A. produce common size profit and loss accounts for the five years and analyse these statements with particular reference to the profitability of Belper.
Transcribed Image Text: 2. Given below are the summarized accounts of Belper Ltd for the past five years. These form
the basis for the questions which follow
19X7
19X8
19X6
Summarized profit and loss accounts of Belper Ltd
19X5
£000
£000
19X4
£000
£000
278,340
372,753
259,470
116,232
346,695
244,809
230,334
101,673
26,058
33,531
29,136
Sales
Cost of sales
Trading profit
14,559
8,151
4,065
3,678
1,380
14,082
10,167
7,707
Depreciation
2,652
19,299
3,825
17,751
Interest
10,527
2,601
7,833
Net profit before tax
9,270
1,746
11,466
1,224
Taxation
8,481
8,781
489
Net profit after tax
4,989
(15)
(870)
Extraordinary items
1,713
16,455
8,466
7,911
5,913
3,738
3,339
3,672
1,812
801
-1,959
12,717
Dividends
Retained profits
5,127
6,099
5,112
30,975
50,427
25,848
Retained at start of year
19,749
14,637
43,692 48,468
30,975
Retained at end of year
25,848
19,749
Notes
(During 19X8 some of the freehold properties were revalued.
(i) Loans amounting to £22 million were repaid during the year.
(i) The extraordinary item shown in the profit and loss account in 19X8 represents the
damages received by the company from a libel action against a newspaper.
(iv) No fixed assets were disposed of during the year.
Summarized balance sheets of Belper Ltd
19X4
19X5
19X6
19X7
Fixed assets
£000
£000
19X8
£000 £000
£000
Freehold land and buildings
14,058
14,571
20,559 20,598 29,721
Leasehold land and buildings
2,349
2,490
5,184
Plant and machinery
5,193 12,564
8,082
11,541
26,781
Total gross fixed assets
30,000
47,172
24,489
28,602
52,524 55,791 89,457
Depreciation freehold
Depreciation leasehold
117
597
147
345
774
Depreciation plant, etc.
Total depreciation
4,197
858
5,325
8,259
4,314
11,277
18,747
Net fixed assets
5,472 8,604
20,175
12,051
20,202
23,130 43,920
Intangible fixed assets
43,740 69,255
Goodwill
Investments
789
807
849
Patents and trade marks
486
795
936
936
393
Current assets
3,972
3,618
303
393
6,063
Stock
8,730
9,345
20,031 23,034
53,091
74,823 99,606
Financial statement analysis
£000
93,930
81,750
12,180
1,023
2,727
8,430
2,517
5,913
Transcribed Image Text: 19X4
19X5
19X6
19X7
19X8
17,589
24,693 60,270
Debtors
Bank and cash
48,987
66,768
4,698
6,801
7,839
3,273
9,747
42,318
54,528 121,200 127,083 176,121
Current liabilities
Creditors
16,197
24,588
55,659
41,130
72,831
Taxation
459
768
4,302
2,712
3,444
Dividends
801
1,812
3,339
3,738
3,672
Bank loans and overdraft
10,581
4,026
18,180
29,316
37,638
28,038 31,194
81,480 76,896 117,585
Net current assets
14,280 23,334
39,720
50,187
58,536
39,702
51,684 90,945 103,896 138,465
Financed by
Ordinary share capital
2,229
2,829
3,396
6,792
7,077
Share premium account
Retained profits
2,931
7,530
14,598
11,247
12,387
19,749
25,848
30,975 50,427 48,468
Revaluation reserves
6,735
6,735
9,423
Total equity and reserves
Loans
24,909
36,207
55,704
75,201 77,355
14,793
15,477 35,241 28,695 61,110
51,684 90,945 103,896 138,465
39,702
(a) From a review of the information above identify the areas which you would concentrate
on in your analysis of the position of Belper Ltd.
(b) Produce common size profit and loss accounts for the five years and analyse these state-
ments with particular reference to the profitability of Belper.
(c) Calculate the trends in the Sales and Cost of sales and comment on the information
disclosed by your analysis.
(d) Using whatever form of analysis you consider appropriate comment on the financial risk
profile of Belper Ltd for the five years under review.
e) Based on your analysis write a brief report for the bank advising them on whether to
continue to provide finance for Belper Ltd.
f) Apart from the information arising from your analysis what other information would you
advise the bank to consider when making its decision?
g) Discuss how your analysis would have been altered if you were carrying out the analysis
on behalf of a prospective shareholder.