Question: prepare a detailed report on the companys performance in terms of profitability and liquidity compared with the average of the sector over the period
Case Study 1: Financial Ratios Scenarlo Barry Edgar is the director of and has in the past achieved Maritime Boating Ltd. The company has traded for 30 years now changing. In recent time it has failed to introduce new product lines, relying on very good levels of growth and return on capital, but this is traditional products and little has been invested in Research or Product Development. You are a business consultant for a firm of Management one of your clients. In recent times a downturn in overall performance Consultants. Maritime Boating is the business has experienced increased turnover but 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 responsibility accounting. of 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. accounts information 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 end. The file attached contains a summary of the company's abbreviated profit statements and balance sheets for the past three years; together with additional information and performance indicators for their business sector as a whole for the period under review. I would like you to examine this information and meet with me on Friday morning to discuss the form and presentation of a detailed financial the three-year period. analysis of the company over Signed: P. Hoppe 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. Prepare a detailed report on the company's performance in terms of profitability and liquidity compared with the average of the sector over the period Case Study 1: Financial Ratios nformationon Maritime Boating Ltd. Summary balance sheets 2010 2011 Fixed assets 2.40 2.77 2.88 Current assets Raw materials 0.09 0.15 Finished goods 0.43 1.32 1.84 0.05 2.49 1.90 0.03 Less Current liabilities Net current assets 0.31 2.71 3.12 3.47 Share Capital and reserves 0.91 Bank loans 2.21 2.21 2.71 3.12 3.47 Summary profit statements 4.90 4.17 0.73 0 24 0.49 0.12 2010 5.30 4.43 0.87 0.30 6.60 Sales turnover Operating costs Operating profit before tax Taxation Profit after tax 0.78 027 0.16 0.16 Retained profit Case Study 1: Financial Ratios N.B. The firm's detailed breakdown of costs as follows: 2009 0.93 0.44 0.19 2010 0.98 0.49 022 011 125 0.61 Years Labour costs Distribution costs Administration costs Maritime Federation- 011 Average ratios for federation members 2 % 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 Admin costs % of sales 1.79 times 14.5% 15:1 .03: 83 days 320% 18.1% 855% 9.5% Required: Quantitative analysis Benchmark 201 2010 2009 1.2 0.99 0.87 0.86 10% 3 121 Ratio Year Current Ratio Quick Ratio 14.5% 7.72% 1.23 18.94% 88.2% 9.24% 4.09% 10.75% Net Profit Margin Asset Turnover 18.1% 85.5% 9.5% 4.5% 18.49% 83.6% 9.25% 4.15% 18.98% 85.1% 8.98% 3.88% Labour cost ofsale Operating cost ofsale Distributing cost of sale cost of Administration 4.17 4.34.29 Debtor turnover 83 days days 87.5 days 84.884.9 days Debtor collection period ROCE "Return on 7.9% 26.94% capital employed" 26% 22.5% 2 90,000 350,000 310,000 40% 62.6% 98% 175% 243% 442% Working capital Return on equity 32% Gearing Ratio Case Study 1: Financial Ratios Scenarlo Barry Edgar is the director of and has in the past achieved Maritime Boating Ltd. The company has traded for 30 years now changing. In recent time it has failed to introduce new product lines, relying on very good levels of growth and return on capital, but this is traditional products and little has been invested in Research or Product Development. You are a business consultant for a firm of Management one of your clients. In recent times a downturn in overall performance Consultants. Maritime Boating is the business has experienced increased turnover but 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 responsibility accounting. of 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. accounts information 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 end. The file attached contains a summary of the company's abbreviated profit statements and balance sheets for the past three years; together with additional information and performance indicators for their business sector as a whole for the period under review. I would like you to examine this information and meet with me on Friday morning to discuss the form and presentation of a detailed financial the three-year period. analysis of the company over Signed: P. Hoppe 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. Prepare a detailed report on the company's performance in terms of profitability and liquidity compared with the average of the sector over the period Case Study 1: Financial Ratios nformationon Maritime Boating Ltd. Summary balance sheets 2010 2011 Fixed assets 2.40 2.77 2.88 Current assets Raw materials 0.09 0.15 Finished goods 0.43 1.32 1.84 0.05 2.49 1.90 0.03 Less Current liabilities Net current assets 0.31 2.71 3.12 3.47 Share Capital and reserves 0.91 Bank loans 2.21 2.21 2.71 3.12 3.47 Summary profit statements 4.90 4.17 0.73 0 24 0.49 0.12 2010 5.30 4.43 0.87 0.30 6.60 Sales turnover Operating costs Operating profit before tax Taxation Profit after tax 0.78 027 0.16 0.16 Retained profit Case Study 1: Financial Ratios N.B. The firm's detailed breakdown of costs as follows: 2009 0.93 0.44 0.19 2010 0.98 0.49 022 011 125 0.61 Years Labour costs Distribution costs Administration costs Maritime Federation- 011 Average ratios for federation members 2 % 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 Admin costs % of sales 1.79 times 14.5% 15:1 .03: 83 days 320% 18.1% 855% 9.5% Required: Quantitative analysis Benchmark 201 2010 2009 1.2 0.99 0.87 0.86 10% 3 121 Ratio Year Current Ratio Quick Ratio 14.5% 7.72% 1.23 18.94% 88.2% 9.24% 4.09% 10.75% Net Profit Margin Asset Turnover 18.1% 85.5% 9.5% 4.5% 18.49% 83.6% 9.25% 4.15% 18.98% 85.1% 8.98% 3.88% Labour cost ofsale Operating cost ofsale Distributing cost of sale cost of Administration 4.17 4.34.29 Debtor turnover 83 days days 87.5 days 84.884.9 days Debtor collection period ROCE "Return on 7.9% 26.94% capital employed" 26% 22.5% 2 90,000 350,000 310,000 40% 62.6% 98% 175% 243% 442% Working capital Return on equity 32% Gearing Ratio
