Maddox Smith Staff asked 5 years ago

Financial Statements

Question 1                    Total marks for Q1. (10 marks)Financial statements of Nimbin Pty Ltd are presented below:Nimbin P/LStatement of Financial PositionAs at 30 June 2015 and 2016 ($000)                            2016        2015Current assetsCash and cash equivalents                $1,645        $2,110Accounts receivables (all trades)              4,100          3,675Inventories                          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 liabilitiesPayables                        $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                            ======    ======EquityShare capital                        $7,700        $7,700Retained earnings                      6,515          4,905                            _______    _______Total equity                        $14,215    $12,605                            ======    ======        Nimbin P/LIncome StatementAs at 30 June 2016($000)Revenues (net sales)                    $55,000Less: 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/LStatement of changes in EquityFor the year ended 30 June 2016($000)Share capitalOrdinary (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 EarningsBalance at start of period                $4,905Total income for the period                  4,362Dividends paid – ordinary                 (2,702)Dividends paid – preference                      (50)                            ______Balance at end of period                $6,515                            ======Additional information:Payables include $5,620 (2016) and $5,730 (2015) trade accounts payable; the remainder is accrued expenses. Market prices of issued shares at year-end (2016): Ordinary $12; Preference $6.70.Required:A.    Calculate the following ratios for 2016. The industry average for similar businesses is shown. (6 marks)Industry average1.    Rate of return on total assets                22%2.    Rate of return on ordinary equity                20%3.    Profit margin                        4%4.    Earnings per share                        45c5.    Price-earnings ratio                    12.06.    Dividend yield                        5%7.    Dividend payout                        70%8.    Current ratio                        2.5:19.    Quick ratio (acid ratio)                    1.3:110.    Receivables turnover                    1311.    Inventory turnover                    612.    Debt ratio                            40%13.    Times interest earned                    614.    Assets turnover                        1.8B.    Given the above industry averages, comment on the company’s profitability, liquidity and use of financial gearing. (4 marks) Question 2                    Total marks for Q5. (10 marks)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? Discuss. (2 MARKS)b)    Accounting provides much information to help managers make economic decisions in their various workplaces. You are required to provide examples of economic decisions that the following people would need to make with the use of accounting information: (3 MARKS)□    A manager of human resources□    A factory manager□    The management team of an Australian Football League (AFL) club□    The manager of a second-hand clothing charityc) Indicate the effect of each of the following transactions on any or all of the three financial statements of a business: (5 MARKS)1. Statement of financial position2. Statement of financial performance3. Statement of cash flowsApart 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.THE END