In: Accounting
Greenwood Plc is an organization that manufactures machine components. You are appointed as a trainee accountant in Greenwood Plc and finance manager has asked you to prepare a report analyzing the financial statements of the organization to assess the performance for the last two years.The summarized statements of profit or loss for the years ended 31st Dec 2019 and 2018 were:
2019 |
2018 |
|
RO ‘000’ |
RO ‘000’ |
|
Sales revenues |
475,300 |
281,700 |
Cost of sales |
332,740 |
176,100 |
Gross profit |
142,560 |
105,600 |
Expenses |
54,660 |
44,100 |
Profit before interest and tax |
87,900 |
61,500 |
Interest expenses |
8,900 |
6,260 |
Profit before tax |
79,000 |
55,240 |
Tax |
26,500 |
18,580 |
Profit for the year |
52,500 |
36,660 |
Statement of Financial Position |
2019 |
2018 |
||
RO ‘000’ |
RO ‘000’ |
RO ‘000’ |
RO ‘000’ |
|
Assets |
||||
Non-current assets (NBV) |
||||
Land and Building |
303,072 |
235,004 |
||
Machinery |
129,888 |
432,960 |
100,716 |
335,720 |
Current assets |
||||
Inventories |
66,000 |
52,800 |
||
Trade receivable |
61,600 |
46,200 |
||
Cash |
8,800 |
136,400 |
6,160 |
105,160 |
Total Assets |
569,360 |
440,880 |
||
Equity and liabilities |
||||
Ordinary shares of RO1 each |
290,000 |
240,000 |
||
Share premium account |
11,200 |
4,400 |
||
Retained earnings |
78,400 |
379,600 |
54,000 |
298,400 |
Non- current liabilities |
||||
Loan (due for repayment 2022) |
100,000 |
80,000 |
||
Current liabilities |
||||
Trade Accounts payable |
57,360 |
40,880 |
||
Bank overdraft |
32,400 |
89,760 |
21,600 |
62,480 |
Total equity and liabilities |
569360 |
440880 |
Additional Information:
i) Assume that the current market share value per share is RO 2.500
ii) Inventory as at 31st Dec 2017 was RO 48,000
iii) Trade receivables as at 31st Dec 2017 was RO 45,000
iv) Trade payables as at 31st Dec 2017 was RO 38,000
Question 1: Assume that you are a trainee accountant in Greenwood Plc of the organization. You are required to prepare a report to be submitted to the Finance Manager of Greenwood Plc assessing the performance of the organization under the following criterions.
A. Calculate appropriate ratios under the following listed categories:
(10 Ratios x .5 Marks=5 Marks+1 Mark for appropriate presentation)
B. Evaluate on the performance and state the concerns of each of the stakeholder’s groups using the ratios calculated above in (A).
C. The organization is planning to invest on buying new models of Machines that will increase the production capacity of the organization. The organization is planning to invest on the new machinery by availing a Bank Loan facility.
Advice Finance Manager of Greenwood Plc whether the organization is able to receive a loan or look for other options (specify clearly the available options, if any). Note: For solving question no 1 (A, B & C), Task A, you should use financial information given in statement of profit or loss, statement of Financial position of Greenwood plc for financial year ended 2019 and 2018 and also the additional information.