Shown below are the financial statements of Woodbank for its most recent two years:
STATEMENTS OF PROFIT OR LOSS FOR THE YEAR ENDED 31 MARCH:
20X4 | 20X3 | |
$'000 | $'000 | |
Revenue | 150,000 | 110,000 |
Cost of sales | 117,000 | -85,800 |
Gross profit | 33,000 | 24,200 |
Distribution costs | -6,000 | -5,000 |
Administrative expenses | -9,000 | -9,200 |
Finance costs – loan note interest | -1,750 | -500 |
Profit before tax | 16,250 | 9,500 |
Income tax expense | -5,750 | -3,000 |
Profit for the year | 10,500 | 6,500 |
STATEMENTS OF FINANCIAL POSITION AS AT 31 MARCH:
20X4 | 20X3 | |
$'000 | $'000 | |
ASSETS | ||
Non-current assets | ||
Property, plant and equipment | 118,000 | 85,000 |
Goodwill | 30,000 | - |
148,000 | 85,000 | |
Current assets | ||
Inventory | 15,500 | 12,000 |
Trade receivables | 11,000 | 8,000 |
Bank | 500 | 5,000 |
27,000 | 25,000 | |
Total assets | 175,000 | 110,000 |
EQUITY AND LIABILITIES | ||
Equity | ||
Equity shares of $1 each | 80,000 | 80,000 |
Retained earnings | 15,000 | 10,000 |
95,000 | 90,000 | |
Non-current liabilities | ||
10% loan notes | 55,000 | 5,000 |
Current liabilities | ||
Trade payables | 21,000 | 13,000 |
Current tax payable | 4,000 | 2,000 |
25,000 | 15,000 | |
Total equity and liabilities | 175,000 | 110,000 |
- On 1 January 20X4, Woodbank purchased the trading assets and operations of Shaw for $50 million and, on the same date, issued additional 10% loan notes to finance the purchase. Shaw was an unincorporated entity and its results (for three months from 1 January 20X4 to 31 March 20X4) and net assets (including goodwill not subject to any impairment) are included in Woodbank's financial statements for the year ended 31 March 20X4. There were no other purchases or sales of non-current assets during the year ended 31 March 20X4.
- Extracts of the results (for three months) of the previously separate business of Shaw, which are included in Woodbank's statement of profit or loss for the year ended 31 March 20X4, are:
$'000 Revenue 30,000 Cost of sales -21,000 Gross profit 9,000 Distribution costs -2,000 Administrative expenses -2,000 - The following six ratios have been correctly calculated for Woodbank for the years ended 31 March:
20X3 Return on capital employed (ROCE) 10.50% (profit before interest and tax
/year-end total assets less current liabilities)Net asset (capital employed) turnover 1.16 times Gross profit margin 22% Profit before interest and tax margin 9.10% Current ratio 1.7:1 Gearing (debt/(debt + equity)) 5.30%
Requirements:
- Calculate the ratios in (iii) above for Woodbank for the year ended 31 March 20X4. (5 marks)
- Calculate for the year ended 31 March 20X4 equivalent ratios to the first FOUR only for Woodbank excluding the effects of the purchase of Shaw. (4 marks)
- Assess the comparative financial performance and position of Woodbank for the year ended 31 March 20X4.
Your answer should refer to the effects of the purchase of Shaw. (11 marks)
Marks: 20
Answers submitted
Created by | Ref | Marking | Action |
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10180 |
20 | ||
10178 |
20 | ||
10152 |
20 | ||
10148 |
20 | ||
9806 |
20 | ||
9178 |
20 | ||
9604 |
20 | ||
9580 |
20 | ||
9518 |
20 | ||
9486 |
20 | ||
9418 |
20 | ||
9408 |
20 | ||
9348 |
20 | ||
9200 |
17 / 20 | ||
7658 |
20 | ||
7654 |
20 | ||
7650 |
20 |
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