Analysis of accounts

David can use the company Balance Sheet to judge how well the business is performing.

May/June 2015

LWM manufactures car tyres in 15 different sizes by means of batch production. In the previous year, LWM sold 60 million tyres, and 40 million of these were the best-selling size. The Finance Director has been examining some financial information shown in Table 1. She commented: ‘Liquidity is important. I need to carry out ratio analysis to assess business performance.’ In the year before that, our Return on Capital Employed was $33\%$. The directors are concerned about rising competition, yet they cannot agree on the best response for LWM.

May/June 2017

Identify two financial statements that the directors should review before CC expands. Explain why they will want to examine each statement.

May/June 2017

IBH is a private limited company owned by a family. It produces a range of children’s shoes by using batch production. The market is highly competitive. Like many businesses, IBH needs finance for several reasons. The Finance Director has been examining some financial data. An extract appears in Table 1. Some directors want IBH to move into the women’s shoe market and would like to know whether its performance is improving. Table 1: Extract from financial data for IBH ($000): Revenue: 2016 = 400, 2017 = 480. Gross profit: 2016 = 240, 2017 = 320. Profit: 2016 = 120, 2017 = 120. Non-current liabilities: 2016 = 100, 2017 = 200.

May/June 2018

PJA manufacture fashion clothing for 16-25 year olds. Several of its rivals are multinational companies. PJA launch new products every 3 weeks. Because of import quotas, all PJA products are made in a local factory. The Managing Director is examining PJA’s financial statements with ratio analysis. An extract is given in Table 2.1.

May/June 2021

Explain two advantages to TT of using lean production methods.

May/June 2022

Explain one effect on PF of the rise in each of the two taxes shown in Appendix 2. Tax on people’s income: Tax on profit made by businesses:

May/June 2025

Ramford is a private limited company. It runs four factories that manufacture a broad selection of food products, including breakfast cereal and ice cream. The Finance Director is worried about the company’s financial results. She has read that many businesses collapsed in the previous year. ‘I think we are suffering from diseconomies of scale’ she said. Ramford’s directors have chosen to reduce the number of different products it makes from 80 to 10. Table 2: Extract from accounts

Oct/Nov 2015

CLW produces wood furniture, such as chairs and tables. Demand has increased rapidly over the last 3 years, so the business must expand the scale of production at its factory. The factory is situated close to the city in an area where unemployment is low. The Finance Director has drawn up a business plan, which includes a balance sheet. The Finance Director is satisfied with CLW’s liquidity.

Oct/Nov 2015

Complete the two different forms of presentation shown below for the population data in Appendix 1. Explain the benefits of each presentation.

Oct/Nov 2015

Dowson is a large business that owns several shops. It offers a range of electrical goods, including computers and televisions. The Finance Director has been reviewing some recent financial information, as shown in Table 1. He is satisfied with Dowson’s liquidity, but he also knows that the business needs to cut its high debt burden, which includes a $6m overdraft. He remarked: ‘The economy is in recession. Many small retailers have failed. Size is an advantage!’

Oct/Nov 2016

Yanis runs a busy restaurant in the city centre. He has 4 skilled chefs and 6 workers employed in the restaurant. Every member of staff is on a part-time contract. The chefs receive a high hourly pay rate, but there are no bonuses. Yanis is concerned that too many chefs are leaving. He is considering other ways to motivate the chefs. Yanis would like to open another restaurant, but he is worried about issues associated with growth. As part of his business plan, he has drawn up a balance sheet. An extract is shown in Table 2. The current ratio was $1.2 : 1$ in 2016.

Oct/Nov 2017

Calculate the profit per day for AH using the information in Appendix 3.

Oct/Nov 2017

Identify and explain two disadvantages for GS of holding inventory at a high level.

Oct/Nov 2017

Identify and explain one effect on GT and one effect on GT’s employees of workers belonging to a trade union. Effect on GT: Explanation: Effect on GT’s employees: Explanation:

Oct/Nov 2018

NBV is a multinational company that produces building products, including bricks. In the previous year, NBV’s financial accounts reported capital employed of $144 billion. NBV operates in 18 countries and has a total workforce of 400 000. NBV is affected by some diseconomies of scale. To avoid exchange rate problems, all raw materials are bought from the countries where it operates. NBV plans to open a factory in Country B for the first time. Some people believe this choice will create only disadvantages for other businesses in country B.

Oct/Nov 2019

Elton runs the business as a sole trader. He sells specialist sports clothing and equipment, including items for baseball and hockey. This is a niche market. Elton set up the business 5 years ago, and it has stayed small. Keeping a broad range of inventory is important. Elton has been examining how well the business is performing financially. The profit margin in 2018 was 35%. Table 3.1 shows an extract from the accounts.

Oct/Nov 2020

Using the figures in Appendix 3, calculate these ratios for CC: • Gross profit margin • Profit margin • Current ratio • Acid test ratio Show your workings.

Oct/Nov 2020

Aurelie runs her business as a sole trader. She launched her small hotel 1 year ago with government support. Aurelie realised that developing strong customer relationships would be vital. She now wants to analyse her financial statements by using ratio analysis. A section is shown in Table 3.1. She is concerned that the Government’s proposal to add a new tourist tax of $1 per tourist per night could affect her business.

Oct/Nov 2021

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

Oct/Nov 2022

ACP makes computers. Ethical conduct matters to ACP. The business has 3000 workers in its factory. ACP sources 65% of its raw materials from abroad. As internal users of accounts, the directors plan to assess ACP’s financial performance by using profitability ratios. The Finance Director believes that generating profit is more important for a business than controlling its cash flow.

Oct/Nov 2023

JTA is a public limited company that sells holidays to a mass market. It operates 44 shops and employs 200 people. The Finance Director is looking at ways in which a business can increase profit, and she has been asked to assess JTA’s financial performance by using ratio analysis. Table 3.1 contains an extract from JTA’s financial statements.

Oct/Nov 2024

Explain two reasons why BB may wish to sell its products in fresh markets in other countries. Reason 1: Explanation: Reason 2: Explanation:

Oct/Nov 2024