Nixon Group Plc. is a global company with markets across Europe, Middle East, America and Africa (EMEAA). The global board of directors are currently reviewing the attached income statement for regional sales and profits, and are considering a range of strategic decisions bordering on the following:
• Maximizing revenue for profit making regional establishments and possible closure of loss-making areas. Any closures would incur an 8% of projected admin and distribution costs, as redundancy payments for staff in the affected regions.
• Development of commercial strategies considering other factors.
• Consideration of the regional interest costs and ease of obtaining funding,
• Operating expenses, including Administrative and Distribution expenses,
• Consider impact of government taxes, being a percentage of PBIT. (For this aspect, loss-making regions make projections to determine potential tax rates, to find impact on any arising profits. • Projected regional net profits & contribution to Group Net Profits. The following are projected market conditions for the different operating segments with current taxes being a % of PBIT and should remain same for the next period. Notes 1 2 4 & 5 3 Market Regions Revenues Gross Profit Govt. Taxes/Interests Operating Expenses Africa To increase by 3% as current % Low Govt. taxes. Cheap Interests. To increase by 3% Europe To increase by 5% as current % Cheap Interest 8%. Taxes 21% – Low. To increase by 4.5% Expensive in Luxembourg America To increase by 1.5% as current % High Mexican Interests To increase by 2.0% Low US taxes. Middle East To increase 4.2% as current % UAE No interest To increase by 3% Page 6 of 9 Required:
a) Outline and discuss the significance of defining and communicating the mission and values of a company, to all employees by senior management. (10 marks)
b) Taking into consideration the performance in the current financial statements, prepare a schedule including Group projected Statement of Comprehensive Incomes, following the strategic options available to the group, stating your assumptions clearly within your strategic plan for implementation. (25 marks)
c) Critically evaluate the significance of reporting the financial performance of the Group, in country segments. Your analysis should consider the accounting concepts which are applicable and the importance to stakeholders
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