The statement of financial position and income statements of Megem Ltd. for the current year 20X5...

 

 

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The statement of financial position and income statements of Megem Ltd. for the current year 20X5 and previous year, 20X4, are set out below. These are to be used for both this question and question 13. Statement of Financial Position as at 31 December 20X5 20X4 000 000 000 000 Non-current assets Land and buildings 414 294 Plant and equipment 474 140 Research and Development 480 1368 100 534 Current assets Stock Debtors Cash at bank Total Assets 390 330 300 240 = 690 18 588 2058 1122 Equity 1 ordinary shares 300 Share premium 78 240 72 Revaluation reserve 126 Retained profit 150 654 150 462 Non-current liabilities Borrowing -10% Loan notes Current liabilities Creditors Bank overdraft Total Equity and Liabilities 900 300 480 300 24 504 60 360 2058 1122 Notes: Income statement for the year to 31 December 20X5 20X4 000 000 Sales revenue 1800 1200 Cost of sales (1,000) (600) Gross profit 800 600 Operating Expenses (560) (360) Operating Profit 240 240 Interest payable (60) (20) Profit before taxation 180 220 Taxation 20 20 Profit for the year 160 200 Required: The market value of the shares of the business at the end of the reporting period was 3.00 for 20X5 and 2.50 for 20X4 Dividends of 160,000 were paid each year. Operating Expenses include depreciation of 36,000 a) Calculate the financial ratios for both 2015 and 2014 as set out below. Return on Equity Current ratio Receivables Days Gearing Ratio Earnings per share Dividend Retention Rate [6 marks] b) Evaluate and interpret how the changes in the financial position and performance of the business as revealed by the financial statements affect Sandbell's profitability, efficiency, liquidity, gearing and investing ability over both years [14 marks] The statement of financial position and income statements of Megem Ltd. for the current year 20X5 and previous year, 20X4, are set out below. These are to be used for both this question and question 13. Statement of Financial Position as at 31 December 20X5 20X4 000 000 000 000 Non-current assets Land and buildings 414 294 Plant and equipment 474 140 Research and Development 480 1368 100 534 Current assets Stock Debtors Cash at bank Total Assets 390 330 300 240 = 690 18 588 2058 1122 Equity 1 ordinary shares 300 Share premium 78 240 72 Revaluation reserve 126 Retained profit 150 654 150 462 Non-current liabilities Borrowing -10% Loan notes Current liabilities Creditors Bank overdraft Total Equity and Liabilities 900 300 480 300 24 504 60 360 2058 1122 Notes: Income statement for the year to 31 December 20X5 20X4 000 000 Sales revenue 1800 1200 Cost of sales (1,000) (600) Gross profit 800 600 Operating Expenses (560) (360) Operating Profit 240 240 Interest payable (60) (20) Profit before taxation 180 220 Taxation 20 20 Profit for the year 160 200 Required: The market value of the shares of the business at the end of the reporting period was 3.00 for 20X5 and 2.50 for 20X4 Dividends of 160,000 were paid each year. Operating Expenses include depreciation of 36,000 a) Calculate the financial ratios for both 2015 and 2014 as set out below. Return on Equity Current ratio Receivables Days Gearing Ratio Earnings per share Dividend Retention Rate [6 marks] b) Evaluate and interpret how the changes in the financial position and performance of the business as revealed by the financial statements affect Sandbell's profitability, efficiency, liquidity, gearing and investing ability over both years [14 marks]