Diploma of Finance and Mortgage
Broking Management
Course 10732
FNS50311

Assessment

Identify and develop complex broking options for client

FNSFMB502A

Present broking options to client with complex needs

FNSFMB503A

Implement complex loan structures

FNSFMB504A

All elements of these units are covered by this assessment

Name:

The above units are UNGRADED and will be recorded as Competent or Not yet competent on your official transcript

To be assessed as competent in this section of the units you must achieve 80% overall competency

ALL questions to be attempted.

I accept by uploading this assessment that I am certifying that this is entirely my own work, except where I have given fully documented references to the work of others, and that the content of this assessment has not previously been submitted for assessment in any formal course of study.

Scenario 1
You are a Mortgage Broker for Careful Financial Services (CFF) Fedtown and have been contacted by a prospective new client Tony Mason.

You have arranged to meet with Tony next week to discuss his requirements further.

Over the phone you have found out the following information:

Client’s names: Anthony and Lyn Mason

Tony is a partner in T& L Accounting Partnership, which has been operating successfully for 5 years.

The Mason’s have recently sold their existing house for $650,000 and are purchasing a new property for $1,000,000.

Their mortgage for $50,000 on their current property is held with Whatbank, Thistown.

Tony finds that July to October is very busy and the business overdraft of $15,000 is not enough during that time.

He currently leases the office that the business is located in but has been approached by the owner to see if he is interested in purchasing it.

Tony mentioned that they will soon need to update the computer equipment in the office to cope with the workload and changes in software that have occurred.

He is also concerned about rising interest rates.

Question 1 (FNSBRK502B E1.1, 2.1)

Using the information provided above identify 5 needs that the Mason’s have and complete the below table.
Need Details






Question 2 (FNSBRK502B E 1.1, 2.1 FNSBRK503B 1.1)

In your own words provide 2 examples of closed questions and 2 examples of open questions you will ask at the interview to ascertain further information on the client’s needs/objectives.

Question 3 (FNSBRK502B E 2.1 FNSBRK504B E2.2)

Identify the four types of documentation you would need to obtain for the partnership to:

? Identify the borrower and his/her/its representatives
? Clarify the capacity and authority to borrow and pledge security
? Verify the ability to repay the amount applied for.

Question 4 (FNSBRK502B E1.1, 1.4, 2.1, 2.2, 2.4, 3.4, FNSBRK503B E1.1 1.4, 2.1 2.2)

Identify 3 personal products and 2 business products that may be suitable to meet the Mason’s needs (based on the information provided above) and complete the following tables with at least 3 items under each heading:

1. Product
Features


Benefits


Drawbacks/risks


Fees and charges



2. Product
Features


Benefits


Drawbacks/risks


Fees and charges

3. Product
Features


Benefits


Drawbacks/risks


Fees and charges

4. Product
Features


Benefits


Drawbacks/risks


Fees and charges

5. Product
Features


Benefits


Drawbacks/risks


Fees and charges


Question 5 (FNSBRK503B E1.3, 1.4, 2.1)

Assuming that one of the options suitable to meet the Mason’s needs is a Commercial Loan over 10 years complete the following loan options table that you will then present to the Mason’s:. The current rates available are:

Variable rate 8.50% p.a.
Fixed rate 1 year 9.00% p.a.
Fixed rate 5 years 9.50% p.a.

Loan options and repayments for Commercial loan over 10 years $545,000
Product details Monthly repayments
Current rate Increase by 1.5%

Principal & Interest Interest only Principal & Interest Interest only




Question 6 (FNSBRK502B E1.1, 3.1,FNSBRK503B E1.1, 2.1)

The Mason’s have asked you to prepare a powerpoint presentation for your scheduled meeting next week – their solicitor and accountant will also be at the meeting

Prepare 3 slides (not required in powerpoint application) to use in this presentation – ensure that each of the 3 slides contain different types of information (this could be in relation to details on products, identifying customer needs, information on your business etc):


Question 7 (FNSBRK502B E1.2, 3.3)

The Mason’s have mentioned that they are risk averse and are concerned about interest rates rising. Identify and describe 3 options the Mason’s could consider to reduce their interest rate risk.

Question 8 (FNSBRK503B E4.4)

List and explain 3 things you will do in the next 12 months to maintain and develop the relationship with the Mason’s.

Question 9 (FNSBRK502B E 3.5)

If the Mason’s were to have a complaint about your dealings what would you advise them to do?

Scenario 2
Bandicoot Boards Pty Limited (“BB”) is a surfboard manufacturer which is owned and operated by two families, the Johnsons and the Williams. “Waxhead” Williams was a professional surfer before teaming up with old school friend and accountant Jimmy Johnson to form BB. Further details are as follows:

BB has been manufacturing high quality surfboards for 10 years with several top-range Bandicoot models being used and endorsed by professional surfers.

BB is located at Thistown Sands, a popular surfing mecca due to the consistent large sets of waves found there in Sept to March.

The Williams have just purchased a renovated unit in trendy Thistown Terrace . The Johnsons own a property in Thistown Heights. The Thistown Heights and Thistown Terrace properties are currently used has security for home loans, however the LVR on each is very low.

BB employs 5 other staff.

