Question
Statement of Financial Position of Leon Tools Corporation as at 31 December 2016/2015 2016 (000) 2015 (000) ASSETS Non-current assets Land 1 000 1 000
Statement of Financial Position of Leon Tools Corporation as at 31 December 2016/2015 | ||
| 2016 (000) | 2015 (000) |
ASSETS |
|
|
Non-current assets |
|
|
Land | 1 000 | 1 000 |
Plant and equipment | 31 000 | 26000 |
Accumulated Depreciation | (13000) | (10000) |
|
|
|
Current assets |
|
|
Cash and cash equivalents | 1 800 | 2 000 |
Trade receivables | 7 600 | 6 000 |
Inventories | 5 220 | 5 000 |
TOTAL ASSETS | 33 620 | 30 000 |
|
|
|
Equities |
|
|
ordinary share | 4 000 | 4 000 |
Retained earnings | 6 620 | 4 000 |
|
|
|
Non-current liabilities |
|
|
Debentures | 4 000 | 4 000 |
|
|
|
Current liabilities |
|
|
Trade payables | 15 600 | 15 000 |
Accrued expenses | 3 400 | 3 000 |
TOTAL LIABILITIES & EQUITIES | 33620 | 30000 |
Extract of the Statement of Comprehensive Income of Lion Tools Corporation for the year ended 31 December 2016/2015 | ||
| 2016 (000) | 2015(000) |
Revenue | 45 000 | 40 909 |
Cost of Goods Sold | (23 000) | (20 909) |
Gross profit /EBITDA | 22 000 | 20 000 |
Selling and admin expenses | (13 000) | (11 818) |
Depreciation expenses | (3 000) | (2 000) |
Earnings Before Interest & Tax /EBIT | 6000 | 6182 |
Interest | (412) | (400) |
Earning Before Tax /EBT | 5 588 | 5 782 |
Tax | (2 235) | (2 313) |
Earning After Tax /EAT | 3 353 | 3 469 |
**ordinary dividend | 733 000 | 758 000 |
You have obtained the following industry averages:
Gross profit margin | 50% |
Operating profit margin | 15% |
Net profit margin | 8% |
Return on assets /ROA | 10% |
Return on equity /ROE | 20% |
Current ratio | 1.5 X |
Quick ratio | 1.0 |
Debt Ratio | 0.5 |
Time interest earned /TIE | 25 |
Average Collection Period /ACP | 45 |
Inventory Turnover /ITO | 8 |
Asset Turnover/ TATO | 1.6 |
REQUIRED
Prepare a MEMORANDUM to submit to your boss, as to whether finance should be granted to Lion Tools Corporation.
Use the format (tables in industry averages) in order to complete the ratio analysis portion of the memorandum.
Marks will be awarded for a correct ratio including its relevant unit of measurement.
Provide comments and evaluations under the respective topics provided.
NO MARKS will be awarded for stating an increase or decrease in the ratios.
You may assume 365 days in a given year and you are not required to use averages.
Assume credit purchases are equal to cost of sales.
Show all your workings and round to 2 decimal points.
- Use font Arial 11 (double spacing) in preparing your memorandum
- Do not exceed 10 pages. (including appendix)
- Each group consists of max 8 persons.
2.35
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