Financial Reporting_Assessment 2.docx - CERTIFICATE IV IN MANAGEMENT LEADERSHIP FINANCIAL REPORTING Assesment 2 Part A – Written Assessment Question

Financial Reporting_Assessment 2.docx - CERTIFICATE IV IN...

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CERTIFICATE IV IN MANAGEMENT & LEADERSHIP FINANCIAL REPORTING Assesment 2 Part A – Written Assessment Question 1 (16 marks) The following summarised accounting data was extracted from the accounting reports of P Senior at 30 June 2015. P SENIOR 2014 2015 Current Assets $ $ $ $ Inventory 400 800 Accounts Receivable 500 400 Total Current Assets Inventory+AR 900 1200 Non Current Assets 1900 2000 Total Assets 2800 3200 Current Liabilities Bank Overdraf 400 400 Acounts Payable 200 200 Total Curren Liabilities 600 600 Non Current Liabilities 1200 1400 Total Liabilities Current L.+Non C.L. 1800 2000 Owner's Equity Captal 1/7/14 800 1000 Net Profit 400 300 Drawings -200 -100 Total Owner’s Equity Owner’s E. together 1000 1200 PROFIT AND LOSS Assets-Liabil.=Own.E. 2800- 1800 =1000 3200- 2000 =1200 Sales 2100 2000 Coast of Goods Sold (Open.I+Purch.+Clo.I) 1200 1200 Inventory 1/7/14 300 400 Purchases 1300 1600 Inventory 30/6/15 -400 -800 Gross Profit (Sales-Cost of.good.) 900 800 Operating Expenses (500) (500) Net Profit (Gross P.-Expenses) 400 300 For 2014 and 2015 calculate the following ratios: 1. Current Ratio 2. Liquid Ratio 3. Equity Ratio 4. Return on Owner’s Equity
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5. Gross Profit 6. Inventory Turnover 7. Accounts Receivable Collection (in days) Assume that all sales were on credit 8. Net Profit Use the answer sheet below. Benchmarking Financial Ratio 2015 2014 Current Ratio =1200/600 2:1 =900/600 1.5:1 Liquid Ratio (1200-800-0)/(600-400) 2:1 (900-400-0)/(600-400-0 2.5:1 Equity Ratio (1200/3200)x100 37,5% ( 1000/2800)x100 35,7 Return on Owner's Equity (300/100)x100 30% (400/800)x100 50% Gross Profit (800/2000)x100 40% (900/2100)x100 43% Inventory Turnover 1200/((400+800(/2) 2 times 1200/((300+400)/2) 3,4 times Accounts Receivable Collection (400/2000)x365 days 73 days (500/2100)x365 days 86 days Net Profit (400/2100)x100 19% (300/2000)x100 15% Current Ratio Current Assets/Current Liabilities Liquid Ratio (Current Assets-Inventory-Prepayment)/ (Current Liabilities-Overdraft) Equity Ratio (Closing Equity/Total Assets)*100 Return on Owner’s Equity (Net Profit/Opening Capital)*100 Gross Profit (Gross Profit/Sales)/*100 Inventory Turnover Cost of Goods Sold/Average Inventory; Average Inventory=(Opening Inventory+Closing Inventory)/2 Accounts Rec. Collection (Account Receivable/Total Credit Sales)*365 Day Net Profit (Net Profit/Sales)*100 Question 2 (34 marks) The accountant for Dasma Enterprises has calculated the following ratios RATIO 2014 2015 External Benchmark Gross Profit 36% 35.3% Industry Average 36% Net Profit 14.7% 15.1% Industry Average 16% Current 1.7:1 1.5:1 Accountants Benchmark Liquid 1.1:1 0.9:1 Accountants Benchmark Return on Equity 40.3% 39.8% Accountants Benchmark Inventory Turnover 6.8 times 6.8 times Industry Average 7 times Receivables Turnover 31 days 39 days Accountants Benchmark Equity 42.8% 51.6% Accountants Benchmark 1. Analyse the results for 2015 by using appropriate internal and external benchmarks. You can use the worksheet below if you wish.
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2. Write a short report for the owner analysing the strengths and weaknesses of the business.
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