BB is owned equally by each family and while each shareholder holds 25% of the shares, Waxhead’s and Jimmy’s spouses do not take an active interest in the day-to-day operations of the company.

Lending Proposal
Johnson & Williams have approached you to obtain funding for the proposed expansion of their manufacturing capacity and product range. They plan to obtain new manufacturing equipment so they can manufacture snowboards. This will mean they will also have to extend their existing premises to accommodate the expanded plant and machinery as well as sell some of the existing machinery which will become obsolete.

A privacy consent form was signed by all the shareholders and the credit reports have come back clear except for a default on Jimmy’s for $500 for a mobile phone company.

Commercial property is currently held as security for existing loan and has not been valued for some years.

4 years financial statements covering 20X2 to 20X5 are provided below.
Income Statements for Bandicoot Boards Pty Limited for the years ending 20X2 to 20X5

20X2 20X3 20X4 20X5

Sales 1,020,000 1,100,000 1,150,000 1,250,000

Less COGS 550,000 660,000 720,000 850,000
Opening Stock 50,000 60,000 85,000 70,000
Purchases 560,000 685,000 705,000 860,000
Closing Stock 60,000 85,000 70,000 80,000

Gross Profit 470,000 440,000 430,000 400,000
Less Expenses
Accounting 2,000 2,200 2,500 1,200
Advertising 1,900 1,000 1,050 900
Bank Charges 1,100 575 625 130
Depreciation 8,000 6,000 6,500 5,000
Directors Fees 50,000 40,000 40,000 40,000
Electricity 6,000 6,050 1,025 1,050
Insurance 4,000 4,200 4,300 4,350
Interest 19,300 20,260 22,320 22,430
Lease Payment 12,000 12,000 12,000 12,000
Motor Vehicle 12,400 8,500 2,755 2,650
Salaries 280,000 280,000 280,000 290,000
Superannuation 27,000 27,000 29,000 30,000
Telephone 1,645 1,750 2,100 1,800

Total 425,345 409,535 404,175 411,510

Net Profit (Loss) 44,655 30,465 25,825 (11,510)


Balance Sheets for Bandicoot Boards Pty Limited as at 30/6/X2 to 30/6/X5

20X2 20X3 20X4 20X5

Current Assets
Petty Cash 500 650 400 450
Stock 60,000 85,000 70,000 80,000
Accounts Rec 125,700 143,000 173,250 203,450
Prepayments 3,600 4,200 3,800 4,650
189,800 232,850 247,450 288,550

Non Current Assets
Plant & Machinery 120,000 115,000 110,000 105,000
Office Equipment 7,000 6,000 7,500 8,000
Motor Vehicle 30,000 25,000 20,000 15,000
Land & Buildings 250,000 250,000 250,000 250,000
407,000 396,000 387,500 378,000

Total Assets 596,800 628,850 634,950 666,550

Current Liabilities
Bank Overdraft 18,000 32,600 63,200 79,292
Accounts Pay 47,500 56,300 67,600 98,958
Accruals 2,300 3,100 2,200 2,100
67,800 92,000 133,000 180,350

Non Current Liabilities
Finance Lease 122,000 110,000 98,000 86,000
Long Term Loan 175,000 170,000 160,000 145,000
Shareholders Loans 200,000 200,000 200,000 200,000
497,000 480,000 458,000 431,000

Total Liabilities 564,800 572,000 591,000 611,350

20X2 20X3 20X4 20X5

Proprietorship
Capital 20,000 20,000 20,000 20,000
Retained Earnings (32,655) 6,385 (1,875) 46,710
Net Profit 44,655 30,465 25,825 (11,510)

32,000 56,850 43,950 55,200



Question 10 (FNSBRK502B E2.1 FNSBRK504B E1.1,2.2)

a) Using the financial statements for Bandicoot Boards Pty Limited calculate the following for the 3 years 20X3 to 20X5:

- Gross profit ratio
- Net profit ratio
- Current ratio
- Quick assets ratio
- Accounts receivable ratio
- Accounts payable ratio
- Debt to assets ratio
Note – complete ratios to 1 decimal place

Ratio 20X3 20X4 20X5
Gross profit ratio
Net profit ratio

Current ratio

Quick assets ratio
Accounts receivable ratio
Accounts payable ratio
Debt to assets ratio

b) Using the information that has been provided and the ratios calculated in Question 11 for Bandicoot Boards Pty Limited, complete the following table with 2 examples of strengths and weaknesses for each of the 5C’s.

5C’s Strengths Weaknesses
Character


Capacity


Capital


Conditions


Collateral



c) What security structure would you recommend? Give reasons for your answer along with any matters that would need to be considered before executing the security documentation. Local lenders will only lend up to 70% LVR on commercial premises.

Question 11 (FNSBRK502B E2.1 FNSBRK504B E1.1, 2.3, 2.4, 3.3)

In the implementation stage of the process:

a) Identify 3 key parties (other than the client) that you would need to communicate with and describe what each of them would be used for, This could include verification of required documents, preparing for settlement.

Key party Details
Example.
Conveyancer
A Conveyancer completes the required documentation for the legal transfer of property. They charge either a flat fee or an amount based on the value of the property.

1.
2.
3.

b) What would happen if the legal documents (following settlement) were not stamped and registered within the timeframe required by law?