Income Statement and Balance Sheet of Universal Ltd.

 

	2021 (£000)	2022 (£000)
Non-current Asset
Vehicle	20.00	18.00
Furniture	8.00	5.00
	28.00	23.00
Current Assets
Inventory	4.90	13.70
Receivable	8.80	11.60
Balance at Bank	13.90	11.50
Cash In hand	2.60	4.20
Total current asset	30.20	41.00
Current Liabilities	16.70	30.80
	41.50	33.20
Shareholders' equity	20.00	20.00
Retained Profit	16.00	12.50
General reserve	5.50	0.70
	41.50	33.20

 

Sales	30.00	40.00
Cost of Sales	8.00	9.00
Net Profit	16.00	18.50

 

 

Investors Ratios:
Dividend PerShare	12 Pence	18 Pence
Number of SharesIssued	20,000 units	20,000 units
Average share price	£2.50	£3.30

 

 

The following ratios indicatethe benchmark performance of the industryaverage for the year 2021:

 

Ratios	Measures
Gross Profit Margin	50 percent
Net Profit Margin	45 percent
Receivable Collection Period	30 days
Earning Per Share	50 pence
Dividend Yield	3.2 percent
PE ratio	6.5 times

 

1. You are required to calculate and show your workings on the following ratios for both years:

 

1. Gross Profit Margin                                                                                   
2. Net Profit Margin                                                                                       
3. Current Ratio                                                                                             
4. Quick Ratio                                                                                                
5. Receivables Collection Period                                                                   
6. Earnings Per Share                                                                                     
7. Price Earning Ratio                                                                                    
8. Dividend Yield                                                                                           

 

 

1. Your management requires you to explain the following category. You are required to calculate the ratio and critically comment on it. Suggest improvements to the ratiosfor the organisation where possible.

 

1. Profitability ratio
2. Efficiency ratio
3. Liquidity ratio
4. Investor's Ratio
5. The weakness of Ratio

 

PART 2

The net operational cash flows of investment schemes of Cafe and a Disco as follows:

 

Year	Cafe (£000)	Disco (£000)
0	(82)	(82)
1	20	30
2	30	30
3	40	40
4	40	50
5	50	30

 

Given that the residual value for Cafe and Disci are £18,000 and £ 22,000 respectively while the requiredrate of return is 12%.

 

 

You are required to calculate, for both schemes, the:

1. Accounting Rate of Return                                                           
2. Payback period                                                                             
3. Weakness of the aboveinvestment appraisal method                  

 

PART 3 

1. " Relyingonly on accounting figures from Income Statement and Balance Sheetdo not present    the    complete    performance    and   evaluation    of   a    company" Please argue and critique this statement.

 

 

1. Your company has an intention to expand the business by investing in a greenfield investment. You are required to advise the management on the sources of finances to facilitate this investment.