financial evaluation.
Objectives • Review the concepts related to financial accounting and investment selection • Review the concepts learned during the module with cases related to sports companies Statement and development sequence ACTIVITY A.- The company TRESX is dedicated to the manufacture and installation of artificial turf. Its main business is to install artificial turf surfaces in public facilities. On 31-12-N they receive the following balance sheet: ASSETS LIABILITIES AND EQUITY Machinery 40,000 Capital 5,000 Construction 200,000 Reserves 12,000 Software 10,000 Profits year N 6,000 Clients 3,000 Long-term bank debt 202,000 Checking account 4,000 Short-term bank debt 11,000 Providers 21,000 TOTAL ASSETS 257,000 TOTAL P AND PN 257,000 Machinery, buildings and software are listed at their book value, i.e. at their acquisition value minus accumulated depreciation. The customer account lists outstanding payments to the company by two municipalities for the installation of two artificial turf football fields. The long-term and short-term bank debts are covered by the same loan agreement, with a yearly interest of 6%. The vendor account represents the outstanding payment of the company to the vendor for the plastic material that TRESX uses to manufacture the turf rolls. The student has to do the accounting for the operations of the company in year N+1 and prepare the final balance sheet as at 31-12-N+1 and the income statement for year N+1. The students must decide the operations to be undertaken by the company on the year N+1, fulfilling the following requirements: 1- TRESX will collect the customer’s credit shown on the balance sheet during the first quarter 2- TRESX will pay the outstanding debt with the supplier during the first quarter 3- TRESX will pay the short-term bank debt and the loan interest at the end of year N+1 4- TRESX will buy a new machine during the year N+1 5- TRESX will purchase plastic material from its usual supplier in year N+1 but will not pay the full amount, and the outstanding amount will be paid during the year N+2. 6- TRESX will install three artificial turf surfaces in public facilities during the year N+1, but it will not receive the full payment then and the outsdanding debt will be settled during the year N+2. 7- TRESX will pay the rent for the offices at the beginning of the year N+1 8- TRESX will pay the payroll of its employees, electricity, water and gas supplies and insurance premiums for the year N+1 9- TRESX will depreciate all its non-current assets on 31-12-N+1 10- If the result for year N+1 is positive, the company will have to pay a 25% income tax. The student must submit the following documents: 1- Journal of the Year N+1 2- General Ledger of the Year N+1 3- Balance sheet at 31-12-N+1 4- Profit and loss account for year N+1 ACTIVITY B.- Look for the balance sheet and the profit and loss account of a professional football club in the first league of Germany, Italy or England. The student should use the most recent available. They can be found in the clubs’ financial reports, often through their websites. Find the following items in these documents: a- Outstanding debts for payments from players bought from other clubs b- Amounts pending collection for the sale of players to other clubs c- Payroll for players and coaches d- Outstanding bank loans. e- Ticket sales for matches f- Television broadcasting rights for matches g- The stadium h- Profits from last year i- The capital contributed by the partners j- Sports equipment stocks k- Players bought from other clubs The student can consult the financial papers of the club, which are usually included in the financial report. The Papers contain the comments on the amounts reflected in the balance sheet and the income statement. The student must submit a report with the following: the club’s balance sheet and income statement, indicating in which section the previous items are included. Insightful comments from the student will be graded positively. ACTIVITY C.- Train-tec is a company specialized in machinery for measuring sports performance. They buy special machines from a German company and rent them to Spanish gyms and sports clubs. The German supplier announces that they will launch a new, more modern and precise device in January in the next year. The price will be 31,000 euro. Train-tec is considering the possibility of purchasing this new device and increasing the number of customers and sales over the next three years. YYYY Bank offers Train-tec a loan of 31,000 euros to buy the devices. The loan must be repaid within three years with an interest rate of 7%. Train-tec’s made a cost estimate for the use of the new machine in the next three years: YEAR 1 2 3 Operational costs 22,000 21,000 20,000 Maintenance costs 1,000 1,300 1,500 Income tax 2,000 2,000 2,000 Amortizations 10,000 10,000 10,000 How high should the sales over the next three years be in order for the investment to be profitable for Train-tec? The student must justify their answer using a spreadsheet to make the necessary calculations. They should follow this steps: 1- estimate the sales for the next three years 2- estimate the cash flows for the next three years 3- evaluate the investment according to the NPV and IRR methods Assessment The importance of this activity on the total rating is 10%. Delivery procedure for the activity Submit the documents requested in the activity