KINDLY SOLVE THIS ACCOUNTING QUESTIONS. ESPECIALLY 1,1 AND 1.2
Question 1 The scenario Jupiter Holdings Plc has a portfolio of investments in subsidiary companies and is seeking another acquisition that complements the others. The subsidiary companies already in the group include: machinery and commercial vehicle dealership; finance company, equipment leasing company; haulage company with a fleet of 200 heavy goods vehicles (HGV), and a chain of value hotels across the UK, one of which is making a loss. Two possible acquisition targets have been identified: Griffin Care Services Ltd is based in leased converted hotels and provides care services for young people unable to be cared for in the foster system. Jupiter Holdings Plc are looking into the possibility of converting their failing hotel into a provider of care services and Griffin Care Services Ltd is looking for another property to continue expanding around the UK; Midlands Commercials Ltd has a large unit and caters for the storage and repair of up to 70 commercial vehicles at one time, and has the potential for more space as it is based in a large empty industrial area. Midlands Commercials is looking for a contract with a fleet operator to stabilise their income and growth. Extracts from the financial statements of both target companies are shown below: Statements of Profit or Loss (SOPL) GRIFFIN CARE SERVICES Ltd MIDLANDS COMMERCIALS Ltd vertical analysis 3,147,375 100% vertical analysis 100% Turnover 3,084,560 Cost of sales (1,567,592) 50.82% (939,630) 29.85% Gross profit 1,516.968 49.18% 2,207,745 70.15% Administrative expenses Other operating income (735,096) 18030 23.83% 0.58% (1.049,413) 0 33.34% 0.00% Operating profit 799,902 25.93% 1.158,333 36.80% 2.408 0.08% 3,770 0.12% Other interest receivable and similar income Interest payable and similar charges 0 0.00% (96,263) 3.06% Profit on ordinary activities before taxation 802 310 26.01% 1,065,840 33.86% Tax on profit on ordinary activities (78,810) 2.55% (158,056) 5.02% Profit for the year 723,500 23.46% 907,784 28.849 Statements of Financial Position (SOFP) ) GRIFFIN CARE SERVICES Ltd vertical analysis MIDLANDS COMMERCIALS Ltd F E vertical analysis Fixed assets Tangible assets 9,312 1.1% 728,865 27.2% Total Non Current Assets 9,312 1.1% 728,865 27.2% Page 5 of 14 Current assets Trade receivables Cash at bank and in hand 156,350 677,710 18.5% 30.4% 855,825 1,098,480 31.9% 40.9% Total Current Assets 834,060 98.91 1.954,305 72.8% Total Assets 843,372 100.0% 2,683,170 100 % 414,448 49.11 245,888 9.2% Liabilities Current liability Trade payables Non current liability: Bank borrowing 0 0.0% 742,670 27.7% Total Liabilities 414,448 49.15 988,558 36.8% Equity and reserves Called up share capital Profit and loss account 2 428,922 0.0% 50.94 2 1,694,610 0.05 63.2% Total Equity 428,924 50.9% 1,694,612 63.2% . Total Equity and Liabilities 843,372 100.0% 2,683,170 100.0% Page 6 of 14 The ratio analysis below is in 4 categories (Profitability Management Efficiency. Liquidity and Gearing), and needs completing: Formulae GRIFFIN CARE SERVICES Ltd MIDLANDS COMMERCIALS Ltd Ratios Profitability Ratios ROCE % % 95% PBIT Cap Employed Return on Assets % 95% PBIT Total Assets Asset Turnover 3.7 Revenue Total Assets Gross Profit Margin % 49.2% Gross profit Revenue Net Profit Margin % 26% PBIT Revenue Efficiency Ratios Trade Receivables receivables Collection period (R) 365 Sales days 19 Page 7 of 14 Payables payment period (P) Trade payables X 365 Cost of sales days 97 Cash Cycle R-P days -78 Liquidity Ratios Current Ratio X:1 2.0 Current Assets Current liabilities Financial Risk or GEARING Ratios Gearing 0.0% Fixed int capital Total capital employed Interest cover ratio 0.0 PBIT Interest charges Requirements 1.1 Prepare a business report, maximum 2 pages long (approximately 800 words) with an appendix for your ratio analysis. It is to be addressed to the board of directors of Jupiter Holdings Plc. You must evaluate the financial statements, interpret the ratio analysis and make a convincing argument for investment in one of the two target companies. Your report should be supported with academic references throughout, and your ratio analysis should be put in an appendix to the report. (800 words, 30 marks) 12 Critically evaluate the working capital management (WCM) of both companies using academic Page 8 of 14 Requirements 1.1 Prepare a business report, maximum 2 pages long (approximately 300 words) with an appendix for your ratio analysis. it is to be addressed to the board of directors of Jupiter Holdings Plc. You must evaluate the financial statements, interpret the ratio analysis and make a convincing argument for investment in one of the two target companies. Your report should be supported with academic references throughout, and your ratio analysis should be put in an appendix to the report. (800 words, 30 marks) 1.2 Critically evaluate the working capital management (WCM) of both companies