Which of the following is correct in respect of

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19Which of the following is correct in respect of accounting for inflation? AReturn on capital employed tends to be overstated in times of inflation B Physical capital maintenance measures profit as the increase in the equity of an entity C IFRSs can be described as a historical cost accounting regime DFair value of an asset is the amount it would cost to replace an asset at current prices
9 20Which of the following would be valid ways of measuring the performance of a charitable foundation? (i) Proportion of income spent on charitable causes. (ii) Change in net profit margin. (iii) Current ratio. (iv) Return on capital employed.
10 1 Garner Stores Garner Stores is a retailer of electrical goods which by the end of 20X3 year end had 24 stores in the south of the country in which it operates. The company was originally a family run company but in 20X0 it obtained a listing on a secondary share trading market. The company's sales are mainly in cash or with debit/credit cards, but the company also has a small amount of credit sales to key customers. In 20X2 the managing director, and founding family member, resigned and a new managing director and chairman of the company were appointed. The new managing director and chairman are determined that the company should grow and to that end have put in place a programme of expansion with 5 further stores being added during 20X3. There has also been an extensive programme of refurbishment and change in atmosphere to the existing stores. The aim is now to sell low priced goods and an extensive advertising campaign has been entered into to promote the low price image. To support this new suppliers have been found locally who will supply goods at short notice at competitive prices. Extracts from the company’s financial statements for the year ended 31 October 20X3, with comparatives are given below: STATEMENT OF PROFIT OR LOSS FOR YEAR ENDED 31 OCTOBER 20X3 20X320X2$'000$'000Revenue 25,40018,800Cost of sales(18,000)(12,800) Gross profit7,4006,000Operating expenses (4,600)(3,800Profit before interest and tax2,8002,200 Finance costs(360)(180)Profit before tax2,4402,020Income tax expense(740)(600)PROFIT FOR THE YEAR1,7001,420 STATEMENT OF FINANCIAL POSITION AS AT 31 OCTOBER 20X3 20X320X2$'000$'000Non-current assets Property, plant and equipment 20,12014,300Current assets Inventories 2,1002,600Receivables 320410Bank 9302,4203,94022,54018,240Equity Ordinary share capital ($1 shares) 8,0008,000Retained earnings 5,7504,70013,75012,700Non-current liabilities 6% loan notes 3,0008% loan notes 4,000Section B – ALL THREE questions are compulsory and MUST be attempted )
11 20X320X2$'000$'000Current liabilities Bank overdraft 1,010Trade payables 3,0402,010Tax payable 7405304,7902,54022,54018,240From research it is known that the following key ratios are the average for this type of retail organisation: Gross profit margin 31.7% Operating profit margin 11.5% Non-current asset turnover 1.31 Required Analyse the performance and financial position of Garner Stores based upon the information given. The analysis should include comparisons with the key sector ratios given.

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