Raymond Candies Ltd has just reported an operating profit of 34.4 million for the year ending...

Transcribed Image Text:

Raymond Candies Ltd has just reported an operating profit of 34.4 million for the year ending October 2019. The results of its three operating divisions are presented below. Emillion Division A C Total Sales 300 250 200 750 Cost of sales (150) (100) 190) (340) Gross profit 150 150 110 410 Distribution expenses (100) Administration expenses (35) (35) (100) (80) (280) (22) (92) Operating Profit 15 15 B 38 Taxation (3) (3) (1.6) (7.6) Net profit 12 12 6.4 30.4 Statement of financial position extract ( millions) Non-Current assets 10 10 9 29 Current assets Inventories 15 15 10 40 Trade Receivables 201 30 20 70 Bank 10 15 6 31 Total assets 55 70 45 170 Ordinary share capital 10 10 10 30 Retained profit 15 18 20 53 Total equity 25 28 30 83 Current liabilities Trade payables 10 10 5 25 Non-Current liabilities Long term loans 20 32 10 62 Total equity & liabilities 55 Capital Employed 70 45 28 45 170 60 40 145 The company currently uses Return on Capital Employed (ROCE) as its single measure to assess and compare the financial performance of the divisions. However, the company has now decided: . To use Residual Income (RI) as a divisional performance measure in addition to ROCE. The company has calculated its cost of capital at 8%. To use Balanced Scorecard (BSC) to measure performance. Required: a) Determine the ROCE for the company and each of its three divisions and give your opinion as to whether the company as a whole is making a satisfactory return. b) c) (8 marks) Using the company's cost of capital of 8% determine and comment on the Residual Income for each division. For the company (not divisions), calculate the following ratios (i) Gross profit margin (i) Operating profit margin (iii) Net profit margin (iv) Trade receivable days (v) Trade payable days (vi) Asset Turnover (vi) Gearing (8 marks) PRESENT VALUE of 1 7000ACC Rate Time 1% 2% 3% 4% 5% 1 0.990 0.980 0.971 2 0.952 0.980 0.961 0.943 0.925 0.907 0.962 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 3 4 5 6 0.890 0.873 0.857 0.842 0.826 0.812 0.797 0.783 0.769 0.756 0.743 0.731 0.718 0.706 0.694 0.971 0.942 0.915 0.889 0.864 0.840 0.816 0.794 0.772 0.751 0.731 0.712 0.693 0.675 0.658 0.641 0.624 0.609 0.593 0.579 0.961 0.924 0.888 0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0.636 0.613 0.592 0.572 0.552 0.534 0.516 0.499 0.482 0.951 0.906 0.863 0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.593 0.567 0.543 0.519 0.497 0.476 0.456 0.437 0.419 0.402 0.942 0.888 0.837 0.790 0.746 0.705 7 0.933 0.871 0.813 0.760 0.711 0.665 8 9 10 11 12 13 0.666 0.630 0.596 0.564 0.535 0.507 0.480 0.456 0.432 0.410 0.390 0.370 0.352 0.335 0.623 0.583 0.547 0.513 0.482 0.452 0.425 0.400 0.376 0.354 0.333 0.314 0.296 0.279 0.923 0.853 0.789 0.731 0.677 0.627 0.582 0.540 0.502 0.467 0.434 0.404 0.376 0.351 0.327 0.305 0.285 0.266 0.249 0.233 0.914 0.837 0.766 0.703 0.645 0.592 0.544 0.500 0.460 0.424 0.391 0.361 0.333 0.308 0.284 0.263 0.243 0.225 0.209 0.194 0.905 0.820 0.744 0.676 0.614 0.558 0.508 0.463 0.422 0.386 0.352 0.322 0.295 0.270 0.247 0.227 0.208 0.191 0.176 0.162 0.896 0.804 0.722 0.650 0.585 0.527 0.475 0.429 0.388 0.350 0.317 0.287 0.261 0.237 0.215 0.195 0.178 0.162 0.148 0.135 0.887 0.788 0.701 0.625 0.557 0.497 0.444 0.397 0.356 0.319 0.286 0.257 0.231 0.208 0.187 0.168 0.152 0.137 0.124 0.112 0.879 0.773 0.681 0.601 0.530 0.469 0.415 0.368 0.326 0.290 0.258 0.229 0.204 0.182 0.163 0.145 0.130 0.116 0.104 0.093 0.870 0.758 0.661 0.577 0.505 0.442 0.388 0.340 0.299 0.263 0.232 0.205 0.181 0.160 0.141 0.125 0.111 0.099 0.088 0.078 0.861 0.743 0.642 0.555 0.481 0.417 0.362 0.315 0.275 0.239 0.209 0.183 0.160 0.140 0.123 0.108 0.095 0.084 0.074 0.065 0.853 0.728 0.623 0.534 0.458 0.394 0.339 0.292 0.252 0.218 0.188 0.163 0.141 0.123 0.107 0.093 0.081 0.071 0.062 0.054 0.844 0.714 0.605 0.513 0.436 0.371 0.317 0.270 0.231 0.198 0.170 0.146 0.125 0.108 0.093 0.080 0.069 0.060 0.052 0.045 18 0.836 0.700 0.587 0.494 0.416 0.350 0.296 0.250 0.212 0.180 0.153 0.130 0.111 0.095 0.081 0.069 0.059 0.051 0.044 0.038 0.828 0.686 0.570 0.475 0.396 0.331 0.277 0.232 0.194 0.164 0.138 0.116 0.098 0.083 0.070 0.060 0.051 0.043 0.037 0.031 0.820 0.673 0.554 0.456 0.377 0.312 0.258 0.215 0.178 0.149 0.124 0.104 0.087 