Table 1
VISCOUNT LTD
Balance sheets at 30 June
2014 2015 2016
| Assets | |||
| Current assets | |||
| Cash | 364,700 | 292,720 | 123,790 |
| Inventories | |||
| Finished products | 600,000 | 700,000 | 800,000 |
| Work in progress | 245,500 | 258,000 | 342,000 |
| Raw materials and supplies | 483,050 | 450,000 | 550,000 |
| Accounts receivable | 521,000 | 669,280 | 1,184,210 |
| Total current assets | 2,214,250 | 2,370,000 | 3,000,000 |
| Non-current assets (net of accumulated depreciation) |
|||
| Land (at cost) | 600,000 | 816,300, | 1,334,104 |
| Buildings (at cost) | 2,215,500 | 2,323,000 | 3,400,000 |
| Machinery (at cost) | 2,538,980 | 2,500,370 | 4,505,640 |
| Total non-current assets | 5,354,480 | 5,639,670, | 9,239,744 |
| Total assets | 7,568,730 | 8,009,670 | 12,239,744 |
| Liabilities | |||
| Current liabilities | |||
| Accounts payable | 355,700 | 360,000 | 544,620 |
| Provision for tax | 500,000 | 500,000 | 800,000 |
| Provision for dividend | 130,000 | 430,000 | 672,000 |
| Total current liabilities | 985,700, | 1,290,000 | 2,016,620 |
| Non-current liabilities | |||
| Debentures | 683,030 | 903,370 | 2,999,020 |
| Mortgages | 500,000 | 400,000 | 1,000,000 |
| Total non-current liabilities | 1,183,030 | 1,303,370 | 3,999,020 |
| Total liabilities | 2,168,730 | 2,593,370 | 6,015,640 |
| Net assets | 5,400,000 | 5,416,300 | 6,224,104 |
| Owners’ equity | |||
| 8% preference shares | 500,000 | 500,000 | 1,200,000 |
| Ordinary shares ($1) | 4,000,000 | 4,000,000 | 4,000,000 |
| Retained profits | 900,000 | 916,300 | 1,024,104 |
| Total owners’ equity | 5,400,000 |
Table 2 Additional information from VISCOUNT Ltd’s financial statements
2014 2015 2016
| From Income Statement | |||||
| i | Annual sales | ||||
| Credit | 2,605,000 | 3,011,760 | 4,500,000 | ||
| Cash | 120,000 | 142,600 | 1,500,000 | ||
| Total annual sales | 2,725,000 | 3,154,360 | 6,000,000 | ||
| ii | Cost of goods sold | 1,662,250 | 1,861,070 | 3,720,000 | |
| iii | Net profit before tax | 926,500 | 946,300 | 1,579,804 | |
| Net profit after tax | 463,250 | 473,150 | 789,902 | ||
| iv | Interest expense before tax | 94,642 | 104,269 | 399,902 | |
| Interest expense after tax | 47,321 | 52,135 | 199,951 | ||
Table 3
| From Balance Sheet | |||
| v | Balances as at 30 June 2013 | 30 June 2013 | |
| Accounts receivable | 450,000 | ||
| Total assets | 7,000,000 | ||
| Inventory | 1,441,870 | ||
Table 4
| vii | Selected financial ratios | 2014 | 2015 | 2016 | Industry average 2016 |
| Ratio | |||||
| 1 | Current Ratio | 2.25 | 2.25 | ||
| 2 | Quick Ratio | 0.9 | 1.10 | ||
| 3 | Debt to equity ratio | 0.40 | 0.48 | 0.6 | |
| 4 | Rate of return on shareholders’ equity | 8.6% | 8.8% | 16% | |
| 5 | Gross margin ratio | 39% | 39% | 38% | 40% |
| 6 | Net margin ratio | 17.00% | 15.00% | 16% | |
| 7 | Rate of return on assets | 6.75% | 6.74% | 14% | |
| 8 | Interest expense as a percentage of sales | 3.47% | 3.31% | 6.67% | Not Available |
Requirements:
- Prepare a common size Balance Sheet and Income Statement Extract from the data in Tables 1 and 2 using the 2014 year as the base-year (30 marks)
- Calculate the eight (8) missing ratios from Table 4 above using formulae provided on page 1.
(30marks)
- Evaluate and provide your conclusions about the financial position of Viscount Ltd; using either Common Size Statements information or these eight (8) ratios in trend and comparative analyses: (a) a three-year 2014, 2015, and 2016 longitudinal trend analysis for the company (16marks) (b) a 2016 cross-sectional analysis for company and the industry average. ( 8marks)
- Identify the means by which Viscount Ltd has funded the increase in its non-current assets and comment on how and why this means of purchasing non-current assets may affect the level of business risk of of the company. (Please note it is not intended to calculate the actual effect on the level of business risk between the year 2015 and 2016. You only need to identify how and discuss why this level of business risk effect occurs). ( 9 marks)
- The company has increased its annual sales significantly in 2016 compared to 2015 and 2014. Identify (a) How has the company increased its production capacity to achieve its sales expansion strategy in 2016? and ( 4 marks) (b) What is the impact of its increased production capacity on the solvency position of Viscount Ltd? ( 3 marks)
Click on Buy Solution and make payment. All prices shown above are in USD. Payment supported in all currencies. Price shown above includes the solution of all questions mentioned on this page. Please note that our prices are fixed (do not bargain).
After making payment, solution is available instantly.Solution is available either in Word or Excel format unless otherwise specified.
If your question is slightly different from the above question, please contact us at info@myassignmentguru.com with your version of question.