Revenue The following are key extracts from the financial statements of King's Aerospace PLC for financial years ending 31" of December 2020 and 2021: King's Aerospace PLC 2020 175,000,000 2021 200,000,000 Opening Stock 20,000,000 25,000,000 Purchases 80,000,000 100,000,000 Closing Stack (25,000,000) (45,000,000) Cost of Sales 75,000,000) (80,000,000) Gross Profit 100,000,000 120,000,000 Depreciation (10,000,000 (15,000,000 Other Operating Expenses (50,000,000) Operating Profit 40,000,000 Interest Expense (2,000,000) Profit Before Tax 38,000,000 Corporation Tax (7,400,000) (40,000,000) 65,000,000 (5,000,000) 60,000,000 (12,000,000) Profit for The Year 30,400,000 48,000,000 Non-Current Assets 45,000,000 55,000,000 Prepayments Other Operating Expenses 2,000,000 4,000,000 Trade Receivables 15,000,000 55,000,000 Inventories 25,000,000 45,000,000 Cash 10,000,000 Trade Payable 55,000,000 50,000,000 Accrued Tax Liability 26,000,000 7,600,000 Long term Loan 30,000,000 50,000,000 Share Capital ([1) 10,000,000 40,000,000 Share Premium 20,000,000 30,000,000 15,000,000 43,000,000 Retained Earnings Further to the information contained in the financial statements above during the 2021 financial year a dividend to ordinary shares was paid of 20,000,000 and the interest payable expense was fully paid up in cash at 5,000,000. a) Using the income statement and balance sheet provided above, please draw up the statement of cash flows for the financial year ending the 31" of December 2021 and state what the cash figure should be for 2021 (please note the balance sheet above should not be used to calculate cash, as only extracts are shown above to provide sufficient information to complete the statement of cashflows). (10 marks) See Next Page 4QQMN501 b) Adopt the role of a financial analyst and reflect upon each of the three sections of the statement of cashflows. Based upon the income statement and balance sheet, as well as the cashflow statement you've drawn up in answer to part a, state whether you would consider investing in King's Aerospace PLC and any concerns you might have about this investment given the information provided. What further information would you request from or about King's Aerospace PLC's before making any investment? (10 marks) c) Assume that King's Aerospace PLC is looking to expand the business. and needs to raise 300,000,000 to do so. State firstly whether you would recommend they raise this capital by equity or by debt. Secondly, the rationale behind your recommendation weighing up the advantages and disadvantages. (5 marks) d) If they were to raise the 300,000,000 by equity finance, offer your recommendation on whether they should consider a private placement or public offering to raise this capital. Discuss the rationale behind your recommendation weighing up the advantages and disadvantages. Expert Q&A Done 4QQMN501 Question 2 The following are key extracts from the financial statements and market data of King's Motors PLC and its competitor LSE Motors PLC for financial years ending 31" of December 2020 and 2021: King's Motors PLC 2020 2021 26,000,000 132,000,000 LSE Motors PLC 2010 2021 Cash Revenue GroProf 15,000,000 80,000,000 Operating Prof Interest Expense 35,000,000 12,000,000 2,000,000) 8,000,000 Gross Profit Operating Pr (20.000.000 30.000.000 Profit for The Year 7,000,000 4,000,000 Profit for The Year Trade Receivables 3,000,000 5,000,000 19,000,000 12,000,000 Trade 16,000,000 60,000,000 5,000,000 18,000,000 4,000,000 35,000,000 5,000,000 25,000,000 7,000,000 11,000,000 Cash Trade Pay Share Capital (100) 200,000.000 200.000 Share Price (per share) 20 100 6.000.000 Dividends (Total Payout) 30.000.000 Share Price per shar Cash from operations Trade Payable Long term Loan Share Capital (10) Retained Earings Dividends (Total Payout) Cash from operations 2.000.000 a) Discuss three financial ratios you might consider if you were a supplier to King's Motors Ltd and they asked for 10,000,000 of purchases on credit in 2021. Please ensure to justify your chosen ratios and state whether you agree to this deal? Please ensure in your answers to make clear what insights can be drawn from each of your chosen ratios. Please also discuss what further information you would request from or about King's Motors PLC's before offering your product or services on credit? (10 marks) b) Ensuring your answer is different to the ratios used in answer to part a, assume the role of a management consultant and suggest at least two improvements you would advise King's Motors makes to its business based upon conducting ratio analysis. Please in your answer ensure to justify why you believe your chosen recommendations are important. Please also discuss what further information you would request from or about King's Motors to support you in your recommendations (10 marks c) Adopting the perspective of a financial analyst, evaluate the performance of King's Motors PLC and its biggest competitor LSE Motors PLC. Please advise on which of the two companies you would invest in given the information above and why? Please state your rationale behind your chosen investment. In your answer, please also discuss what further information you might seek to support your decision. (10 marks)