Bradbury Ltd is a family-owned clothes manufacturer. For a number of years, the chair and managing director was David Bradbury. During his period of office, sales revenue had grown steadily at a rate of 2 to 3 per cent each year. David Bradbury retired on 30 November 2017 and was succeeded by his son Simon. Soon after taking office, Simon decided to expand the business. Within weeks he had successfully negotiated a five-year contract with a large clothes retailer to make a range of sports and leisurewear items. The contract will result in an additional £2 million in sales revenue during each year of the contract. To fulfil the contract, Bradbury Ltd acquired new equipment and premises. See Images Dividends of £120,000 were paid on ordinary shares in respect of each of the two years. Required: (a) Calculate, for each year (using year-end figures for statement of financial position items), the following ratios: 1.operating profifit margin 2.return on capital employed 3.current ratio 4.gearing ratio 5.trade receivables settlement period 6 sales revenue to capital employed. (b) Using the above ratios, and any other ratios or information you consider relevant, comment on the results of the expansion programme.
Bradbury Ltd is a family-owned clothes manufacturer. For a number of years, the chair and managing director was David Bradbury. During his period of office, sales revenue had grown steadily at a rate of 2 to 3 per cent each year. David Bradbury retired on 30 November 2017 and was succeeded by his son Simon. Soon after taking office, Simon decided to expand the business. Within weeks he had successfully negotiated a five-year contract with a large clothes retailer to make a range of sports and leisurewear items. The contract will result in an additional £2 million in sales revenue during each year of the contract. To fulfil the contract, Bradbury Ltd acquired new equipment and premises. See Images Dividends of £120,000 were paid on ordinary shares in respect of each of the two years. Required: (a) Calculate, for each year (using year-end figures for statement of financial position items), the following ratios: 1.operating profifit margin 2.return on capital employed 3.current ratio 4.gearing ratio 5.trade receivables settlement period 6 sales revenue to capital employed. (b) Using the above ratios, and any other ratios or information you consider relevant, comment on the results of the expansion programme.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Bradbury Ltd is a family-owned clothes manufacturer. For a number of years, the chair and managing director was David Bradbury. During his period of office, sales revenue had grown steadily at a rate of 2 to 3 per cent each year. David Bradbury retired on 30 November 2017 and was succeeded by his son Simon. Soon after taking office, Simon decided to expand the business. Within weeks he had successfully negotiated a five-year contract with a large clothes retailer to make a range of sports and leisurewear items. The contract will result in an additional £2 million in sales revenue during each year of the contract. To fulfil the contract, Bradbury Ltd acquired new equipment and premises.
See Images
Dividends of £120,000 were paid on ordinary shares in respect of each of the two years.
Required:
(a) Calculate, for each year (using year-end figures for
- 1.operating profifit margin
- 2.return on capital employed
- 3.
current ratio - 4.gearing ratio
- 5.trade receivables settlement period
6 sales revenue to capital employed.
(b) Using the above ratios, and any other ratios or information you consider relevant, comment on the results of the expansion programme.
Transcribed Image Text:Income statements for the year ended 30 November
2009
2010
£000
£000
Revenue
9,482
11,365
1,042
Operating profit
Interest charges
914
(22)
(81)
Profit before taxation
892
961
Тахation
(358)
534
(386)
Profit for the year
575
Statements of financial position as at 30 November
2009
2010
£000
£000
ASSETS
Non-current assets
Property, plant and equipment at cost less depreciation
Premises
5,240
7,360
Plant and equipment
2,375
7,615
4,057
11,417
Current assets
Inventories
2,386
3,420
2,540
4,926
12,541
Trade receivables
4,280
7,700
Total assets
19,117
EQUITY AND LIABILITIES
Equity
Share capital
2,000
2,000
Reserves
7,813
9,813
8,268
10,268
Non-current liabilities
Borrowing – loans
1,220
3,675
Current liabilities
Trade payables
1,157
2,245
Таxation
179
193
2,736
5,174
Short-term borrowings (all bank overdraft)
172
1,508
12,541
Total equity and liabilities
19,117
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