campaigns. He might also address the patent issue by looking at improving the product. Thus focusing on product development (what he is good at) and not business expansion, where he has little experience and interest.

　　Although franchising appears to reduce financial risk, it is unlikely to produce the financial returns as quickly as the internal growth option. Emile must not underestimate the time taken to draw up the licence agreement, develop systems to support the franchise and recruit and appoint franchisees. He must also accept that some franchises are likely to fail and that returns will be low in the early years of operation as the fledgling franchises seek to establish themselves as viable independent companies.
 

　　(b) Tutorial note: There are a range of strategic alliances that the candidate might consider. Two are explicitly evaluated in the model answer. However, appropriate alternatives will be given credit.

　　Strategic alliances take place where two or more organisations share resources and activities to pursue a strategy. Many organisations recognise that they need to acquire materials, skills, innovation, finance or access to markets, and increasingly recognise that these may be more readily obtained through cooperation rather than ownership. The franchising option is a type of alliance, and Emile sees it as a way of funding his expansion without incurring employee motivational and management issues that he is not confident in addressing.

　　In terms of Graffoff, the motivation for an alliance is likely to be co-specialisation, where each partner concentrates on activities that best match their capabilities. Graffoff specialises in product design and product development. Its weaknesses,in the context of the planned expansion, appear to lie in marketing, retail and finance. Franchising has already been considered as a type of alliance. Another type of alliance that Emile might consider is a joint venture, where a new

　　organisation is set up jointly owned by its parents. It is often used by companies to enter a new geographical market where one of the companies provides the expertise and the other local knowledge and labour. This is not the case here, where expansion is within the country. Furthermore, there is no obvious candidate for a joint venture and, even if a partner could be found, it would take time to establish a contractual relationship. Emile, as an entrepreneur, might also find it difficult to work within a framework of a joint venture where he would need to cede a certain amount of control.

　　In a network arrangement, two or more organisations work in collaboration without a formal relationship. The Equipment Emporium already has 57 superstores in the country selling tools and machines. Emile rebuffed their initial advance offering to sell his product in the store, because of the need for mandatory product training. However, he might return to them and offer to set up small in-store outlets where his product could be demonstrated and its services sold. The Equipment Emporium would be paid a fee, but such an approach would, in essence, be the same as his organic growth plan but without the need for large scale capital investment. Furthermore, the locations already exist and are backed up by significant marketing expertise and high brand awareness. This kind of opportunistic alliance is a quick way of achieving the expansion that Emile requires and it draws on both partners’ expertise. There is a concern in such a loose arrangement that one partner might steal the other’s ideas or products, but that seems unlikely here. Graffoff is not interested in becoming a general machine superstore and The Equipment Emporium is primarily focused on products not services. From Emile’s perspective, this opportunistic alliance provides a potential way of piloting his proposed organic growth expansion strategy before moving into dedicated premises or, indeed, offering the outlets to franchisees.
 

　　(c) The consultant has suggested to Emile, that the company has internal sources of finance it can exploit to fully meet its required funding for organic growth. Typical sources of internal finance are retained profits, tighter credit control, reduced inventory and delayed payment to creditors. Given that Emile is committed to high dividend payments and that no information is given about inventory, two of these are relevant here.

　　Tightening up credit control makes it possible to release money for funding. The average settlement period for receivables can be calculated as (trade receivables/sales revenue) x 365. For the second year trading this is (260/1,600) x 365 = 59 (59·31)days. Thus, customers take, on average, 59 days to pay their debts, despite agreeing to a 30 day payment term.

　　Reducing this to the agreed 30 days would realise about $128,500, which could be used to invest in the business. Reducing it to 40 days (the sector-wide standard) would realise approximately $84,500.

　　However, these gains would only be achieved through implementing better procedures in accounts receivable. Emile realizes that this section is poorly motivated and under-staffed. Thus some of the proposed savings may be offset by increased staffing costs. He is also very sensitive to upsetting his customers and so the need to strictly adhere to payment terms may create initial difficulties and strain customer relations. He will have to refrain, in future, from intervening in the debt collection process, and not offer the generous terms of payment that currently undermine the debt collection efforts of the accounts receivable department.

　　This approach might be allied to delaying payments to creditors. Given the limited information, a crude estimate of the average settlement period for payables (creditors) can be calculated by (trade payables/cost of sales) x 365. In this instance this is (75/1,375) x 365 = 20 (19·91) days. Thus Graffoff pays its creditors within 20 days, whilst 40 days is common in this sector. Bringing the company in line with this practice would realise up to a further $75,500 which again could be used for investment.

　　There is no suggestion that this will cause a problem. The current fast payment of invoices seems to reflect the zeal of the administrator in accounts payable, rather than any policy of the company. If Graffoff elects to pay within 30 days (the normal credit terms for the country), this will still realise about $38,000.

　　This means that up to approximately $204,000 could be raised by Graffoff if customers adhered to payment terms and suppliers accepted sector-wide practice. This would result in a short-term, one-off acceleration of cash inflow.

　　Finally, the acknowledged problems with credit control might also cause Emile to consider factoring the company invoices.

　　Debt factoring involves a third party taking over the businesses debt collection. Most factoring companies are willing to pay 80% of approved trade receivables in advance. At current values, this should lead to an immediate cash input of $208,000 and this might be an attractive alternative to trying to manage receivables internally. It might also address the problems of motivation and staffing in the accounts receivables section. Factoring might be very valuable in a period of expansion,improving cash flow and removing, from the company, responsibility for credit investigation and debt chasing.

　　Whichever options are chosen, internal finance resources cannot completely raise the $500,000 required for the organic growth plan and so the consultant is incorrect in his assertion. Emile would have to seek external sources of finance to make up the shortfall. However, the amount raised through internal sources may be sufficient to effectively finance either the franchising option or the building of an opportunistic alliance with The Equipment Emporium.
 

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