AFIN6013: GNK Industries Case Study - Accounting and Finance Assignment Help

Assignment Task:

The assignment is worth 30% of the total course mark. The assignment is composed of two parts and this document focuses on the first part. 

• Part 1 (20%): make projections for a snack company. 

• Part 2 (10%): perform analysis and summarise your findings in a report. Part 2 of the assignment will be released later in the semester. 

CASE STUDY: 

GNK industries is a snack manufacturing company that sell snacks to the local retail companies, such as supermarket and food store. Its sole income is from the sales of different lines of products, and its costs include production costs, employment, and other administrative costs. The owner of the business, Grace, wants you to make some forecast for her. 

Grace shares with us her view of the future. You will use the following assumptions to project the childcare’s financial performance in the next 6 years. (Hint: Assu will be put besides the assumption if you are required to include it in the projection. This means if that number changes, your financial statement will be different. For example, if I can change the first digit of your student ID, your projections will be different.) All rates are annual rates, and you are required to make annual projections. 

• Currently GNK has three lines of products. The first two lines of products have been in the markets for a long time, generating stable income for the company. The sales growth rate of the first line of product is 1% plus the modulus of the first digit of your ID (Assu) over 3. You can calculate it as 1% + MOD(digit 1, 3)/100. The sales growth rate of the second line of product is 1% plus the modulus of the second digit of your ID (Assu) over 3. You can calculate it as 1% + MOD(digit 2, 3)/100. 

The third line of product is new to the market and is very popular. The current growth rate is very high, and is 15% plus the modulus of the third digit of your ID (Assu) over 4. You can calculate it as 1% + MOD(digit 3, 4)/100. However the growth is expected to slow down after a particular year, which is 2 plus the modulus of the fourth digit of your ID (Assu) over 2. You can calculate it as 2 + MOD(digit 4, 2). The long term sustainable growth rate is the same as the growth rate of the first product (Assu). 

The current sales of the three lines of products are $250,000, $170,000 and $ 100,000 respectively. 

• The cost of goods sold is assumed to be 30% (Assu) of the sales in the same year. The ratio is not going to change. 

• Other operating costs will be increasing at the inflation rate. The inflation rate is the 1% plus the modulus of the fifth digit of your ID (Assu) over 3. You can calculate it as 1% + MOD(digit 5, 3)/100. 

• Administrative cost will be increasing as well, but at the rate that is lower than the inflation rate by 0.5% (Assu). 

• The interest rate paid on the current debt (initial principle $250,000) is 1% plus the modulus of the sixth digit of your ID (Assu) over 3. You can calculate it as 1% + MOD(digit 6, 3)/100. 

• GNK Industries does not earn any interest income on its cash balance. But there is a limit on the maximum amount cash held in the bank. Whenever the cash balance is higher than $175,000 (Assu), the excess amount will be used to reduce the debt principle. The company has no plan to borrow additional debt. 

• The at cost fixed assets will be 60% (Assu) of the sales, and the depreciation expense is 5% (Assu) of the opening balance of the total fixed assets at cost.

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