Arizona pic has carried on business for a number of years as a retailer of a wide
Question:
In recent years, the company has found it necessary to provide credit facilities to its customers in order to achieve growth in turnover. As a result of this decision, the liability to the company's bankers has increased substantially.
The statutory accounts of the company for the year ended 31 March 1998 have recently been published, and extracts are provided below, together with comparative figures for the previous two years.
Other information:
¢ Depreciation charged for the three years was as follows:
Other information:
¢ Depreciation charged for the tree years was as follows:
¢ The debentures are secured by a floating charge over the assets of Arizona pic. Their repayment is due on 31 March 2008.
¢ The bank overdraft is unsecured. The bank has set a limit of £630 million on the overdraft.
¢ Over the past three years, the level of credit sales has been:
Given the steady increase in the bank overdraft which has taken place in recent years, the company has recently written to its bankers to request an increase in the limit. The request was received by the bank on 15 May 1998 two weeks after the 1998 statutory accounts were published.
You are an accountant employed by the bankers of Arizona pic. The bank is concerned at the steep escalation in the level of the company's overdraft and your regional manager has asked for a report on the financial performance of Arizona pic for the last three years.
Required:
Write a report to your regional manager which analyzes the financial performance of Arizona pic for the period covered by the financial statements.
Your report may take any form you wish, but should specifically address the particular concern of the bank regarding the rapidly increasing overdraft. Therefore, your report should identify aspects of poor performance which could have contributed to the increase in the overdraft.
Debenture DefinitionDebentures are corporate loan instruments secured against the promise by the issuer to pay interest and principal. The holder of the debenture is promised to be paid a periodic interest and principal at the term. Companies who...
Step by Step Answer:
International Financial Reporting and Analysis
ISBN: 978-1408075012
5th edition
Authors: David Alexander, Anne Britton, Ann Jorissen