APPENDIX 1 ROMA S.p.A. SUMMARY PROFIT AND LOSS ACCOUNTS 2020 000 2019 '000 Sales Cost of Sales Gross Profit Selling and distribution costs Administrative expenses Operating Profit Interest charges Profit before taxation Taxation Profit after taxation Dividends Retained profit for the financial year BALANCE SHEETS 10,853 5725 5,128 1,120 1.150 2,858 250 2,608 285 2.323 850 1.473 7,900 3.600 4,300 700 950 2,650 144 2,506 200 2,306 150 2.156 '000 2020 000 2019 '000 Non-current assets 8,100 Current assets Inventores Debtors Cash 1,285 2,920 2.125 1.350 4973 3475 Current liabilities Creditors Net current assets 3993 3.185 9.195 Non-current liabilities Share capital and resence APPENDIX 2 Italian Advertising Institute (IAI) - Key Financial Statistics The following data has been compiled from the financial statements of the companies that are members of the IAI: 2020 Gross profit margin Profit margin Retum on capital employed Return on owner's equity Eamings per share Current ratio Quick ratio Average collection period Times interest camed Dividend cover 61% 33% 28% 30% 1.25 4.5 22 55 days 6.0 6.5 Required: 1. In advance of the meeting, prepare a financial analysis of Roma for both 2019 and 2020 that could be used to compare Roma's statistics with those of the IAL Show all workings (10 marks) 22 From your financial analysis, identify Roma's financial strengths and weaknesses in relation to the LAT data (10 marks - maximum word count 800 words) 3 Calculate the impact of Alessandro's planned cost savings on Roma's profit margin and return on capital employed Comment on the effect of these savings. Show all working (5 marlo) Total 25 marks "Well, I nevert gasped Alessandro Pirlo, as he stuck his head around the door of Francesca Maldini's office, grasping some papers. Alessandro Pino is CEO of Milano S.p.A. (Milano), an advertising business. Francesca Maldini is Financial Controller of Milano and has worked with Alessandro for many years, so she was used to his unusual greetings. Before Francesca could respond, Alessandro went on, 'Roma S.p.A. (Roma) is up for sale. Its owners, the Turin Group, has decided that Roma is a 'bad fit with the group's future strategic direction - and want to sell. Roma's portfolio of clients is perfect for Milano. We have to buy it.' Francesca stared intently at Alessandro and remembered, with limited enthusiasm, the number of times in the past when she had become excited about similar opportunities, none of which had ever succeeded. She was busy and did nor welcome the prospect of the extra activity needed to construct a financial assessment of Roma. You do not look too interested, moaned Alessandro Roma is in great shape and would be a terrific acquisition. I am meeting their President tomorrow to commence discussions. It might give us some funding problems, but I am fire that it would be a sound buy. *My information on Roma is out of date, interrupted Francesca Roma used to be fairly solid but unspectacular company. Alessandro ever brightened, dropping his papers on Francesca' desk *Exactly the replied. Here are the 2020 Accounts that you need (Appendix 1). plus our industry sectise averages as well (Appendix 2). I believe that post acquisition we can slice 25% off Roma's distribute costs and reduce its administration expenses by 50% Cur away these duplicated resources and we will pay for the acquisition in a few years Before Francesca could counter his enthusiasm, Alessandro was away, saying "Can I please have your analysis of these accounts for nw meeting tomorrow with Roma's President Francesca glared the disappeanng back and then go down to work 'Wed, I neved' gasped Alessandro Pirlo, as he stuck his head around the door of Francesca Maldini's office, grasping some papers. Alessandro Pido is CEO of Milano S.p.A. (Milano), an advertising business. Francesca Maldini is Financial Controller of Milano and has worked with Alessandro for many years, so she was used to his unusual greetings. Before Francesca could respond, Alessandro went on, 'Roma S.p.A. (Roma) is up for sale. Its owners, che Turin Group, has decided that Roma is a bad fit' with the group's future strategic direction - and want to sell. Roma's portfolio of clients is perfect for Milano. We have to buy it." Francesca stared intently at Alessandro and remembered, with limited enthusiasm, the number of times in the past when she had become excited about similar opportunities, none of which had ever succeeded. She was busy and did not welcome the prospect of the extra activity needed to construct a financial assessment of Roma. "You do not look too interested,' moaned Alessandro. "Roma is in great shape and would be a terrific acquisition. I am meeting their President Tomorrow to commence discussions. It might give us some funding problems, but I am sure that it would be a sound buy *My information on Roma is out of date," interrupted Francesca "Roma used