Question 1 (34 marks) ( The new managing director (MD) of Laser & Tiger Ltd has asked you to analyse and give your views on the relative profitability and liquidity. The following summarised financial statements have been prepared for two years. Laser & Tiger Ltd Statement of financial position as at 30 June 2010 NS 2010 N$ 2009 ASSETS Non-current assets PPE Investments in properties Investments in subsidiaries Loan receivable Goodwill Total non-current assets 150,000.00 5,000,000.00 48,000.00 250,000.00 120,000.00 5,568,000.00 120,000.00 4,500,000.00 54,000.00 300,000.00 100,000.00 5,074,000.00 Current assets Inventory Trade receivables Cash and cash equivalents Total current assets TOTAL ASSETS 76,000.00 42,000.00 1,200,000.00 1,318,000.00 6,886,000.00 35,000.00 11,000.00 1,300,000.00 1,346,000.00 6,420,000.00 EQUTY AND LIABILITIES Equity Stated capital Retained earnings Total equity 3,000,000.00 2,685,000.00 5,685,000.00 3.000.000.00 2,430,000.00 5,430,000.00 Non-current liabilities Loans from shareholders Long-term debt Total non-current liabilities 120,000.00 950,000.00 1,070,000.00 100,000.00 750,000.00 850,000.00 Current liabilities Trade payables Provisions Taxation payables 79,000.00 41,000.00 11.000.00 54,000.00 63,000.00 23,000.00 Page 21 of 27 Total current liabilities TOTAL EQUITY AND LIABILITIES Additional information: 131,000.00 6,886,000.00 140,000.00 6,420,000.00 1. Included in other income is interest income of N$ 34 000 (2009: N$ 40 000). 2. 20% of all sales (revenue) were made on credit. 3. Purchases on N$ 150 000 and N$ 120 000 were made on credit in 2010 and 2009 respectively. All other purchases were for cash. You are required to: 1. Use the information in respect of Laser & Tiger Ltd 2010 and 2009 financial year, to write a report to the MD analysing the results. (NB: calculate the ratios I.R.O working capital and formulas are crucial) 1.1 Report format (3 marks) 1.2 Gross profit percentage (2 marks) 1.3 Net profit percentage 1.4 ROABT (2 marks) (2 marks) 1.5 ROCE (2 marks) 2 1.6 Days inventory on hand (2 marks) 1.7 Debtors collection period (2 marks) 1.8 Creditors collection period (2 marks) 2. Discuss what each of the above seven ratios tells you about the efficiency and the profitability of Laser & Tiger Ltd in 2010. (17 marks) Question 1 (34 marks) ( The new managing director (MD) of Laser & Tiger Ltd has asked you to analyse and give your views on the relative profitability and liquidity. The following summarised financial statements have been prepared for two years. Laser & Tiger Ltd Statement of financial position as at 30 June 2010 NS 2010 N$ 2009 ASSETS Non-current assets PPE Investments in properties Investments in subsidiaries Loan receivable Goodwill Total non-current assets 150,000.00 5,000,000.00 48,000.00 250,000.00 120,000.00 5,568,000.00 120,000.00 4,500,000.00 54,000.00 300,000.00 100,000.00 5,074,000.00 Current assets Inventory Trade receivables Cash and cash equivalents Total current assets TOTAL ASSETS 76,000.00 42,000.00 1,200,000.00 1,318,000.00 6,886,000.00 35,000.00 11,000.00 1,300,000.00 1,346,000.00 6,420,000.00 EQUTY AND LIABILITIES Equity Stated capital Retained earnings Total equity 3,000,000.00 2,685,000.00 5,685,000.00 3.000.000.00 2,430,000.00 5,430,000.00 Non-current liabilities Loans from shareholders Long-term debt Total non-current liabilities 120,000.00 950,000.00 1,070,000.00 100,000.00 750,000.00 850,000.00 Current liabilities Trade payables Provisions Taxation payables 79,000.00 41,000.00 11.000.00 54,000.00 63,000.00 23,000.00 Page 21 of 27 Total current liabilities TOTAL EQUITY AND LIABILITIES Additional information: 131,000.00 6,886,000.00 140,000.00 6,420,000.00 1. Included in other income is interest income of N$ 34 000 (2009: N$ 40 000). 2. 20% of all sales (revenue) were made on credit. 3. Purchases on N$ 150 000 and N$ 120 000 were made on credit in 2010 and 2009 respectively. All other purchases were for cash. You are required to: 1. Use the information in respect of Laser & Tiger Ltd 2010 and 2009 financial year, to write a report to the MD analysing the results. (NB: calculate the ratios I.R.O working capital and formulas are crucial) 1.1 Report format (3 marks) 1.2 Gross profit percentage (2 marks) 1.3 Net profit percentage 1.4 ROABT (2 marks) (2 marks) 1.5 ROCE (2 marks) 2 1.6 Days inventory on hand (2 marks) 1.7 Debtors collection period (2 marks) 1.8 Creditors collection period (2 marks) 2. Discuss what each of the above seven ratios tells you about the efficiency and the profitability of Laser & Tiger Ltd in 2010. (17 marks)