a. Abstracts from the Profit & Loss Accounts and Balance Sheets of WayToGo are presented in...

 

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a. Abstracts from the Profit & Loss Accounts and Balance Sheets of WayToGo are presented in the following 2 pages. Using ratio analysis, you are required to prepare a report for the board of directors assessing the performance of the company, highlighting strengths, any areas of weakness and any recommendations for improving the company's situation that you might have. As far as possible, you are encouraged to try and gain insights into the actual operations/processes of the company and not remain solely at the purely financial level. Justifications supporting the case you make must include appropriate ratios. b. Write a short note for the directors explaining the appropriate way to use ratio analysis and any limitations of the method. WayToGo Limited has traded profitably for many years and, since moving to a new factory in 2000, its turnover has risen annually. From the information given below, you are required to prepare a report for the board of directors of WayToGo Limited, assessing the performance of WayToGo Limited from 2009 to 2013, including an analysis of its profitability and financial position. Abstracts from the financial statements of WayToGo Limited for the five years ended 31 December 2013 are set out below: Profit and loss accounts 2009 2010 2011 $ 2012 $ 2013 $ $ $ Turnover 4,500,000 4,980,000 5,994,000 6,720,000 8,100,000 Purchases 3,781,200 4,188,000 5,152,800 5,734,200 7,101,000 Increase in stocks 33,000 64,200 204,000 168,600 305,400 3,748,200 4,123,800 4,948,800 5,565,600 6,795,600 751,800 856,200 1,045,200 1,154,400 1,304,400 411,400 461,200 551,000 599,800 Gross profit Staff costs Depreciation Other operating charges 668,600 46,200 45,600 176,200 43,200 45,600 45,000 104,000 117,800 146,200 155,000 558,600 624,600 742,200 801,000 193,200 231,600 890,400 Operating profit 303,000 353,400 414,000 Bank interest 14,400 34,800 51,600 7,200 224,400 288,600 318,600 362,400 Profit before taxation Taxation 193,200 110,400 114,600 121,800 142,500 157,200 82,800 109,800 166,800 176,100 205,200 Profit after taxation Retained profits brought forward 188,400 200,700 240,000 334,800 438,900 271,200 310,500 406,800 510,900 644,100 70,500 70,500 72,000 72,000 72,000 Dividend Retained profits carried forward 200,700 240,000 334,800 438.900 572,100 Balance Sheets as at 31 December Fixed assets Land and buildings at cost Machinery at cost, less depreciation Current assets Stocks Debtors Cash Creditors: amounts falling due within one year Trade creditors Taxation and dividend payable Bank overdraft Net current assets Total assets less current liabilities Capital and reserves Ordinary share capital Capital reserve Retained profits Note: The Selling Price Index of the goods sold by WayToGo Limited is as follows: 2010 2011 2012 2009 100 120 150 180 2009 2010 2011 2012 2013 $ $ $ $ $ 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 354,000 367,800 360,000 369,000 366,000 1,434,000 1,447,800 1.440,000 1,449,000 1,446,000 880,200 1,048,800 612,000 676,200 379,200 433,500 6,600 5,400 1,354,200 739,500 514,800 619,500 3,600 1,398,600 1,672,200 3,900 2,700 997,800 1,115,100 2,096,400 406,200 411,000 468,900 310,200 330,600 180,900 185,100 193,800 214,500 67,200 229,200 163,800 316,800 532,200 763,800 942,300 1,230,300 491,100 582,900 506,700 532,200 634,800 729,900 866,100 1,940,700 1,980,000 2,074,800 2,178,900 2,312,100 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 240,000 240,000 240,000 240,000 200,700 240,000 334,800 438.900 240,000 572,100 1,940,700 1,980,000 2,074,800 2,178,900 2,312,100 2013 200 a. Abstracts from the Profit & Loss Accounts and Balance Sheets of WayToGo are presented in the following 2 pages. Using ratio analysis, you are required to prepare a report for the board of directors assessing the performance of the company, highlighting strengths, any areas of weakness and any recommendations for improving the company's situation that you might have. As far as possible, you are encouraged to try and gain insights into the actual operations/processes of the company and not remain solely at the purely financial level. Justifications supporting the case you make must include appropriate ratios. b. Write a short note for the directors explaining the appropriate way to use ratio analysis and any limitations of the method. WayToGo Limited has traded profitably for many years and, since moving to a new factory in 2000, its turnover has risen annually. From the information given below, you are required to prepare a report for the board of directors of WayToGo Limited, assessing the performance of WayToGo Limited from 2009 to 2013, including an analysis of its profitability and financial position. Abstracts from the financial statements of WayToGo Limited for the five years ended 31 December 2013 are set out below: Profit and loss accounts 2009 2010 2011 $ 2012 $ 2013 $ $ $ Turnover 4,500,000 4,980,000 5,994,000 6,720,000 8,100,000 Purchases 3,781,200 4,188,000 5,152,800 5,734,200 7,101,000 Increase in stocks 33,000 64,200 204,000 168,600 305,400 3,748,200 4,123,800 4,948,800 5,565,600 6,795,600 751,800 856,200 1,045,200 1,154,400 1,304,400 411,400 461,200 551,000 599,800 Gross profit Staff costs Depreciation Other operating charges 668,600 46,200 45,600 176,200 43,200 45,600 45,000 104,000 117,800 146,200 155,000 558,600 624,600 742,200 801,000 193,200 231,600 890,400 Operating profit 303,000 353,400 414,000 Bank interest 14,400 34,800 51,600 7,200 224,400 288,600 318,600 362,400 Profit before taxation Taxation 193,200 110,400 114,600 121,800 142,500 157,200 82,800 109,800 166,800 176,100 205,200 Profit after taxation Retained profits brought forward 188,400 200,700 240,000 334,800 438,900 271,200 310,500 406,800 510,900 644,100 70,500 70,500 72,000 72,000 72,000 Dividend Retained profits carried forward 200,700 240,000 334,800 438.900 572,100 Balance Sheets as at 31 December Fixed assets Land and buildings at cost Machinery at cost, less depreciation Current assets Stocks Debtors Cash Creditors: amounts falling due within one year Trade creditors Taxation and dividend payable Bank overdraft Net current assets Total assets less current liabilities Capital and reserves Ordinary share capital Capital reserve Retained profits Note: The Selling Price Index of the goods sold by WayToGo Limited is as follows: 2010 2011 2012 2009 100 120 150 180 2009 2010 2011 2012 2013 $ $ $ $ $ 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 354,000 367,800 360,000 369,000 366,000 1,434,000 1,447,800 1.440,000 1,449,000 1,446,000 880,200 1,048,800 612,000 676,200 379,200 433,500 6,600 5,400 1,354,200 739,500 514,800 619,500 3,600 1,398,600 1,672,200 3,900 2,700 997,800 1,115,100 2,096,400 406,200 411,000 468,900 310,200 330,600 180,900 185,100 193,800 214,500 67,200 229,200 163,800 316,800 532,200 763,800 942,300 1,230,300 491,100 582,900 506,700 532,200 634,800 729,900 866,100 1,940,700 1,980,000 2,074,800 2,178,900 2,312,100 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 240,000 240,000 240,000 240,000 200,700 240,000 334,800 438.900 240,000 572,100 1,940,700 1,980,000 2,074,800 2,178,900 2,312,100 2013 200

Answer rating: 100% (QA)

It is often necessary to compare a firms performance or different organisations performance over a number of years Ratio analysis can be used to compare the year to year profitability liquidity and ef... View the full answer