Sheet 1 of 2 UNIVERSITY COLLEGE LONDON CEGE3010 CEGEG010 FINANCIAL ASPECTS OF PROJECT ENGINEERING AND CONTRACTING BENG 3006 PROJECT

APPRAISAL FOR BIOPROCESS

CHRISTMAS ASSIGNMENT 2012/2013

I have set an assignment like this for some time now. It fulfils a whole variety of purposes in making you: show a grasp of the functions and main features of the Balance Sheet, (as opposed to the Profit and Loss Account), and the Cash Flow statement. It will show you why you needed to learn something about accountancy. realise how things interact on one another. When marking your work I shall look particularly whether the tables you produce are all consistent with one another. For example, a increase in overdraft should go with increased interest payments. invent numbers whose magnitude show some realism, which takes some thought. discover for yourself how delicate the profit margin is, and the importance of good control over the company's operations if it is not to run off the rails.

Its all simplified so as to minimise boring, unproductive work. I want from you: Ideally, four sheets of paper is all you need to hand in. I once had a student give me 46 sheets, and I marked him down for that. A correct set of items on each of the sheets. For example, don't put things into the Balance Sheet which belong into the Profit and Loss. Show the Balance Sheet and P&L in standard UK format with previous years figures where appropriate. Keep it simple (enough information but not too much). Dont have a share premium. The story that the numbers tell should be consistent, within each of the sheets and between them. If the description of your "unexpected event" says you had trouble with cash flow, your "actual" cash flow statement must reflect that. Try to show some realism in the magnitude of the numbers, and avoid silly numbers. Don't, for example, expect me to believe you're so smart that an ordinary engineering contracting company can make 50% profit on turnover. Make sure that your "unexpected event" is big enough to have a significant effect on the "actual" numbers on the b. tables, that it forces you to take some action. And make sure that the effect is shown on all the b. sheets. For example, a delay usually leads to increased need for working capital which has to be met somehow, and that in turn raises the interest payable.

NOTES 1 SHOW YOUR SURNAME CLEARLY SO THAT I CAN ORDER THE PAPERS ALPHABETICALLY. 2 HAND IN YOUR ASSIGNMENT TO THE CIVIL ENGINEERING DEPARTMENTAL OFFICE. 3 THE ASSIGNMENT MUST BE DATE STAMPED BY THE OFFICE FRIDAY 25 LATEST. 4 LATE SUBMISSIONS WILL LOSE MARKS. 5 THIS ASSIGNMENT IS WORTH 15% OF THE COURSE MARKS.
TH

JANUARY 2013

Sheet 2 of 2 UNIVERSITY COLLEGE LONDON CIVL3010 FINANCIAL ASPECTS OF PROJECT ENGINEERING AND CONTRACTING BENG 3006 PROJECT APPRAISAL FOR BIOPROCESS CHRISTMAS ASSIGNMENT 2012/2013

Create an imaginary contracting company with about 10m/pa turnover. (Feel free to invent some comic name for your creation - Im afraid thats the only fun to be had in this assignment). In this exercise you are going to: a. forecast the companys performance in 2012, and then b. show what actually happened in 2012. The companys financial year corresponds to the calendar year. Now set out these tables: Table 1a. This shows the Balance Sheet as it was on 31st December 2011, and reflects the state of the company at the beginning of the 2012 trading year. Include a 500k bank loan under the liabilities, and don't forget the Provisions! Dont have a share premium. Remember that the Balance Sheet conventionally shows the previous years figures for comparison. Table 2a. This is your overall business plan for 2012 - i.e turnover, direct costs, overheads, finance costs, and profit this is effectively a forecast Profit & Loss account identify the contribution to show that its realistic. Table 3a. Produce a cash flow forecast for 2012, in twelve monthly periods (it would be sensible to do this in Excel, but show how the calculations were done so that I can see how you got the answers). For this, youll need to make some assumptions about your contracts. Assume that you will start just four contracts in the year. For realism make each different from the others and don't start them at exactly threemonth intervals. Include a half completed contract at both the start and the end of the financial year, so there are five contracts in all for you to reckon with. Assume half the contract price is payable halfway through each contract period, that there are no retentions, that all contracts carry the same percentage contribution, that their direct costs are a straight-line graph, and that the company's overheads are constant over the year. (All these are simplifications and most unrealistic - but they do save a lot of work!). (When drawing up this plan for the years work, you might find it helps you to draw a graphic representation to give yourself a better oversight of the years events. I dont need to see this, so you can do it by hand or, of course, use Excel.) You have to repay the bank loan at 50k/month, so the last payment is in October. 200k tax falls due in August. Apart from that, ignore tax and dividends, but dont forget interest. Now assume that it's January 2013. As always, something unexpected happened during 2012. In less than 300 words say what it was and what action the company had to take as a result. Now draw up actual tables: 3b 2b 1b the actual monthly cash flow for 2012 to reflect what really happened - including whatever you had to do. the Year End Profit and Loss account on 31st December 2012. st the Year End Balance Sheet on 31 December 2012.

Show the previous years results on each Balance Sheet and P&L Account. It would be a good idea to put the a and b tables on the same sheets - maybe in different colours - so that the difference between them is quite obvious.