using academic Page 8 al 14 Question 1 The scenario Jupiter Holdings Plc has a portfolio of investments in subsidiary companies and is seeking another acquisition that complements the others. The subsidiary companies already in the group include: machinery and commercial vehicle dealership; finance company, equipment leasing company; haulage company with a fleet of 200 heavy goods vehicles (HGV), and a chain of value hotels across the UK, one of which is making a loss. Two possible acquisition targets have been identified: Griffin Care Services Ltd is based in leased converted hotels and provides care services for young people unable to be cared for in the foster system. Jupiter Holdings Plc are looking into the possibility of converting their failing hotel into a provider of care services and Griffin Care Services Ltd is looking for another property to continue expanding around the UK; Midlands Commercials Ltd has a large unit and caters for the storage and repair of up to 70 commercial vehicles at one time, and has the potential for more space as it is based in a large empty industrial area. Midlands Commercials is looking for a contract with a fleet operator to stabilise their income and growth. Extracts from the financial statements of both target companies are shown below: Statements of Profit or Loss (SOPL) GRIFFIN CARE SERVICES Ltd MIDLANDS COMMERCIALS Ltd vertical analysis 3,147,375 100% vertical analysis 100% Turnover 3,084,560 Cost of sales (1,567,592) 50.82% (939,630) 29.85% Gross profit 1,516.968 49.18% 2,207,745 70.15% Administrative expenses Other operating income (735,096) 18030 23.83% 0.58% (1.049,413) 0 33.34% 0.00% Operating profit 799,902 25.93% 1.158,333 36.80% 2.408 0.08% 3,770 0.12% Other interest receivable and similar income Interest payable and similar charges 0 0.00% (96,263) 3.06% Profit on ordinary activities before taxation 802 310 26.01% 1,065,840 33.86% Tax on profit on ordinary activities (78,810) 2.55% (158,056) 5.02% Profit for the year 723,500 23.46% 907,784 28.849 Statements of Financial Position (SOFP) ) GRIFFIN CARE SERVICES Ltd vertical analysis MIDLANDS COMMERCIALS Ltd F E vertical analysis Fixed assets Tangible assets 9,312 1.1% 728,865 27.2% Total Non Current Assets 9,312 1.1% 728,865 27.2% Page 5 of 14 Current assets Trade receivables Cash at bank and in hand 156,350 677,710 18.5% 30.4% 855,825 1,098,480 31.9% 40.9% Total Current Assets 834,060 98.91 1.954,305 72.8% Total Assets 843,372 100.0% 2,683,170 100 % 414,448 49.11 245,888 9.2% Liabilities Current liability Trade payables Non current liability: Bank borrowing 0 0.0% 742,670 27.7% Total Liabilities 414,448 49.15 988,558 36.8% Equity and reserves Called up share capital Profit and loss account 2 428,922 0.0% 50.94 2 1,694,610 0.05 63.2% Total Equity 428,924 50.9% 1,694,612 63.2% . Total Equity and Liabilities 843,372 100.0% 2,683,170 100.0% Page 6 of 14 The ratio analysis below is in 4 categories (Profitability Management Efficiency. Liquidity and Gearing), and needs completing: Formulae GRIFFIN CARE SERVICES Ltd MIDLANDS COMMERCIALS Ltd Ratios Profitability Ratios ROCE % % 95% PBIT Cap Employed Return on Assets % 95% PBIT Total Assets Asset Turnover 3.7 Revenue Total Assets Gross Profit Margin % 49.2% Gross profit Revenue Net Profit Margin % 26% PBIT Revenue Efficiency Ratios Trade Receivables receivables Collection period (R) 365 Sales days 19 Page 7 of 14 Payables payment period (P) Trade payables X 365 Cost of sales days 97 Cash Cycle R-P days -78 Liquidity Ratios Current Ratio X:1 2.0 Current Assets Current liabilities Financial Risk or GEARING Ratios Gearing 0.0% Fixed int capital Total capital employed Interest cover ratio 0.0 PBIT Interest charges Requirements 1.1 Prepare a business report, maximum 2 pages long (approximately 800 words) with an appendix for your ratio analysis. It is to be addressed to the board of directors of Jupiter Holdings Plc. You must evaluate the financial statements, interpret the ratio analysis and make a convincing argument for investment in one of the two target companies. Your report should be supported with academic references throughout, and your ratio analysis should be put in an appendix to the report. (800 words, 30 marks) 12 Critically evaluate the working capital management (WCM) of both companies using academic Page 8 of 14 Requirements 1.1 Prepare a business report, maximum 2 pages long (approximately 300 words) with an appendix for your ratio analysis. it is to be addressed to the board of directors of Jupiter Holdings Plc. You must evaluate the financial statements, interpret the ratio analysis and make a convincing argument for investment in one of the two target companies. Your report should be supported with academic references throughout, and your ratio analysis should be put in an appendix to the report. (800 words, 30 marks) 1.2 Critically evaluate the working capital management (WCM) of both companies using academic Page 8 al 14
