Write a short report that compares the business performance

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Reference no: EM131536024

Assignment: Financial Statement Analysis

Ace Hardware is a leading family business that specialises in the manufacturing and wholesale distribution of floor tile products. Over the past two years Ace Hardware has experienced difficult operating conditions. John, the company accountant, has prepared the income statement and balance sheet for the prior two years for a management meeting. The owners of Ace Hardward have asked John to evaluate the financial statements and prepare an evaluation of operating capability to present to senior management. 60 percent of sales are made on credit.

Profit and Loss

 

201X

 

 

 

201Y

 

Total Income

 

14,543,837

 

 

11,981,782

Less Cost of Sales

 

10,752,813

73.9%

 

8,967,229

77.1%

Gross Profit (Loss)

 

3,791,024

26.1%

 

3,014,553

22.9%

Total Other Income

 

86,363

0.6%

 

-

3.3%

Less Expenses

Administrative Staff Costs

 

 

2,385,760

 

16.40%

 

 

1,719,171

 

14.35%

Advertising and Marketing Support

 

140,470

0.97%

 

75,500

0.63%

Bad Debts

 

68,534

0.47%

 

63,057

0.53%

Administrative Overhead

 

280,600

1.93%

 

290,238

2.42%

Freight and Cartage

 

10,210

0.07%

 

21,681

0.18%

Hire of Plant and  Equipment

 

103,828

0.71%

 

118,016

0.98%

Bank Charges

 

25,573

0.18%

 

20,749

0.17%

Light and Power

 

49,176

0.34%

 

42,017

0.35%

Lease of MV

 

28,160

0.19%

 

2,201

0.02%

MV Running Costs

 

332,103

2.28%

 

249,192

2.08%

Rent

 

328,307

2.26%

 

321,177

2.68%

Repairs and Maint

 

35,367

0.24%

 

18,875

0.16%

Telephone

 

67,899

0.47%

 

63,170

0.53%

Travel

 

21,398

0.15%

 

8,516

0.07%

Total Operating Expenses

 

3,877,386

26.7%

 

3,013,560

25.2%

Net Operating Profit (Loss)

 

1

 

 

993

 

Balance Sheets                                          201X                 201Y

Current Assets

Cash at Bank

-

-

Trade Debtors

1,116,467

875,607

Stock on Hand

1,697,220

1,231,111

Total Current Assets

2,813,687

2,106,718

 Fixed Asets

Furniture & Fitting - At Cost

43,511

43,511

Less Accum Depn Frn & Fitting

(36,606)

(37,543)

Plant & Equip - At Cost

1,329,334

1,329,334

Less Accum Depn - Plant & Equip

(1,045,363)

(1,096,991)

Motor Vehicle - At Cost

863,042

840,728

Less Accum Depn - Motor Vehicle

(707,518)

(720,326)

Office Equipment - At Cost

368,650

368,650

Less Accum Depn - Office Equip

(302,075)

(319,537)

Total Fixed Assets

512,975

407,826

Investments

Shares in Listed Company

96,788

96,788

Loans & Deposits

153,782

153,782

Total Investments

250,570

250,570

 Intangible Assets

 

 

Trademarks & Patents

867

27,958

Goodwill - At Cost

5,430

5,430

Formation Expense - At Cost

1,000

1,000

Total Investments

7,297

34,388

 Total Non Current Assets

770,842

 692,784

Total Assets

3,584,529

2,799,502

Current Liabilities

Bank Overdraft

 

 

98,917

 

 

116,643

Trade Creditors

1,394,198

1,181,797

Loan At Call - To Directors

149,354

137,586

Total Current Liabilities

1,642,469

1,436,026

 

Deferred Liabilities

Loan - Unsecured - business Partner  1,819,577 1,326,934
Total Deferred Liabilities 1,819,577 1,326,934



Total Liabilities 3,462,046 2,762,960
Net Assets 122,483 36,542
Equity

Profit B/F 1 993
Settled Capital 50 50
Accumulated Trust Funds 31,027 31,027
Retained Profits 91,405 4,472
Total Equity 122,483 36,542

Questions:

1. Calculate the following ratio's for the two financial years:

a. Current

b. Quick

c. Debt

d. Inventory Turnover for year Y only

e. Accounts Receivable Turnover for year Y only

f. Gross Profit Percentage

g. Profit Margin

h. Return on Total Assets for year Y only

i. Return on Owner's Equity for year Y only

2. Write a short report that compares the business' performance in 201X with that in 20XY regarding its liquidity, financial flexibility, operating capability and profitability.

The report must be presented in essay format with an introduction, body and conclusion and all external references must be referenced using APA 6th edition referencing style. Word count should not exceed 1,000 words.

Verified Expert

In this particular assignment the financial statement and financial radio of Ace Hardware has been done. The financial analysis and the financial performance of the company has been showcased for two financial year.

Reference no: EM131536024

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