Schedule of Statistics For the years ending 31 March
|
PROFITABILITY |
2014 |
2015 |
2016 |
|
|
(i) |
Growth in Sales % |
16.36% |
7.81% |
13.04% |
|
(ii) |
Gross Profit % |
50% |
50.72% |
53.85% |
|
(iii) |
Mark up % |
100% |
102.84% |
116.67% |
|
(iv) |
Selling and distribution expenses % |
31.25% |
30.33% |
28.08% |
|
(v) |
Administration expenses% |
2.50% |
2.54% |
2.18% |
|
(vi) |
Financialexpenses % |
1.25% |
1.30% |
1.28% |
|
(vii) |
Total expenses % |
35% |
34.13% |
31.54% |
|
(viii) |
Net Profit (beforetax) % |
15% |
16.59% |
22.31% |
|
(ix) |
Return on Equity % |
97.22% |
110.81% |
114.55% |
|
ASSET UTILISATION |
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|
(x) |
Inventory Turnover |
11.03 Times p.a. |
10.30 Times p.a. |
8.57 Times p.a. |
|
(xi) |
Age of Debtors |
16.43 days |
15.00 days |
14.29 days |
|
FINANCIAL STABILITY |
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|
(xii) |
Current ratio |
2.48:1 |
2.08:1 |
1.79:1 |
|
(xiii) |
Liquidity ratio |
1.6:1 |
1.34:1 |
1:1 |
|
(xiv) |
Interest Cover |
20.20 Times |
18.44 Times |
24.20 Times |
|
(xv) |
Debt: Equity Ratio |
1.46:1 |
1.91:1 |
1.20:1 |
|
(xvi) |
Proprietorship % |
40.68:1 |
34.42:1 |
45.40:1 |
Total number of calculations = 48 / 4 = each calculation is worth 0.25 of a mark.
REMEMBER: attach your workings at the end of this booklet.
|
2014 |
2015 |
2016 |
||
|
PROFITABILITY |
||||
|
(i) |
Growth in Sales % |
=(928000-797500)/797500*100 |
=(1000500-928000)/928000*100 |
=(1131000-1000500)/1000500*100 |
|
(ii) |
Gross Profit % |
=464000/928000*100 |
=507500/1000500*100 |
=609000/1131000*100 |
|
(iii) |
Mark up % |
=464000/464000*100 |
=507500*100/493000 |
=609000/522000*100 |
|
(iv) |
Selling and distribution expenses % |
=290000/928000*100 |
=303050/1000500*100 |
=317550/1131000*100 |
|
(v) |
Administration expenses% |
=23200*100/928000 |
=25375/1000500*100 |
=24650/1131000*100 |
|
(vi) |
Financialexpenses % |
=11600/928000*100 |
=13050/1000500*100 |
=14500/1131000*100 |
|
(vii) |
Total expenses % |
=324800/928000*100 |
=341475/1000500*100 |
=356700/1131000*100 |
|
(viii) |
Net Profit (beforetax) % |
=139200/928000*100 |
=166025/1000500*100 |
=252300/1131000*100 |
|
(ix) |
Return on Equity % |
=101500/104400 |
=118900/107300 |
=1827000/159500 |
|
ASSET UTILISATION |
||||
|
(x) |
Inventory Turnover |
=464000/((43500+40600)/2) |
=493000/((43500+52200)/2) |
=522000/((52200+69600)/2) |
|
(xi) |
Age of Debtors |
=33350*100/203000 |
=39150*100/261000 |
=43500*100/304500 |
|
FINANCIAL STABILITY |
||||
|
(xii) |
Current ratio |
=89900/36250 |
=108750/52200 |
=124700/69600 |
|
(xiii) |
Liquidity ratio |
=(89900-43500)/(36250-7250) |
=(108750-52200)/(52200-10150) |
=(124700-69600)/(69600-14500) |
|
(xiv) |
Interest Cover |
=(139200+7250)/7250 |
=(177025+10150)/10150 |
=(252300+10875)/10875 |
|
(xv) |
Debt:Equity Ratio |
=152250/104400 |
=204450/107300 |
=191850/159500 |
|
(xvi) |
Proprietorship % |
=104400/256650*100 |
=107300/311750*100 |
=159500/351350*100 |
(In this part of the assignment, you can make the boxes smaller or larger as necessary)
(i) Profitability
For each of the three (3) Profitability calculations of Fox Sounds Limited stated below, you are required to:
|
1. Growth in sales % Growth in Sales shows the percentage increase in current year’s sale over the previous year’s sales. For Fox Sounds Limited, the overall trend of sales is decreasing and is therefore unsatisfactory. This is shown by the fluctuations in figures. Figure 2014 (16.36%) shows that the business had a good start withhigh sales growth. In year 2015, sales growth decreased to just 7.81% which is half of 2014. On the other hand, 2015 (13.04%) shows significant increases in sales from previous year but however, the business still achieved fewer growth than 2014. Between years 2012 and 2014, the Sales Growth increased due to improvement in the local economy. Also, the Turnover has contributed to increase in sales since customers bought more products from Fox Sounds Limited.In the following two years (2015 and 2016), sales growth may have declined due to many credit customers not paying their account on time. |
|
2. Gross Profit % Gross profit represents the profit percentage created by the company from the sales after meeting the cost of goods sold (Delen, Kuzey & Uyar, 2013). It can be observed from the calculation table that the gross profit of Fox Sounds Limited is in increasing trends and it went up to 53.85% in 2016 from 50% in 2014. Reason behind increase in gross profit was due to increase in sales from 928,000 in 2014 to 11,31,000 in 2016. |
|
3. Net Profit before Tax % of Sales Net profit before tax represents the profit made by the company before paying the tax expenses or the amount of taxable profit. It can be seen from the income statement of Fox Sounds Limited that the net profit percentage of the company is in increasing trend and it went up to 16.59% in 2015 from 15.00% in 2014 and further to 22.31% in 2016. The reason behind the increase was the increases in sales were higher as compared to increase in operational expenses. |
