RTO 90982 BSBSMB421: Individual Activities Finance Assessment

This document presents a completed individual assessment for the BSBSMB421 unit, focusing on managing small business finances. The assignment includes questions on calculating net profit targets, considering investment scenarios with different bank deposit rates and risk premiums, and explaining the rationale behind investment decisions. It also covers the identification and purpose of various operating budgets, such as sales, production, overhead, and direct labor budgets. Furthermore, the assessment addresses the legal requirements for starting a business in Australia, including GST, ABN, PAYG, and TFN registrations, emphasizing their importance. The student provides detailed answers, calculations, and explanations to demonstrate their understanding of the unit's core concepts related to financial management in a small business context.

Lecture Assessment 2
Individual Activities
Unit: BSBSMB421Manage small business finances
Qualification: BSB42618 Certificate IV in New Small Business
Training
Package: BSB Business Services
Due date: Week 7 Assessment Type:
Individual activities
Student name: Student
No:
By submitting this Assessment I acknowledge my understanding
of plagiarism
Plagiarism
All work must be done individually. Copied work will not be accepted and
could lead to an “academic non-performance” rating. Plagiarism by a
student will result in an automatic ‘NYS’, and as well as being recorded,
may result in further disciplinary action such as a student’s exclusion from
a course. Plagiarism is presenting and using someone else’s work,
writings or ideas as your own with or without their consent.
V2019.2
/tmp/7860796310169478856.docx
Page 1 of 25
RTO 90982
CRICOS 02599C

Assessment submission rules and conditions
I have read and agree to the assessment guidelines conditions below.
1. The purpose of this activity is to assess your knowledge and skills of the unit.
2. If you have any considerations that may affect your performance in the
assessment please inform your assessor immediately. Your assessor will
provide you with a suitable alternative to complete this assessment.
3. To gain competency for this assessment, demonstrate competency in activity
tasks by the due date.
4. Student downloads the assessment through Moodle.
5. Student completes the assessment cover page ensuring they have written
their name and student number. Online submission opens one week prior to
due week and cut off date is set on Saturday at 11:55pm in the week of due
date.
6. In case of late submission, the student is only able to submit the assessment
with permission. The Student is first required to see student services and
make late submission fee payment before submitting the assessment after
due date. The student service officer issues the receipt and student is
required to see Trainer to submit the assessment. The trainer will grant
extension on Moodle for the student to re-submit their assessment.
7. The student will receive results within 2 weeks from due week, resulting in a
determination of Satisfactory (S) or Not Yet Satisfactory (NYS) for the task and
this result will be displayed on Moodle.
8. In case of ‘NYS’ (not yet satisfactory) result of the assessment, the student is
given an opportunity to re-attempt and submit the assessment by an agreed
date with their assessor or as soon as possible within the duration of the unit.
The trainer will grant extension on Moodle for the student to re-submit their
assessment, cut off date of re-submission is Saturday at 11:55pm in week 8.
Re-attempted assessments submitted during the term will not incur penalty.
9. The re-attempted work must address the specific performance tasks beyond
doubt for the assessor to issue a satisfactory (S) result. The system allows the
student to re-attempt online two times within the duration of the unit. Student
is required to meet their assessor before submitting the third re-attempt. The
assessor will grant extension manually only by request. A repeat NYS outcome
could lead to an administration fee.
10.Any re-submission or late submission occurring during week 8, the student is
required to see trainer before submitting the late or re-assessment. The
trainer will grant extension on Moodle by request only and the submission will
be closed on Saturday at 11:55pm in week 8.
V2019.2
/tmp/7860796310169478856.docx
Page 2 of 25

11.Any re-submission or late submission occurring during week 9, the student is
required to see trainer before submitting the late or re-assessment. The
trainer will grant extension on Moodle by request only for 15 minutes.
Therefore students should be ready to submit their assessment before going
to see the trainer.
12.All work must be done individually. Copied work will not be accepted and
could lead to an academic "non-performance” rating. See below about
Plagiarism.
Plagiarism
Plagiarism by a student will result in an automatic ‘NYS’, and as well as being
recorded, may result in further disciplinary action such as a student’s
exclusion from a course. Plagiarism is presenting and using someone else’s
work, writings or ideas as your own with or without their consent.
Some examples of plagiarism as follows
 Presenting work by another individual as one’s own unintentionally
 Handing in assessments markedly similar to or copied from another
student
 Handing in assessments without the sufficient acknowledgement of
sources used, including assessments taken totally or in part from the
Internet
13.Appeal process - If you feel the decision made by your assessor was incorrect
please refer to your Student Handbook for information on assessment appeals
for the required steps to appeal this decision. Download the assessment you
want to appeal and complete the appeal box in Feedback Evaluation Sheet by
signing as to whether you wish to appeal. You are required to hand the hard
copy in to student services.
Submission requirements
If an assessment is not submitted in accordance with the submission
requirements then it will be deemed as being non-compliant. Non-compliant
submissions result in pending on being marked and /or recorded NYS.
 All submissions must be done by PDF file. The Student is required to
convert word file assessments, PowerPoint presentation and other
attachments to PDF before submitting unless the evidence is required to
submit its original format (eg. word or excel).
 The first page in the file must be cover page. Both the cover page must
contain student name and student number.
 The Student is allowed by default to upload up to five documents on each
submission. You must upload each file separately. You must not upload zip
file.
 Submissions from overseas are not allowed as students are required to be
in Australia to attend their regular classes.
V2019.2
/tmp/7860796310169478856.docx
Page 3 of 25

