Financial Analysis and Performance Assessment of Abbots Limited

Question and Requirements

For a module up to and including 60% weighting, our advice is that it would be reasonable to spend up to two (2) working days on the assessment; Wor count/page length – maximum This assignment comprises four (4) questions. Parts of questions 1, 2 and 4 are quantitative in nature. It is anticipated that you will use Excel for this. If so, copy your Excel work and paste it into the document as image(s). You should check how your image(s) look onscreen before AND after you save the whole document as a PDF to ensure readability.

You should not exceed two thousand (2,000) words – you may use fewer words if you so choose to. If you use more than two thousand (2,000) words any excess words will not be marked.

Please include a word count, where necessary, at the end of each question.

Included in numbers of pages/word count Do note that as this alternative assessment is an alternative to an exam, it is not expected that appendices will be included. If they are they will not be marked.

Required

a) Using the above information provided, calculate the following ratios for Abbots Limited for both years ended 31st December 2018 and 2019.

• three (3) profitability ratios,

• three (3) efficiency ratios,

• two (2) liquidity ratios,

• two (2) gearing ratios,

• two (2) investment ratios,

• Z-Score using the formula: 0.717a + 0.847b + 3.107c + 0.420d + 0.998e where

a = Working capital/Total assets

b = Accumulated retained profits/Total assets

c = Operating profit/Total assets

d = Book value of ordinary & preference shares/ Total liabilities at book value

e = Sales revenue/Total assets

b) Considering all relevant contextual information provided and your answer to part (a) above, assess the overall performance and financial health of Abbots Limited. Maximum number of words: 400 words. [12 Marks]

Within the marks allocation to this question, there is a sub-allocation of 5 marks reflecting academic judgement applied by the marker/assessor, based on the marker/assessor’s perception of logic, rationale, thrust, and communication. The composition of the 5 marks is based upon the assessment criteria for a level 7 module in relation to Knowledge and Understanding as well as Intellectual Skills.

Lyndals Limited is a small medium sized enterprise that deals with the manufacture and distribution of the ‘Relentless Recycler’ – a bin designed to assist in the sorting and disposal of  domestic recycling items such as bottles, plastics, cans etc.

Lyndals Limited’s management team is considering replacing its existing production equipment with new equipment that should, in theory, reduce operating costs and vastly improve quality, thus increase sales volumes over a five-year period.

The investment would cost £2,150,000 at the start of the project. Currently, unit production costs, excluding depreciation, are £7.50 with fixed overheads of £600,000 per year. If the new equipment were purchased, the unit production cost would decrease by £1.30. Accordingly, greater efficiencies will allow sales prices to be reduced from the current level of £10 per unit to £8.25. If the new equipment is purchased and used the company’s existing fixed overheads will increase by £100,000 in each of the five years. The company’s cost of capital is 12%.