ACCA Strategic Business Leader (SBL) Dec Mock Answers PDF

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ACCAStrategic Business LeaderFinal Mock – December 2018Marking scheme and suggestedsolutionsProfessional marks may be rewarded as in the following rubric:How well has thecandidatedemonstratedprofessionalskills as follows: Not at all Not so well Quite well Very well1 (a) Analysis skills in assessing ...

Description

ACCA

Strategic Business Leader

Final Mock – December 2018

Marking scheme and suggested solutions

2

Marking scheme Technical marks Requirement 1

Marks

(a)

Up to 2 marks for each appropriate calculation with associated discussion, up to 9 marks. No marks for calculations without discussion. Up to 3 marks for a brief explanation of the different types of additional information that may be useful, based on 1 mark per relevant point. Up to a maximum of 12 marks for requirement 1(a)

12

(b)

Up to 2 marks for each relevant point. Up to a maximum of 14 marks for requirement 1(b)

14

(c)

Up to 2 marks for each relevant point. Up to a maximum of 14 marks for requirement 1(c)

14

Requirement 2

Marks

Up to 2 marks for appropriate calculations in respect of Scenario 1 Up to 2 marks for appropriate calculations in respect of Scenario 2 Up to 2 marks for associated discussion of the results of the calculations Up to 5 marks for the discussion of concerns, based on 1 mark per relevant point Requirement 3

11

Marks

(a)

Up to 2 marks for each relevant point in respect of the impact of the ASC listing on HFC’s corporate governance systems and structures Up to a maximum of 11 marks for requirement (a)

11

(b)

Up to 2 marks for each appropriate point for slide 1 Up to a maximum of 4 marks Up to 2 mark for each appropriate point for slide 2 Up to a maximum of 4 marks

8

Requirement 4

Marks

1 mark for each relevant point in respect of evaluating ethical and reputational issues 1 mark for each relevant action provided Up to a maximum of 10 marks

3

10

Professional marks may be rewarded as in the following rubric: How well has the candidate demonstrated professional skills as follows: 1 (a) Analysis skills in assessing the financial performance and position of HFC, and identifying additional information to support further analysis.

Not at all

Not so well

Quite well

Very well

The candidate has failed to analyse the financial performance and position of HFC. No attempt was made to explain the movements in the figures. No attempt was made at identifying and explaining the additional information which would support further analysis.

The candidate has attempted some analysis of the financial performance and position of HFC. Analysis is mainly confined to highlighting simple movements (actual and %) in the financial information provided with little attempt made at explaining the reasons behind any movements. A limited attempt was made at identifying and explaining the additional information which would support further analysis.

The candidate has made a reasonable attempt at analysing the financial performance and position of HFC. The analysis incorporates the identification of key movements (actual and %) in the financial information provided, and includes some ratio analysis. The results of the ratio analysis performed were commented on with a reasonable attempt made at interpreting the results. The candidate’s answer was well structured and made use of appropriate headings. A range of different types of additional information was identified and some rationale was provided as to the insight that this would bring.

The candidate has demonstrated excellent analytical skills by calculating a range of different ratios to assess HFC’s performance and position from different perspectives. The results of the ratio analysis performed was commented on and correctly interpreted. Appropriate headings were used to structure the answer, for example, profitability, gearing etc. A wide range of different types of additional information was identified and appropriate rationale was provided as to the insight that this information would bring.

0

1

2

4

4

Professional marks may be rewarded as in the following rubric: How well has the candidate demonstrated professional skills as follows: 1 (b) Analysis skills in assessing the current position of the two divisions and highlighting the division which offers the better prospects.

Not at all

Not so well

Quite well

Very well

The candidate has failed to provide a meaningful analysis of the current position of the two divisions. No attempt was made at highlighting the division which offers HFC the better longer term prospects.

The candidate has attempted some analysis of the current position of the two divisions. Analysis is mainly confined to simply highlighting the issues facing each division, little consideration is given to the implications or significance of the issues identified to the two respective divisions. A limited attempt was made at comparing and contrasting the position of the two divisions. A poorly justified attempt was made at highlighting the division most likely to offer HFC the better longer term prospects.

The candidate has made a reasonable attempt to analyse the current position of the two divisions. The analysis incorporates the identification of the key issues facing the two divisions. Consideration of the issues identified in terms of their implications and significance for the two divisions is provided and well explained. A reasonable attempt was made at comparing and contrasting the position of the two divisions. The candidate structured their answer in an appropriate manner, and concluded their answer with a justified explanation of the division most likely to offer HFC the better longer term prospects.

The candidate has demonstrated excellent analytical skills by presenting a range of appropriate points in respect of the position of the two divisions. The points made consider the position of the two divisions from a number of perspectives for example, the strengths, weaknesses, opportunities and threats of each division. The candidate clearly compared and contrasted the position of the two divisions. The candidate has structured their answer in an appropriate manner, and concluded their answer with a justified explanation of the division most likely to offer HFC the better longer term prospects.

