Financial Accounting Assignment

Question 1                                                     

Financial statements of Nimbin Pty Ltd are presented below:

Nimbin P/L

Statement of Financial Position

As at 30 June 2013 and 2014

($000)

 

                                                                                    2014                2013

Current assets

Cash and cash equivalents                                          $1,645             $2,110

Accounts receivables (all trades)                                  4,100               3,675

Inventories                                                                    7,000             6,930

                                                                                    ______            _____

            Total current assets                                         12,745             12,715

                                                                                    ______            ______

Non-current assets                                                     

Property, plant and equipment                                    17,190             15,330

                                                                                    _______          ______

            Total non-current assets                                  17,190             15,330

                                                                                    _______          _______

Total assets                                                                 $29,935           $28,045

                                                                                    =======        ======

Current liabilities

Payables                                                                      $5,780             $5,990

                                                                                    _______          ______

Total current liabilities                                                5,780               5,990

                                                                                    _______          ______

Non-current liabilities

Interest-bearing liabilities                                            9,940               9,450

                                                                                    _______          _____

            Total non-current liabilities                             9,940               9,450

                                                                                    _______          _______

Total liabilities                                                             $15,720           $15,440

                                                                                    ======          ======

Equity

Share capital                                                                $7,700             $7,700

Retained earnings                                                         6,515               4,905

                                                                                    _______          _______

Total equity                                                                 $14,215           $12,605

                                                                                    ======          ======                     

 

 

Nimbin P/L

Income Statement

As at 30 June 2014

($000)

 

Revenues (net sales)                                                   $55,000

Less: cost of sales                                                         35,100

                                                                                    _______

Gross profit                                                                   19,900

                                                                                    _______

Less: Expenses

            Selling and distribution expenses                      7,100

            Administrative expenses                                    4,970

            Finance costs                                                     1,560

                                                                                    ______

            Total expenses                                                13,630

                                                                                    ______

Profit before income tax                                               6,270

            Income tax expense                                          1,908

                                                                                    ______

Profit                                                                           $4,362

                                                                                    =====

Nimbin P/L

Statement of changes in Equity

For the year ended 30 June 2014

($000)

 

Share capital

Ordinary (7,200.000 shares)              

Balance at start of period                                            $7,200

                                                                                    ______

Balance at end of period                                             7,200

                                                                                    _______

                                                                                   

Preference (250,000 shares)  

Balance at start of period                                            500

                                                                                    ______

Balance at end of period                                             500

                                                                                    ______

Total share capital                                                       $7,700

                                                                                    ======

 

Retained Earnings

Balance at start of period                                            $4,905

Total income for the period                                          4,362

Dividends paid – ordinary                                          (2,702)

Dividends paid – preference                                             (50)

                                                                                    ______

Balance at end of period                                             $6,515

                                                                                    ======

 

Additional information:

 

 

 

Payables include $5,620 (2014) and $5,730 (2013) trade accounts payable; the remainder is accrued expenses. Market prices of issued shares at year-end (2014): Ordinary $12; Preference $6.70.

 

Required:

 

A. Calculate the following ratios for 2014. The industry average for similar businesses is shown.

 

  1. Rate of return on total assets 22%
  2. Rate of return on ordinary equity 20%
  3. Profit margin 4%
  4. Earnings per share 45c
  5. Price-earnings ratio 0
  6. Dividend yield 5%
  7. Dividend payout 70%
  8. Current ratio 5:1
  9. Quick ratio (acid ratio) 3:1
  10. Receivables turnover 13
  11. Inventory turnover 6
  12. Debt ratio 40%
  13. Times interest earned 6
  14. Assets turnover 8

 

B. Given the above industry averages, comment on the company’s profitability, liquidity and use of financial gearing.

 

 

 

Question 2                                                     

 

a) A local restaurant is noted for its fine food, as evidenced by the large number of customers. A customer was heard to remark that the secret of the restaurant’s success was its fine chef.  Would you regard the chef as an asset of the business?  If so, would you include the chef on the balance sheet of the business and at what value? 

 

b) Indicate the effect of each of the following transactions on any or all of the three financial statements of a business:

 

  1. Statement of financial position
  2. Statement of financial performance
  3. Statement of cash flows

 

Apart from indicating the financial statements (s) involved, use appropriate phrases such as ‘increase total asset’, ‘decrease equity’, ‘increase income’, ‘decrease cash flow’ to describe the transaction concerned.

 

  1. Purchase equipment for cash.
  2. Provide services to a client, with payment to be received within 40 days.
  3. Pay a liability.
  4. Invest additional cash into the business by the owner.
  5. Collect an account receivable in cash.
  6. Pay wages to employees.
  7. Receive the electricity bill in the mail, to be paid within 30 days.
  8. Sell a piece of equipment for cash.
  9. Withdraw cash by the owner for private use.
  10. Borrow money on a long-term basis from a bank.

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