Fluent Speech Reloaded – Mock Exams – Sample Pages Please find attached some of the sample pages from our mock exams based on the November 2012 Case Study. We know that it takes a lot of time to read and analyse a set of Advance Information so we have created 5 practice exams all based on the same AI, allowing you to invest your time in practising technique rather than learning lots of AIs. We provide examples of questions, appendices, mark schemes and “Examiner’s Thinking” sections. The references to "Boxes" in the "Examiner's Thinking" sections refers to the “40 Box” approach which we use to teach Case. For more details, see our book “Cracking Case – How to Pass the ACA Case Study”. Please see the Purchase page on our website if you wish to buy the full mock exams. We provide our mock exams as a fully printable but copy protected PDF - the copy protection consists of a unique QR code place on each page of the PDF to allow us to trace the purchaser of each copy. Mock Exam 1 Fluent Speech Reloaded – July 2013 ACA Case Study Preparation Exams Mock Exam 1 1 © ACA Simplified 2013. No copying or reproduction permitted. Text and questions set out in ICAEW-style format Mock Exam 1 EXHIBIT 15 From: To: Subject: Date: Enid Lightfoot Charlie Monks Fluent Speech Limited (FS) 7 November 2012 FS has just completed another year of trading. It now requires our assistance in assessing performance in the past year, analysing two course options and understanding two new business opportunities involving NHS work or expansion associated with Russia. I am attaching Exhibits 16 to 20. Please draft for my review a report addressed to the FS board. The report should comprise: 1. Review of FS’s management accounts for the year to 30 September 2012, as presented in Exhibit 17. Please provide an analysis of revenue and gross profit for the 3 primary revenue streams by comparison to the year to 30 September 2011. In addition to this, please calculate the effect on cash and receivables for the year end and at 30 March 2013. Assume the underlying cash flow is the same as that for 30 September 2012. 2. An assessment of 2 tuition packages outlined by Paz Trans (Exhibit 19) Using the information provided by Paz, you should assess the financial impact of the 2 alternative packages for the years to 30 September 2013, 2014 and 2015 by calculating the additional gross profit earned. You should review and comment on the assumptions made by Paz in Exhibit 19 and explain any other assumptions you make. 3. An evaluation of the potential new business opportunities for FS arising from potential new work with the NHS or in Russia (Exhibit 20). You should consider all the strategic benefits and risk of the opportunities, including any possible ethical concerns. I look forward to receiving your draft report. 3 © ACA Simplified 2013. No copying or reproduction permitted. Full and detailed Exam Paper information, providing realistic test of ICAEW-style scenarios Mock Exam 1 EXHIBIT 19 From: To: Date: Subject: Paz Trans Enid Lightfoot 30 October 2012 Financial modelling – 2 course packages Enid, As discussed at our last meeting, profit from Translation & Interpretation was very high last year but we know that we won’t be able to earn the same amount this year, now that the Olympics are over. We are keen to do something that fits with our business model and last year’s strategic review. We also think that whilst we have a very good reputation, Fluent Speech is not yet at the really elite level, offering the full suite of services which some of the better colleges offer. Although there has been a decline in students due to UKBA issues, there has been an influx of very rich students from China and Russia who are seeking a really good language experience and are happy to pay for the privilege. We believe that most Chinese and Russian parents want their children to go to a UK university, and preferably to study something technical like IT, maths or the sciences before returning home to help run the family business or even set up on their own. I’ve taken some market consultancy advice from Research4You, a new business consultancy based in Oxford. We’ve never used them before but they seem pretty good – we got our research report back the same day that we sent them our signed engagement letter! Unfortunately there wasn’t as much quantitative analysis as I had hoped and we are following up on that, but in the meantime could you help please? I’ve included some extracts from the Research4You report below. Please calculate the gross profit we should expect to earn for both proposals put forward by Research4You. For these purposes, please treat the Child Protection Agency costs and legal advice/consultancy as direct costs. If you need any figures on class sizes etc, please use the detailed breakdown of fees and costs for English-language courses which Edwin should have sent you last year. As you pointed out at the last meeting, it is very hard to predict these things beyond a 3 year horizon so please just perform the calculations for the remainder of the year ending 30 September 2013 and then for the following two full years. Don’t worry about cash – just look at gross profit earned. All the best, Paz PS. I