Question 1 Naturalistic pic is a British manufacturer of garden sheds, summer houses, gates, and benches. The company has built a good reputation for its high-quality products and employed a large number of highly skilled carpenters and apprentices. The high standard of craftsmanship has enabled Naturalistic pic to charge a premium price for its products. The majority of Naturalistic plc's sales are to retail customers (home and garden centers), hotel chains, and public projects like parks and schools. At the start of 2021, Naturalistic plc launched a new strategy in order to expand the business They obtained a large bank loan to update the production facilities and invest more heavily in marketing and sales. The company also offered a longer credit period to the key retail customers in order to encourage sales. Extracts of Naturalistic plc's financial statements for 2020 and 2021 are shown at the end of this question. 

Required: 

(A) For Naturalistic plc, calculate the following ratios for 2020 and 2021. The workings and formulae used must be clearly stated. (1) Operating Profit Margin (W) Return on Capital Employed (1) Trade Receivables Turnover (in days) (iv) Trade Payables Turnover (in days) (v) Inventory Turnover (in days) (vi) Working capital conversion cycle (in days) 

(B) Using the ratios calculated for Naturalistic plc in (A) and the information from the financial statements, assess the performance of the company in 2020 and 2021. You should relate your performance assessment to the new strategy that Naturalistic plc launched in 2021. Word count guidance for Part (B):

(C) Woody plc, a key competitor of Naturalistic plc, has adopted a cost-leadership strategy. Through a market intelligence company, Naturalistic plc has obtained the ratios of Woody plc, as given below. 

Use these ratios, compare Woody plc's performance with Naturalistic pic's, and suggest two practical changes that Naturalistic plc could make to maintain competitiveness. 2020 

(a) Operating Profit Margin 

(b) Return on Capital Employed 20% 8% 2021 12% 25% 50 

(c) Receivables Turnover days 30 

(d) Payables Turnover days 

(e) Inventory Turnover days 40 40 60

Answer rating: 100% (QA)

A i Balance Sheet of Naturalistic plc as at 31 Dec 2020 Naturalistic plc 31 Dec 20 Individual account 000 1 Cash 5000 2 Trade receivables from customers 10000 3 Trade payables 070620 30000 4 Inventory ... View the full answer