Analysis of accounts

Dhoni is a profitable small business. It operates five shops selling kitchen equipment such as cooking pots and knives. Most of its products go to restaurants and hotels. The company has been offered a takeover price of $700 000 by a large rival. Dhoni’s shareholders have been studying the accounts and are unsure whether the takeover would bring them a benefit. Dhoni’s return on capital employed was 7% in 2015 and 9% in 2016.

Feb/March 2016

Paul serves as the Managing Director of a private limited company named PShirts. It produces and sells shirts for men and women in country Y. Its items are priced below those of most competitors. Sales have dropped recently despite an economic boom. Paul is considering selling shirts in other countries. One director is concerned about legal controls in other countries. A summary of the accounts appears in Table 1.

Feb/March 2018

Explain two characteristics that help George to succeed as an entrepreneur.

Feb/March 2018

The company Balance Sheet enables David to judge how well the business is performing.

May/June 2015

Jenson Travel (JT) provides a broad selection of holidays designed for the mass market. It offers these holidays through its 350 shops in country F. JT has agreed to acquire another company that focuses on activity holidays, including skiing. This takeover will give JT 50 more shops and raise its market share to 40%. The takeover may cut JT’s costs by $35m per year. Table 1 shows a summary of JT’s accounting information for 2016. The Finance Director believes shareholders and customers will gain from the takeover.

May/June 2016

Identify four stakeholder groups that would want to examine FF’s accounts and explain why each one would want access to them.

May/June 2016

Identify and explain two reasons why well qualified employees matter to this business.

May/June 2016

LWM carries out batch production to manufacture car tyres in 15 different sizes. In the previous year, LWM sold 60 million tyres, of which 40 million were the most popular size. The Finance Director has been examining the financial figures shown in Table 1. She stated: ‘Liquidity is important. I need to use some ratio analysis to assess business performance. In the year before, our Return on Capital Employed was 33%.’ The directors are concerned about stronger competition, yet they are unable to agree on the best response for LWM.

May/June 2017

Identify and explain one reason why TT requires short-term finance and one reason why TT requires long-term finance.

May/June 2017

Identify four communication methods SC could use with its stakeholders. For each method, explain one situation in which it could be used.

May/June 2017

IBH is a private limited company owned by one family. It produces a range of children’s shoes using batch production. The market is highly competitive. As with many businesses, IBH needs finance for several purposes. The Finance Director has been examining some financial information. An extract is shown in Table 1. Some directors want to move into the women’s shoe market and would like to know whether IBH’s performance is improving.

May/June 2018

Calculate Gross profit margin in 2017.

May/June 2018

Identify and explain two opportunities and two threats that globalisation creates for businesses in Country Z.

May/June 2019

Identify and explain one benefit and one drawback to VC from using job production. Advantage - a positive effect. Disadvantage - a negative effect.

May/June 2019

PJA manufactures fashion clothing for 16-25 year olds. A lot of its rivals are multinational companies. Every 3 weeks PJA launches new products. Because of import quotas, all of PJA’s products are produced in a local factory. The Managing Director is examining PJA’s financial statements by using ratio analysis. An extract appears in Table 2.1.

May/June 2021

VCG produces premium briefcases and travel bags. There are 50 skilled production workers in VCG’s factory. VCG plans to grow by constructing a second factory, and several sites are under consideration. The Managing Director is examining VCG’s financial statements. An extract appears in Table 3.1. Both VCG’s internal and external stakeholder groups are interested in this information.

May/June 2022

Explain two benefits to TT of applying lean production methods.

May/June 2022

Explain one opportunity and one threat for RR arising from the use of ecommerce.

May/June 2023

GTB is a business that operates in the tertiary sector. It owns 5 cafés where it sells food and drinks. The business promotes itself through social media. The Finance Manager, Moeen, is examining GTB’s financial statements. An extract appears in Table 2.1. He is thinking about methods to increase GTB’s profit margin. Moeen is aware that there are other users interested in a business’s accounts.

May/June 2024

Population and financial information is given in Appendix 1 and Appendix 2.

Oct/Nov 2015

Dowson is a sizeable business that owns several shops. It sells a variety of electrical goods, including computers and televisions. The Finance Director has been reviewing some recent financial information, which is shown in Table 1. He is pleased with Dowson's liquidity, but he knows that its large debt burden must be reduced, including an overdraft of $6m. He remarked: ‘The economy is in recession. Many small retailers have failed. Size is an advantage!’

