Hardy is a public listed manufacturing company. Its summarised financial statements for the year ended 30 September 2010 (and 2009 comparatives) are:   2010 RM’000 2009 RM’000 Revenue 29,500 36,000 Cost of sales   (25,500)  (26,000) Gross profit   4,000 10,000   Distribution costs (1,050)  (800) Administrative expenses     (4,900) (3,900) Investment income  50 200 Finance costs (600) (500) Profit (loss) before taxation   (2,500)  5,000 Income tax (expense) relief    400 (1,500) Profit (loss) for the year (2,100) 3,500 Income statements for the year ended 30 September:   Statements of financial position as at 30 September:     2010 2009   RM’000 RM’000 RM’000 RM’000 Assets         Non-current assets         Property, plant and equipment 17,600    24,500     Investments at fair value through profit or loss 2,400  20,000  4,000  28,500           Current assets         Inventory and work-in-progress  2,200   1,900   Trade receivables  2,200   2,800   Tax asset 600   nil   Bank  1,200 6,200 100 4,800 Total assets   26,200    33,300           Equity and liabilities         Equity         Equity shares of $1 each 13,000   12,000     Share premium 1,000   nil   Revaluation reserve nil   4,500   Retained earnings 3,600 17,600  6,500 23,000           Non-current liabilities           Bank loan 4,000   5,000   Deferred tax 1,200 5,200 700 5,700           Current liabilities         Trade payables 3,400   2,800   Current tax payable nil 3,400 1,800   4,600 Total equity and liabilities   26,200   33,300   The following information has been obtained from the Chairman’s Statement and the notes to the financial statements: ‘Market conditions during the year ended 30 September 2019 proved very challenging due largely to difficulties in the global economy as a result of a sharp recession which has led to steep falls in share prices and property values. Hardy has not been immune from these effects and our properties have suffered impairment losses of $6 million in the year.’ The excess of these losses over previous surpluses has led to a charge to cost of sales of $1·5 million in addition to the normal depreciation charge. ‘Our portfolio of investments at fair value through profit or loss has been ‘marked to market’ (fair valued) resulting in a loss of $1·6 million (included in administrative expenses).’ There were no additions to or disposals of non-current assets during the year. ‘In response to the downturn the company has unfortunately had to make a number of employees redundant incurring severance costs of $1·3 million (included in cost of sales) and undertaken cost savings in advertising and other administrative expenses.’ ‘The difficulty in the credit markets has meant that the finance cost of our variable rate bank loan has increased from 4·5% to 8%. In order to help cash flows, the company made a rights issue during the year and reduced the dividend per share by 50%.’ ‘Despite the above events and associated costs, the Board believes the company’s underlying performance has been quite resilient in these difficult times.’ Calculate the following "underlying" ratio, those of 2010 from the additional information. 1)Operating profit margin(not net profit margin) 2)Average inventory turnover 3)Pre tax return on equity *Ratios should be calculated as per ACCA formula and examiers' report.

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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Hardy is a public listed manufacturing company. Its summarised financial statements for the year ended 30 September 2010 (and 2009 comparatives) are:

 

2010

RM’000

2009

RM’000

Revenue

29,500

36,000

Cost of sales

 

(25,500)

 (26,000)

Gross profit

 

4,000

10,000

 

Distribution costs

(1,050)

 (800)

Administrative expenses

 

 

(4,900)

(3,900)

Investment income

 50

200

Finance costs

(600)

(500)

Profit (loss) before taxation

 

(2,500)

 5,000

Income tax (expense) relief

 

 400

(1,500)

Profit (loss) for the year

(2,100)

3,500

Income statements for the year ended 30 September:

 

Statements of financial position as at 30 September:

 

 

2010

2009

 

RM’000

RM’000

RM’000

RM’000

Assets

 

 

 

 

Non-current assets

 

 

 

 

Property, plant and equipment

17,600

 

 24,500

 

 

Investments at fair value through profit or loss

2,400

 20,000

 4,000

 28,500

 

 

 

 

 

Current assets

 

 

 

 

Inventory and work-in-progress

 2,200

 

1,900

 

Trade receivables

 2,200

 

2,800

 

Tax asset

600

 

nil

 

Bank

 1,200

6,200

100

4,800

Total assets

 

26,200

 

 33,300

 

 

 

 

 

Equity and liabilities

 

 

 

 

Equity

 

 

 

 

Equity shares of $1 each

13,000

 

12,000

 

 

Share premium

1,000

 

nil

 

Revaluation reserve

nil

 

4,500

 

Retained earnings

3,600

17,600

 6,500

23,000

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

Bank loan

4,000

 

5,000

 

Deferred tax

1,200

5,200

700

5,700

 

 

 

 

 

Current liabilities

 

 

 

 

Trade payables

3,400

 

2,800

 

Current tax payable

nil

3,400

1,800

 

4,600

Total equity and liabilities

 

26,200

 

33,300

 

The following information has been obtained from the Chairman’s Statement and the notes to the financial statements:

‘Market conditions during the year ended 30 September 2019 proved very challenging due largely to difficulties in the global economy as a result of a sharp recession which has led to steep falls in share prices and property values. Hardy has not been immune from these effects and our properties have suffered impairment losses of $6 million in the year.’


The excess of these losses over previous surpluses has led to a charge to cost of sales of $1·5 million in addition to the normal depreciation charge.

‘Our portfolio of investments at fair value through profit or loss has been ‘marked to market’ (fair valued) resulting in a loss of $1·6 million (included in administrative expenses).’

There were no additions to or disposals of non-current assets during the year.

‘In response to the downturn the company has unfortunately had to make a number of employees redundant incurring severance costs of $1·3 million (included in cost of sales) and undertaken cost savings in advertising and other administrative expenses.’

‘The difficulty in the credit markets has meant that the finance cost of our variable rate bank loan has increased from 4·5% to 8%. In order to help cash flows, the company made a rights issue during the year and reduced the dividend per share by 50%.’

‘Despite the above events and associated costs, the Board believes the company’s underlying performance has been quite resilient in these difficult times.’

Calculate the following "underlying" ratio, those of 2010 from the additional information.

1)Operating profit margin(not net profit margin)

2)Average inventory turnover

3)Pre tax return on equity

*Ratios should be calculated as per ACCA formula and examiers' report.

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