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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

 

  1. 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.
  2. 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

     

  3. 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:

  1. Calculate the ratios in (iii) above for Woodbank for the year ended 31 March 20X4.        (5 marks)
  2. 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)
  1. 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

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Runa Akter's picture
Runa Akter
11/27/2020 - 06:51

10180
20
Runa Akter's picture
Runa Akter
11/21/2020 - 07:46

10178
20
Runa Akter's picture
Runa Akter
11/15/2020 - 08:57

10152
20
MD.Sabuj Sarker nil's picture
MD.Sabuj Sarker nil
11/14/2020 - 23:25

10148
20
Francis Satia's picture
Francis Satia
10/13/2020 - 18:16

9806
20
Kamrul Hasan's picture
Kamrul Hasan
09/04/2020 - 19:18

9178
20
Kamrul Hasan's picture
Kamrul Hasan
09/04/2020 - 17:16

9604
20
Kamrul Hasan's picture
Kamrul Hasan
09/03/2020 - 10:54

9580
20
Sajjad Hosen Pavel's picture
Sajjad Hosen Pavel
08/24/2020 - 21:17

9518
20
Kamrul Hasan's picture
Kamrul Hasan
08/22/2020 - 13:03

9486
20
Kamrul Hasan's picture
Kamrul Hasan
08/18/2020 - 09:31

9418
20
Kamrul Hasan's picture
Kamrul Hasan
08/17/2020 - 09:48

9408
20
Md. Sojib Khan's picture
Md. Sojib Khan
08/12/2020 - 11:44

9348
20
Kamrul Hasan's picture
Kamrul Hasan
06/08/2020 - 23:04

9200
17 / 20
Hassan Kanok Kanok's picture
Hassan Kanok Kanok
10/26/2019 - 18:06

7658
20
Lokonath Debnath's picture
Lokonath Debnath
10/26/2019 - 18:05

7654
20
Md Ishtiak Isty's picture
Md Ishtiak Isty
10/26/2019 - 18:07

7650
20