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Brief :
Topic-FINAL DECISION MAKING
Learning outcomes-
LO1 What terms are used in financial statements and also explain its structure
LO2 Make use of the management accounting techniques for planning, control and decision making within the organisation
LO3 produce the calculations for important accounting ratios and also elaborate its importance for the users of financial statements
LO4 What role is played by finance and accounting in the organisation. Explain this from the perspective of reporting and decision making
Scenario-
A UK based company, Alpha limited is a manufacturing unit that was initiated in 1954. company has certain plans with respect to expansion of its operations by covering other parts of UK in upcoming 10 years. Below are the attached financial statements.
Task-1
Functions of accounting and finance is important to any organisation. You are required to do a critical evaluation of its roles. Make sure that the evaluation includes examples also.
Task-2
Provide the calculations of the ratios that are required and also provide the comments on performance of company from the perspective of potential investors
- Return on capital employed
- Net profit margin
- Current ratio
- Average Receivable days/ Debtor’s collection period
- Average Payable days/ Creditors collection period
The summarised financial statements-
|
For the year ended 31 Dec. 2017 |
For the year ended 31 Dec. 2018 |
|||
|
£000 |
£000 |
£000 |
£000 |
|
|
Sales revenue |
2,400 |
3,000 |
||
|
Cost of sales |
||||
|
Opening inventory |
600 |
225 |
||
|
Purchases |
1,350 |
2,400 |
||
|
1,950 |
2,625 |
|||
|
Less: Closing inventory |
(225) |
(1,725) |
(450) |
(2,250) |
|
Gross profit |
675 |
750 |
||
|
Operating expenses |
(300) |
(337.50) |
||
|
Finance cost |
(75) |
(150) |
||
|
Net profit |
300 |
262.50 |
||
|
Statement of financial position |
As at year to 31 Dec. 2017 |
As at year to 31 Dec. 2018 |
||
|
£000 |
£000 |
£000 |
£000 |
|
|
Non-current assets |
1,477.50 |
3,000 |
||
|
Current assets |
||||
|
Inventory |
225 |
375 |
||
|
Receivables – trade |
450 |
600 |
||
|
Prepayments |
45 |
52.50 |
||
|
Cash |
37.50 |
757.50 |
7.50 |
1,035 |
|
2,235 |
4,035 |
|||
|
Issued share capital |
450 |
450 |
||
|
Share premium account |
150 |
150 |
||
|
Retained earnings |
562.50 |
825 |
||
|
1,162.50 |
1,425 |
|||
|
Non-current liabilities |
||||
|
10% loan notes |
750 |
1,500 |
||
|
Current liabilities |
||||
|
Payables – trade |
285 |
1,050 |
||
|
Accruals |
37.50 |
322.50 |
60 |
1,110 |
|
2,235 |
4,035 |
|||
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