realise that the figures can only be estimates – please make sure you state your assumptions so we can make a reasonable judgement call on this. 8 © ACA Simplified 2013. No copying or reproduction permitted. Realistic examples of press articles and Exam Paper data for Requirements 2 and 3 Birmingham Car Retailer Weekly Mock Exam 3 15 October 2012 New car sales for the last month continue to be weak, according to our monthly survey of 4 leading dealerships. Sales of mid-range models are especially weak as consumers look at cheaper models. However, sales of high-end models continue to buck the trend. It appears that higher income consumers are not feeling any real squeeze on incomes. Marques such as BMW, Jaguar, Honda and Toyota are continuing to see increased sales and investment. Lord Debitt, Mayor of Birmingham, praised the inward investment and job creation which this has brought to the West Midlands region. “Obviously the short term benefit is that people get to stay in their jobs. Over the medium to long term, we want to see sustained long run investment and greater interaction with the home countries of these leading brands. That will hopefully lead to greater knowledge of research, development and technological processes which we can then bring back into the West Midlands. The supply chain of these companies is very long, involving hundreds of countries in some cases, with an increasing involvement in economies such as China and Vietnam. We believe that we offer a different kind of workforce - one that is more skilled and therefore not subject to low wages and even human rights abuses. Of course, we need to recognise that we operate in a new world – that can mean plenty of opportunities, provided that we maintain our base in this country.” 35 © ACA Simplified 2013. No copying or reproduction permitted. Appendices presented in full, giving you an example of how you should format numerical work on the day Mock Exam 2 Answers and mark scheme Appendix 2 Proposal 1 - Increase class size New schedule, after Edwin's amendments Income Executive Intensive - 2 week Intensive - 4 week Semester/long Intake Fee/week Ratio Weeks 60 100 60 720 2500 900 900 180 6 20 20 6 1 2 4 12 Annual income 150,000 180,000 216,000 1,555,200 2,101,200 Costs Classes Executive Intensive - 2 week Intensive - 4 week Semester/long Wage/hour Tutor weeks Hours/week 10 5 3 120 30 15 12 25 10 10 12 1440 25 25 25 25 7,500 3,750 3,600 900,000 914,850 Comparison of gross profit Amended Prior year (from Exhibit 10) Change Revenue 2,101,200 2,155,200 -54,000 Costs -914,850 -1,105,000 -190,150 Gross profit 1,186,350 1,050,200 136,150 56.46% 48.73% Gross profit margin 7.73% Proposal 2 - Implement FLB course FLB course schedule Income FLB Costs Intake Fee/week Ratio Weeks 300 300 12 12 Classes FLB 25 Annual income 1,080,000 Wage/hour Tutor weeks Hours/week 40 300 8 96,000 Fee per week = 1.2*250 (Day per week, Exhibit 11) Gross profit analysis Revenue 1,080,000 Costs -96,000 Gross profit 984,000 Gross profit margin 91.11% Note: gross profit on existing Day per week classes per prior year schedule is 408,000 and a margin of 68% Ass umptions 1 2 3 4 5 6 Prior figures regarding revenue, costs and margins are still correct All estimates of intakes and cos ts are correct 20% price increase vers us existing Day per week courses is appropriate for FLB cours e No other s unk costs e.g. advertis ing, capital expenditure Ratio of 12:1 for new FLB course Wage rate for FLB tutors correct 22 © ACA Simplified 2013. No copying or reproduction permitted. Full examples of ICAEW-style marking grids given for all questions Mock Exam 2 Answers and mark scheme Requirement 3 mark scheme – Merger v Closure of T&I stream 27 ♦ ♦ ♦ ♦ Assimilating & Using Information Uses AI and EP FS has been approached re merger/strong bargaining position LTL margin in line with FS/slightly higher Cash position weak/other opps may be limited Increase in number of companies offering distance-learning 29 ♦ ♦ ♦ ♦ ♦ Interpretation is very low value stream ♦ Structuring Problems and Solutions Risks and benefits of merger Strong growth by LTL/high margin company Good national coverage/can penetrate London market Accredited/high reputation/”market-leading” Larger class sizes/quality impact LTL employs tutors/operating gearing/against FS strategy of reducing operating gearing ♦ Specialist in ELT which is struggling/some T&I expertise ♦ (free response) 28 Identifies business issues and wider context 30 Risks and benefits of closing T&I ♦ Merger is rapid way to replace T&I revenue ♦ T&I struggling at the moment ♦ ELT stream suffering/UKBA visa issues ♦ Distance-learning more popular.premium price ♦ Distance-learning more popular/overcome UKBA ♦ Edwin has IT experience/background/may have contacts ♦ LTL has UKBA accreditation – vital given visa issues ♦ Strategy can be implemented quickly/freelance translators ♦ FS has had translation problems/impact on reputation ♦ Distance-learning needs investment in IT/little cash for this ♦ Own research (free response) ♦ T&I has high margins/contributions/cash so significant loss ♦ (free response) 31 Ethics ♦ Not ethical to exclude directors from discussions/may be illegal ♦ At same time, ensure Art and Edwin