Question No.1

The information below provides details on the Income Statements for the period ending 31 December 2018 for Palace Enterprise Limited and Shand Limited.

	Palace Enterprise Ltd	Shand Limited
	$000	$000
Revenue	630	260
Cost of Sales	(210)	(105)
Gross Profit	420	155
Distribution Costs	(90)	(30)
Administration Expenses	(60)	(45)
Profit from Operations	270	80
Investment Income from Shand	18
Profit before Taxation	288	80
Taxation	(65)	(13)
Profit for the Year	223	67

Required:

Prepare the common size Income Statements for both companies?

Prepare a brief report from the common size Income Statement?

What benefits can be obtained from common size Income Statements?

Question No.2

The following information relates to Octagon Limited for the years ended 31 March 2018 and 31 March 2019.

	2019	2018
	$000	$000
Sale Revenue	3,800	2,500
Cost of Sales	(1,800)	(1,200)
Gross Profit	2,000	1,300
Administrative Expenses	(315)	(250)
Selling & Distribution Expenses	(200)	(150)
Profit Before Tax	1,485	900
Income Tax	(210)	(150)
Profit for the year	1,275	(750)
Dividend Paid	(90)	(90)
Retained Profit	1,185	660
Retained Earnings b/f	2,565	1,110

Required:

Prepare a Statement of Horizontal Analysis and analyze the results