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ACCFIN1003 Finance

Task
This Mid Module Assignment is split into two parts.
 
Part 1
 
Review the financial information for Watley's Furniture. Ratio analysis is a useful tool for businesses to analyse financial performance and to develop plans for future business improvements. Using the above information for Watley’s, carry out ratio analysis for liquidity, activity, profitability and gearing. For each of the four categories, ONE ratio only should be considered. The ratio should be calculated for both years i.e. you will work out 4 x 2014 and 4 x 2015 = 8 ratios in total. This is a technical question with no specific word count limit; a little supporting text to aid presentation is welcomed, but there is no expectation for any detailed analysis.
 
Part 2
 
Using the ratios calculated in part 1, carry out critical analysis for each of the 4 pairs of ratios in turn. Your answer should explain what can be gleaned from the ratios, and also what Watley’s should do differently in order to improve their future financial performance. This is an essay-style question with a word count range of 1500 – 2000 words.
 
Learning Outcomes: Understand the process of company account preparation Critically evaluate company financial statements Apply appropriate techniques to analyse and evaluate financial performance.
 

Income Statement for the periods ending 30.3.2014 and 31.3.2015

                                                                                  2014

2015

 

£000

£000

Sales revenue

3290

3520

Cost of sales

(1290)

(1500)

 

2000

2020

Gross profit

Overheads

(1480)

(1600)

Depreciation

(100)

(100)

 

420

320

Operating profit

Interest on bank loan

(20)

(20)

 

 

 

Profit for the period

400

300

 
Breakdown of overheads
 

 

£000

£000

Salaries and wages

1130

1300

Rates, utility bills etc.

30

30

Advertising

110

40

Logistics

130

130

Other

80

100

 

1480

1600

 

Statement of Financial Position at 31.3.2014 and 31.3.2015

                                                                                  2014

2015

 

£000

£000

ASSETS

 

 

Fixed Assets

 

 

Buildings

730
400
120

730
320
100

Machines

Motor vehicles

 

1250

1150

Current Assets

 

 

Inventory

90
160
50

140
260
80

Trade receivables

Cash in the bank

 

300

480

 

 

 

EQUITY AND LIABILITY

 

 

Equity

 

 

Shareholder’s funds

900
180

1080
140

Retained profit

 

1080

1220

 

Non-current Liabilities

 

 

Bank loan

200

200

Current Liabilities

 

 

Trade payables

50
80
140

50
60
100

Tax

Dividends

 

270

210

Total Equity and Liabilities

1550

1630

 

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