Prepare a detailed report on the Companys performance in terms of profitability and liquidity compared with the average of the sector over the period
se Study 1: Financial Ratios Scenario: Barry Edgar is the director of Maritime Boating Ltd. The company has traded for 30 years and has in the past achieved very good levels of growth and return on capital, but this is now changing. In recent time it has failed to introduce new product lines, relying on traditional products and little has been invested in Research or Product Development. You are a business consultant for a firm of Management Consultants. Maritime Boating is one of your clients. In recent times the business has experienced increased turnover but a downturn in overall performance. Barry Edgar has had a meeting with your Director and he has stated that he wants to introduce tighter management control within the company by introducing a system of responsibility accounting. You receive the following memo from your Director, Pauline Hoppe, regarding this case. Memorandum To: Business Consultant Date: 21st May 2011 From: Pauline Hoppe, Director Subject: Maritime Boating Ltd. - ormation You are aware that I met with Barry Edgar yesterday and that he is concerned with the latest results shown in the final accounts that have recently been prepared at year en The file attached contains a summary of the company's abbreviated profit statements and balance sheets for the past performance indicators for their business sector as a whole for the period under review years; together with additional information and I would like you to examine this information and meet with me on Friday morning to discuss the form and the three-year period. presentation of a detailed financial analysis of the company over Signed: P. Hoppe Financial information on Maritime Boating ta 9 LEea firm Summary balance sheets Sm 2009 2.40 Sm 2010 2.77 $m 2011 2.88 Fixed assets Current assets Inventories: Raw materials Finished goods 0.09 0.40 1.14 0.03 1.66 1.35 0.12 0.43 1.32 0.04 1.91 1.56 0.15 0.45 1.84 0.05 2.49 1.90 Av Debtors Less Current iabilities Net current assets 0.31 0.59 2.71 3.12 3.47 0.5 2.21 2.71 0.91 2.21 3.12 Share Capital and reserves 1.26 2.21 3.47 Bank loans Summary profit statements 2009 4.90 4.17 0.73 0.24 0.49 0.12 0.37 2010 5.30 4.43 0.87 0.30 0.57 0.16 0.41 2011 Sales turnover Operating costs Operating profit before tax Taxation Profit after tax Dividends 6.60 0.78 0.27 051 profit Case Study 1: Financial Ratios N.B. The firm's detailed breakdown of costs is as 2009 0.93 0.44 0.19 2010 0.98 0.49 0.22 2011 1.25 0.61 0.27 Years Labour costs Distribution costs Administration costs Maritime Federation - Average ratios for federation members 2011 % Return on capital employed Asset turnover Net profit margin Current ratio Acid test ratio Debtors collection period Gearing ratio Labour cost % of sales Operating cost % of sales Distribution costs % of sales 26.0% 1.79 times 14.5% 1.5:1 1.03:1 83 days 32.0% 18.1% 85.5% 9.5% 4.5% Admin costs % of sales Required: In your role of planning assistant you are to prepare an analysis of the company's figures over the three- year period using the performance criteria listed in the inter-firm comparison table. ration members for 2009 the ratios-givep in the average ratios for 10 20 ailed report on the company's performance in terms of pared with the average of the sector over the period 2. Prepare a det profitability and se Study 1: Financial Ratios Scenario: Barry Edgar is the director of Maritime Boating Ltd. The company has traded for 30 years and has in the past achieved very good levels of growth and return on capital, but this is now changing. In recent time it has failed to introduce new product lines, relying on traditional products and little has been invested in Research or Product Development. You are a business consultant for a firm of Management Consultants. Maritime Boating is one of your clients. In recent times the business has experienced increased turnover but a downturn in overall performance. Barry Edgar has had a meeting with your Director and he has stated that he wants to introduce tighter management control within the company by introducing a system of responsibility accounting. You receive the following memo from your Director, Pauline Hoppe, regarding this case. Memorandum To: Business Consultant Date: 21st May 2011 From: Pauline Hoppe, Director Subject: Maritime Boating Ltd. - ormation You are aware that I met with Barry Edgar yesterday and that he is concerned with the latest results shown in the final accounts that have recently been prepared at year en The file attached contains a summary of the company's abbreviated profit statements and balance sheets for the past performance indicators for their business sector as a whole for the period under review years; together with additional information and I would like you to examine this information and meet with me on Friday morning to discuss the form and the three-year period. presentation of a detailed financial analysis of the company over Signed: P. Hoppe Financial information on Maritime Boating ta 9 LEea firm Summary balance sheets Sm 2009 2.40 Sm 2010 2.77 $m 2011 2.88 Fixed assets Current assets Inventories: Raw materials Finished goods 0.09 0.40 1.14 0.03 1.66 1.35 0.12 0.43 1.32 0.04 1.91 1.56 0.15 0.45 1.84 0.05 2.49 1.90 Av Debtors Less Current iabilities Net current assets 0.31 0.59 2.71 3.12 3.47 0.5 2.21 2.71 0.91 2.21 3.12 Share Capital and reserves 1.26 2.21 3.47 Bank loans Summary profit statements 2009 4.90 4.17 0.73 0.24 0.49 0.12 0.37 2010 5.30 4.43 0.87 0.30 0.57 0.16 0.41 2011 Sales turnover Operating costs Operating profit before tax Taxation Profit after tax Dividends 6.60 0.78 0.27 051 profit Case Study 1: Financial Ratios N.B. The firm's detailed breakdown of costs is as 2009 0.93 0.44 0.19 2010 0.98 0.49 0.22 2011 1.25 0.61 0.27 Years Labour costs Distribution costs Administration costs Maritime Federation - Average ratios for federation members 2011 % Return on capital employed Asset turnover Net profit margin Current ratio Acid test ratio Debtors collection period Gearing ratio Labour cost % of sales Operating cost % of sales Distribution costs % of sales 26.0% 1.79 times 14.5% 1.5:1 1.03:1 83 days 32.0% 18.1% 85.5% 9.5% 4.5% Admin costs % of sales Required: In your role of planning assistant you are to prepare an analysis of the company's figures over the three- year period using the performance criteria listed in the inter-firm comparison table. ration members for 2009 the ratios-givep in the average ratios for 10 20 ailed report on the company's performance in terms of pared with the average of the sector over the period 2. Prepare a det profitability and
