Non-current assets Question 2.2 Devon Ltd is a company that manufactures and retails office products. Their summarised financial statements for the years ended 30 June 2007 and 2006 are given below. Devon Limited: Statement of financial position as at 30 June 2007 and 20X6: 20X6 000 341,400 20X7 '000 509,590 Current assets Inventories 109,400 Trade receivables 419,455 88.760 206,560 Cash 0 95400 Total current assets 528,855 390,710 Total assets 1.038,445 732,110 Equity & Liabilities Equity shares 100,000 100,000 Share premium 20,000 20.000 Revaluation reserve 50,000 0 Retained earnings 376,165 287.420 Total equity 546,106 407,420 Non-current Nabilities 61,600 83,100 Current labies Trade payables 345,480 179.500 Overdra 30,200 0 Tax payable 55,000 62.000 Total current liabilities 430,680 241,590 Total equity and liabilities 1,038,445 732,110 Devon Limited: Income Statement for the year ended 30 June 20X7 and 20X6: Additional information: Revenue Cost of sales Gross profit Operating expenses Profit from operations Finance costs Profit before tax Profit after tax Page 7 of 11 Module Code: LUBS229101 20X7 20x6 '000 1,391,820 '000 1,150,850 (1.050825) (753450) 340,995 406,400 (161,450) (170 1950) 179,545 235,450 (10.000) (14,000) 169,545 221,450 (50.800) (66,300) 118,745 155,150 Turn the page over L The directors concluded that their revenue for the year ended 30 June 20X6 fell below budget and introduced measures in the year end 30 June 20X7 to improve the situation. These include: a) cuting prices, and b) extending credit faces ii. The directors are now reviewing the results for the year ended 30 June 2007 and have asked for your advice as an external business consultant as to whether or not the above strategies have been successful. Required: Prepare a report to the directors of Devon Ltd assessing the performance and position of the company in the year ended 30 June 20X7 compared to the previous year. A maximum of five pairs of ratios for 2006 and 20X7 are required as part of the report's appendix. However, additional ratios and horizontal analysis calculations may also be used to assist in the interpretation of the performance and position of the company. There is no requirement to include any investor ratios Note: Ratios should be calculated to 3 significant figures. Total 20 marks