5 Collingham plc produces electronic measuring instruments for medical research. It has recorded strong and consistent growth during the past 10 years since its present team of managers bought it out from a large multinational corporation. They are now contemplating obtaining a stock market listing.

Collingham’s accounting statements for the last financial year are summarised below. Fixed assets, including freehold land and premises, are shown at historic cost net of depreciation. The debenture is redeemable in two years although early redemption without penalty is permissible.

The following information is also available regarding key financial indicators for Collingham’s industry.

Required

(a) Briefly explain why companies like Collingham seek stock market listings.

(b) Discuss the performance and financial health of Collingham in relation to that of the industry as a whole.

(c) In what ways would you advise Collingham:
(i) to restructure its balance sheet prior to flotation?
(ii) to change its financial policy following flotation?

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Profit and Loss Account for the year ended 31 December 1994 (Em) Turnover Cost of sales Operating profit 80.0 (70.0) 10.0 Interest charges Pre-tax profit Corporation tax (after capital allowances) Profits attributable to ordinary shareholders Dividends Retained earnings (3.0) 7.0 (1.0) 6.0 (0.5) 5.5