Make Up Ltd Analysis Assignment Sample

• Subject Name : Accounting and Finance

Global Corporate Accounting - Question 1

a) NPV =(13842.3) as calculated below in the working notes, indicates that Make Up Ltd should not manufacture the face wash. This is not going to be positive project and if directors accepts this project they will be decreasing the shareholder’s wealth, by putting the cash into an negative or highly risky project.

Working Notes:

b) Payback period is useful as follows:-

• Simplicity – It is extremely simple concept to calculate and understand. It is first thing to know that by when our investment will be recovered so quite easy to predict the profitability, payback period method can even be used without a calculator or electronic mode.
• Focus on Risk: This analysis is primarily focuses on how quickly the money can be recovered for an investment. which is nothing else but measurement of risk. So if to projects need to be compared anyone will choose the one will shorter payback period to reduce the risk.
• Liquidity : Payback period method of analysis favours with shorter payback period which tends to result in investment with higher degree of liquidity.

c) In a decision making process it is financial analysis is a important step and the factors which are key for decision making other than financial are :-

Social – There are various objectives linked to doing things which are ethical and environmentally important. So, if an investment which might be profitable but not ethical or environmentally and socially. Illegal projects howsoever profitable it may be should not be accepted.

Personal Satisfaction - Any projects which aims to satisfy the personal ambition or wish of an entrepreneur even if NPV is negative will be given preference to get the desired output.

Challenge and Control: - Sometimes entrepreneur select a project to accept a challenge or take high risk project to prove and control the things may be sometimes to capture the market A company launch a project which may not be successful initial years of its operation of commencement. But the long term future is rewarding.

Independence- It relates to working for oneself , that is a entrepreneur thinks that they want to perform and take decisions independently they might choose a project without giving much importance to its viability.

Global Corporate Accounting - Question 2

a) And b) Answers

Consolidated Balance sheet as on 30^th June 2020

Note-

1. Share capital of Kellar is converted at historical value i.e. 01 July
2. Reserve as on 01 July has been converted at July 01 Rate
3. Income statement and balance sheet is converted at closing rate of 30 June, 2020

c) Fair value of accounting is the concept of using current market value of the various tangible and intangible assets under the IFRS. IFRS is an international accounting standard which is getting popular because of its practical and realistic approach towards accounting treatments of transactions. Fair Value is estimated price of an asset in which it can be sold to a third party.

Fair Value adjustments are necessary while calculating goodwill to know the real worth of investment to adjust the investment to that extent, According to IAS 21, effects of changes in Foreign Exchange rates, treatment of goodwill is considered as an assets and re-translated at each reporting date. And accordingly the exchange gain and loss on goodwill valuation is also translated at each reporting date.. So when a company prepares its consolidated statement it is very much expected to show the real value of the investments and true value of its assets and liabilities. Goodwill is an intangible asset and it is very important to book it to its real value i.e current value. Generally, there are two approaches adopted to ascertain fair value of an asset

• Market Approach
• Income approach

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