Given below are the summarized accounts of Belper Ltd for the past five years. These form the basis for the questions which follow.

Notes

(i) During 19X8 some of the freehold properties were revalued.

(ii) Loans amounting to £22 million were repaid during the year.

(iii) The extraordinary item shown in the profit and loss account in 19X8 represents the damages received by the company from a libel action against a newspaper.

(iv) No fixed assets were disposed of during the year.

(a) From a review of the information above identify the areas which you would concentrate on in your analysis of the position of Belper Ltd.

(b) Produce common size profit and loss accounts for the five years and analyse these state­ments with particular reference to the profitability of Belper.

(c) Calculate the trends in the Sales and Cost of sales and comment on the information disclosed by your analysis.

(d) Using whatever form of analysis you consider appropriate comment on the financial risk profile of Belper Ltd for the five years under review.

(e) Based on your analysis write a brief report for the bank advising them on whether to continue to provide finance for Belper Ltd.

(f) Apart from the information arising from your analysis what other information would you advise the bank to consider when making its decision?

(g) Discuss how your analysis would have been altered if you were carrying out the analysis on behalf of a prospective shareholder.

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Summarized profit and loss accounts of Belper Ltd 19X5 £000 Sales Cost of sales Trading profit Depreciation Interest Net profit before tax Taxation Net profit after tax Extraordinary items Dividends Retained profits Retained at start of year Retained at end of year 19X4 £000 93,930 116,232 259,470 81,750 101,673 230,334 12,180 14,559 29,136 1,023 1,380 3,678 2,727 2,652 7,707 8,430 10,527 17,751 2,517 1,746 5,913 8,781 5,913 801 5,112 14,637 19,749 19X6 £000 (870) 9,270 8,481 (15) 7,911 8,466 1,812 3,339 6,099 5,127 19,749 25,848 25,848 30,975 19X7 £000 278,340 244,809 33,531 4,065 10,167 19,299 7,833 11,466 4,989 16,455 3,738 12,717 30,975 43,692 19X8 £000 372,753 346,695 26,058 8,151 14,082 3,825 2,601 1,224 489 1,713 3,672 -1,959 50,427 48,468 Summarized profit and loss accounts of Belper Ltd 19X5 £000 Sales Cost of sales Trading profit Depreciation Interest Net profit before tax Taxation Net profit after tax Extraordinary items Dividends Retained profits Retained at start of year Retained at end of year 19X4 £000 93,930 116,232 259,470 81,750 101,673 230,334 12,180 14,559 29,136 1,023 1,380 3,678 2,727 2,652 7,707 8,430 10,527 17,751 2,517 1,746 5,913 8,781 5,913 801 5,112 14,637 19,749 19X6 £000 (870) 9,270 8,481 (15) 7,911 8,466 1,812 3,339 6,099 5,127 19,749 25,848 25,848 30,975 19X7 £000 278,340 244,809 33,531 4,065 10,167 19,299 7,833 11,466 4,989 16,455 3,738 12,717 30,975 43,692 19X8 £000 372,753 346,695 26,058 8,151 14,082 3,825 2,601 1,224 489 1,713 3,672 -1,959 50,427 48,468

Answer rating: 100% (QA)

Answers and Explanation a In my analysis of the position of Belper Ltd I would concentrate on the following areas Financial performance analyzing the revenue cost of sales gross profit operating expen... View the full answer