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Group Assignment (Groups of 2 or 3)

Assignment Submission date: 3pm AEST 21 September 2014

Submission Method: Hard Copy & Soft Copy

Bachelor of Business

Trimester 2 2014

Unit: Business Accounting

Unit Code: B01ACT105

Student #_________________________________________

Signature_______________________________________

Assessment item 3: Assignment-Comprehensive Accounting Exercise (Group)

Objective(s): This addresses Unit Learning Objectives 1, 2 and 3

Weighting: 15%

Due: 22/09/2014 at 3pm AEST

Task:

Overview:

This assignment is designed to assess students’ understanding and ability to conduct financial statement analysis as well as report writing using appropriate referencing style. Students are required to read Chapter 15 of the prescribed textbook on Financial statement analysis before attempting this assignment. Students are encouraged to use additional textbooks in preparing the assignment report.

Submission:

The assignment report is due on 21 September 2014, 3 pm AEST. The hard-copy of the report has to be submitted to the lecturer.

A penalty of 10% of the overall marks per day will apply for late submissions.

Assignment Task

ABC Computers has approached your bank for a loan of $100,000 for new equipments to expand its business. Your manager has asked your team to assess the profitability, efficiency, liquidity and capital structure of the business using financial ratios. Write a report advising ABC Computers whether its loan application has been approved, the reasons for the decision based on the evaluation of the company’s profitability, efficiency, liquidity and capital structure using financial ratios as part of the financial statement analysis.

The Bank has asked ABC Computer to provide its Income Statements and Statement of Financial Performance for the past three years which are attached.

Task requirements

1. Calculate the following ratios for the years 2012, 2013 and 2014. You should group the ratios under the headings profitability, efficiency, liquidity or capital structure. Show the formula used to calculate each ratio and all the workings in your report, a brief explanation of what each ratio measures and the trend that it is showing.

· Return on assets

· Return on equity

· Gross profit margin

· Net profit margin

· Asset turnover ratios (times)

· Asset turnover (days)

· Accounts receivable turnover (days)

· Current ratio

· Quick asset ratio

· Gearing ratio

· Debt to equity ratio

2. Write a report (750 - 1000 words) advising ABC Computers whether its loan application has been approved, the reasons for the decision and an evaluation of the company’s performance in the areas of profitability, efficiency, liquidity and capital structure.

Income Statement

ABC Computers
Income Statement for the years ending 30 June:
		2014		2013		2012
		,000		,000		,000
Revenue
PCs		350		674		850
Laptops		815		745		698
Tablets		1,120		853		670
Total Revenue			2,285		2,272		2,218
Less:
Cost of goods sold
	Cost of PCs	285		470		623
	Cost of Laptops	490		525		542
	Cost of Tablets	877	1,652	700	1,695	530	1,695
Gross profit			633		577		523
Less:
	Advertising	53		48		50
	Wages	150		138		123
	Utility	68		62		57
	Insurance	30		28		25
	Rent	50		47		45
	Depreciation	50		50		50
	Stationery	23	424	25	398	24	374
Earnings before Interest and Tax			209		179		149
Less:
	Interest expense	10		9		9
	Tax expense	28	38	22	31	17	26
Net profit after Interest and Tax			171		148		123

Balance Sheet

ABC Computers
Statement of Financial Position at 30 June:
	2014		2013		2012		2011
	,000		,000		,000		,000
Current Assets
Cash at bank		160		180		175		170
Account Receivable		914		881		752		698
Inventory - PCs		68		78		81		87
Inventory - Laptops		74		69		68		78
Inventory - Tablets		84		75		59		28
Total Current Assets		1,300		1,283		1,135		1,061
Non-current assets
Office furniture	250		240		231		229
Accumulated depreciation	32	218	31	209	30	201	29	200
Office equipment	87		78		69		58
Accumulated depreciation	11	76	10	68	9	60	7	51
Motor vehicle	66		65		65		64
Accumulated depreciation	8	58	8	57	8	57	8	56
Total non-current assets		352		334		318		307
Total assets		1,652		1,617		1,453		1,368
Current liabilities
Bank overdraft		31		30		28		24
Account payable		315		308		298		284
Income tax payable		25		21		19		17
Total current liabilities		371		359		345		325
Non-current liabilities
Long term loan		85		82		80		78
Total non-current liabilities		85		82		80		78
Total liabilities		456		441		425		403
Shareholders' equity
Issued capital		250		250		250		250
Retained earnings		946		926		778		715
Total Shareholders' euqity		1,196		1,176		1,028		965