to be a fairly solid but unspectacular company. Alessandro's eves brightened, dropping his papers on Francesca desk. Exactly, he replied. Here are the 2020 Accounts that you need (Appendix 1), plus our industry sector averages as well (Appendix 2). I believe that post acquisition we can slice 25% off Roma's distnbution costs and reduce its administration expenses by 50% Cut away these duplicated resources and we will pay for the acquisition in a few years. Before Francesca could counter his enthusiasm, Alessandra was away, saying "Can please have your analysis of these accounts for my meeting tomorrow with Roma's President Francesca glared at her boss's disappearing back and then got down to work ROMA S.p.A. SUMMARY PROFIT AND LOSS ACCOUNTS 2020 000 2019 000 Sales Cost of Sales Gross Profit Sdling and distribution costs Administrative expenses Operating Profit Interest charges Profit before taxation Taxation Profit after taxation Dividends Retained profit for the financial year 10,853 5.725 5,128 1,120 1.150 2,858 250 2,608 285 2,323 850 1473 7,900 3.600 4,300 700 950 2,650 14 2,506 20.0 2,306 22156 BALANCE SHEETS 2020 000 "000 2019 000 Non-current assets 8,100 6.210 Current assets Inventories Debtors Cash 2,125 1,350 1,285 2,920 768 4.973 3:15 Current liabilities Creditor 980 2.99 Net current assets 3.993 12,093 3.185 9,395 Non-current liabilities Loans 1.700 10,393 425 8.920 Share capital and reserves Ordinary share capital el ordinary shares) kerana pot LON 02 APPENDIX 2 Italian Advertising Institute (IAD) -Key Financial Statistics The following data has been compiled from the financial statements of the companies that are members of the IAI: 2020 Gross profit margin Profit margin Return on capital employed Return on owner's equity Famings per share Current ratio Quick ratio Average collection period Times interest eamed Dividend cover 61% 33% 28% 30% 1.25 4.5 2.2 55 days 6,0 6.5 Required: 1. In advance of the meeting, prepare a financial analysis of Roma for both 2019 and 2020 that could be used to compare Roma's statistics with those of the IAL. Show all workings (10 marks) From your financial analysis, identify Roma's financial strengths and weaknesses in relation to the 1 Al data (10 marks - maximum word count 800 words) 3 Calculate the impact of Alessandro's planned cost savings on Roma's profit margin and return on capital employed. Comment on the effect of these savings Show all working (5 marks) Total 25 marks APPENDIX 1 ROMA S.p.A. SUMMARY PROFIT AND LOSS ACCOUNTS 2020 000 2019 '000 Sales Cost of Sales Gross Profit Selling and distribution costs Administrative expenses Operating Profit Interest charges Profit before taxation Taxation Profit after taxation Dividends Retained profit for the financial year BALANCE SHEETS 10,853 5725 5,128 1,120 1.150 2,858 250 2,608 285 2.323 850 1.473 7,900 3.600 4,300 700 950 2,650 144 2,506 200 2,306 150 2.156 '000 2020 000 2019 '000 Non-current assets 8,100 Current assets Inventores Debtors Cash 1,285 2,920 2.125 1.350 4973 3475 Current liabilities Creditors Net current assets 3993 3.185 9.195 Non-current liabilities Share capital and resence APPENDIX 2 Italian Advertising Institute (IAI) - Key Financial Statistics The following data has been compiled from the financial statements of the companies that are members of the IAI: 2020 Gross profit margin Profit margin Retum on capital employed Return on owner's equity Eamings per share Current ratio Quick ratio Average collection period Times interest camed Dividend cover 61% 33% 28% 30% 1.25 4.5 22 55 days 6.0 6.5 Required: 1. In advance of the meeting, prepare a financial analysis of Roma for both 2019 and 2020 that could be used to compare Roma's statistics with those of the IAL Show all workings (10 marks) 22 From your financial analysis, identify Roma's financial strengths and weaknesses in relation to the LAT data (10 marks - maximum word count 800 words) 3 Calculate the impact of Alessandro's planned cost savings on Roma's profit margin and return on capital employed Comment on the effect of these savings. Show all working (5 marlo) Total 25 marks "Well, I nevert gasped Alessandro Pirlo, as he stuck his head around the door of Francesca Maldini's office, grasping some papers. Alessandro Pino is CEO of Milano S.p.A. (Milano), an advertising business. Francesca Maldini is Financial Controller of Milano and has worked with Alessandro for many years, so she was used to his unusual greetings. Before Francesca could respond, Alessandro went on, 'Roma S.p.A. (Roma) is up for sale. Its owners, the Turin Group, has decided that Roma is a 'bad fit with the group's future strategic direction - and want to sell. Roma's portfolio of clients is perfect for Milano. We have to buy it.' Francesca stared intently at Alessandro and remembered, with limited enthusiasm, the number of times in the past when she had become excited about similar opportunities, none