0

0.5

1

2

5

Professional marks may be rewarded as in the following rubric: How well has the candidate demonstrated professional skills as follows: 1 (c) Commercial acumen skills in using judgement when evaluating the two strategic options.

Not at all

Not so well

Quite well

Very well

The candidate has demonstrated no commercial acumen skills. The candidate failed to display any judgement or awareness when evaluating the two strategic options specified. No consideration of the issues and risks that related to HFC was provided.

The candidate has demonstrated only limited commercial acumen skills. The candidate displayed some judgement and awareness when evaluating the two strategic options specified. However, this was limited by not fully considering the commercial realities that HFC would face when implementing either of the two specified strategic options. Limited consideration was provided of the issues and risks associated with the two strategic options.

The candidate has demonstrated reasonable commercial acumen skills. The candidate displayed judgement and awareness when evaluating the two strategic options specified. This extended to giving reasonable consideration to the commercial realities that HFC would face when implementing either of the two specified options. A reasonable evaluation of the issues and risks associated with the two strategic options was provided, although this was not as comprehensive as it could have been.

The candidate demonstrated strong commercial acumen skills. The candidate displayed strong judgement and awareness when evaluating the two strategic options specified. This extended to giving comprehensive consideration to the commercial realities that HFC would face when implementing either of the two specified options. A comprehensive evaluation of the issues and risks associated with the two strategic options was provided.

0

1

2

4

6

Professional marks may be rewarded as in the following rubric: How well has the candidate demonstrated professional skills as follows: 2 Scepticism skills in assessing the AutoBelt proposal and reflecting on any concerns.

Not at all

Not so well

Quite well

Very well

The candidate has failed to display any professional scepticism in their answer, instead choosing to accept the merits of the AutoBelt proposal. No consideration was given to any areas of concern associated with the proposal.

The candidate made a limited attempt at deploying professional scepticism when considering the AutoBelt proposal. The candidate identified some areas of concern with the proposal, but overall focused more on performing calculations in an attempt to assess the financial viability of the proposal without much in the way of further explanation.

The candidate employed professional scepticism concerning the proposal, and highlighted areas of concern in the event that HFC proceeded to purchase the AutoBelt solution. The candidate made a reasonable attempt at conducting calculations to assess the financial viability of the proposal and made an attempt at explaining the results and implications of this.

The candidate displayed excellent professional scepticism to question the financial viability of the proposal and the overall appropriateness of the AutoBelt solution. The candidate made a strong attempt at conducting calculations to challenge the financial viability of the proposal and provided a thorough explanation of the results and implications of this. A range of well explained concerns were provided in respect of the AutoBelt proposal.

0

0.5

1

2

7

Professional marks may be rewarded as in the following rubric: How well has the candidate demonstrated professional skills as follows: 3 (a) Evaluation skills in assessing the impact of the ASC listing in relation to HFC’s corporate governance systems and structures.

Not at all

Not so well

Quite well

Very well

The candidate has failed to evaluate the impact that an ASC listing would have on HFC’s corporate governance. The answer was purely theoretical with no reference to HFC.

The candidate made some attempt at evaluating the impact that an ASC listing would have on HFC’s corporate governance. The evaluation provided lacked focus, and tended to adopt a scattergun approach which included general references to the theory of corporate governance with limited application to the ASC listing and situation at HFC.

The candidate made a reasonable attempt at providing an evaluation of the impact that the ASC listing would have on HFC’s corporate governance. The evaluation included appropriate application of the theory of corporate governance to the ASC listing and the situation at HFC. Despite this the evaluation was not as well structured as it might have been.

The candidate provided a comprehensive evaluation of the main impacts that obtaining an ASC listing would have on HFC’s corporate governance. The candidate’s evaluation included an appraisal of the main ways in which HFC’s approach to shareholder relationships, leadership, control, and risk management would change should the ASC listing be obtained. The candidate displayed a strong understanding of the key principles of best practice corporate governance. The candidate structured their answer well, and made appropriate use of headings to ensure that the points made in this assessment were sufficiently distinct.

1

2

4

0

8

Professional marks may be rewarded as in the following rubric: How well has the candidate demonstrated professional skills as follows: 3 (b) Communication skills in explaining how integrated reporting differs from conventional reporting and conveying how HFC could make use of integrated reporting should the company obtain an ASC listing.

Not at all

Not so well

Quite well

Very well

The candidate just listed the elements of integrated reporting, and failed to discuss how integrated reporting differed from conventional reporting and how HFC could make use of integrated reporting should it obtain an ASC listing. The candidate did not use the slides and supporting notes format.

The candidate made an attempt at discussing how integrated reporting differed from conventional reporting and made an attempt at explaining how HFC could make use of integrated reporting should it obtain an ASC listing. The answer was not sufficiently applied to the situation facing HFC should it obtain an ASC listing. The answer was set out in the required format with supporting notes.