Oct/Nov 2016

Izaak runs a small fish restaurant. He employs two chefs (cooks) and three workers who serve in the restaurant. He has been trying to raise added value to improve profits. Izaak has been studying the business accounts shown in Table 1. He believes fixed costs are too high. Izaak has received several complaints about food and service. He feels that quality needs to improve, but he cannot choose the best method.

Oct/Nov 2016

Yanis runs a busy restaurant in the city centre. He has 4 skilled chefs and 6 workers who serve customers in the restaurant. Every employee is employed on part-time contracts. The chefs receive a high hourly wage rate, but they are given no bonuses. Yanis is concerned that too many chefs resign. He is considering other ways to motivate the chefs. Yanis would like to open another restaurant but is concerned about growth-related difficulties. He has drawn up a balance sheet as part of his business plan. An extract is shown in Table 2. The current ratio was 1.2:1 in 2016.

Oct/Nov 2017

Issue 1: Why this matters: Issue 2: Why this matters:

Oct/Nov 2017

Identify and explain one effect on GT and one effect on GT’s employees when workers belong to a trade union.

Oct/Nov 2018

Elton runs his business as a sole trader. He sells specialist sports clothing and equipment, including baseball and hockey items. This is a niche market. He began the business 5 years ago, and it has stayed small. Having a broad range of inventory matters. Elton has been reviewing how well his business is performing financially. In 2018, the profit margin was 35%. Table 3.1 shows an extract from the accounts.

Oct/Nov 2020

CLN is a public limited company. It sells a variety of electrical products, including televisions and computers. The Managing Director has been examining CLN’s accounts. An extract appears in Table 3.1. He stated: ‘We need more finance. Last year CLN made a loss of $250m. I blame increased competition from e-commerce.’ CLN intends to shut 30 of its 120 shops. This choice will affect many stakeholders, including the local communities. The number of sales made by each shop will be used to choose which shops are closed.

Oct/Nov 2020

From the information in Appendix 3, work out these ratios for CC: • Gross profit margin • Profit margin • Current ratio • Acid test ratio Show your working.

Oct/Nov 2020

Aurelie runs as a sole trader. She opened her small hotel 1 year ago with government support. Aurelie understood that developing strong customer relationships would matter. She now wants to use ratio analysis to examine her financial statements. An extract appears in Table 3.1. She is concerned about how the Government’s plan to introduce a new tourist tax of $1 per tourist per night might affect her business.

Oct/Nov 2021

Show how each of the following four users of MA’s accounts could use the financial information in Appendix 1 when making decisions: Shareholders: Suppliers: Employees: Banks:

Oct/Nov 2021

CPK runs 5 sports clubs. Each club provides a variety of activities, including gym and yoga classes. To keep its 60 employees well-motivated, CPK uses job enrichment. Having the correct marketing mix is essential to CPK’s success. The Finance Director is examining CPK’s financial statements. Table 3.1 shows an extract. He wants to find out how a rise in taxation could influence CPK’s business.

Oct/Nov 2022

Kemala produces high-quality beauty products. Demand for her best-selling hand cream is price inelastic. She promotes her products in specialist beauty magazines. Kemala is examining her income statement. An extract is shown in Table 2.1. She commented: ‘When I started my business, I did not understand why cash matters’.

Oct/Nov 2022

Explain four advantages to employees of being members of a trade union.

Oct/Nov 2022

Explain two ways a decrease in interest rates might affect DD.

Oct/Nov 2022

ACP is a computer manufacturer. Ethical behaviour matters to ACP. The business has 3000 employees in its factory. ACP brings in 65% of its raw materials from abroad. As internal users of the accounts, the directors intend to examine ACP’s financial performance by using profitability ratios. The Finance Director believes that earning a profit is more important for a business than controlling its cash flow.

Oct/Nov 2023

Explain two reasons why training is significant for PH.

Oct/Nov 2023

JTA is a public limited company. It offers holidays to a mass market. The business has 44 shops and employs 200 people. The Finance Director is considering ways in which a business can increase profit. She has been asked to analyse JTA’s financial performance by using ratio analysis. An extract from JTA’s financial statements is shown in Table 3.1. Table 3.1 Extract from JTA’s financial statements for 2023 ($ million): Revenue 900, Profit 100, Capital employed 800.

Oct/Nov 2024

Explain one way each of the following ES stakeholder groups may find the financial information in Appendix 3 useful. Owners. Employees. Suppliers. Bank.

Oct/Nov 2025