of which had ever succeeded. She was busy and did nor welcome the prospect of the extra activity needed to construct a financial assessment of Roma. You do not look too interested, moaned Alessandro Roma is in great shape and would be a terrific acquisition. I am meeting their President tomorrow to commence discussions. It might give us some funding problems, but I am fire that it would be a sound buy. *My information on Roma is out of date, interrupted Francesca Roma used to be fairly solid but unspectacular company. Alessandro ever brightened, dropping his papers on Francesca' desk *Exactly the replied. Here are the 2020 Accounts that you need (Appendix 1). plus our industry sectise averages as well (Appendix 2). I believe that post acquisition we can slice 25% off Roma's distribute costs and reduce its administration expenses by 50% Cur away these duplicated resources and we will pay for the acquisition in a few years Before Francesca could counter his enthusiasm, Alessandro was away, saying "Can I please have your analysis of these accounts for nw meeting tomorrow with Roma's President Francesca glared the disappeanng back and then go down to work 'Wed, I neved' gasped Alessandro Pirlo, as he stuck his head around the door of Francesca Maldini's office, grasping some papers. Alessandro Pido is CEO of Milano S.p.A. (Milano), an advertising business. Francesca Maldini is Financial Controller of Milano and has worked with Alessandro for many years, so she was used to his unusual greetings. Before Francesca could respond, Alessandro went on, 'Roma S.p.A. (Roma) is up for sale. Its owners, che Turin Group, has decided that Roma is a bad fit' with the group's future strategic direction - and want to sell. Roma's portfolio of clients is perfect for Milano. We have to buy it." Francesca stared intently at Alessandro and remembered, with limited enthusiasm, the number of times in the past when she had become excited about similar opportunities, none of which had ever succeeded. She was busy and did not welcome the prospect of the extra activity needed to construct a financial assessment of Roma. "You do not look too interested,' moaned Alessandro. "Roma is in great shape and would be a terrific acquisition. I am meeting their President Tomorrow to commence discussions. It might give us some funding problems, but I am sure that it would be a sound buy *My information on Roma is out of date," interrupted Francesca "Roma used to be a fairly solid but unspectacular company. Alessandro's eves brightened, dropping his papers on Francesca desk. Exactly, he replied. Here are the 2020 Accounts that you need (Appendix 1), plus our industry sector averages as well (Appendix 2). I believe that post acquisition we can slice 25% off Roma's distnbution costs and reduce its administration expenses by 50% Cut away these duplicated resources and we will pay for the acquisition in a few years. Before Francesca could counter his enthusiasm, Alessandra was away, saying "Can please have your analysis of these accounts for my meeting tomorrow with Roma's President Francesca glared at her boss's disappearing back and then got down to work ROMA S.p.A. SUMMARY PROFIT AND LOSS ACCOUNTS 2020 000 2019 000 Sales Cost of Sales Gross Profit Sdling and distribution costs Administrative expenses Operating Profit Interest charges Profit before taxation Taxation Profit after taxation Dividends Retained profit for the financial year 10,853 5.725 5,128 1,120 1.150 2,858 250 2,608 285 2,323 850 1473 7,900 3.600 4,300 700 950 2,650 14 2,506 20.0 2,306 22156 BALANCE SHEETS 2020 000 "000 2019 000 Non-current assets 8,100 6.210 Current assets Inventories Debtors Cash 2,125 1,350 1,285 2,920 768 4.973 3:15 Current liabilities Creditor 980 2.99 Net current assets 3.993 12,093 3.185 9,395 Non-current liabilities Loans 1.700 10,393 425 8.920 Share capital and reserves Ordinary share capital el ordinary shares) kerana pot LON 02 APPENDIX 2 Italian Advertising Institute (IAD) -Key Financial Statistics The following data has been compiled from the financial statements of the companies that are members of the IAI: 2020 Gross profit margin Profit margin Return on capital employed Return on owner's equity Famings per share Current ratio Quick ratio Average collection period Times interest eamed Dividend cover 61% 33% 28% 30% 1.25 4.5 2.2 55 days 6,0 6.5 Required: 1. In advance of the meeting, prepare a financial analysis of Roma for both 2019 and 2020 that could be used to compare Roma's statistics with those of the IAL. Show all workings (10 marks) From your financial analysis, identify Roma's financial strengths and weaknesses in relation to the 1 Al data (10 marks - maximum word count 800 words) 3 Calculate the impact of Alessandro's planned cost savings on Roma's profit margin and return on capital employed. Comment on the effect of these savings Show all working (5 marks) Total 25 marks