Well, I neverl' gasped Alessandro Pirlo, as he stuck his head around the door of Francesc Maldini's office, grasping some papers. Alessandro Pirlo is CEO of Milano S.p.A. (Milano), an advertising business. Francesc Maldini is Financial Controller of Milano and has worked with Alessandro fo many years, so she was used to his unusual greetings. Before Francesca could respond, Alessandro went on, 'Roma S.p.A. (Roma) is up for sale. Its owners, the Turin Group, has decided that Roma is a 'bad fit with the group's future strategic direction - and want to sell. Roma's portfolio of clients is perfect for Milano. We have to buy it.' Francesca stared intently at Alessandro and remembered, with limited enthusiasm, the number of times in the past when she had become excited about similar opportunities, none of which had ever succeeded. She was busy and did not welcome the prospect of the extra activity needed to construct a financial assessment of Roma, You do not look too interested,' moaned Alessandro. "Roma is in great shape and would be a terrific acquisition. I am meeting their President tomorrow to commence discussions. It might give us some funding problems, but I am sure that it would be a sound buy. *My information on Roma is out of date,' interrupted Francesca. "Roma used to be a fairly solid but un pectacular company." Alessandro's eyes brightened. dropping his papers on Francesca' desk. Exactly he replied. "Here are the 2020 Accounts that you need (Appendix 1), plus our industry sector averages as well (Appendix 2). I believe that post acquisition we can slice 25% off Roma's distribution costs and reduce its administration expenses by 50%, Cut away these duplicated resources and we will pay for the acquisition in a few years. Before Francesca could counter his enthusiasm, Alessandro was away, saving "Can I please have your analysis of these accounts for my meeting tomorrow with Roma's President ancesca glared at her boss's disappearing back and then sot down to work SUMMARY PROFIT AND LOSS ACCOUNTS 2020 C'000 2019 '000 Sales Cost of Sales Gross Profit Selling and distribution costs Administrative expenses Operating Profit Interest charges Profit before taxation Taxation Profit after taxation Dividends Retained profit for the financial year 10,853 5.725 5,128 1,120 1.150 2,858 250 2,608 285 2,323 850 1.473 7,900 3.600 4,300 700 950 2,650 2,506 200 2,306 150 2.15.6 BALANCE SHEETS 2020 '000 2019 C000 000 Non-current assets 8,100 6.210 Current assets Inventories Debtors Cash 1,285 2,920 768 2,125 1 350 3.425 Current liabilities Creditors 980 200 Net current assets 3.993 12.093 3.185 9,395 Non-current liabilities Loan 1. 175 8920 Share capital and reserves Ord share capital dinary charc) Retaici posfit TU 1020 3.393 BORO Italian Advertising Institute (IAD) - Key Financial Statistics The following data has been compiled from the financial statements of the companies that are members of the IAI: 2020 Gross profit margin Profit margin Return on capital employed Return on owner's equity Earnings per share Current ratio Quick ratio Average collection period Times interest earned Dividend cover 61% 33% 28% 30% 1.25 4.5 2.2 55 days 6.0 6.5 Required: In advance of the meeting, prepare a financial analysis of Roma for both 2019 and 2020 that could be used to compare Roma's statistics with those of the IAI. Show all wockings (10 marks) 2. From your financial analysis, identify Roma's financial strengths and weaknesses in relation to the l Al data, (10 marks-maximum word count 800 words) 3 Calculate the impact of Alessandro's planned cost savings on Roma's profit margin and retum on capital employed Comment on the effect of these savings Show all workings (5 marks) Total 25 marks Well, I neverl' gasped Alessandro Pirlo, as he stuck his head around the door of Francesc Maldini's office, grasping some papers. Alessandro Pirlo is CEO of Milano S.p.A. (Milano), an advertising business. Francesc Maldini is Financial Controller of Milano and has worked with Alessandro fo many years, so she was used to his unusual greetings. Before Francesca could respond, Alessandro went on, 'Roma S.p.A. (Roma) is up for sale. Its owners, the Turin Group, has decided that Roma is a 'bad fit with the group's future strategic direction - and want to sell. Roma's portfolio of clients is perfect for Milano. We have to buy it.' Francesca stared intently at Alessandro and remembered, with limited enthusiasm, the number of times in the past when she had become excited about similar opportunities, none of which had ever succeeded. She was busy and did not welcome the prospect of the extra activity needed to construct a financial assessment of Roma, You do not look too interested,' moaned Alessandro. "Roma is in great shape and would be a terrific acquisition. I am meeting their President tomorrow to commence discussions. It might give us some funding problems, but I am sure that it would be a sound buy. *My information on Roma is out of date,' interrupted Francesca. "Roma used to be a fairly solid but un pectacular company." Alessandro's eyes brightened. dropping his papers on Francesca' desk. Exactly he replied. "Here are the 2020 Accounts that you need (Appendix 1), plus our industry sector averages as well (Appendix 2). I believe that post acquisition we can slice 25% off Roma's distribution costs and reduce its administration expenses by 50%, Cut away these duplicated resources and we will pay for the acquisition in a few years. Before Francesca could counter his enthusiasm, Alessandro was away, saving "Can I please have your analysis of these accounts for my meeting tomorrow with Roma's President ancesca glared at her boss's disappearing back and then sot down to work SUMMARY PROFIT AND LOSS ACCOUNTS 2020 C'000 2019 '000 Sales Cost of Sales Gross Profit Selling and distribution costs Administrative expenses Operating Profit Interest charges Profit before taxation Taxation Profit after taxation Dividends Retained profit for the financial year 10,853 5.725 5,128 1,120 1.150 2,858 250 2,608 285 2,323 850 1.473 7,900 3.600 4,300 700 950 2,650 2,506 200 2,306 150 2.15.6 BALANCE SHEETS 2020 '000 2019 C000 000 Non-current assets 8,100 6.210 Current assets Inventories Debtors Cash 1,285 2,920 768 2,125 1 350 3.425 Current liabilities Creditors 980 200 Net current assets 3.993 12.093 3.185 9,395 Non-current liabilities Loan 1. 175 8920 Share capital and reserves Ord share capital dinary charc) Retaici posfit TU 1020 3.393 BORO Italian Advertising Institute (IAD) - Key Financial Statistics The following data has been compiled from the financial statements of the companies that are members of the IAI: 2020 Gross profit margin Profit margin Return on capital employed Return on owner's equity Earnings per share Current ratio Quick ratio Average collection period Times interest earned Dividend cover 61% 33% 28% 30% 1.25 4.5 2.2 55 days 6.0 6.5 Required: In advance of the meeting, prepare a financial analysis of Roma for both 2019 and 2020 that could be used to compare Roma's statistics with those of the IAI. Show all wockings (10 marks) 2. From your financial analysis, identify Roma's financial strengths and weaknesses in relation to the l Al data, (10 marks-maximum word count 800 words) 3 Calculate the impact of Alessandro's planned cost savings on Roma's profit margin and retum on capital employed Comment on the effect of these savings Show all workings (5 marks) Total 25 marks