You are an assistant financial consultant for Simplicity Financial and Business Advisory Group Pty Ltd, and you have been notified the client converted their business to a public company PTCG Ltd.

Below is the new company's performance information.

You have been assigned to create a detailed financial analysis for PCGT Ltd using comparative financial statement information per the Corporations Act 2001, Accounting Standards (AASB101) and other financial regulations. Ignore GST in this question.

1. 5 year record of Sales

Net Sales	2022	2021	2020	2019	2018
861,000	805,000	681,000	719,000	737,000

2. 5 year record of Cost of Goods sold

Cost of goods sold	2022	2021	2020	2019	2018
516,000	511,000	491,000	450,000	471,000

3. A set of financial reports for years ending 30 June 2021 and 2022, respectively.

PTGC Ltd Comparative Income Statements For the years ended 30 June 2021 and 2022
	2022	2021
Net Sales	861,000	805,000
Less: Cost of goods sold	516,000	511,000
Gross Profit	345,000	294,000
Other Revenues
Interest revenue	4,000	-
	349,000	294,000
Expenses
Selling Expenses	126,000	114,000
Administrative Expenses	118,000	123,000
Interest expense	24,000	14,000
Total Expenses	268,000	251,000
Profit before Income tax expense	81,000	43,000
Income tax paid	33,000	17,000
Net Profit	48,000	26,000

PTGC Ltd Comparative Balance Sheet As at 30 June 2021 and 2022
	2022	2021
Assets
Current Assets
Cash at bank	29,000	32,000
Accounts receivable	114,000	85,000
Inventories	113,000	111,000
Prepaid Expenses	6,000	8,000
Total Current Assets	262,000	236,000
Non - current Assets
Long-term investments	18,000	9,000
Property, plant, and equipment (net accumulated depreciation)	507,000	399,000
Total Non-current assets	525,000	408,000
Total Assets	787,000	644,000
Liabilities
Current Liabilities
Loan payable	42,000	27,000
Accounts payable	73,000	68,000
Accrued liabilities	27,000	31,000
Total current liabilities	142,000	126,000
Non-current Liabilities
Long term borrowings	289,000	198,000
Total liabilities	431,000	324,000
Net Assets	356,000	320,000
Shareholders' Equity
Share Capital	186,000	186,000
Retained earnings	170,000	134,000
Total Shareholder's equity	356,000	320,000

Additional information

• Inventory for 2020 was $109,000
• Shareholder's Equity for 2020 was 280,000
• Accounts receivable for 2020 was $80,000
• Total Assets for 2020 were 620,000
• During 2021 and 2022 when the business incorporated 93,000 ordinary shares were issued
• Share Price for 2021 $3.50
• Share price for 2022 $5
• Dividend paid 2021 10c per share
• Dividend paid 2022 12c per share
• All financial statements are prepared in accordance to AASB 101

Industry standards/benchmarks

Current Ratio 1.38:1

Liquid Ratio 1.18:1

Day's sales in ending Inventory 34 days

Inventory Turnover 6.28 times

Accounts receivable Turnover 7- 10

Debt to Equity ratio 75%

Day's sales in Receivables 39 days

Earnings per Share $0.35 per share

P/E ratio 18.86 times

Return on Equity 9.08%

Profit margin 22%

Times Interest Covered 3.74 times

Dividend yield 10%

Required:

Task 1 Financial statement analysis

The client needs a review of financial performance as well as working capital management

1. Use the Net Sales and Cost of goods information supplied to work out the gross profit
2. Work out the Trend percentages for the information in item 1 using 2018 as the base year.
3. Perform a horizontal analysis using both dollar amounts and percentages
4. Perform a vertical analysis 2021 and 2022
5. Discuss the importance of AASB101 in relation to financial Statement analysis.

Answer rating: 100% (QA)

Task 1 Financial Statement Analysis Gross Profit Calculation Gross Profit Net Sales Cost of Goods So... View the full answer