Assignment : Financial Statement Analysis Ace Hardware is a leading family business that specialises
Assignment : Financial Statement Analysis
Ace Hardware is a leading family business that specialises in the manufacturing and wholesale distribution of floor tile products. Over the past two years Ace Hardware has experienced difficult operating conditions. John, the company accountant, has prepared the income statement and balance sheet for the prior two years for a management meeting. The owners of Ace Hardward have asked John to evaluate the financial statements and prepare an evaluation of operating capability to present to senior management. 60 percent of sales are made on credit.
Profit and Loss
201X
201Y
Total Income
14,543,837
11,981,782
Less Cost of Sales
10,752,813
73.9%
8,967,229
77.1%
Gross Profit (Loss)
3,791,024
26.1%
3,014,553
22.9%
Total Other Income
86,363
0.6%
–
3.3% Less Expenses
Administrative Staff Costs
2,385,760
16.40%
1,719,171
14.35%
Advertising and Marketing Support
140,470
0.97%
75,500
0.63%
Bad Debts
68,534
0.47%
63,057
0.53%
Administrative Overhead
280,600
1.93%
290,238
2.42%
Freight and Cartage
10,210
0.07%
21,681
0.18%
Hire of Plant and Equipment
103,828
0.71%
118,016
0.98%
Bank Charges
25,573
0.18%
20,749
0.17%
Light and Power
49,176
0.34%
42,017
0.35%
Lease of MV
28,160
0.19%
2,201
0.02%
MV Running Costs
332,103
2.28%
249,192
2.08%
Rent
328,307
2.26%
321,177
2.68%
Repairs and Maint
35,367
0.24%
18,875
0.16%
Telephone
67,899
0.47%
63,170
0.53%
Travel
21,398
0.15%
8,516
0.07%
Total Operating Expenses
3,877,386
26.7%
3,013,560
25.2%
Net Operating Profit (Loss)
1
993
Balance Sheets
201X
201Y
Current Assets
Cash at Bank
–
–
Trade Debtors
1,116,467
875,607
Stock on Hand
1,697,220
1,231,111
Total Current Assets
2,813,687
2,106,718
Fixed Asets
Furniture & Fitting – At Cost
43,511
43,511
Less Accum Depn Frn & Fitting
(36,606)
(37,543)
Plant & Equip – At Cost
1,329,334
1,329,334
Less Accum Depn – Plant & Equip
(1,045,363)
(1,096,991)
Motor Vehicle – At Cost
863,042
840,728
Less Accum Depn – Motor Vehicle
(707,518)
(720,326)
Office Equipment – At Cost
368,650
368,650
Less Accum Depn – Office Equip
(302,075)
(319,537)
Total Fixed Assets
512,975
407,826
Investments
Shares in Listed Company
96,788
96,788
Loans & Deposits
153,782
153,782
Total Investments
250,570
250,570
Intangible Assets
Trademarks & Patents
867
27,958
Goodwill – At Cost
5,430
5,430
Formation Expense – At Cost
1,000
1,000
Total Investments
7,297
34,388
Total Non Current Assets
770,842
692,784
Total Assets
3,584,529
2,799,502 Current Liabilities
Bank Overdraft
98,917
116,643
Trade Creditors
1,394,198
1,181,797
Loan At Call – To Directors
149,354
137,586
Total Current Liabilities
1,642,469
1,436,026
Deferred Liabilities
Loan – Unsecured – business Partner
1,819,577
1,326,934
Total Deferred Liabilities
1,819,577
1,326,934
Total Liabilities
3,462,046
2,762,960
Equity
Profit B/F
1
993
Settled Capital
50
50
Accumulated Trust Funds
31,027
31,027
Retained Profits
91,405
4,472
Total Equity
122,483
36,542
Questions:
1. Calculate the following ratio's for the two financial years:
a. Current
b. Quick
c. Debt
d. Inventory Turnover for year Y only
e. Accounts Receivable Turnover for year Y only
f. Gross Profit Percentage
g. Profit Margin
h. Return on Total Assets for year Y only
i. Return on Owner's Equity for year Y only
2. Write a short report that compares the business' performance in 201X with that in 20XY regarding its liquidity, financial flexibility, operating capability and profitability.
You are required to take the trial balance and information provided and create the adjusted trial balance. Using the adjusted trial balance you are then required to construct a Statement of Financial Position (balance sheet) and a Statement of Income (profit and loss). You may use and present your solutions in excel or word.
The report must be presented in essay format with an introduction, body and conclusion and all external references must be referenced using APA 6th edition referencing style. Word count should not exceed 1,000 words.