Module 4: Sourcing Essentials

Using the following financial information:

(a) Evaluate the finances of this organisation highlighting the strengths and weaknesses of their position.

(b) Provide a justified recommendation as to whether you would consider this organisation for a sourcing exercise for Facilities Management Services emphasising any limit that should be placed on the financial exposure (maximum contract value).

Financial Profit and Loss Statement

12 month period ended 31 March 2014 £ or $ (delete) ‘000

12 month period ended 31 March 2013 £ or $ (delete) ‘000

Turnover

161,438

138,276

Cost of sales

(124,677)

(112,654)

Gross Profit

36,761

25,622

Other operating expenses

(32,561)

(26,984)

Operating profit

4,200

(1,362)

Interest receivable

17

18

Profit/ (loss) before taxation

4,217

(1,344)

Tax on profit/ (loss) on ordinary activities

(1,545)

(8)

Profit/ (loss) for the financial year

2,672

(1,352)

Balance Sheet at 31 March 2014 (continued overleaf)

Notes

12 month period ended 31 March 2014 £ or $ (delete) ‘000

12 month period ended 31 March 2013 £ or $ (delete) ‘000

Fixed Assets

Intangible assets

1,202

1,352

Tangible Assets

1

1,726

1,786

2,928

3,138

Current Assets

Stocks

2

726

1,446

Debtors

35,975

30,457

Cash

12,253

5,483

Total Assets

51,882,

40,524

Creditors, amounts falling within one year

(43,524)

(33,842)

Creditors, amounts falling due after more than one year

3

(73)

(111)

Provisions for liabilities

4

(4,079)

(2,340)

Net assets

4,206

4,231

Sourcing Essentials V3, Mar 2015 © CIPS 2014, Page 2 of 2

Balance Sheet at 31 March 2014 (continued)

Capital and Reserves

Share capital

1,135

1,135

Profit and loss account

3,071

3,096

Total shareholders’ funds

4,206

4,231

Notes to the Accounts

(1) Tangible fixed assets consists of plant and machinery, computer equipment and other equipment

(2) Stocks consists of 31 Mar 2013 31 Mar 2012

Raw materials and consumables 576 724

Finished goods 150 722

726 1,446

(3) Creditors due after more than one year consists of hire purchase agreements for equipments

(4) Provisions for liabilities consists of tax liabilities, pension liabilities and the liability for the lease of properties

Guidance

The answer to this task should consist of approximately 3,000 words and should be supported by a title, your candidate number, contents page, executive summary, references and a bibliography. Any source materials such as web sites, reports, articles, market data, journals or texts should be referred to in your work.

Syllabus Coverage

The following content from the Practitioner syllabus can be used to answer this assessment:

• The use of pre-qualification criteria or processes for supplier appraisal in the sourcing process

• Sources of information on suppliers such as financial reports, credit rating agencies or other appropriate publications and sources

• The assessment of financial statements to evaluate the financial, commercial and technical capabilities of potential suppliers in the sourcing process

• The use of ratio analysis to evaluate potential suppliers

This assessment helps you achieve the following capabilities:

• Evaluate the use and choice of pre-qualification criteria or processes for supplier appraisal in the sourcing process taking into account stakeholder requirements

• Research information on suppliers using appropriate sources of information to select appropriate suppliers

• Evaluate the financial, commercial and technical capabilities of potential suppliers and make recommendations on their selection

• Analyse key ratios that indicate profitability, liquidity, gearing and investment in order to evaluate the suitability of potential suppliers

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