0.073 0.061 0.051 0.043 0.037 0.031 0.026 14 15 16 17 19 20 Raymond Candies Ltd has just reported an operating profit of 34.4 million for the year ending October 2019. The results of its three operating divisions are presented below. Emillion Division A C Total Sales 300 250 200 750 Cost of sales (150) (100) 190) (340) Gross profit 150 150 110 410 Distribution expenses (100) Administration expenses (35) (35) (100) (80) (280) (22) (92) Operating Profit 15 15 B 38 Taxation (3) (3) (1.6) (7.6) Net profit 12 12 6.4 30.4 Statement of financial position extract ( millions) Non-Current assets 10 10 9 29 Current assets Inventories 15 15 10 40 Trade Receivables 201 30 20 70 Bank 10 15 6 31 Total assets 55 70 45 170 Ordinary share capital 10 10 10 30 Retained profit 15 18 20 53 Total equity 25 28 30 83 Current liabilities Trade payables 10 10 5 25 Non-Current liabilities Long term loans 20 32 10 62 Total equity & liabilities 55 Capital Employed 70 45 28 45 170 60 40 145 The company currently uses Return on Capital Employed (ROCE) as its single measure to assess and compare the financial performance of the divisions. However, the company has now decided: . To use Residual Income (RI) as a divisional performance measure in addition to ROCE. The company has calculated its cost of capital at 8%. To use Balanced Scorecard (BSC) to measure performance. Required: a) Determine the ROCE for the company and each of its three divisions and give your opinion as to whether the company as a whole is making a satisfactory return. b) c) (8 marks) Using the company's cost of capital of 8% determine and comment on the Residual Income for each division. For the company (not divisions), calculate the following ratios (i) Gross profit margin (i) Operating profit margin (iii) Net profit margin (iv) Trade receivable days (v) Trade payable days (vi) Asset Turnover (vi) Gearing (8 marks) PRESENT VALUE of 1 7000ACC Rate Time 1% 2% 3% 4% 5% 1 0.990 0.980 0.971 2 0.952 0.980 0.961 0.943 0.925 0.907 0.962 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 3 4 5 6 0.890 0.873 0.857 0.842 0.826 0.812 0.797 0.783 0.769 0.756 0.743 0.731 0.718 0.706 0.694 0.971 0.942 0.915 0.889 0.864 0.840 0.816 0.794 0.772 0.751 0.731 0.712 0.693 0.675 0.658 0.641 0.624 0.609 0.593 0.579 0.961 0.924 0.888 0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0.636 0.613 0.592 0.572 0.552 0.534 0.516 0.499 0.482 0.951 0.906 0.863 0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.593 0.567 0.543 0.519 0.497 0.476 0.456 0.437 0.419 0.402 0.942 0.888 0.837 0.790 0.746 0.705 7 0.933 0.871 0.813 0.760 0.711 0.665 8 9 10 11 12 13 0.666 0.630 0.596 0.564 0.535 0.507 0.480 0.456 0.432 0.410 0.390 0.370 0.352 0.335 0.623 0.583 0.547 0.513 0.482 0.452 0.425 0.400 0.376 0.354 0.333 0.314 0.296 0.279 0.923 0.853 0.789 0.731 0.677 0.627 0.582 0.540 0.502 0.467 0.434 0.404 0.376 0.351 0.327 0.305 0.285 0.266 0.249 0.233 0.914 0.837 0.766 0.703 0.645 0.592 0.544 0.500 0.460 0.424 0.391 0.361 0.333 0.308 0.284 0.263 0.243 0.225 0.209 0.194 0.905 0.820 0.744 0.676 0.614 0.558 0.508 0.463 0.422 0.386 0.352 0.322 0.295 0.270 0.247 0.227 0.208 0.191 0.176 0.162 0.896 0.804 0.722 0.650 0.585 0.527 0.475 0.429 0.388 0.350 0.317 0.287 0.261 0.237 0.215 0.195 0.178 0.162 0.148 0.135 0.887 0.788 0.701 0.625 0.557 0.497 0.444 0.397 0.356 0.319 0.286 0.257 0.231 0.208 0.187 0.168 0.152 0.137 0.124 0.112 0.879 0.773 0.681 0.601 0.530 0.469 0.415 0.368 0.326 0.290 0.258 0.229 0.204 0.182 0.163 0.145 0.130 0.116 0.104 0.093 0.870 0.758 0.661 0.577 0.505 0.442 0.388 0.340 0.299 0.263 0.232 0.205 0.181 0.160 0.141 0.125 0.111 0.099 0.088 0.078 0.861 0.743 0.642 0.555 0.481 0.417 0.362 0.315 0.275 0.239 0.209 0.183 0.160 0.140 0.123 0.108 0.095 0.084 0.074 0.065 0.853 0.728 0.623 0.534 0.458 0.394 0.339 0.292 0.252 0.218 0.188 0.163 0.141 0.123 0.107 0.093 0.081 0.071 0.062 0.054 0.844 0.714 0.605 0.513 0.436 0.371 0.317 0.270 0.231 0.198 0.170 0.146 0.125 0.108 0.093 0.080 0.069 0.060 0.052 0.045 18 0.836 0.700 0.587 0.494 0.416 0.350 0.296 0.250 0.212 0.180 0.153 0.130 0.111 0.095 0.081 0.069 0.059 0.051 0.044 0.038 0.828 0.686 0.570 0.475 0.396 0.331 0.277 0.232 0.194 0.164 0.138 0.116 0.098 0.083 0.070 0.060 0.051 0.043 0.037 0.031 0.820 0.673 0.554 0.456 0.377 0.312 0.258 0.215 0.178 0.149 0.124 0.104 0.087 0.073 0.061 0.051 0.043 0.037 0.031 0.026 14 15 16 17 19 20