Late submission
Late submission arises in two cases.
1. Student does not submit the assessment in time because of their own
fault. In this case, the student is required to make late submission fee of
$50 before submitting the assessment after the due date.
2. Student has approved leave. In this case, the student is exempted from
the late submission fee payment. The student is required to show their
deferment approve letter from the college to their trainer. The trainer will
re-open the submission on Moodle for the student.
I have read and agree to the assessment guideline conditions above
V2019.2
/tmp/7860796310169478856.docx
Page 4 of 25

Assessment Instructions:
Read all the following questions carefully and write down your
answers neatly and clearly in the spaces provided.
1. What does desired net profit target mean?
Target net profit is the profit goal set by the organisation. It is the
predetermined point where the investor may exit the trade in the
profitable position. It is the part of various trading strategies that is used
by investors as well as the technical traders for managing the risk. Target
profit can be determined at different point of the investment. Some of the
trading strategies integrate the target profit with the initial order. In case
of other investors the investor may use the conditional order for setting up
the target profit after looking into certain expenses.
2. If you have $100,000 to invest in a business and the current bank
deposit rate is 5%, calculate the net profit target if the premium is
15% and your current rate of pay is $70,000.
Amount to be received from bank deposit = 100000 * 5% = $ 5000
Premium is = $ 100,000 *15% = $ 15,000
shortfall = (15000 – 5000) = 10000
Net profit target will be = $ 70000 + $ 10000 = $ 80000
V2019.2
/tmp/7860796310169478856.docx
Page 5 of 25

3. Read the scenario below and answer the questions that follow.
You have $150,000 available for investing into your company. The risk premium
for your organisation is 14%. Bank deposit rates available are:
 RaboDirect 6.40%,
 ING Direct 6.25%
 ANZ Online saver 6.00%
Choose and highlight one bank’s rate and then, based on this rate, calculate
a. How much money would you have after a year of keeping $150,000 in the bank?
Money to be received after keeping for 1 year in RaboDirect = $ 150000 + ($
150000 * 6.40%)
= $ 174,600
b. The minimum desired rate of return on investment
Minimum desired rate of return = organisation’s risk premium = 14%
c. The minimum desired net profit target for the year to make investing in your company
a worthwhile investment.
Minimum desired return = $ 100000 * 14% = $ 14000
d. You need to decide whether you should invest your money in this new
organisation or put it in a much safer investment such as a bank term
deposit.
Explain what would be the reason behind your decision.
V2019.2
/tmp/7860796310169478856.docx
Page 6 of 25

If the company is risk lover and can accept the risk it may opt for investing in the
new organisation. It will further enable it to get quick return and high return as
compared to bank deposit. However, if the company does not need quick money
and is not ready for taking up risk it shall go for bank deposit.
4. List four different operating budgets and describe their purpose.
Operating budget is one of the two parts of master budget. It describes income
generating activities of the company like sales, finished goods inventory and
production. Main aim of the operating budget is preparing the pro-forma for
income statement and computing operating profit margin. Types of different
operating budget and their purposes are as follows –
 Sales budget – main purpose of sales budget is planning and controlling
the resource expenditures like material, people, facilities and money that
is required for achieving the targeted sales objectives. Main objective of
sales budget is leveraging as well as maximising the profits. Apart from
that another purpose of sales budget is achieving objectives for the sales
department.
 Production budget – it assists the company is tracking the costs. It
generally includes the estimate regarding the requirement of the company
for production. Numbers of the units produced are dependent on 2 factors
– inventory and sales targets. Production budget provides details
regarding the requirement of cash for keeping adequate product in hand
for meeting the company’s inventory requirement. Further, it forecasts
costs required for meeting the sales demand for the products.
 Overhead budget – it includes all the manufacturing costs except the direct
labour and direct material. Information included in overhead budget is the
V2019.2
/tmp/7860796310169478856.docx
Page 7 of 25

part of COGS line items help in preparing the master budget. Further, the
total overhead cost converted into per unit overhead cost used in deriving
cost of the closing finished goods inventory which in turn is recorded in the
budgeted balance sheet.
 Direct labour budget – it determines the budgeted fours for the direct
labour through establishing the relationship between output and labour. It
is used for computing the number of labour hours required for producing
units itemized under production budget.
5. What are the legal requirements to start a business and why
are they important?
For starting up business in Australia the owner have to register the business
before commencing the business activities. In addition to register for the
business name different taxes are there for which the business shall be
registered are –
 Goods and service tax (GST) – it is a broad based tax at the rate of 10% on
most of the services and goods and the other item those are consumed in
Australia.
 Australian business number (ABN) – it is a unique 11 digit number and is
used to identify the business to the community and the government
 Pay as you go (PAYG) holding – it is the legal requirement for keeping a
portion of the payments made to the employees made to the employees
and other businesses that is paid to ATO afterwards.
 Tax file number (TFN) – it is the unique number that is issued to the
business by ATO to administer the tax and the other systems of Australian
government.
Apart from the above the business shall be complied under these laws –
 Fair trading laws
 Contract laws
 The privacy act
 Anti-bullying laws
 Independent contractors
 Unfair dismissal
 Exporting and importing
 Intellectual property
V2019.2
/tmp/7860796310169478856.docx
Page 8 of 25

