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 ImagesDividends 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 margin2.return on capital employed3.current ratio4.gearing ratio5.trade receivables settlement period6 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. Income statements for the year ended 30 November20092010£000£000Revenue9,48211,3651,042Operating profitInterest charges914(22)(81)Profit before taxation892961Тахation(358)534(386)Profit for the year575Statements of financial position as at 30 November20092010£000£000ASSETSNon-current assetsProperty, plant and equipment at cost less depreciationPremises5,2407,360Plant and equipment2,3757,6154,05711,417Current assetsInventories2,3863,4202,5404,92612,541Trade receivables4,2807,700Total assets19,117EQUITY AND LIABILITIESEquityShare capital2,0002,000Reserves7,8139,8138,26810,268Non-current liabilitiesBorrowing – loans1,2203,675Current liabilitiesTrade payables1,1572,245Таxation1791932,7365,174Short-term borrowings (all bank overdraft)1721,50812,541Total equity and liabilities19,117

Financial statements refer to the set of statements prepared by a company to measure the financial…

Answered: Bradbury Ltd is a family-owned clothes…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

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 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.

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

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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