Bounty plc (Bounty) is engaged in the production of clothing and essentials for retailers in the UK.
Question:
- Bounty plc (Bounty) is engaged in the production of clothing and essentials for retailers in the UK.
Bounty Plc
Income Statement for the Year Ended 30 September 2020 and the previous year ended 30 September 2019
2020 £000 | 2019 £000 | |
Revenue | 98,000 | 108,000 |
Cost of Sales | (56,600) | (67,400) |
Gross Profit | 41,400 | 40,600 |
Administration Expenses | (20,100) | (20,150) |
Trading Profit | 21,300 | 20,450 |
Finance Costs | (6,600) | (7,200) |
Profit on Ordinary Activities Before Taxation | 14,700 | 13,250 |
Taxation on Profit on Ordinary Activities | (7,938) | (8,648) |
Profit for the Year | 6,762 | 4,602 |
Bounty Plc
Balance Sheet as at 30 September 2020 and 30 September 2019
2020 | 2019 | ||
Non-Current Assets | £000 | £000 | |
Intangible Assets | 22,450 | 22,450 | |
Property, Plant and Equipment | 87,200 | 91200 | |
Other Investments | 17,800 | 17,800 | |
127,450 | 131,450 | ||
Current Assets | |||
Inventories | 18,700 | 17,500 | |
Trade and Other Receivables | 27,530 | 25,500 | |
Cash and Short-Term Deposits | 13,400 | 14,650 | |
59,630 | 57,650 | ||
Total Assets | 187,080 | 189,100 | |
Current Liabilities | |||
Bank Overdrafts | 12,600 | 9,440 | |
Unsecured Bank Loans | 8,400 | 7,500 | |
Trade and Other Payables | 13,200 | 11,300 | |
Current Tax Liability | 9,320 | 8,360 | |
43,520 | 36,600 | ||
Non-Current Liabilities | |||
Medium Term Bank Loans | 22,000 | 28,000 | |
Finance Leases | 9,600 | 6,900 | |
Provisions | 10,200 | 21,500 | |
41,800 | 56,400 | ||
Total Liabilities | 85,320 | 93,000 | |
Net Assets | 101,760 | 96,100 | |
Equity | |||
Called Up Share Capital | 37,200 | 37,200 | |
Share Premium | 24,000 | 24,000 | |
Other Reserves | 12,400 | 12,400 | |
Retained Earnings | 28,160 | 22,500 | |
101,760 | 96,100 |
a) Evaluate the Profitability, liquidity position and debt to equity ratio of Bounty for the two years (2019 and 2020). Your answer should include calculation of these ratios, for each year.
Profitability:
Gross Profit %
Pre-tax profit %
Liquidity:
Current ratio
Quick ratio
Gearing %
b) Comment on the overall profitability and liquidity position of the company Bounty plc using the ratios.
c) State any two limitation of ratios in evaluating the performance of companies.
Principles of Accounting
ISBN: 978-1133626985
12th edition
Authors: Belverd E. Needles, Marian Powers and Susan V. Crosson