 Laws of environment
6. Based on the following estimates for Leather Sole Ltd:
 The cash balance on 1 April is $75,000
 Sales revenues for the first six months of 20XX are estimated to be as
follow:
January $2300,000
February $300,000
March $500,000
April $565,000
May $600,000
June $560,000
 20% of all sales per month are for cash
 70 % of all credit sales are collected within the month of sale
 20% of all credit sales are collected in the month following the sale
 7% of credit sales are collected two month after the sale
 Raw materials costs are equivalent to 20 % of the sales revenue for the
next month
 Raw materials are always purchased and turned into finish goods in the
month before they are sold
 50 % of raw materials purchases are paid for with cash. The amount
outstanding is settled in the next month
 Wages total $50,000 each month and are paid in the month they are
incurred
 Budgeted operating expenses total $103,000, of which $ 3,000 is rent
(prepaid in January).
 $15,000 in interest payments are made on 15 April
 Selling and administration expenses are approximately $25,00 per month,
these are paid monthly
 On 10 April, new equipment will be purchased for $70,000 (with a
$10,000 cash deposit, and then 12 monthly instalments starting on 1
May). The old equipment it is replacing is expected to be sold for
$13,000 cash in mid-April.
Prepare:
a. Schedule of cash receipts from sales in April
V2019.2
/tmp/7860796310169478856.docx
Page 9 of 25

Item Description Calculations April 20XX
April cash
sales
20% of total credit sales
Total sales = 565000
Cash sales =
565000*20%
= 113000
113000
April credit
sales collected
70% of sales are in
credit, 70% collected in
same month, 20%
collected from previous
month, 7% collected
from 2 months back
(565000*80%)*70%
=316400
316400
March credit
sales collected
20% of credit sales of
march collected in April
(100000*80%)*20% =
80000
80000
February
credit sales
collected
7% of credit sales of
February collected in
April
(60000*80%)*7% =
16800
16800
Total cash
receipts 413200
b. A schedule of cash payments from material purchases from April
Item Description Calculations April 20XX
March credit
purchases
113000*50% =56500 56500
V2019.2
/tmp/7860796310169478856.docx
Page 10 of 25

Cost of raw material is
20% of sales revenue,
50% of March purchase
paid in April
April cash
purchases
50% of April purchase
paid in April
120000*50% = 60000 60000
Total cash
payments
116500
c. A cash budget for April
April
Sales $ 5,65,000.00
Cash sales $ 1,13,000.00
Credit sales $ 4,52,000.00
Collected in same month $ 3,16,400.00
Collected in next month $ 80,000.00
Collected after 2 months $ 16,800.00
Total cash collection $ 5,26,200.00
Cost of raw material $ -1,20,000.00
Payment in same month $ -60,000.00
Payment in next month $ -56,500.00
Payment for raw material $ -1,16,500.00
Payment for wages $ -50,000.00
Operating expenses $ 1,00,000.00
Interest payment $ -15,000.00
Selling and administration expense $ -2,500.00
Purchase of new equipment $ -10,000.00
Total cash payment $ -2,10,500.00
amount received from replacing old equipment $ 13,000.00
Cash available $ 3,28,700.00
Add: opening cash balance $ 75,000.00
Cash available at the end of the month $ 4,03,700.00
V2019.2
/tmp/7860796310169478856.docx
Page 11 of 25

Note – In absence of information it is assumed that except the prepaid
rent rest operating expenses are assumed to be incurred in April
7. Complete the aged debtors schedule
Outstanding sales invoices for the week ending 30 April 2019 are shown as
follows:
Invoice date Invoice number Customer Amount
6/1/19 806 K Gee $ 326.40
26/02/19 849 T Tyler $ 416.85
17/3/19 884 K Gee $ 156.30
26/3/19 903 M Sams $ 562.30
6/4/19 921 A Wolski $ 318.65
a. Prepare an aged debtors schedule for the week ending 2 May
2019
Name Current 30+ 60+ 90+
K Gee $ 156.30 $ 326.40
T Tyler $ 416.85
M Sams $ 562.30
A Wolski $ 318.65
b. What action should be taken for each account?
Customer Action to be taken
K Gee
Generally for the bill that is due for more than 90 days is
seems to be uncollectible or shall be considered as bad
debt. K Gee with the invoice number 806 for the amount $
326.40 is due for more than 90 days. Hence, it shall be
treated as bad debt. For another invoice that is invoice
number 884 he shall be sent frequent reminder as one of his
invoice already treated as bad debt
V2019.2
/tmp/7860796310169478856.docx
Page 12 of 25