1. You have been asked by a client to advice on the financial position of two...

 

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1. You have been asked by a client to advice on the financial position of two companies in a similar trade sector. You have been supplied with the following financial statements. Income Statement for the year ended 31 March 2016 James Ltd Smith Ltd Notes £000 £00 Revenue 638 493 Cost of sales (331) (297) Gross profit 307 196 (36) (99) (29) (46) Distribution costs Administrative expenses 1 Profit before taxation 172 121 Taxation (21) (22) Profit for the year 151 99 Statement of financial position as at 31 March 2016 Notes James Ltd Smith Ltd £000 £000 £000 £000 £000 £000 Non-current assets (NBV): Property, plant and equipment 1 198 111 Current assets: Inventory 60 58 Trade and other receivables 35 43 Cash and cash equivalents 2 97 101 Total assets 295 212 Equity and liabilities: Share capital (f1 share each) Retained earnings 50 30 161 66 211 96 Non-current liabilities: 20 Borrowings Current liabilities: Trade and other payables Current tax payable 2 74 74 10 12 Bank overdraft 10 84 96 - 84 116 Total equity and liabilities 295 212 Notes to the financial statements: 1. The non-current assets held by the companies are as follows: James Ltd Smith Ltd £000 £000 Land and buildings Fixtures and fittings 97 43 28 17 Motor vehicles 73 51 198 111 2. Trade and other payables for both companies include a proposed dividend. James Ltd has proposed a dividend of £50,000 and Smith Ltd a dividend of £40,000. Required: Calculate appropriate ratios (at least 2 from each group) and critically appraise the current financial position of each of the two companies. 30 marks 1. You have been asked by a client to advice on the financial position of two companies in a similar trade sector. You have been supplied with the following financial statements. Income Statement for the year ended 31 March 2016 James Ltd Smith Ltd Notes £000 £00 Revenue 638 493 Cost of sales (331) (297) Gross profit 307 196 (36) (99) (29) (46) Distribution costs Administrative expenses 1 Profit before taxation 172 121 Taxation (21) (22) Profit for the year 151 99 Statement of financial position as at 31 March 2016 Notes James Ltd Smith Ltd £000 £000 £000 £000 £000 £000 Non-current assets (NBV): Property, plant and equipment 1 198 111 Current assets: Inventory 60 58 Trade and other receivables 35 43 Cash and cash equivalents 2 97 101 Total assets 295 212 Equity and liabilities: Share capital (f1 share each) Retained earnings 50 30 161 66 211 96 Non-current liabilities: 20 Borrowings Current liabilities: Trade and other payables Current tax payable 2 74 74 10 12 Bank overdraft 10 84 96 - 84 116 Total equity and liabilities 295 212 Notes to the financial statements: 1. The non-current assets held by the companies are as follows: James Ltd Smith Ltd £000 £000 Land and buildings Fixtures and fittings 97 43 28 17 Motor vehicles 73 51 198 111 2. Trade and other payables for both companies include a proposed dividend. James Ltd has proposed a dividend of £50,000 and Smith Ltd a dividend of £40,000. Required: Calculate appropriate ratios (at least 2 from each group) and critically appraise the current financial position of each of the two companies. 30 marks