acting ethically ♦ Unethical to mislead overseas students about location/skills of tutors ♦ LTL class size much larger/unfair to existing FS students ♦ Risk re Edison as related party of new accountants Applying judgement Conclusions and recommendations 32 Evaluates opportunities 35 Draws conclusions under a heading ♦ LTL would add expertise in Brazilian Portuguese – high demand for this per AI ♦ Merger is more positive/quantified/possibility for rapid expansion with little apparent cash cost ♦ LTL would add expertise in Arabic – FS Arabic error in prior year ♦ Merger would significantly change class size/locations/emphasis of FS – major change in FS ♦ LTL has state of the art facilities and good coverage ♦ Concludes on main risks and benefits ♦ Closing T&I gives more resources for ELT and FLT ♦ Concludes on way forward ♦ Distance-learning avoids visa problems ♦ Concludes on ethics ♦ Opportunity for high margins if using cheap tutors for distance learning 33 Evaluates risks 36 Makes recommendations ♦ LTL specialises in ELT – may not be good idea to give more emphasis to this given visa issues ♦ Do not exclude directors from discussions/engage with them ♦ Could mean loss of quality staff/create competitor (Edwin and especially Art) ♦ Seek full due diligence on LTL ♦ May not happen until late 2013, possibly later ♦ Seek independent legal advice on both options ♦ Little detail on alternative strategy re T&I ♦ Research closure of T&I more fully ♦ T&I is very good source of profit and cash ♦ Negotiate an earn out to ensure LTL is as it says it is ♦ No experience in distance-learning programmes ♦ Analyse LTL revenue streams in more detail ♦ Other recommendations (free response) 34 Professional scepticism ♦ LTL is very new firm/offering merger/may be biased ♦ Management accounts/delay in final figures ♦ What is evidence for “market leading” claim? ♦ Margin figure of 45% could hide differences by stream ♦ What is motive/need for LTL to merge, given strong performance? ♦ No estimate of any reorganisation costs is given 26 © ACA Simplified 2013. No copying or reproduction permitted. “Examiner’s Thinking” discussion for all Requirement 2s and 3s explaining why we wrote the questions as we did and highlighting the skills hinted at. We also provide a fully written out model answer for all Requirements of Mock Exam 1. Mock Exam 4 Answers and mark scheme Examiner’s Thinking - Requirement 2 This appears to be a very complex calculation, with two different locations, three years to include and a need to calculate both revenue and costs using the fairly complex costing schedules in the AI. The examiner will not require you to do pages of calculations so look for the shortcuts and if it looks like a mammoth task, question what you are doing because you must be overcomplicating the matter – remember that as long as you are including the inputs you will get most of the Box 17 marks. In this case, the hint is that everything is based on the MCS numbers so gross profit and gross profit margins will be fixed – you just multiply by the relevant figure. China provides the second calculation. Here the exchange rate issue needs to be handled quickly but carefully as there is a separate requirement to conclude on the forex impact. SCEPTICISM should have been raised from the missing information – how were the London and Cambridge figures calculated? Is the MCS a reasonable benchmark? Does Paz’s contact know about the different commercial sector? With respect to China, it seems unlikely that we can just pass on a UK pricing level. We have also not finalised the profit sharing ratio. For Box 23 on other factors, hints should have been provided by the lack of application of the 10% development and monitoring fees. Standard issues such as cash and management time plus quality and reputation issues were used to fill the rest of Box 23. Candidates should have been well prepared for Box 18 on background business factors as this Requirement 2 drew heavily on the detailed revenue and cost schedules in the AI and so should have anticipated. Therefore candidates should have had a number of ideas to raise regarding Fluent Speech’s positioning and the market in general. This would be a good thing but remember not to write too much on Box 18 – you only need 3 diamonds and should get one of these “automatically” as there is always a “candidate’s own response” diamond. Hence you would only need 2 more good points. Avoid overwriting on this section. This was a fairly complicated set of calculations so remember the rule – have a go but move on to make sure your narrative discussion is good enough. Use the complexity to generate lots of ASSUMPTIONS (Box 21) and SCEPTICISM (Box 24) points instead - remember that you have a very good chance of getting 2 Sufficiently Competent grades in these Boxes if the calculation is complex because there will be more figures to mention as ASSUMPTIONS and questions as part of SCEPTICISM so that is the upside of hard calculations. Only 3 more Sufficiently Competent grades in Requirement 2 and you will pass, regardless of what your calculations say. 48 © ACA Simplified 2013. No copying or reproduction permitted.
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