ACC 272 Illustrating analysis of financial statements Dr DML Kasilo

FINANCIAL STATEMENT ANALYSIS THEORY AND PRACTICE

ILLUSTRATING ANALYSIS OF FINANCIAL STATEMENTS

Required: Assess the performance of Noga Company Limited during the financial
year 2010

FINANCIAL INFORMATION FOR DECISION MAKING FROM THE BALANCE SHEET

OF NOGA CO. LTD;DEC.31, 2010
INVESTMENT DECISIONS:

Current Assets:
Cash 10
Marketable Securities 25
Notes Recievable 40
Accounts Recievable 245
Work-in-Progress 50
Raw Materials 50
Finished goods 250 350
Prepayments 10
Staff andvances and Imprests 5
Staff Loans 15
Dividends Receivable 10
Accrued Interest Recievable 5
Gross Working Capital 715

Longterm Investment Decisions:

Goodwill (net) 10
Shares in Kasi Ltd 25
Machinery (cost) 125
Less Accum.depreciation 25 100
Buildings (cost) 350
Less Accum.depreciation 50 300
Furniture and Equipment
(cost) 175
Less Accum.depreciation 75 100
Total Fixed Assets 535

TOTAL ASSETS 1,250

FINANCING DECISIONS:

Short-term Financing Decisions:

Notes Payable 75
Accounts Payable 100
Advances from Customers 150
Acrued Liabilities 25
Bank Overdraft 150
Total Current Liabilities 500

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 ACC 272 Illustrating analysis of financial statements Dr DML Kasilo

Longterm Financing Decisions:

Longterm Bank Loan 150

TOTAL LIABILITIES 650

Shareholders Equity

10% Prefered stock 20

Ordinary Share Capital of Tshs 1
par value 430
Retained Earnings:1/1/01 125
Add: Net Profit 25
Retained Earnings:31/12/01 150
TOTAL SHAREHOLDERS EQUITY 600

TOTAL FINANCING 1,250

MANAGEMENT OPERATING DECISIONS IN THE INCOME STATEMENT

INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2001

INCOME:
Sales (Note N15) 2377
Less: Cost of Goods Sold (Note N16): Purchases 5% 1500
Gross Profit 877

OPERATING AND ADMINISTRATION EXPENSES

Selling expenses 150
Advertising expenses 240
Directors' salaries 25
Other salaries and wages 40
House Rent 15
Licenses 5
Postage, fax, telephone, and telegrams 5
Travelling on duty 15
Travelling on live 10
Motor vehicle expenses 125
Stationery 80
Bad debts 20
Depreciation and Amortization 25
Accountancy, auditing, and secretarial charges 10
Legal fees 10
Total Operating and Administration Expenses 775

OPERATING PROFITS (Earnings before Interest and

Taxes) 102

Interest Expenses 60

PROFITS BEFORE TAXES 42

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 ACC 272 Illustrating analysis of financial statements Dr DML Kasilo

TAXATION 15

NET PROFIT AFTER TAXES 27

APPROPRIATION:
10% Preference Dividends:20 x 10%
= 2
Retained Earnings 25

(a) Have many performance indicators have you been able to identify to provide
information for decision making by the Board of Directors?

(b) Summarise the performance of the firm under each category of ratios, viz.
liquidity, Activity, long-term solvency, and profitability

(c) Would you advise your friend to invest in this company?

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