Complete the financial statements by preparing the Statement of Cashflows for 2021.
QUESTION 1.
You are a financial analyst reviewing the draft financial statements of Speedy Coaches Ltd with a view to purchasing the company and have been given the following information.
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Income statements for the year ended 30 June |
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2021 |
2020 |
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£'000 |
£'000 |
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Revenue |
32,800 |
29,459 |
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Cost of sales |
(17,855) |
(15,840) |
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Gross profit |
14,945 |
13,619 |
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Operating expenses |
(11,680) |
(10,477) |
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|
(1,198) |
(1,063) |
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Operating profit |
2,067 |
2,079 |
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Interest |
(74) |
(94) |
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Profit before |
1,993 |
1,985 |
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Taxation |
(634) |
(601) |
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Profit for the year |
1,359 |
1,384 |
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|
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2021 |
2020 |
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£'000 |
£'000 |
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ASSETS |
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Non-current assets |
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Property, plant and equipment |
10,300 |
8,720 |
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Current assets |
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Inventories |
750 |
701 |
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Trade receivables |
597 |
436 |
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Cash |
407 |
279 |
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1,754 |
1,416 |
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|
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Total assets |
12,054 |
10,136 |
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Current liabilities |
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Trade payables |
551 |
652 |
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Other payables and accruals |
390 |
480 |
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Taxation |
225 |
125 |
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|
1,166 |
1,257 |
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Total assets less current liabilities |
10,888 |
8,879 |
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EQUITY AND LIABILITIES |
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Equity |
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Ordinary share capital (£1 shares, fully paid) |
7,500 |
6,500 |
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|
2,738 |
1,379 |
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|
10,238 |
7,879 |
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Non-current liabilities |
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Borrowings – Bank loan |
650 |
1,000 |
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|
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Total equity and non-current liabilities |
10,888 |
8,879 |
Required (show your workings, you may refer to the formulae sheet at the end of the paper)
a) Complete the financial statements by preparing the Statement of Cashflows for 2021.
b) Calculate least five ratios covering profitability, efficiency, liquidity and gearing.
c) Comment on the financial health of Speedy Coaches Ltd, summarising your findings from b) including a recommendation about whether or not to make the purchase.
d) Discuss the limitations of ratio analysis and identify any further information that may be useful.
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