This assignment solution addresses a comprehensive finance problem centered around Cameron Ltd, a small private company. Part A requires the preparation of a Profit and Loss account and Balance Sheet for the year ending December 31, 2015, utilizing a provided trial balance and additional financial information. This involves adjusting for items like stock valuation, depreciation, advertising fees, and corporation tax. Part B focuses on cash flow forecasting for Sophie, Mr. Cameron's daughter, who is planning to start a Crèche. The task involves creating a 12-month cash flow statement, a summary for the year, and writing a letter advising Sophie on the importance of monthly cash flow forecasts. The finance section explores economic concepts such as floating exchange rates and their impact on current account deficits. It delves into currency futures, requiring calculations of importer's pay-offs and analysis of a Euro call option, calculating net profit or loss under different spot rates. Finally, the assignment requires an explanation of purchasing power parity (PPP) and its implications for currency values, as well as reasons why PPP may not hold in practice.
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