Wayside and Window Dressing

Feedback on Exam Technique

Part (a)

1. Short Term attraction

2. Long Term confidence

3. Which is more important

Sentences to make an examiner purr

By window dressing their accounts Wayside will make the new venture more attractive for investors. This, of course, could damage the long term confidence in the way the business records its accounts, but it is worth doing for the long term survival of the business

Attracting investment from shareholders is the best option for Wayside: borrowing more would worsen their already poor financial health and doing nothing could mean continued decline. If window dressing is the only way to secure this extra investment then it is the best way forward fro them.

Decontextualisation

Shell?

Pointlessness

“I think they should weigh up all the factors and come up with the best one”

Re-telling the case study“They are not in a great cash situation”

Gearing means riches when times are good but ruin when lean times strike.

Gearing will rise from 55% to 59% : full marks for application

Is it to high or too risky?

Part (b)

Borrowing more : the effect on gearing and discussion

Alternatives and their applicability. Sale and leaseback

Sentences to make examiners purr

By borrowing more gearing will rise to 59%. This is high, but not too high if sales improve, which is likely given the new venture. With increased sales, liquidity will improve and the extra repayments will not be a problem for Wayside. Although it is not without risk, it is the best option for Wayside.

Wayside’s financial health is already weak. Putting extra strain on their gearing is not the best option. Thy should sell some of their assets and lease them back. This will give Wayside the cash injection they need to launch the new venture. Lease payments should be easily covered by increased cash from new sales.