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7115 · 2.4

Internal and external communication — practice questions

Practice and worked examples for 7115 Internal and external communication. Short previews only — attempt the full question in MarkScheme against the official scheme.

Worked example 1

Manufacturer launches new quality standards but shop-floor defect rate unchanged. Staff survey: 'We heard about it on the news before our manager told us.' Analyse the communication failure.

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Purpose failed: Internal instruction and objective sharing - staff not told what to do differently.

Channel failure: External (media) before internal - destroys trust (7.1.4) and morale.

Consequence: Standards exist on paper only; quality objective (4.1.2) missed.

Fix: CEO briefing → team meetings → written SOPs → training; upward feedback on barriers to new process.

Worked example 2

A company, 'GreenTech Solutions', reported a net profit of $5,200,000 for the year, an increase of 30% from the previous year. The company has 10,000,000 shares outstanding. The management needs to communicate this performance to its shareholders. Calculate the Earnings Per Share (EPS) for the current year and explain how this key metric should be communicated in the annual report.

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Step 1: Identify the purpose of communication. The purpose is external communication with shareholders (investors) to inform them about the company's financial performance and build investor confidence.

Step 2: Calculate the key performance metric (EPS). The formula for Earnings Per Share (EPS) is: EPS=Net ProfitNumber of Outstanding SharesEPS = \frac{\text{Net Profit}}{\text{Number of Outstanding Shares}} Substituting the values: EPS=$5,200,00010,000,000=$0.52EPS = \frac{\text{\textdollar}5,200,000}{10,000,000} = \text{\textdollar}0.52

Step 3: Calculate the previous year's profit for comparison. Current year profit = $5,200,000, which is a 30% increase. Let Previous Year's Profit be P. Then P×(1+0.30)=$5,200,000P \times (1 + 0.30) = \text{\textdollar}5,200,000. P=$5,200,0001.30=$4,000,000P = \frac{\text{\textdollar}5,200,000}{1.30} = \text{\textdollar}4,000,000. Previous year's EPS = $4,000,00010,000,000=$0.40\frac{\text{\textdollar}4,000,000}{10,000,000} = \text{\textdollar}0.40.

Step 4: Formulate the communication message. The annual report's chairman's statement should highlight the positive results clearly. Message: "We are pleased to report a strong financial performance for the year, with net profit increasing by 30% to $5.2 million. This translates to an Earnings Per Share (EPS) of $0.52, up from $0.40 in the previous year. This growth reflects the success of our strategic initiatives and our commitment to delivering value to our shareholders."

Final Answer: The company should report an EPS of $0.52. This should be communicated within the annual report's financial highlights and chairman's statement, comparing it to the previous year's EPS of $0.40 to emphasize the 30% growth in profitability.

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