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Shown below are the recently issued summarised financial statements of Harbin, a listed entity, for the year ended 30 September 20X7, together with comparatives for 20X6 and extracts from the Chief Executive’s report that accompanied their issue.
Consolidated statements of profit or loss
|
|
|
20X7 |
20X6 |
|
|
|
$000 |
$000 |
|
Revenue |
|
250,000 |
180,000 |
|
Cost of sales |
|
(200,000) |
(150,000) |
|
|
|
––––––– |
––––––– |
|
Gross profit |
|
50,000 |
30,000 |
|
Operating expenses |
|
(26,000) |
(22,000) |
|
Finance costs |
|
(8,000) |
(Nil) |
|
|
|
––––––– |
––––––– |
|
Profit before tax |
|
16,000 |
8,000 |
|
Income tax expense (at 25%) |
|
(4,000) |
(2,000) |
|
|
|
––––––– |
––––––– |
|
Profit for the period |
|
12,000 |
6,000 |
|
|
|
––––––– |
––––––– |
Consolidated statement of financial position
|
|
|
20X7 |
20X6 |
|
|
|
$000 |
$000 |
|
Non-current assets |
|
|
|
|
Property, plant and equipment |
|
210,000 |
90,000 |
|
Goodwill |
|
10,000 |
Nil |
|
|
|
––––––– |
––––––– |
|
|
|
220,000 |
90,000 |
|
|
|
––––––– |
––––––– |
|
Current assets |
|
|
|
|
Inventory |
|
25,000 |
15,000 |
|
Trade receivables |
|
13,000 |
8,000 |
|
Bank |
|
nil |
14,000 |
|
|
|
––––––– |
––––––– |
|
|
|
38,000 |
37,000 |
|
|
|
––––––– |
––––––– |
|
Total assets |
|
258,000 |
127,000 |
|
|
|
––––––– |
––––––– |
|
Equity and liabilities |
|
|
|
|
Equity shares of $1 each |
|
100,000 |
100,000 |
|
Retained earnings |
|
14,000 |
12,000 |
|
|
|
––––––– |
––––––– |
|
|
|
114,000 |
112,000 |
|
Non-current liabilities |
|
|
|
|
8% loan notes |
|
100,000 |
Nil |
|
|
|
––––––– |
––––––– |
|
Current liabilities |
|
|
|
|
Bank overdraft |
|
17,000 |
Nil |
|
Trade payables |
|
23,000 |
13,000 |
|
Current tax payable |
|
4,000 |
2,000 |
|
|
|
––––––– |
––––––– |
|
|
|
44,000 |
15,000 |
|
|
|
––––––– |
––––––– |
|
Total equity and liabilities |
|
258,000 |
127,000 |
|
|
|
––––––– |
––––––– |
Extracts from the Chief Executive’s report:
‘Highlights of Harbin’s performance for the year ended 30 September 20X7:
- an increase in sales revenue of 39% •
- gross profit margin up from 16.7% to 20%
- a doubling of the profit for the period.
In response to the improved position the Board paid a dividend of 10 cents per share in September 20X7 an increase of 25% on the previous year.’
You have also been provided with the following further information.
On 1 October 20X6 Harbin purchased the whole of the net assets of Fatima (previously a privately owned entity) for $100 million. The contribution of the purchase to Harbin’s results for the year ended 30 September 20X7 was:
|
|
$000 |
|
Revenue |
70,000 |
|
Cost of sales |
(40,000) |
|
|
–––––– |
|
Gross profit |
30,000 |
|
Operating expenses |
(8,000) |
|
|
–––––– |
|
Profit before tax |
22,000 |
|
|
–––––– |
There were no disposals of non-current assets during the year.
The following ratios have been calculated for the year ended 30 September 20X6 and 20X7:
|
|
20X7 |
20X6 |
|
Return on year-end capital employed |
|
7.1% |
|
Net asset (equal to capital employed) turnover |
1.2 |
1.6 |
|
Net profit (before tax) margin |
6.4% |
4.4% |
|
Current ratio |
|
2.5 |
|
Closing inventory holding period (in days) |
|
37 |
|
Trade receivables’ collection period (in days) |
|
16 |
|
Trade payables’ payment period (based on cost of sales) (in days) |
42 |
32 |
|
Gearing (debt over debt plus equity) |
|
Nil |
Requirements:
(a) Calculate the missing ratios for 20X7. (5 marks)
(b) Assess the financial performance and position of Harbin for the year ended 30 September 20X7 compared to the previous year. Your answer should refer to the information in the Chief Executive’s report and the impact of the purchase of the net assets of Fatima. (15 marks)
Answers submitted
| Created by | Ref | Marking | Action |
|---|---|---|---|
 |
10208 |
20 | |
 |
9622 |
20 | |
 |
9614 |
20 | |
|
|
9582 |
20 | |
|
|
9502 |
20 | |
|
|
9420 |
20 | |
 |
7682 |
20 | |
 |
7680 |
20 | |
 |
5552 |
5 / 20 | |
 |
7684 |
20 | |
 |
6476 |
20 | |
 |
6452 |
20 | |
 |
5554 |
20 | |
 |
5550 |
20 | |
|
|
5544 |
20 | |
 |
5548 |
20 | |
|
|
5542 |
20 |
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