(ii) Asset Utilisation
Using both of the Asset Utilisation calculations, complete the following for Fox Sounds Limited:
|
Inventory Turnover It reveals the times for which the company is able to sell and replace its inventories during the particular time period (Needles, Powers & Crosson, 2013). It can be observed from the calculation table that the inventory turnover of the company is in decreasing trend. It decreased to 10.30 times 11.03 times and further reduced to 8.57 times from 10.30 times over the year from 2014 to 2015 and from 2015 to 2016. The reason behind the reduction is mainly the increase percentage in inventory over the year was more than the increase percentage in COGS. |
|
Age of Debtors Age of debtors represents the times the company takes to collect its debt from the debtors. The debtor’s age for Fox Sounds Limited decreased to 15 days from 16.43 days and further reduced to 14.29 days from 15 days over the year from 2014 to 2015 and from 2015 to 2016. This decreasing trend is representing that the company is improving in its debt collection efficiency. The main reason behind this is that the company may have reduced the credit period. |
(iii) Financial Stability
For each of the three (3) financial stability calculationsof Fox Sounds Limited stated in your answer booklet, you are required to:
|
1. Current Ratio Current ratio represents the ability of the company to pay off its short-term obligation with the available current assets of the company (Weil, Schipper & Francis, 2013). From the calculation it is found that the current ratio of the company is in decreasing trend. It reduced to 2.08 from 2.48 and further reduced to 1.79 from 2.08 over the year from 2014 to 2015 and from 2015 to 2016. This decreasing trend is representing that the company’s liquidity position is deteriorating. The main reason is that the accounts payable of the company is significantly increased over the 3 years period. |
|
2. Liquid Ratio It is the company’s ability to meet the short – term financial obligation. From the calculation it is found that the current ratio of the company is in decreasing trend. It reduced to 1.34 from 1.60 and further reduced to 1.00 from 1.34 over the year from 2014 to 2015 and from 2015 to 2016. This decreasing trend is representing that the company’s liquidity position is deteriorating. The main reason is that the accounts payable of the company is significantly increased as compared to accounts receivable over the 3 years period. |
|
3. Proprietorship Ratio It represents the percentage of shareholders equity in total asset of the company and it roughly presents the capitalization amount that is used for supporting the business (Brigham & Ehrhardt, 2013). The proprietorship percentage of the company is reduced from 40.68% to 34.42% during 2014 to 2015, however, it increased to 45.40% in 2016. Therefore the company has improved the position in 2015 as compared to 2015. The reason behind the increase was the increase in equity and decrease in long term loans over the year from 2015 to 2016. |
The answers to Part C should be typed into the appropriate place in the answer booklet supplied.
Use the analysis in Part B of your answers and IDENTIFY:
|
Area of success for the business: Sales of the company over the years from 2014 to 2016 has been increased which is a good sign for the business sustainability. Why do you consider this is a success area for the business? The reason is that increase in sales will eventually increase the profit of the company that put the company in better position for sustainability. |
|
Problem area for the business. Liquidity area as it has a decreasing trend Recommendations to improve this problem area for the business. The company shall pay off the short term dues and lower the credit period offered to the debtors for making improvement in this area. |
Nzx Statistics Schedule
Date of observation …………………
Complete the following table.
|
Company |
Code |
Shares issued |
Volume of shares traded |
EPS $ |
P/E |
Gross Dividend Yield (%) |
|
Auckland International Airport Limited |
AIA |
|||||
|
Briscoe Group Limited |
BGR |
Reference
Brigham, E. F., & Ehrhardt, M. C. (2013). Financial management: Theory & practice. Cengage Learning.
Delen, D., Kuzey, C., & Uyar, A. (2013). Measuring firm performance using financial ratios: A decision tree approach. Expert Systems with Applications, 40(10), 3970-3983.
Needles, B. E., Powers, M., & Crosson, S. V. (2013). Principles of accounting. Cengage Learning.
Weil, R. L., Schipper, K., & Francis, J. (2013). Financial accounting: an introduction to concepts, methods and uses. Cengage Learning.
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