Assignment 1- Financial Statement Analysis
Part 1 - Financial Analysis
The condensed financial statements of Soule Company for the years 2013 and 2014 are presented below.
Soule Company
Balance Sheets
December 31
|
2014 |
2013 |
| Current assets |
|
|
| Cash and cash equivalents |
£ 330 |
£ 360 |
| Accounts receivable (net) |
470 |
433 |
| Inventory |
430 |
300 |
| Prepaid expenses |
120 |
160 |
| Total current assets |
1350 |
1,343 |
| Property, plant, and equipment |
420 |
380 |
| Investments |
10 |
10 |
| Intangibles and other assets |
530 |
510 |
| Total assets |
£2,310 |
£2,243 |
| Current liabilities |
£ 900 |
£ 810 |
| Long-term liabilities |
390 |
303 |
| Stoc kholders' equity-common |
1,020 |
1.04 |
| Total liabilities and stockholders' equity |
£2,310 |
£2,243 |
Soule Company
Income Statements
For the Years Ended December 31
|
2014 |
201 3 |
| Sales revenue |
£ 4,000 |
£3,600 |
| Costs and expenses |
|
|
| Cost of goods sold |
9.84 |
895 |
| Selling and ad ministrative expenses |
2,400 |
2,330 |
| Total costs and expenses |
10 |
20 |
| Interest expense |
3,394 |
3,245 |
| In come before income taxes |
606 |
355 |
| Income tax expense |
242 |
142 |
| Net income |
£ 364 |
£ 213 |
Compute the following ratios for 2014 and 2013.
(a) Current ratio.
(b) Inventory turnover. (Inventory on 12/31112 was £326.)
(c) Profit margin ratio.
(d) Return on assets, (Assets on 12/31/12 were E2,100,)
(e) Return on common stockholders' equity. (Stockholders' equity on 12/31/12 was £960.)
(f) Debt to total assets ratio.
(g) Times interest earned.
Critically evaluate your ratio calculations and conclude on the current state of the company.
Part 2 - Performance Evaluation
Evaluate the financial performance of a company of your choosing using the knowledge and technical skills that you have gained during the course so far. Provide a theoretical explanation of any ratio analysis. No need to recalculate ratios, often the financial reports provides these.
Attach the company financial statements as an appendix to your statement as reference to your work.
Present your findings in a Management Business Report wordage should be 1500 +0'- 10%.
Guidelines for assignment
- This is an individual assignment
- Ground your answer in relevant theory
- Plagiarism and reproduction of someone else's work as your own will be penalized
- Make use of references, where appropriate - Use Harvard or APA referencing method.
- Late submission are not accepted
Assignment 2 - Budgeting
Learning Objectives for Course.
1. Develop quantitative skills necessary to read, interpret and perform the calculations for the accounting reports involved in cost control and profit planning.
2. Evaluate and identify financial strengths and weaknesses of a business through appropriate conceptual analysis.
3. Analyse information and knowledge effectively in order to develop meaning to solve complex problems and make decisions;
Question 1 - Planning and Control
Write an essay of 1000 words demonstrating your conceptual understanding of the following questions.
1. Is budgeting used primarily for scorekeeping, attention, directing or problem solving?
2. How do strategic planning, long range planning and budgeting differ?
3. Why is budgeted performance better than past performance as a basis for judging actual results?
4. What are the major benefits of budgeting?
5. Is budgeting an unnecessary burden for day to day problems? Explain your answer.
6. Why is the sales forecast the starting point for budgeting?
7. How do Spreadsheets aid the application of sensitivity analysis?
Question 2 - Budget Preparation - Intellectual and Practical Skills
Application of learning:
Prepare the following budgets for the 6 months ending September 2013. You are required to use Excel spreadsheets, which can be copied into word once you finish, should you wish. A template is available for you to use as a basis.
a) Sales budget
b) Cash Budget
c) Debtors Budget
d) Creditors Budget
e) Production Cost Budget
f) Raw Materials and finished goods Budget
g) Profit and Loss Account Budget
h) Balance Sheet Budget
Draw conclusions from your budgets and prepare a short management report.
|
Europe Ltd
Balance Sheet as at 31st March 2013
|
|
|
£ |
£ |
| Fixed Assets |
|
|
100,000 |
|
|
|
|
| Current Assets |
|
|
|
| Debtors |
(Feb £10000, March £14000) |
24000 |
|
| Stock |
Raw Materials |
9000 |
|
|
Finished Goods |
13000 |
|
|
|
46000 |
|
| Current Liabilities |
|
|
|
| Creditors |
(Feb £10000, March £10000) |
18000 |
|
| Bank |
|
3000 |
|
|
|
21000 |
|
| Net Current Assets / Working Capital |
|
|
25000 |
|
|
|
|
| NET ASSETS |
|
|
|
|
|
|
125000 |
| Financed by: |
|
|
|
|
Share Capital |
|
100,000 |
|
Profit and Loss |
|
25,000 |
|
|
|
|
| TOTAL SHAREHOLDERS FUNDS |
|
|
125,000 |
Notes:
- Fixed Assets are depreciated at 20% straight line method per year.
- Purchases will be £51D00 in April, increasing by £1000 per month and paid 2 months alter purchase.
Sales in April will be £20,000„ increasing by E2,000 per month and paid 2 months in arrears.
Production costs per unit will be:
Direct materials f 15
Direct Labour £12
Production overheads ES
- Direct Labour and production overheads are paid as they are incurred.
- Production units per month are 500 units
- Sales units in April are 400 units, increasing by 40 units per month.
Expenses run at E10,000 per month, paid in the month that they are incurred.