Financial statements of Nimbin Pty Ltd are presented below:
Statement of Financial Position
As at 30 June 2013 and 2014
|Cash and cash equivalents||$1,645||$2,110|
|Accounts receivables (all trades)||4,100||3,675|
|Total current assets||12,745||12,715|
|Property, plant and equipment||17,190||15,330|
|Total non-current assets||17,190||15,330|
|Total current liabilities||$5,780||$5,990|
|Total non-current liabilities||9,940||9,450|
As at 30 June 2014
|Revenues (net sales)||$55,000|
|Less: cost of sales||35,100|
|Selling and distribution expenses||7,100|
|Profit before income tax||6,270|
|Income tax expense||1,908|
Statement of changes in Equity
For the year ended 30 June 2014
|Ordinary (7,200.000 shares)Balance at start of period||$7,200|
|Balance at end of period||7,200|
|Preference (250,000 shares)Balance at start of period||500|
|Balance at end of period||500|
|Total share capital||$7,700|
|Balance at start of period||$4,905|
|Total income for the period||4,362|
|Dividends paid – ordinary||(2,702)|
|Dividends paid – preference||(50)|
|Balance at end of period||$6,515|
Payables include $5,620 (2014) and $5,730 (2013) trade accounts payable; the remainder is accrued expenses. Market prices of issued shares at year-end (2014): Ordinary $12; Preference $6.70.
A.Calculate the following ratios for 2014. The industry average for similar businesses is shown.
|1.Rate of return on total assets||22%|
|2.Rate of return on ordinary equity||20%|
|4.Earnings per share||45c|
|9.Quick ratio (acid ratio)||1.3:1|
|10. Receivables turnover||13|
|13.Times interest earned||6|
B. Given the above industry averages, comment on the company’s profitability, liquidity and use of financial gearing
A. local restaurant is noted for its fine food, as evidenced by the large number of customers. A customer was heard to remark that the secret of the restaurant’s success was its fine chef. Would you regard the chef as an asset of the business? If so, would you include the chef on the balance sheet of the business and at what value?
B. Accounting provides much information to help managers make economic decisions in their various workplaces. You are required to provide examples of economic decisions that the following people would need to make with the use of accounting information:
- A manager of human resources
- A factory manager
- The management team of an Australian Football League (AFL) club
- The manager of a second-hand clothing charity
c) Indicate the effect of each of the following transactions on any or all of the three financial statements of a business:
1.Statement of financial position
2.Statement of financial performance
3. Statement of cash flows
Apart from indicating the financial statements (s) involved, use appropriate phrases such as ‘increase total asset’, ‘decrease equity’, ‘increase income’, ‘decrease cash flow’ to describe the transaction concerned.
1.Purchase equipment for cash.
2.Provide services to a client, with payment to be received within 40 days.
3.Pay a liability.
4.Invest additional cash into the business by the owner.
5.Collect an account receivable in cash.
6.Pay wages to employees.
7.Receive the electricity bill in the mail, to be paid within 30 days.
8.Sell a piece of equipment for cash.
9.Withdraw cash by the owner for private use.
10.Borrow money on a long-term basis from a bank.