Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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BWealth Ltd provides a fee-based, high-quality financial planning and personalised investment service to 'high net worth' retired individuals, as well as to trusts, charities and small businesses.
BWealth Ltd employees work to enhance the income of the business' long-term investors. The industry BWealth Ltd operates in is becoming more and more competitive. The Managing Partner feels that promotion of new investment products to BWealth Ltd's clients would be likely to upset their generally conservative nature and, as a result, the business has been managed with similar products for the last couple of years.
The last two years of financial results are shown below:
| 2016 | 2015 | |
| Turnover ($000) | 1,001 | 950 |
| Net profit ($000) | 198 | 190 |
| Average debtor/trade receivables days | ||
| (industry average 20 days) | 19 days | 21 days |
| Average cash balances ($000) | 20 | 19 |
BWealth Ltd operates in a country where the average rate of inflation is around 3% per annum.
For requirements q35 and q36
During the early part of 2009, BWealth employed a newly qualified
Internal Business Processes
| 2016 | 2015 | |
| Error rates in jobs done | 15% | 9% |
| Average job completion time | 7 weeks | 9 weeks |
Customer Knowledge
| 2016 | 2015 | |
| Number of customers | 1,210 | 1,432 |
| Average fee levels ($) | 549 | 450 |
| Market Share | 12% | 19% |
Learning and Growth
| 2016 | 2015 | |
| Percentage of revenue from non-core work | 4% | 5% |
| Industry average of the proportion of revenue from non-core work in similar practices | 30% | 25% |
| Employee retention rate | 60% | 80% |
Notes
- Error rates measure the number of jobs with mistakes made by staff as a proportion of the number of clients serviced.
- Core work is defined as being investment management. Non-core work is defined primarily as estate planning and retail banking. Non-core work is traditionally high margin work.
a) Assess the financial performance of BWealth Ltd using the information given.
b) Briefly explain why non-financial information is likely to give a better indication of the likely future success of the business than the financial information given.
c) Asses the performance of the business with comments on all non-financial aspects separately, as well as a concluding comment on the overall performance of the business.
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