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# Financial statements

1.

A)

2015 2014
Current Ratio = Current CR =
1 Current Ratio Assets: Current 475000/176000 CR=448000/20
a (liquidity) Liabilities = 3: 1 1500=2:1
Increased 3:1 2:1

Operating Profit Margin= OPM= OPM=
Operating Profit before Interest, (192850/723700 (169750/69400
1 Profit Margin taxes and )* 0) *
b (profitability) dividends/Sales * 100 100 100
192850/723700 169750/69400
= 0=
0.266477822 0.244596542
0.266477822*10
0= 0.244596542*1
27% 00=24%
Increased 27% 24%

ROSF (Return ROSF = Profit after
on tax/Share capital + ROSF = ROSF =
Shareholders reserves * 100 (116494/ (97725/
1 Fund) (110000+13000 (95000+67500
C (profitability) 0)) * 100 )) * 100
95000+67500
Common shares + 110000+130000 =
Retained earnings = 240000 162500
116494/240000 97725/162500
= =
0.485391667 0.601384615
0.485391667*10
0= 0.601384615*1
49% 00=60%
Decreased 49% 60%

Average
settlement
period for
receivables DD=
1 (Debtor Days) Debtor Days=trade DD= 120000/69400
d (efficiency) receivables/credit sales 130000/723700 0

Analysis The current ratio of XYZ Ltd. on the average takes 62 days while in 2015 it rose to an average of 64 days (Wood & Sangster. liquidity and profitability increase in the period under review and as such XYZ Ltd.d.22 XYZ Ltd. 130000/723700 120000/69400 = 0= 0. Increased from 2.37 per share in 2015 (Wood & Sangster. Their statement also shows that XYZ Ltd. as the financial statement of XYZ indicates an overall satisfactory performance based on their current ratio. 2005).) The Return on Shareholders Fund (ROSF) indicates that XYZ Ltd.179632444*35 0.172910663*3 6= 56= 64 days 62 days Increased 64 days 62 days Earnings per 1 Share EPS=profit after tax/no EPS= 116494/ EPS= 97725/ e (Investment) of ordinary shares issued (110000-25000) (95000-15000) Common shares – 110000-25000= 95000-15000= Outstanding shares 85000 80000 £1.). indicates that there was an increase on the average number of days they were taking for credit.22 Increased £1.179632444 0. n. .22 in 2014 to 2.37 £1. From the above I will recommend that XYZ can invest in XYZ Ltd. This implies that there was a decline in the profit available for shareholders in 2015 Debtor Days for XYZ Ltd. Earnings per share for XYZ Ltd.172910663 no of days no of days =356 =356 0. n.d. operating profit margin and earnings per share which shows a progressive increase. In 2014.70 in 2015 The operating profit margin indicates that the company net income of 24 pence for each pound of sales in 2014 rose to 27 pence for each pound of sales in 2015 (Investopedia. can meet up with their obligations as at when due. rose from a profit of £1.22 per share a shareholder invested in 2014 to £1. made a profit of 60% in 2014 for every ordinary shareholders stake in its business which now declined to about 49% in 2015 (Finance Learners .37 £1. debtors of XYZ Ltd. 2005).

000 Adjustments for: Depreciation and amortization 25.500 Decrease in Prepaid Insurance 5.000 83.000 Gain on sale of equipment -7.500 Decrease in inventories 1.2.000 Increase in Account payables 16.1 Bulls Corporation Statement of Cash Flows for the year ended 12/31/x1 Cash flows from operating activities £ Net income 62.500 Income tax Expense 4.000 Cash flows from investing activities Purchase of equipment -36.300 Purchase of Land -13.500 Decrease in Account receivables 9.500 Cash generated from operations 86.500 Advertising Paid -30.000 2.900 Proceeds from sale of equipment 48.500 .700 Net cash used in investing activities -1.

500 .500 Less: Account Receivable C/F 20. Cash Paid to Suppliers for Inventory Add: Account Payable B/F 42.000 Cash and cash equivalents at end of period 38.2 1.000 35. Cash Paid for Advertising Expense Add: Advertising Payable B/F 0 Advertising Expense 35.500 1.500 2.090.099.000 Less: Advertising Payable C/F 5.500 2. Cash Collected from Clients Sales 1.500 Net cash used in financing activities -54.000 Less: Account Payable C/F 58.Cash flows from financing activities Proceeds from issue of common stock 14.000 Cash Paid For Advertising 30.000 Add: Account Receivable B/F 29.000 Purchases 673.119.500 Cash and cash equivalents at beginning of period 8.500 Repayment of Notes Payable -43.000 3.500 Cash Paid to Suppliers 656.000 Dividends -25.000 715.000 Cash Collected From Clients 1.000 Net increase in cash and cash equivalents 30.

000 77.500 Proceeds from sale of equipment 21.000 -62. Calculation for Purchases Cost of Goods Sold 672.000 710.500 Cash flows from investing activities Purchase of equipment -6.000 Add: Closing Inventory 38.000 68.000 Less: Opening Inventory 37.000 Decrease in Account receivables 11.250 Increase in Salaries Payable -42.500 Proceeds from Investment 2.000 Adjustments for: Depreciation and amortization 20.000 Increase in Account payables 28.000 Purchases 673.1 Candles Limited Statement of Cash Flows for the year ended 12/31/x1 Cash flows from operating activities £ Net income 48.000 Net cash used in investing activities -6.000 Purchase of Land -22.500 Decrease in inventories 7.000 3.500 Decrease in Prepaid Expenses 7.250 Cash generated from operations 83.750 Decrease in Supplies 14.500 Income tax Expense 12.250 Tax Paid -20.000 Gain on sale of equipment -2.000 .

000 Add: Closing Inventory 42.500 Dividends -48.500 3.000 Less: Opening Inventory 35.500 Net cash used in financing activities -50.3 Cash Paid to Suppliers for Inventory Add: Account Payable B/F 46.000 3.Cash flows from financing activities Share Issue Proceed 15.000 .500 Net increase in cash and cash equivalents 27.000 252.500 Decrease in Notes Payable -17.000 Purchases 217.250 Less: Account Payable C/F 75.000 Cash and cash equivalents at beginning of period 9.000 Cash and cash equivalents at end of period 36.2 Cash Collected from Customers Sales 350.500 Less: Account Receivable C/F 15.000 Add: Account Receivable B/F 26.500 376.250 Calculation for Purchases Cost of Goods Sold 210.000 263.000 Cash Collected From Clients 361.250 Purchases 217.000 Cash Paid to Suppliers 188.

[Online] Available From: http://www.com. (2005).).blogspot. 10 th Ed. A.).d. Finance Learners (n.Profit and Operating Margin. Essex: Pearson Education Limited. E. [Online] Available From: http://financelearners.html (Accessed: 22 August 2016) Investopedia (n.ng/2011/06/return-on-shareholders-funds-rosf- ratio.References Atrill.asp (Accessed: 22 August 2016) Wood. P. (2013) Accounting and Finance for Non . Harlow. Business Accounting.d. Harlow. Essex: Pearson Education Limited . F.Profit and Operating Margin.Specialists 8th Ed. The Income Statement: Key Ratios . and McLaney.com/exam-guide/series- 65/quantitative-methods/income-statement-key-ratios-profit-operating-margin.investopedia. The Income Statement: Key Ratios . & Sangster.