Financal statements & analysis of a report

Financal statements & analysis of a report

QUESTION 1:
Simplified financial statements for Nigel plc are:
Income statement for the year ended 30 September 2011
£m
Revenue 290.0
Cost of sales (215.0)
Gross profit 75.0
Operating expenses (Note 1) (62.0)
Operating profit 13.0
Interest payable (Note 2) (3.0)
Profit before taxation 10.0
Taxation (2.6)
Profit for the year 7.4

Statement of financial position as at 30 September
2010 2011
£m £m
ASSETS
Non-current assets (Note 4) 80.0 85.0
Current assets
Inventories and trade receivables 119.8 122.1
Cash at bank 9.2 16.6
129.0 138.7
Total assets 209.0 223.7

EQUITY AND LIABILITIES
Equity
Share capital 35.0 40.0
Share premium account 30.0 30.0
Reserves 31.0 34.9
96.0 104.9
Non-current liabilities
Borrowings 32.0 35.0
Current liabilities
Trade payables 80.0 82.5
Taxation 1.0 1.3
81.0 83.8
Total equity and liabilities 209.0 223.7

Notes:
i. Operating expenses include depreciation of £13 million and a surplus of £3.2 million on the sale of non-current assets.
ii. The expense and the cash outflow for interest payable are equal.
iii. A dividend of £3.5million was paid during 2011.
iv. Non-current asset costs and depreciation:
Cost Accumulated Depreciation Carrying amount
£m £m £m
At 1 October 2010 120.0 40.0 80.0
Disposals (10.0) (8.0) (2.0)
Additions 20.0 20.0
Depreciation – 13.0 (13.0)
At 30 September 2011 130.0 45.0 85.0

Required:
Prepare a Statement of Cash flows for Nigel plc. for the year ended 30 September 2011.
(Total marks for this question: 30 marks)

QUESTION 2:
Heritage Services provides a range of business consultancy services. Its financial statements for the last year with prior comparison are reproduced in the table below:

Heritage Services Plc
Income Statement
In £’000 2014 2013
Revenue 34,000 29,000
Less Expenses 16,500 13,000
Operating profit before interest 17,500 16,000
Less interest expense 4,000 2,700
Profit before tax 13,500 13,300
Income tax expense 5,400 5,320
Net profit after tax 8,100 7,980

The Statement of Changes in Equity shows the following:
Dividends paid 4,000 3,750
Number of shares issued 10,000,000 10,000,000
Earnings per share £0.81 £0.80
Dividend per share £0.40 £0.38
Market price of shares £8.55 £10.20

Statement of Financial Position
In £’000 2014 2013
Assets
Non-current assets 21,933 17,990

Current assets
Receivables 7,080 4,750
Bank 377 1,250
7,457 6,000
Total Assets 29,390 23,990

Liabilities
Non-current liabilities
Long-term loans 2,750 2,000

Current liabilities
Payables 4,300 3,750
Total liabilities 7,050 5,750

Net assets 22,340 18,240

Equity
Capital and reserves
Shareholders’ funds 10,000 10,000
Retained profits 12,340 8,240
22,340 18,240

Required:
Using the above financial statements, calculate the following ratios and prepare a report, commenting on the results obtained for 2013 and 2014:
i. Interest cover
ii. PBIT/Sales
iii. ROCE
iv. ROI (NPAT/SHF)
v. Dividend yield
vi. P/E ratio
vii. Asset efficiency (Sales/TA)
viii. Receivable days
ix. Current ratio
x. Gearing ratio
(Total marks for this question: 50 marks)

QUESTION 3:

Explain the idea of value- based management and how shareholder value relates to the interaction between product and capital markets.
(Total marks for this question: 10 marks)

QUESTION 4:

Explain the difference between accounting, account and accountability.
(Total marks for this question: 10 marks)

TOTAL MARKS FOR ASSIGNMENT: 100 MARKS