Fairfield Foods plc is a catering establishment which also owns shops and cafes. Due to increased competition the company has recently experienced declining profitability. In order to ascertain whether this is a sector-wide problem the directors wish to investigate this trend. As a result, they have acquired average ratios for the sector. Some of these equivalent ratios are shown below. Sector averages for the year ended 30 June 2020: Return on capital employed Operating profit margin Net asset turnover Inventory holding period Debt to equity The following information has been extracted from the draft financial statements of Fairfield Foods plc for the year ended 31 December 2020: Revenue Cost of Sales Gross Profit Statement of profit or loss for the year ended 31 December 2020: £'000 201,600 (140,000) 61,600 (35,280) 26,320 Operating expenses Profit from operating Non-current assets Inventory Equity: Equity shares of £1 each Extracts from the Statement of financial position as at 31 December 2020 £'000 Revaluation surplus Retained earnings Total Equity Non-current liabilities: 10% bank loan 18.6% 8.6% 2.01 110,000 7,920 4 days 80% 34,000 10,800 20,960 65,760 28,800

Fairfield Foods plc is a catering establishment which also owns shops and cafes. Due to increased competition the company has recently experienced declining profitability. In order to ascertain whether this is a sector-wide problem the directors wish to investigate this trend. As a result, they have acquired average ratios for the sector. Some of these equivalent ratios are shown below. Sector averages for the year ended 30 June 2020: Return on capital employed Operating profit margin Net asset turnover Inventory holding period Debt to equity The following information has been extracted from the draft financial statements of Fairfield Foods plc for the year ended 31 December 2020: Revenue Cost of Sales Gross Profit Statement of profit or loss for the year ended 31 December 2020: £'000 201,600 (140,000) 61,600 (35,280) 26,320 Operating expenses Profit from operating Non-current assets Inventory Equity: Equity shares of £1 each Extracts from the Statement of financial position as at 31 December 2020 £'000 Revaluation surplus Retained earnings Total Equity Non-current liabilities: 10% bank loan 18.6% 8.6% 2.01 110,000 7,920 4 days 80% 34,000 10,800 20,960 65,760 28,800

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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