Sheet3

ABC Computers

Statement of Financial Position at 30 June:

2014201320122011

,000,000,000,000

Current Assets

Cash at bank160 180 175 170

Account Receivable914 881 752 698

Inventory - PCs68 78 81 87

Inventory - Laptops74 69 68 78

Inventory - Tablets84 75 59 28

Total Current Assets1,300 1,283 1,135 1,061

Non-current assets

Office furniture250 240 231 229

Accumulated depreciation32 218 31 209 30 201 29 200

Office equipment87 78 69 58

Accumulated depreciation11 76 10 68 9 60 7 51

Motor vehicle66 65 65 64

Accumulated depreciation8 58 8 57 8 57 8 56

Total non-current assets352 334 318 307

Total assets1,652 1,617 1,453 1,368

Current liabilities

Bank overdraft31 30 28 24

Account payable315 308 298 284

Income tax payable25 21 19 17

Total current liabilities371 359 345 325

Non-current liabilities

Long term loan85 82 80 78

Total non-current liabilities85 82 80 78

Total liabilities456 441 425 403

Shareholders' equity

Issued capital250 250 250 250

Retained earnings946 926 778 715

Total Shareholders' euqity1,196 1,176 1,028 965

Income Statement

ABC Computers
Income Statement for the years ending 30 June:
		2014		2013		2012
		,000		,000		,000
Revenue
PCs		350		674		850
Laptops		815		745		698
Tablets		1,120		853		670
Total Revenue			2,285		2,272		2,218
Less:
Cost of goods sold
	Cost of PCs	285		470		623
	Cost of Laptops	490		525		542
	Cost of Tablets	877	1,652	700	1,695	530	1,695
Gross profit			633		577		523
Less:
	Advertising	53		48		50
	Wages	150		138		123
	Utility	68		62		57
	Insurance	30		28		25
	Rent	50		47		45
	Depreciation	50		50		50
	Stationery	23	424	25	398	24	374
Earnings before Interest and Tax			209		179		149
Less:
	Interest expense	10		9		9
	Tax expense	28	38	22	31	17	26
Net profit after Interest and Tax			171		148		123

Balance Sheet

ABC Computers
Statement of Financial Position at 30 June:
	2014		2013		2012		2011
	,000		,000		,000		,000
Current Assets
Cash at bank		160		180		175		170
Account Receivable		914		881		752		698
Inventory - PCs		68		78		81		87
Inventory - Laptops		74		69		68		78
Inventory - Tablets		84		75		59		28
Total Current Assets		1,300		1,283		1,135		1,061
Non-current assets
Office furniture	250		240		231		229
Accumulated depreciation	32	218	31	209	30	201	29	200
Office equipment	87		78		69		58
Accumulated depreciation	11	76	10	68	9	60	7	51
Motor vehicle	66		65		65		64
Accumulated depreciation	8	58	8	57	8	57	8	56
Total non-current assets		352		334		318		307
Total assets		1,652		1,617		1,453		1,368
Current liabilities
Bank overdraft		31		30		28		24
Account payable		315		308		298		284
Income tax payable		25		21		19		17
Total current liabilities		371		359		345		325
Non-current liabilities
Long term loan		85		82		80		78
Total non-current liabilities		85		82		80		78
Total liabilities		456		441		425		403
Shareholders' equity
Issued capital		250		250		250		250
Retained earnings		946		926		778		715
Total Shareholders' euqity		1,196		1,176		1,028		965

Sheet3

ABC Computers

Income Statement for the years ending 30 June:

201420132012

,000,000,000

Revenue

PCs350 674 850

Laptops815 745 698

Tablets1,120 853 670

Total Revenue2,285 2,272 2,218

Less:

Cost of goods sold

Cost of PCs285 470 623

Cost of Laptops490 525 542

Cost of Tablets877 1,652 700 1,695 530 1,695

Gross profit633 577 523

Less:

Advertising53 48 50

Wages150 138 123

Utility68 62 57

Insurance30 28 25

Rent50 47 45

Depreciation50 50 50

Stationery23 424 25 398 24 374

Earnings before Interest and Tax209 179 149

Less:

Interest expense10 9 9

Tax expense28 38 22 31 17 26

Net profit after Interest and Tax171 148 123