The candidate made a reasonable attempt at discussing how integrated reporting differed from conventional reporting and made a reasonable attempt at explaining how HFC could make use of integrated reporting in communicating its strategy and performance in the event that the ASC listing was obtained. The answer was set out in the required format with detailed supporting notes.

The candidate’s answer comprehensively discussed how integrated reporting differed from conventional reporting. The candidate clearly explained how integrated reporting could help HFC to communicate its strategy and performance in the event that the ASC listing was obtained. The answer was persuasive and set out in the required format with detailed supporting notes.

0

0.5

1

2

9

Professional marks may be rewarded as in the following rubric: How well has the candidate demonstrated professional skills as follows: 4 Scepticism skills in evaluating any ethical and reputational issues associated with the proposals made by Roger Williams in light of the chemical leak at ABC Co.

Not at all

Not so well

Quite well

Very well

The candidate has failed to display any professional scepticism in their answer, choosing instead to accept the proposals made by Roger Williams in handling the situation at ABC Co at face value. In doing so, the candidate has failed to challenge the view supplied.

The candidate made a limited attempt at deploying professional scepticism when challenging the proposals made by Roger Williams in handling the situation at ABC Co. The candidate identified some ethical and reputational issues associated with Roger Williams’s proposals, but failed to explain the significance of these points. The actions suggested by the candidate did not clearly relate to the ethical and reputational issues identified.

The candidate employed professional scepticism when challenging the proposals made by Roger Williams in handling the situation at ABC Co. The candidate made a reasonable attempt at identifying and explaining the ethical and reputational issues associated with Roger Williams’s proposals and made an attempt at explaining the significance of the issues identified. A reasonable attempt was made at using the ethical and reputational issues identified when recommending appropriate actions.

The candidate displayed excellent professional scepticism to question the proposals made by Roger Williams in handling the situation at ABC Co. The candidate clearly identified and explained a number of ethical and reputational issues and the likely consequences of these for HFC of adopting Roger Williams’s proposals. The candidate used these points when recommending appropriate actions.

0

0.5

1

2

10

Suggested solutions Note. For case study exams such as Strategic Business Leader, it is not possible to produce suggested answers which cover all the valid points that candidates might make. Credit will be given to candidates for points which are relevant to the requirements, even if they are not included in the suggested solutions. The suggested answers presented below include more detail than would be expected from candidates under exam conditions, because they are designed to show the range of relevant points which could be extracted from the case information. The solutions are intended to provide a structure of the approach required from candidates, and to cover the range and depth of knowledge which might be demonstrated by the most well-prepared and able candidates. In this respect, the solutions are also intended to support revision and tuition for future examinations. Report To: HFC’s Senior Management team From: Management consultant Date: September 20X6 1

(a)

Financial analysis The first section of this report analyses the financial performance and position of HFC over the period 20X2 to 20X6. Consideration is also given to the additional information that would be required in order for a fuller analysis to be completed. Profitability The reduction in HFC’s profitability over the period is likely to have been caused by changes in the market for the men’s shoes produced by the FF division as this is the larger of the two divisions. This is evident as the number of small independent men’s clothing and footwear retailers which sell the FF division’s products has been declining, which, when coupled with increasing competition from supermarkets and specialist footwear retailers, would certainly help to explain the deterioration in performance. Without further information it would appear likely that improved sales in the CF division are not compensating for falling sales in the FF division. HFC’s gross and operating profit margins have declined steadily over the years under review (see Appendix), as shown below: 20X2 20X4 20X6 Gross profit margin 23.35% 19.81% 17.66% Operating profit margin 8.10% 4.53% 2.72% HFC has failed to keep costs under control, and while sales have fallen by $168 million over the four years under review (representing a 17.6% fall), cost of sales have reduced by only 11.5%, or $84 million. This requires further investigation. One possible explanation for this may be due to the issues that have been caused by the faulty production line in the FF division, which has damaged raw materials prior to their use. This damage will most likely have required additional purchases of materials to have been made. The current situation at HFC could however worsen significantly in 20X7, in the event that the CF division loses the lucrative contract to supply the Arcadian Paramedic and Ambulance service with hardened shoes. HFC’s Return on Capital Employed (ROCE) has fallen significantly from 24.74% in 20X2 to 6.38% in 20X6 (see Appendix). This can be explained partly by the reduction in profitability, and by the increase in long-term borrowings between 20X2 and 20X6. Without information to the contrary it is likely that at least part of the increase in long-term borrowings is as a consequence of funding the investments in manufacturing equipment and IT systems in the CF division. Part of the increase in borrowings was definitely caused by the bank loan which was taken out last year to purchase a new piece of equipment for use in the FF division.

11

Gearing The following observations about HFC’s capital structure over the period are most notable: 

HFC’s long-term borrowing has increase...